The tribes won a separate federal court order Tuesday temporarily barring collections [image-nocss] against them. But the state had said it would start imposing the $4.35 per pack levy on other reservation retailers starting Wednesday.
The New York Association of Convenience Stores (NYACS) has asked Paterson to issue an executive order suspending the 58% tax hike on cigarettes that took effect July 1, "in fairness to long-suffering retailers whom state and federal courts have now deprived of the 'other side of the bargain'the promised level playing field" starting September 1.
"We are disappointed today that the appellate division has stayed the implementation of our statute and regulations with respect to licensed stamping agents," Paterson spokesperson Jessica Bassett said. "Despite this ruling, we believe the state's legal arguments are sound and we believe that ultimately the state will prevail in this matter."
The Senecas' federal court suit, which the Cayugas joined, seeks to invalidate the state tax law by arguing New York lacks jurisdiction to regulate Indian nations within their territories. The tribes' state court challenge, meanwhile, opposes the expedited way New York tax officials chose to adopt the regulations to implement the law, not the law itself.
Attempts to collect the tax in the 1990s resulted in sometimes-violent protests and fires on Seneca territories, which at one point shut down the New York State Thruway where it bisects the Senecas' Cattaraugus reservation. State officials have been reluctant to push the issue since, said the report.
But with New York facing a fiscal crisis, the governor and state lawmakers vowed in June to go after what they view as a potential $200 million revenue source by requiring cigarette wholesalers, effective September 1, to prepay the sales taxes before supplying reservation stores.
According to AP, a sign was spotted last week on an overpass on the Tonawanda Band of Senecas' reservation reading: "NYS declares war 9-1-2010. Let the fires begin!"
About 100 people rallied Wednesday on Seneca land along the Thruway, saying they wanted the issue settled peacefully in court, but could be pushed only so far.
Cigarette makers sold 24 million cartons of non-native-brand cigarettes to tribes in New York in 2009, with the Senecas buying the most at 10.2 million, the report said, citing the state Department of Taxation & Finance. Tribes also sell millions of cartons of American Indian brands.
Free of the state sales tax, Indian retailers have a huge competitive edge over off-reservation sellers. Native American stores were recently offering cartons of Marlboros for $50.99, compared with the $100 price tag in off-reservation stores in New York, the report said.
In a letter tom Paterson, NYACS president James Calvin wrote, "In light of the court rulings blocking the start of tax collection on Indian sales of cigarettes to non-Indians, the New York Association of Convenience Stores respectfully requests that you temporarily suspend the cigarette excise tax increase that was enacted July 1."
He added, "The double-edged bargain you made with the legislature in June was to sharply increase the cigarette tax rate on July 1, but to mitigate its negative effect on tax-collecting retailers by capturing taxes on tribal sales to non-Indians starting September 1. If one side of this bargain has been placed on hold, it's only fair that the other should be put on hold as well."
Since the cigarette tax hike jumped from $2.75 a pack to $4.25 a pack July 1, NYACS said mom-and-pop stores have lost 25% to 45% of their cigarette unit sales, virtually all of it because of the ensuing wave of cigarette tax evasion it triggered.
"They shouldn't have to continue to endure this economic hardship while courts allow their Native American competitors to keep thumbing their noses at New York State's tax law," wrote Calvin.
"We share your deep disappointment in the federal and state court rulings on the cigarette tax collection issue," he told Paterson. "We were looking forward to a level retail playing field finally being restored. We nonetheless commend you for your courageous leadership on this issue, and look forward to supporting your efforts to lift the temporary restraining orders."
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