Actions Slow N.Y. Cigarette Tax Progress

Veto, restraining order stir state's tax-fairness cauldron

ALBANY, N.Y. -- Supporters of fair collection of cigarette taxes in New York State suffered two temporary setbacks Thursday, according to James Calvin, President of the New York Association of Convenience Stores.

First, Gov. George E. Pataki vetoed a bill that would have prohibited cigarette manufacturers from delivering their product to any licensed distributor identified by the attorney general, the state Department of Taxation and Finance, or the city of New York as an illegal supplier of unstamped cigarettes to Native American tribes.

We're dismayed, but given Governor Pataki's abysmal record on this issue, we're not surprised, said Calvin, whose association had actively supported the bill. The reality, however, is that anything Mr. Pataki does or says on the tax fairness issue is no longer relevant. The Legislature, the attorney general and the community of law-abiding manufacturers, distributors and retailers are determined to remedy this problem without him.

The battlefront now shifts back to the Legislature to consider overriding the veto. It requires a two-thirds majority vote in both houses. The Legislature is expected to return to Albany briefly in mid-September, and NYACS will lobby for an override vote then, Calvin said. If successful, the law would take effect immediately.

Meanwhile, in State Supreme Court in Buffalo, Judge Rose Sconiers Thursday granted a temporary restraining order in a case brought by Day Wholesale Inc. of Tupper Lake, N.Y., one of the distributors that supplies untaxed cigarettes to Indian tribes in defiance of a state law that took effect March 1 barring the practice.

The restraining order is in effect until September 25, when Day Wholesale and the defendants the attorney general's office and the state of New York will argue the merits of the case before Judge Sconiers, according to NYACS. The restraining order not only bars the state from enforcing the law, but may also bar Attorney General Eliot Spitzer from claiming that the sale of untaxed product to tribal stores violates that law, according to NYACS.

Spitzer's previous letter to Philip Morris and other tobacco manufacturers stating that as fact was the impetus for a new Philip Morris policy requiring its distributors to start tax-stamping PM product bound for tribal stores effective August 10, which in recent days had begun to affect supply and pricing at some reservation stores, NYACS said. What effect, if any, the restraining order will have on this policy remains to be seen.

Lost in all this is that last week, for the first time ever, cigarette distributors in New York State who supply Indian tribal retailers began pre-paying state excise taxes on Philip Morris product they deliver to those stores, said Calvin. It's an historic step, and we commend Philip Morris for their leadership in addressing the tax fairness issue.

Calvin emphasized that both of these setbacks are temporary. The veto can be overridden by the Legislature, and the restraining order can be lifted by the judge after hearing argument, he said. The tax collection law is still in effect, even though the governor is shirking his responsibility to enforce it.

Meanwhile, there is no decision yet from State Supreme Court Justice E. Michael Kavanaugh in the lawsuit filed by NYACS in April against Pataki, state Tax Commissioner Andrew Eristoff, and Day Wholesale and other cigarette distributors who supply Indian stores seeking an order compelling them to implement the new tax collection law.