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May 11, 2011 9:27 AMPublication: The Southampton Press

Court Bans Sale Of Tax-Free Cigarettes By Tribes

May 11, 2011 11:35 AM

A New York State appeals court has unanimously upheld a 2010 state law requiring Native American tribes to charge state-levied taxes on cigarettes sold to patrons from off the reservations, according to Attorney General Eric Schneiderman.

The ruling lifts an injunction against enforcing the law, put in place after the Seneca Nation in upstate New York challenged the law’s constitutionality. Now, Native American cigarette sellers say that national tobacco companies are no longer delivering cigarettes to them unless taxes are collected.

“Right now, we’ll have to start looking at layoffs,” said Lance Gumbs, a Shinnecock Indian Nation member who operates a trading post and smoke shop on the reservation in Southampton. “What this does is, it puts us out of business. It won’t stop people from buying tax-free cigarettes—it will just create a black market, like during Prohibition.”

Attorney General Schneiderman applauded the court’s ruling in a statement issued Monday, saying the new law will close a legal loophole that was costing the state millions in lost tax revenue each year.

“Today’s decision respects tribal rights and at the same time represents an important victory for the state to collect deserved revenue and to protect public health,” he said. “The decision closes an enormous tax-evasion loophole that was depriving New York of hundreds of millions of dollars in tax revenue.”

The State Legislature approved the law in August 2010, requiring taxes to be collected from wholesalers who sell cigarettes to Native American tribes, rather from the sellers themselves. Native American tribes are considered sovereign nations and cannot be taxed themselves by the federal or state governments. The state estimates that nearly $500,000 in cigarette taxes go unpaid every day through the tax-free sale of cigarettes by Native Americans.

But tribe members said that the new law actually is an end-run around the constitutional exemption from taxes afforded to Native Americans that robs them of one of few economic opportunities for their members. They also claimed that the purported benefits of charging the tax is a red herring, because the state will not actually see increases in revenues: with no price advantage over traditional cigarette sellers, they say, Native American sellers will simply go out of business.

Harry Wallace, a former chief of the Unkechaug tribe in Mastic and owner of a cigarette shop on the Poospatuck Reservation, said he hopes to be able to continue his business either on the back of further litigation overturning this week’s court decision or by selling Native American-produced cigarette brands, which may be exempt from the tax legislation.

“We’re not trying to evade any laws, we’re just trying to protect our rights,” Mr. Wallace said. “A lot of the different nations have switched to just Native American brands. I think I will be able to continue.”

The state has claimed that even Native American brands of cigarettes must be taxed if they are to be sold to non-Indian buyers—a point that may be the subject of future litigation.

Mr. Gumbs said that the legislation was not driven by health concerns or because it was hurting small convenience stores, but by large tobacco companies like Phillip Morris who are trying to put Native American brands of cigarettes out of business because they are not bound to contribute money to a federal pact that makes tobacco companies pay for stop-smoking advertising.

“That’s what this thing is really all about—the tobacco companies want to put us out of business so they don’t have the competition,” Mr. Gumbs said. “They just have the state in their pockets. Phillip Morris wrote this legislation. They think they’re fooling everyone ...

“It’s not going to go away. Other people will just sneak [tobacco products] into the state. It won’t be the Indian tribes—it will be some other group, someone you don’t know and can’t see where the money goes.”

