Federal appeals court retains cigarette tax injunction against NY

NEW YORK – Indian nations within the boundaries of New York have won a round in the ongoing cigarette tax fight with the state: The nations can continue to sell tax-free cigarettes to non-Indians in sovereign Indian country while the court decides whether the state’s new tax laws are legal.

On Dec. 9, a three-judge panel of the Second Circuit Court of Appeals rejected the state’s request to lift injunctions that stop the state from collecting cigarette taxes from sales on Indian land while several challenges to the tax laws are pending.

The panel did, however, approve the state’s motion to consolidate appeals by the Seneca Nation of Indians, the Oneida Indian Nation of New York, the St. Regis Mohawk Tribe, the Cayuga Nation, and the Unkechaug Indian Nation. The nations filed lawsuits and then appeals against the state’s new tax law that would force them to pay cigarette taxes on sales to non-Indians by requiring wholesalers to pay for and affix a $4.35-a-package tax stamp on all cigarettes sold in the state, and pass the tax on to Native retailers.

“While this is not the end of the case, the appellate court’s decision maintains the status quo, and allows our businesses to continue for the near future,” said Seneca Nation President Robert Odawi Porter. “We will continue to fight this illegal effort by the state to interfere with our treaty rights and destroy our tobacco commerce and the Western New York jobs it supports.”

The panel included Circuit Judges Wilfred Feinberg, Barrington D. Parker and Richard C. Wesley.

In recent months, judges in two separate federal courts issued orders prohibiting the state from implementing its new tax scheme.

Judge David Hurd, of the U.S. District Court for the Northern District of New York, issued a preliminary injunction Oct. 14 in a case filed by the Oneida Indian Nation against Gov. David Paterson and other state officials, asking the court to declare the state’s new laws illegal. The laws, which were devised last summer, abandoned the state’s decades-long “forbearance” policy – a hands-off approach that allowed the nations to prosper and become economic engines, contributing billions of dollars to the state and providing thousands of jobs in western, central and northern parts of the state.

The Second Circuit decision was welcomed by Oneida.

“The Oneida Nation is pleased that the federal appeals court is continuing to stop New York state’s efforts to circumvent the nation’s sovereignty by imposing taxes upon suppliers of products to be sold on the Oneida reservation and other Indian reservations in this state,” said Mark F. Emery, director of media relations. “Though the nation remains convinced that these issues are best resolved through negotiation, the nation is prepared to vigorously protect its rights when the court hears the case.”

In his 25-page ruling, Hurd provided a number of substantive arguments against the state’s new cigarette tax law.

He agreed with Oneida that the law would impose irreparable harm by requiring the nation to pay a $4.35-a-package tax, which he deemed “unconstitutional,” because as a sovereign nation the tribe is “an untaxable entity.”

The state is appealing Hurd’s injunction.

Around the same time that Hurd issued a preliminary injunction in the Oneida case, Judge William Arcara in the Western District Court denied the Seneca and Cayuga Nations’ request for a preliminary injunction and issued instead a stay against the state implementing its tax law. In the hierarchy of prohibitions, a preliminary injunction packs more weight than a stay, which in turn is more forceful than a temporary restraining order.

Arcara found that the nations’ tribal sovereignty “is not unconstitutionally burdened” by the state’s new cigarette tax laws, and that they failed to demonstrate a likelihood of success on the merits of their claims.

But he acknowledged that the tax law “will almost certainly have an adverse impact upon the nations’ existing tobacco economies.”

He also acknowledged that the nations’ intent to appeal the denial of their motion for a preliminary injunction to the Second Circuit, noting that if the appeals court rules that the tax burden on the nations is unconstitutional, “it may be too late to undo the harm suffered by the nations’ existing tobacco businesses in the interim. Accordingly, the threat of irreparable harm favors granting a stay pending appeal.”

The appeals court panel also ordered that the pending appeals of the state and the Indian nations be consolidated in a single case as a matter of judicial administrative efficiency and indicated that it would issue an additional order on the state’s motion for an expedited briefing schedule.

In connection with the briefing schedule, the Indian nations and the state have recently asked the court to consider a suggested briefing schedule that allows for an orderly briefing on the merits of all of the pending cases by mid-February.

source: indiancountrytoday.com

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