Skip to comments.

Posted on 02/11/2004 5:41:00 PM PST by lockjaw02

Bid to collect taxes from Senecas halted By TOM PRECIOUS News Albany Bureau 2/11/2004

(picture caption) Assembly Speaker Sheldon Silver is willing to allow the governor time to work out deals with Native American tribes.

ALBANY - The state Tax Department is suspending indefinitely the government's efforts to collect taxes on sales of cigarettes and gasoline on Indian reservations to non-Indian consumers.

Gov. George E. Pataki last month said he would ask the Legislature for permission to delay the tax collection for a year while he negotiates side deals with Indian tribes.

But State Tax Commissioner Andrew Eristoff said Tuesday that his agency does not intend to collect the tax. Collections were supposed to start next month.

The Legislature last year ordered the agency to devise regulations to stop the flow of what lawmakers say are costly and illegal tax avoidance schemes by Indian tribes taking advantage of New York's high cigarette taxes.

Non-Indian retailers condemned the move by the tax chief, while officials with the Senecas, considered among the nation's top Indian cigarette sellers, said the tribe's multimillion-dollar ad campaign against the tax may have persuaded Albany to back down.

But in a rare display of division within the Pataki administration, the governor's economic development director said the state needs to provide a level playing field for small businesses to compete with Indian retailers.

Eristoff recalled the violence along the Thruway in 1997, the last time the state tried to enforce the tax rules. He acknowledged that the threat of violence by some Indians contributed to his decision to stop the collection efforts.

Trying to work something out makes most sense for the state, Eristoff told reporters after he testified before Senate and Assembly committees on the governor's 2004 state budget plan.

"I think it would give anyone pause before taking action," Eristoff said of the violence in 1997.

"We feel this has been an extremely complicated process. We have endeavored to strike a reasonable balance between the Legislature's intent and the need to respect Indian sovereignty," he said.

Assembly Speaker Sheldon Silver, D-Manhattan, has said he is willing to give Pataki time to negotiate deals with Indians.

A spokesman for Senate Majority Leader Joseph L. Bruno, R-Brunswick, said Tuesday the issue will be discussed in state budget talks.

Charles Gargano, the state's economic development chief, said, "I can't speak for the Department of Taxation, but I do believe there should be level competition at all times to protect our small businesses."

He added that the state needs to look out for small businesses and that he would not support any unfair competition.

Tax officials said Tuesday that New York tribes account for more than 50 percent of Internet cigarette sales in the nation. One official estimated that some Seneca retailers export 85 percent of their cigarettes out of state.

The agency estimates 28 million cartons of cigarettes were sold by wholesalers to Indian nations in New York, with much of that going to Seneca retailers.

Non-Indian retailers and legislators say the state is losing at least $400 million in excise taxes - $15 on a carton of cigarettes - by not collecting on Indian sales of cartons. But tax officials say the number is closer to $40 million because much of the Indian cigarettes are sold beyond the state's borders.

Critics dispute that, and say the agency is not taking into account lost sales of cigarettes Indians purchase from sources outside those monitored by state tax officials.

Non-Indian retail groups said the tax department's decision Tuesday is illegal.

The leader of the New York Association of Convenience Stores noted that Pataki last month asked the Legislature to approve a one-year delay in the law's implementation and the state tax commissioner is now pushing off the enforcement.

"It sends a message that the state of New York does not care about equality in enforcing its tax law, and it sends a message to every citizen of New York that if you don't like a certain tax policy, you threaten some sort of violence and then you can get a pass," said James Calvin, executive director of the New York Association of Convenience Stores. Dan Finkle, a spokesman for Fair Application of Cigarette Taxes, a consortium of non-Indian businesses and health groups, said: "This isn't cooperation or confrontation. It's capitulation."

Last month, Pataki said the regulations should be put on hold while he tries to negotiate separate deals with Indian tribes. He suggested the Indians might raise the price of their products to create price parity with non-Indian retailers.

But Seneca leaders insisted they would never negotiate such deals and said their tax-free sales are protected by an 1842 treaty between the tribe and the federal government. The tribe last week asked President Bush to intervene in the dispute.

"For the Seneca Nation, it's one of the end results we were looking for," Arthur Montour, a Seneca tribal council leader, said of the tax commissioner's announcement Tuesday.

Eristoff said the tax agency also has signed a memorandum of understanding with the New York State Police to work more closely together on cigarette bootlegging crimes.

"It's really designed to ensure we don't trip over each other," he said.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.