New York State - Governor Patterson will not tax cigarettes sold among Native Americans..

August 27, 2010 - At the New York State Fair, Governor David Paterson told NewsChannel 9 Syracuse the State would not try to tax cigarettes sold among Native Americans as long as those cigarettes never leave the reservation. Earlier in the day, he had promised to begin collecting taxes on cigarettes sold by reservation businesses, or sold by retailers to those businesses.

The Oneida Nation recently announced plans to move its cigarette-manufacturing facility from Western New York to the reservation in Central New York. The maneuver would hamper the state's ability to tax cigarettes manufactured on sovereign lands. Paterson told NewsChannel 9 that the state would decline to tax those cigarettes as long as they remain on sovereign lands.

"As you know, the Indian Nations have sovereign territory and as long as they manufacture those cigarettes and sell them on their own land, they'll be fine," Paterson said. "If their cigarettes start turning up in New York markets, we're going to tax them and we're going to find out who is smuggling them if they're not taxed."

The Onondaga Nation will likely stop selling national-brand cigarettes next month and rely solely on Indian-made brands at its smoke shop south of Syracuse, a nation attorney said Thursday. “Unless something changes, as of September 1 we won’t be able to sell major brands that are untaxed,” said lawyer Joe Heath. “It doesn’t make that much sense to sell them at the same price as people can get them at the convenience store across the street.” The Onondagas sold 1.2 million cartons of cigarettes last year tax-free. On Wednesday, September 1st the state will require wholesalers who supply Indian reservation stores to pay the $4.35 per-pack tax upfront and then collect it from the tribes. Tribes say they won’t pay any New York taxes and will sell their own brands instead. (Onondagas say they will stop selling national-brand cigarettes, Glenn Coin, The Post-Standard, 8/27/2010.)

Prior to NewsChannel 9's interview with the Governor at the State Fairgrounds, he said on a radio show that taxes would be collected from wholesalers sending cigarettes to the tribes. He also said State Troopers will be kept off the reservations to avoid trouble.

The State also plans to collect $4.35 per pack sales tax on cigarettes sold by Native American retailers to non-Indian customers beginning September 1. The tax is expected to generate about $200 million a year in revenues for the state.

The Seneca and Mohawk tribes are seeking federal court orders to stop the collection, claiming it would violate their rights.

Paterson says officials will enforce taxes when anyone brings unstamped cigarettes off the reservations.

Reference: VIDEOS - Paterson at the Fair: Clarifies plan to tax Indian cigarettes, 9WSYR-TV-SYRACUSE-DT17, 8/26/2010.

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