A state law enacted March 1, 2006, requires collection of such taxes, but Paterson and his two predecessors have refused to enforce it, instead maintaining a "policy of forbearance." On Tuesday, January 19, in his annual budget message, Paterson said his Tax Department is going to rescind that [image-nocss] policy, and promulgate regulations to implement the tax collection system prescribed by the law. That system requires wholesale distributors to prepay the taxes before they deliver cigarettes to the tribes, and the Department to provide the tribes with a reasonable quantity of "tax exemption coupons" to present to their wholesaler in order to preserve the tax exemption on Indian sales to members of their tribe.
"Fifteen years of delay and deceit have taught us to be skeptical of any new promises from the Capitol on the tax fairness issue," said NYACS president James Calvin. "However, no one can question Governor Paterson's sincerity in wanting to resolve this long-standing dilemma he inherited. We applaud his commitment to fully and fairly enforcing the tax collection law, and our stores are eager to help New York State collect all the tax revenue it is entitled to."
Unfortunately, Paterson's budget also proposed a $1-a-pack increase in the state excise tax on cigarettes. If approved by the state legislature, it would boost New York's state tax to $3.75, highest in the nation, and lift the combined state/city tax on New York City sales to $5.25 a pack, effective June 2, 2010.
"It would be a mistake to further increase the cigarette tax rate prior to the enforcement initiative," Calvin said, "because it would only make the current tax evasion epidemic worse, as the last three increases have done. First things first. Enforce the law, recapture the hundreds of millions of dollars in cigarette tax revenue that is escaping at the current rate, and then examine whether any change in the rate is really necessary."
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