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Just raise the price to 25 dollars a pack. Most smokers are helpless..use the taxes collected for education or road improvements
By sag runner (24), Easthampton on May 11, 11 10:56 AM
It is terrible to see the Native Americans lose a valuable source of revenue, but smoking costs this country billions of dollars a year in increased health care costs. The legislation may very well have been driven by Philip Morris, but, in the end, cigarettes are killers regardless of who sells and manufactures.
By progressnow (556), sag harbor on May 11, 11 11:02 AM
1 member liked this comment
Suffolk county will lose a fair amount of business. I shop at the indians once a month. I also, when I'm there go eat lunch, get gas and do food shopping. I sometimes make a day of it and go sample the farm stands, hit Tanger or one of the other malls/stores. I probably spend close to $200 per trip on non cigarrette purchases.That's $2400 dollars a year that local merchants won't get because of this law. Instead I'll drive to PA and spend my dollars there and in New Jersey on the way to and from. ...more
By pbsnyc (1), New York on May 11, 11 4:42 PM
1 member liked this comment
quit smoking and invest the money in the market and you will have about 100,000 saved in 12 years
By 3k (7), easthampton on May 11, 11 8:58 PM
1 member liked this comment
what are you threatening? You are going to stop those extra purchases just because you can't buy illeagal ciggies? looking to duck paying the taxes? The rest of us law abiding citizrns pay for your addiction. You know as far as any real local is concerned you can go to New Jersey. The families who invaded my home town in the 1890's put out a booklet. In it they state that any unwanted publlicity would attract undesirable people from the Jersey Shore. This booklet was published privately.
By summertime (589), summerfield fl on May 12, 11 12:22 PM
1 member liked this comment
"invest" ahahahaha LOVE THAT JOKE!!

go ahead and buy 10Y US Treasuries at 3.15% or buy gold & silver at all time high of mankind! or give it to local investing superstar WALTER NOEL & Family and LOSE EVERYTHING IMMEDiATELY!!
By david h (405), southampton on May 19, 11 3:23 PM
Honestly, they don't just sell cigarettes.

I myself am quite fond of a particular Cognac dipped cigarillo, which I pick up at the reservation for a third of the normal cost at a gas station. No filter paper, no dioxins, no 1200 known chemicals like a Marlboro. All natural tobacco, and the only way I can really afford to enjoy Cognac.

"Born innocent, taxed to death."
By Mr. Z (11659), North Sea on May 11, 11 5:00 PM
1 member liked this comment
This ban has NOTHING to do with protecting the health of New Yorkers.
Give me a break!

It's about money. Tax revenues - and-sticking it to the Shinnecock tribe.

Shame on NYS!
By elliot (254), sag harbor on May 11, 11 9:29 PM
I wouldn't worry about sticking it to the shinnecocks. At the last I knew about the Indian living on the Reservation (now very high dollar property) they never have to pay U S or NYS taxes.
By summertime (589), summerfield fl on May 12, 11 12:26 PM
Summertime, ever study American history. Have a look at the history of the treatment of Native Americans.
By peoplefirst (787), Southampton on May 12, 11 1:05 PM
1 member liked this comment
I am not responsible for what some folks did in the past. Maybe I am resopnsible for what some kids said in 1948 in school, but the other stuff, not my fault, nor is it yours. since we do know about it we should look to correct the situation as we see it around us. Kinda hard to correct some of the stuff the elected officials are doing now. Nobody in this highly Republican area where I currently live will listen to me!
By summertime (589), summerfield fl on May 12, 11 9:10 PM
Which version of history? The myth of "Native Americans" living as one with nature in a peaceful paradise until the evil europeans came along...or the reality of viscious warrior tribes who conquered and burned villages, raped, enslaved, and dispatched their captured opponents using the most horrific torture imaginable?

