ALBANY, N.Y. -- Although his administration has delayed efforts to collect taxes on the cigarettes sold by American Indian retailers, New York Governor Eliot L. Spitzer is targeting tobacco manufacturers who provide the cigarettes, reported The Buffalo News.
Spitzer has backed away from his pledge during his 2006 campaign to end the tax-free sales, calling the matter a complex issue that should be negotiated with the Indian tribes, particularly the Seneca Nation, the state's tobacco-selling leader.
But deep in his recently proposed state budget, the governor has buried a provision [image-nocss] that would impose substantial financial penalties on cigarette manufacturers who sell their product to wholesalers supplying any retailers, including Native Americans, who sell cigarettes tax free, said the report. The state legislature had approved that approach in 2006, but then-Gov. George E. Pataki vetoed it.
Now, with the legislature increasingly interested in ending the tax-free sales, Spitzer has revived the effort to go "upstream" in the cigarette sales chain, the Buffalo News said. His proposal would apply to manufacturers who "know or reasonably should know" that taxes aren't being paid on the product.
Groups pushing the state to collect the taxes said that a state law already requires wholesalers to pay the tax before it reaches retailers. But enforcement of the law remains on hold, tax officials said last week, because of a court injunction issued against the state.
Critics said the injunction would be lifted if, as the law specifies, state tax authorities distribute special coupons to Native Americans permitting them to buy cigarettes from Indian retailers without paying the tax.
"We'd prefer that Gov. Spitzer address this problem directly by just enforcing the law, rather than passing the buck. But if he lacks the political will to do that, an upstream embargo on the supply of tax-free cigarettes is a viable alternative. We support the concept," James Calvin, executive director of the New York State Association of Convenience Stores (NYACS) told the newspaper."Spitzer [is] trying to dodge his constitutional responsibility to enforce the law and instead push it onto the shoulders of the manufacturers," Calvin told CSP Daily News.Lawmakers have estimated the state loses $500 million or more a year in revenues from tax-free tobacco sales, according to the report.
Philip Morris USA, the Senecas' biggest source of tobacco products, said it supports the state's effort to collect the cigarette taxes. But the company warned that putting the legal responsibility on manufacturers to end the tax-free sales is not the answer. "Manufacturers just can't enforce laws and shouldn't bear the burden or responsibility for enforcement," PM USA spokesperson David Sutton told the paper concerning Spitzer's plan.
Still, the administration hopes to collect the taxes, Jeffrey Gordon, a Spitzer budget spokesperson, said. "The legislation is not inconsistent with negotiating with the tribes," he told the paper. "If negotiations do not prove fruitful, this provides another possible option for achieving the goals."
The percentage of the state's smokers buying tax-free cigarettes all or some of the time has slipped to 33% in 2006 from 40% in 2003, a state advisory board on tobacco issues recently was told. But while Internet and cross-border sales have slowed, the percentage buying from Indian retailers has remained steady, according to the report, citing Matthew Farrelly of the North Carolina-based Research Triangle Institute, a firm hired as a consultant for the state Health Department.
"Tax evasion remains fairly common," he told the State Tobacco Use Prevention & Control Advisory Board, a panel of doctors, research scientists and others appointed by the governor and legislature to find ways to reduce smoking.
A state Health Department advisory board, meanwhile, has unanimously called on Spitzer and lawmakers to double the state's cigarette excise tax, now $1.50 per pack, to reduce tobacco use, the Buffalo News said.
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