Cuomo sees $130 million from tax on cigarettes

ALBANY — The proposed state budget assumes the state will collect $130 million in excise taxes on cigarettes sold by Indian retailers, making Gov. Andrew M. Cuomo the fifth governor vowing to end tax-free tobacco sales.

The governor hasn’t specified how or when he might try to begin collecting the tax, and leaders of the Seneca Nation quickly vowed to fight any state effort.

“This is nothing new, and nothing has changed,” said Robert Odawi Porter, president of the Seneca Nation, the largest Native American sellers of cigarettes.

Governor Andrew Cuomo is the fifth governor vowing to end tax-free tobacco sales.

Governor Andrew Cuomo is the fifth governor vowing to end tax-free tobacco sales.

The new Seneca leader said he hopes to meet with the new governor on the controversial issue, which initially surfaced in earnest during the administration of Gov. Mario M. Cuomo, the governor’s father, with a 1994 U.S. Supreme Court ruling that authorized the state to collect the tax.

“But the Seneca Nation will never be the state’s tax collector. We’ve said that repeatedly, and nothing has changed in that regard,” Porter said. The matter is now in federal court, though a decision could come from an appeals panel in Manhattan in coming months.

Indian tribes, including the Senecas, have challenged a state law — which the state has yet to enforce — requiring that tobacco wholesalers sell only cigarettes with state excise tax stamps affixed to their packaging.

Going after the tax “upstream,” at the middleman level, gets the state out of trying to collect the tax from the Indian retailers, officials say. The law also provides for a certain level of tax-free sales to members of Indian tribes for personal consumption.

The state contends that the court case, which Cuomo’s office had defended while he was attorney general before becoming governor last month, is winnable and that a collection effort can begin once a decision is reached.

“The governor’s position is absolutely clear: He fully intends to collect taxes on cigarettes sold by Indian reservations,” said Joshua Vlasto, a Cuomo spokesman.

The last four governors have, at one time or another, signed off on state budgets that projected revenue from collecting the tobacco taxes. Industry groups that support the collection say the state loses $1 billion or more a year to the Indian tax-free sales.

State officials have long maintained those estimates are inflated.

But Indian retailers have had a steeper price advantage over non-Indian merchants since the state last year again boosted the excise tax on cigarettes by $1.60 per pack to $4.35 — the nation’s highest levy. It means Indian retailers have a built-in edge of at least that amount — plus sales taxes they don’t collect — over non-Indian competitors.

Last year, the administration of then-Gov. David A. Paterson counted on collecting $160 million by ending tax-free sales, but court action halted that effort.

The state made its last serious attempt to collect the tax in 1997, on orders from then-Gov. George E. Pataki. A violent clash between Indian protesters and state troopers, which shut down a portion of the Thruway in Western New York, pushed Pataki to reverse his order.

Seneca officials have long maintained the state has no legal authority to collect the taxes and that the tax-free sales are protected by treaty rights dating back to George Washington.

But James Calvin, executive director of the New York Association of Convenience Stores, a trade group representing non-Indian merchants, said he believes Cuomo must think the state will win the court battle if he is including the $130 million in his proposed budget.

“I think it’s encouraging to see the new governor express his intent to enforce the law once the courts give him that opportunity, and we applaud him for remaining steadfast and pursing the lawful collection of these taxes,” Calvin said.


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