That said, the US Government not honoring deals made in good faith is unacceptable, just like the tribes currently fighting to deny tribal rights (and casino revenue) to ...more
By RealityFirst (597), Bridgehampton on May 12, 11 9:53 PM
1 member liked this comment
Reality first, you are one of the most hateful, ignorant, wingnuts posting on these boards. Is there one single group other than middle class white males with whom you do not have a problem?
By peoplefirst (787), Southampton on May 14, 11 12:09 PM
1 member liked this comment
Oops, sorry reality first, I forgot about the king of ignorant morons, capt'n bagger
By peoplefirst (787), Southampton on May 14, 11 1:55 PM
Reality check Summertime...their so-caled high dollar property does not provide them with advantages of other homeowners. You can walk into a bank and take a home improvement loan or a building loan...they can not. Not to worry you will get a taste of exactly what the government offers when they take away your rights with health care. One of the wonderful benefits they received when they were allowed to keep their high dollar property was health care. Take a look at the stats on their life span ...more
By Irish114 (4), Hampton Bays on May 18, 11 10:05 AM
oh yeah, summertime, they just walk into a store and say I want to pay for this bag of groceries but I do not pay taxes & just ask summertime.
By mo (89), Sag Harbor on May 18, 11 1:23 PM
they just walk into a store and say I want to purchase these items, but I live on the reservation & I don't pay taxes. Just ask summertime.
By mo (89), Sag Harbor on May 18, 11 1:27 PM
actually thats exactally right. They just have to have their tax exempt form and they cannot be charged tax on anything. I used to have a night job in a grocery store and thats what happened. No tax on anything....I say good for them! Wish I could do that!
By squeaky (291), hampton bays on May 20, 11 9:40 AM
This comment has been removed because it is a duplicate, off-topic or contains inappropriate content.
By squeaky (291), hampton bays on May 20, 11 9:41 AM
When a state or the federal government recognizes an Indian tribe, they recognize the Indian tribe as a government. One of the functions of government is regulation of taxation. "Tax free cigarettes" aren't a loophole as suggested by the article so much as it is a government or set of governments exercising it's right to regulate commerce within it's borders.

Also, the notion that this is a move on behalf of NYS to protect public health is laughable. Tax revenue is the bottom line here ...more
By cochise316 (58), southampton on May 12, 11 7:44 AM
1 member liked this comment
I don't understand how the state can mandate that the tribes collect taxes on sales made on the reservation.

Once those goods cross the "border" into the state, it's a different matter, but frankly, that's New York State's problem, not the tribes.

New York would need to set up the equivalent of a customs checkpoint outside of the the reservation to collect those taxes, but I guess they don't want to spend the money to do it the correct way.
By RealityFirst (597), Bridgehampton on May 12, 11 9:15 AM
ReallityFirst you do make me laugh. Anything, tangiable items, made and sold on the Reservation is tax free. You see "made ON their property". Are you also one of those who do not want to pay taxes? Shame on you. And everyone of those folks claiming Indian parentage living in a beautiful spot that the Shinnecocks have should be grateful. They have the opportunity for a good public school education, the grants for their college education, taking advatage of every advance in living the life we all ...more
By summertime (589), summerfield fl on May 12, 11 12:40 PM
1 member liked this comment
Woah! I don't even smoke, but your logic doesn't make any sense to me.

Remember, these are SOVEREIGN nations within our state.

If I make cigarettes in New York, and export them to Japan, the only taxes levied on those cigarettes will be whatever Japan imposes, not New York State taxes.

Similarly, if a tribal nation imports cigarettes, no state taxes are charged. When the tribe sells them on their reservation, they are free to impose their own taxes or no taxes at all. ...more
By RealityFirst (597), Bridgehampton on May 12, 11 10:01 PM
I will ask once again...at what point will I not have to be responsible for the treatment of people that arent even alive now? My family came from Ireland in 1865....my ancestors never took a thing from any Native American and as far as Im concered I paid for my home.. who will make ammends for the bigotry my great grandfather had to endure? Oh wait...no one.
By squeaky (291), hampton bays on May 12, 11 4:08 PM
Ok Squeaky (160) two of my great grandparents came over from Ireland in the 1860's. one was a tailor working for the rich Lords.
I never claimed you, or anyone else, is responsible for what someone in the past did. I don't know where you are coming from. I happen to be interested in history. The libraries in the Hamptons are wonderful in the information they have on the shelves and the help available from the staff is phenomenal. You are not responsible for what any of your ancestors did... ...more
By summertime (589), summerfield fl on May 12, 11 9:03 PM
1 member liked this comment
Look, the whole notion of "racial guilt" is absurd, and the only people who seem to be peddling it have a self serving agenda.

In my experience, it's not decendants of Native Americans trying to affix blame for what happend 200 years ago on any particular people, it's liberals who take it upon themselves to rescue "oppressed brown people" from "evil white people".

