The transaction is expected to be completed by October 2010, Bob Hilburger, a business development director for the nation, said Thursday.
The nation runs the Turning Stone Resort & Casino, a dozen SavOn gas station-convenience [image-nocss] stores, a gaming software company and five golf courses. It sells about $34 million of untaxed cigarettes a year at its stores.
Sovereign Tobacco produces Niagara and Bishop discount cigarette brands that sell for $30 a carton, about half the cost of taxed, name-brand cigarettes sold in non-Indian outlets.
The Erie County cigarette plant employs about 28 people and sold 1.4 million cartons of cigarettes last year, distributing mostly to about 60 Native American outlets in upstate New York.
Hilburger said the plant expects to add another 20 workers as it expands during the next year.
The nation agreed to buy the cigarette plant last year, two months after the state legislature passed a law requiring cigarette manufacturers to make sure that wholesalers that buy from them pay the $27.50-per-carton state excise tax before selling the cigarettes to retailers, including Indian tribes.
Tribes in New York have long claimed sovereignty from state and local laws, and they have refused to collect sales and excise taxes for the state on cigarettes they sell, despite a U.S. Supreme Court ruling in 1994 that states have the right to collect those taxes. Successive governors in New York have all declined to enforce the tax laws.
"I suspect that they are making the decision that this will protect their supply of cigarettes when and if the state of New York begins to enforce the tax collection law," Jim Calvin, executive director of the New York Association of Convenience Stores (NYACS), told The Post-Standard.
By producing their own cigarettes, Calvin said, tribes could cut out the wholesalers who are licensed by the state. "It may well be that the tribes are thinking that it would be more difficult for the state to enforce tax collection on those Native American brands," he said.
The Oneidas sold about $34 million worth of cigarettes in the fiscal year ending September 2008, the nation has told the federal government, according to the newspaper.
At SavOn stores, the two brands are promoted with bright yellow signs that read "Lowest Price."
Tribes are heavily promoting their own brands to win converts, Calvin said. "There's a concerted effort by the tribes to flip Marlboro and Newport and Camel customers who are coming into their stores to native-made brands of cigarettes," he added.
The Seneca brand of cigarettes, manufactured in Western New York, is among the top 10 best-selling brands in the state, Calvin said.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.