New York State ready to quickly end tax-free cigarette sales by Indian retailers to non-Indian customers...

March 9, 2011 - The state's top tax collector said the state is ready to quickly end tax-free cigarette sales by Indian retailers to non-Indian customers.

New York State is awaiting a ruling from a federal appeals court on the long-simmering tobacco tax issue, said Thomas Mattox, who was confirmed Tuesday by the State Senate to the tax commissioner's post. The federal appeals court in Manhattan considering the challenge to the state’s Indian tax collection law could issue its ruling in the coming weeks. (While the Second U.S. Circuit Court of Appeals ponders its next ruling — perhaps pivotal, perhaps not — millions of cigarettes are still being sold on reservations to non-Indian individuals who want to avoid $5 a pack in state and local taxes.) (New York State - federal judge rules in favor of the state but still can't start collecting sales tax; no mediation..)

"We're prepared to enforce immediately," Mattox said after being unanimously backed by the Senate Finance Committee for the tax post.

Mattox said the agency is prepared to issue tax-free coupons to members of Indian tribes and collect the tax on non-Indian customers "as soon as we are [allowed] to do so by the courts."

Is he concerned about possible confrontations as occurred the last time the state tried to collect the tax in 1997? "I don't have the expertise on that. I think that's really a question for law enforcement," he said. "Our focus has been on the tax laws and our requirements under them, and we are prepared to enforce them."

Seneca Nation President Robert Odawi Porter issued a statement following Mattox's comments.
"There's nothing new here," Porter said. "The Nation prefers dialogue to confrontation. When the state wants to discuss this issue, we'll be open to those discussions. As always, we will defend our treaty rights vigorously."

Gov. Andrew M. Cuomo is counting on $130 million in revenue by ending the tax-free Indian tobacco sales. The state wants to collect the tax "upstream" at the tobacco wholesale level so that the taxes already would have been paid to Albany by the time cigarettes reach Indian retailers. (New York State - in budget governor includes $130 million in revenues from taxes on cigarettes sold by Indian merchants..)

The state wants to collect its $4.35-per-pack excise tax, which is not being charged to smokers who buy from Indian retailers.

The Senate Nation, whose private tobacco retailers are considered the biggest Native American cigarette suppliers, is fighting the Cuomo effort in court and before the Legislature. They argue that the tax-free sales are protected by treaty rights and that they will not be party to a tax collection effort by Albany.

Mattox is a former executive at Goldman Sachs & Co. and Chase Manhattan Bank. In the Senate Finance hearing, Mattox said his department is also considering a system used in other states that employs a special encryption system on cigarettes to reduce counterfeit cigarettes flowing into the high tobacco state.

References: Tax man eyes Indian tobacco sales by Tom Precious (tprecious@buffnews.com), NEWS ALBANY BUREAU, BuffaloNews.com, 3/8/2011; Tax official ready to halt cigarette sales by Indians to non-Indians, a12iggymom's Blog, 3/5/2011.