The tribes just want the deals they made honored, and rightly so.
By RealityFirst (597), Bridgehampton on May 12, 11 10:10 PM
2 members liked this comment
Please explain what the number of comments have to do with anyones post. If you know where Im coming from then you would get what Im saying. History has nothing to do with it.Everyone wronged 200 years ago is dead. Time to live in the now. People on the Res should be given the same opportunities that I am. But don't pull the "my ancestors went thru this" garbage. Give your ancestors the honor they deserve and be the best American, the best human or best whatever you can be.
By squeaky (291), hampton bays on May 13, 11 9:06 AM
Squeaky, your simplistic view of the world may help you live in blissful ignorance, but it does not change a history of Native American genocide on a scale of unimaginable horror. Your grandfather came here from another land. He was a freaking immigrant, not a native!

In 1985 your grandfather was fleeing a tyrannical British rule. He was fleeing a country that had been taken away from the native Irish by England. The Native Americans had already been here for thousands of years when ...more
May 13, 11 9:30 AM appended by razza5351
Meant to say 1865, yes
By razza5351 (551), East Hampton on May 13, 11 9:30 AM
Its not simplistic! And your ignorance is showing....Never said he was a native! Never tried to make any parallel example....I am just asking that at what point will any generation not be forced to pay for past transgressions!!!! Not hard to answer! My children are also 1/4 Cherokee...maybe you owe them a little something....
By squeaky (291), hampton bays on May 16, 11 10:42 AM
the fact that you the term "the hamptons" not only worries me, but shows that you are not from the area. The reservation may look beautiful but it is still plagued with the same sticky situations as any other town/city, crime, poverty, hate....don't put the reservation on a pedestal just because of its beautiful water views.
By MartyMcDougal (24), Sag Harbor on May 17, 11 9:33 AM
Your family were immigrants new to this country as where mine. These tribes are NATIVE AMERICANS that were cheated out of there own lands....
By River Dance (1), MASTIC on Jul 30, 11 5:41 PM
razza5351 I know that was a typo error the date of the year was 1865 and your history is correct. But to get back to the question, who owes, or pays taxes on the cigaretts? I do not propose that I am any law expert but when the Indians started selling cigarettes there on Montauk Highway I was disappointed. Mainly because I believe cigarettes and all such stuff is bad for the physical body. So when the taxes were raised to "help pay for health programs" I thought it was a good idea.
By summertime (589), summerfield fl on May 13, 11 12:20 PM
ok "Summertime" Ive read enough of your posts of you scolding "what you don't want to pay your taxes?" For your information those o fus who shop at the res are not against paying taxes- we are against paying ridiculous taxes.

The cost of a pack of Marlboros at the res (without state tax) is $5
The cost for the same pack elsewhere is $ 10 (at least). That equals a 100% tax!!!.

Summertime, are you willing to pay a 100% tax on anything you buy? I didn't ...more
By CaptainSig (716), Dutch Harbor on May 13, 11 5:39 PM
2 members liked this comment
There's nothing like genuine, necessitated Civil Disobedience.
By Mr. Z (11659), North Sea on May 14, 11 6:53 PM
Well at least the federal gov is consistent. Throughout time our leaders have stuck-it to the Indian. I say they should continue to sell cigarettes at whatever price they want on there land cause its their property rights. I hope they build a casino right in the middle of Hampton Bays, a Trump Marina like casino. I hate what our hypocritical government does to our native American Indian brothers and sisters, while at the same time taxing and selling the very same tobacco, gambling, etc... This is ...more
By rrc1049 (63), Bridgehampton on May 14, 11 9:21 AM
The money the federal government gets with the tax will be used maybe to raise all their salaries. Won't help us.
By housewife (79), east hampton on May 14, 11 11:45 AM
3 members liked this comment
There are a lot of mentally ill people that use smoking for coping and comfort. I'm not saying that it's a good idea, but it's reality. Many of these people purchase cigs in bulk from the Tribes as they simply can not afford the retail price. Seems to me another cash grab by NY State.
By double standard (1506), Remsenburg on May 16, 11 12:37 PM
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