July 30, 2010 - BUFFALO, N.Y. — Seneca Indians in the mail-order cigarette business can no longer use the post office to ship cigarettes while they fight to have a new law banning the practice struck down in court, a federal judge ruled Friday.
In a mixed decision, Judge Richard Arcara upheld the mail-order ban contained in the Prevent All Cigarette Trafficking Act (PACT) but temporarily exempted more than 140 Seneca-owned businesses from a provision requiring them to comply with all taxing laws in the places they sell cigarettes.
The order will remain in place while a lawsuit claiming the PACT Act is unconstitutional works its way through the court.
The ruling disappointed Seneca Nation President Barry Snyder, who said it would not protect tobacco employees from losing their jobs.
Some Seneca businesses shut down even before the law took effect June 29, saying without the post office they had no way to ship the thousands of cartons of discount cigarettes ordered by phone and Internet each day by smokers around the country. UPS and FedEx voluntarily stopped shipping cigarettes several years ago.
“The nation urges Seneca business people to continue their court battle — all the way to the U.S. Supreme Court, if necessary — to allow mailing of legal tobacco products,” Snyder said.
Seneca-owned businesses are estimated to control 80 percent of the country’s mail-order cigarette market. Relying on tribal sovereignty, sellers do not collect state sales taxes, allowing them to sell cigarettes at prices far lower than nonnative competitors.
Native American sellers were offering cartons of Marlboros for $50.99 on Friday, compared with the $100 price tag in off-reservation convenience stores in New York, where the sales tax is $4.35 per pack.
Nonnative retailers are among PACT’s biggest supporters.
In his ruling, Arcara disagreed with claims by Seneca lawyers that the law violated the Constitution’s equal protection rights because it has a disproportionate effect on Native Americans. Congress knew leveling the playing field for nonnative retailers would hurt American Indian businesses, he wrote, “but took that action in spite of that fact, and not because of it.”
He also shot down challenges to the mail ban, saying Congress has the authority to prohibit tobacco shipments if it wants.
“It was Congress’s judgment that use of the mails …. facilitates illegal cigarette trafficking and enhances the accessibility of cigarettes for minors,” Arcara said.
But the judge said the law’s unprecedented requirement that sellers follow the taxing schemes of the cities and states into which they ship could have far-reaching effects and deserved a closer look.
“If Congress possesses the authority to subject out-of-state retailers to every state and local taxing jurisdiction into which their products are delivered, then it has the authority to do so for all commercial products, not just cigarettes,” Arcara said.
Plaintiff Aaron Pierce, whose 10-year-old Seneca Smokeshop does business in 46 states from the Cattaraugus reservation, planned to find an alternate delivery method, his lawyer said without elaborating.
“We’re pleased to be remaining in business and we intend to do so,” attorney Michael Feeley said.
Arcara’s ruling came hours before an earlier temporary order blocking enforcement of the entire law was set to expire.
Reference: NY judge temporarily exempts Seneca cigarette sellers from some new regulations, not mail ban, Business News, blog.taragana.com, 7/30/2010.
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