Spitzer vs. Pataki

Indian cigarette tax law smackdown?

ALBANY, N.Y. -- On Wednesday, the government of the state of New York will be breaking the law and begin costing taxpayers millions of dollars by choosing not to enforce legislation that would end the huge sales advantage that Indian tribes have over taxpaying competitors off reservations, said Attorney General Eliot Spitzer, according to an Associated Press report.

The current tax laws are being ignored, Spitzer said. The new law goes into effect automatically on March 1...regardless of what the tax department does.

The state [image-nocss] Department of Taxation & Finance said it would not enforce the new law requiring Indian tribes to pay the state's rising cigarette taxes for sales to non-Indians through its massive Internet site and at reservation stores. Instead, Commissioner Andrew Eristoff said he will wait to see if the state legislature agrees with Governor George Pataki to again delay enforcement by a yeara delay the Democrat-led Assembly already rejects.

Nonetheless, officials on all sides figure nothing will happen next Wednesday. But some fear a reprise of violence by Indians like in the 1990s, the last time the state tried to collect taxes.

As written, the law this time is aimed not at the tribeswhose leaders say they are shielded from collecting state taxes as sovereign nationsbut at the large commercial tax and stamping agents licensed by the state. The wholesalers are compelled by the law to stop selling untaxed, unstamped cigarettes to tribes. The Pataki administration's role under the law is to provide coupons, already printed up, that would allow Indians to avoid taxes on the cigarettes they buy for their own personal use.

The Pataki administration refused to say what, if anything, it has told the wholesalers to do as of March 1. Tax Department spokesperson Tom Bergen said he did not know if the cigarette wholesalers will adhere to the law and stop providing untaxed, unstamped cigarettes to tribes. Normally, the state Taxation & Finance Department would take action against those lucrative licenses if a wholesaler failed to follow state law.

The next tier of action could be lawsuits by non-Indian retailers against the state, or by Spitzer's office against wholesalers.

The tax stamping agents are required to comply with the law when it takes effect, said Spitzer, who is the front-runner in the governor's race. If they don't, then the tax department should initiate proceedings to pull their stamping licenses.

The biggest Indian customer is the Senecas in western New York. Seneca spokesperson Susan L. Asquith said the tribe thinks the law does not begin March 1 and does not know what wholesalers will do.

We do not expect to begin enforcement on March 1, Eristoff stated in testimony before the legislature at a February 15 budget hearing. As a matter of practical administration, we think it would be premature to begin implementing at the same time that the legislature is reviewing substantive amendments to the law.

But the legislature apparently is not. No one is considering it seriously, said Assemblyman Alexander Pete Grannis (D), the chamber's leader on the issue. March 1, they are violating the law, he said of the Pataki administration. We believe this new approach is a workable, legal, nonintrusive approach as it relates to the sovereignty of the Indian Nations, Grannis said.