Tobacco

Cigarette Sellers Group Sues N.Y.

Seeks to overturn law banning Internet tobacco sales

ALBANY, N.Y. -- A group of cigarette distributors and sellers filed a lawsuit against the state of New York on Wednesday seeking to overturn a law banning Internet, telephone and mail order tobacco sales, the Associated Press said.

The suit by the Association of Responsible Cigarette Sellers, filed in Erie County Supreme Court, contends the 2000 state law violates the Commerce Clause of the U.S. Constitution.

David McNamara, the group's lawyer, said his case was bolstered by last year's U.S. Supreme Court ruling striking down [image-nocss] laws in New York and Michigan that banned wine shipments from out-of-state producers. The Constitution prohibits states from passing laws that discriminate against out-of-state businesses.

The group, based in Salamanca, N.Y., near where the Seneca tribe is based, claims the law also violates the Indian Commerce Clause, which gives the federal government the sole right to regulate commerce with Indian tribes. Many Internet sellers are located on tribal reservations in western New York.

In January, state Attorney General Eliot Spitzer said Philip Morris USA, the nation's biggest tobacco company, agreed to end shipments of any of its products to customers, Indian tribes and enterprises that states deem illegal, as part of an agreement with attorneys general for 37 states and territories. The action was the third prong of the states' efforts to curb the sale of cigarettes to minors over the Internet and by mail order. In March 2005, major credit card companies agreed to stop processing payments from Internet retailers. Shippers DHL and UPS Inc. agreed to stop shipping packages from the vendors.

Authorities consider Internet cigarette sales to be illegal because they violate state and federal laws aimed at collecting sales taxes and stopping sales to underage smokers.

The lawsuit seeks to keep Spitzer from enforcing the agreements with the shippers and credit card companies.

Attorney general spokesperson Marc Violette said his office had not yet seen the lawsuit and declined to comment.

The 2nd U.S. Circuit Court of Appeals ruled in 2003 against such a challenge to the law, saying the statute treats in-state and out-of-state businesses equally.

Margaret Murphy, a lawyer representing the cigarette vendors, said that decision has been brought into question by last year's Supreme Court decision and that her clients are challenging the law on different grounds.

On Tuesday, as reported in CSP Daily News, convenience store operators sued Governor George Pataki to compel him to enforce a new state law requiring tax collection on tobacco products and gasoline sold to Indian businesses. The New York Association of Convenience Stores (NYACS) said Pataki's failure to collect taxes on the goods before they reach the reservations, as required under a law that took effect March 1, costs taxpayers $450 million a year and costs businesses $1 billion a year.

Businesses located near reservations say they suffer a competitive disadvantage because they must charge substantially higher prices. A carton of cigarettes bought from a tribe can retail at $15 less than at off-reservation retailers.

Click here to read the complaint.

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