New York State - state democrats insist governor tax cigarettes sold on Indian reservations..

February 2, 2010 - Back on January 20, 2010 we reported that Governor Paterson is taking on the American Indians in New York (NY), moving to collect taxes on cigarettes sold within reservations to non-Indians.

Now State Senate Democrats lit a fire under Gov. Paterson Thursday, January 28th to collect taxes from cigarettes sold on Indian reservations. The group argued that bootleg cigarettes bought at Indian reservations and sold on the street at a steep discount cost city bodegas, grocery stores and newstands $250 million a year in lost business - and $30 million a week in lost state tax revenue.

Collecting tax on non-Indians seems to be working in Florida: Florida - non-Indian customers pay tax on tobacco at reservation shops...

Sen. Carl Kruger (D-Brooklyn), chairman of the Senate Finance Committee, hinted that he would oppose Paterson's effort to raise the state's current $2.75-per-pack cigarette tax by another $1 unless there is demonstrable action on collecting the taxes from reservation brokers. "Right now, I think it would be hypocritical to support a tax increase on already taxed cigarettes while we show a blind eye to the untaxed cigarettes," Kruger said.

Bootleg wholesalers purchase the untaxed cigarettes at Indian reservations for as little as $4 a pack and then typically sell them at two packs for $10.

The bodega (a small grocery store, sometimes combined with a wineshop), grocery store owners and newsstand operators estimate that more than half the cigarettes sold in the city are bootleg cigarettes sold at such a discount.

Efforts to collect taxes from cigarettes sold to non-Indians through reservations have been stalled for decades because governors have been concerned with possible violence.

Several collection efforts in the 1990s resulted in blockades of highways upstate by the Seneca Tribe of Western New York.

Sen. Jeff Klein (D-Bronx/Westchester) said that everyone has an obligation to obey tax laws, adding, "It's disingenuous of the native-American side to constantly say every time we meet with them and every time this issue is raised that they're going to threaten violence." Sen. Pedro Espada (D-Bronx) demonstrated the scam Thursday by having an aide buy two packs of Newports outside his district office on Webster Ave. for $10. "Why would you go and buy in a store?" he asked.

Paterson last week said he was going to force Indian dealers to pay the taxes. However, he did not include the new tax revenue in the current fiscal year budget, leading some to believe that he would not immediately enforce the tax.

Reference: State Senate Democrats urge Gov. Paterson to tax cigarettes sold on Indian reservations by Frank Lombardi (flombardi@nydailynews.com) and Mike Jaccarino, New York Daily News, 1/29/2010.

Some related news briefs:
NY State Governor Patterson - part of budget - collect Indian cigarette taxes..;
NYC - wins round in fight against Indian Tobacco Vendors.;
In Process - New York - city and state officials back off plans to crack down on cigarette black market..;
NYC can move forward with reservation cigarette lawsuit..;
NY Governor signs bill to attempt to curb illegal sale of tax-free cigarettes to non-Indian purchasers..;
NYC sues reservation smoke shops over bootlegging..;
NY Governor Paterson to negotiate with Native Americans over cigarette taxes..;