BUFFALO — A federal judge said Friday he will hold off deciding on a request by two Indian tribes for a temporary restraining order to block New York from imposing steep new taxes on cigarettes sold on reservations.
To help close a mammoth budget gap, Gov. David Paterson is vowing to collect a $4.35-per-pack tax beginning Wednesday on cigarettes sold by Native American retailers to non-Indian customers.
At a hearing in Buffalo, U.S. District Judge Richard Arcara reserved decision until at least Monday on the request by the Seneca Indian Nation and the Cayuga Indian Nation.
The tribes argued that the new taxes could doom their booming business in tax-free cigarettes and spell trouble for other Native American tobacco dealers in the state.
If the taxes are imposed, “the Cayuga Nation will be out of business,” declared Lee Alcott, an attorney for the tribe in central New York.
“There would be chaos in the (Seneca) Nation’s free market economy,” echoed Riyaz Kanji, an attorney for the Senecas, which operates two reservations in western New York.
Successive governors in New York have pulled back on forcing Indian tribes to collect cigarette and fuel taxes from their reservation stores. The tribes say they can avoid charging the new taxes because they enjoy sovereign immunity.
The new taxes already in effect since July in off-reservation stores across New York “places a minimum burden on the tribes,” countered Robert Siegfried, New York’s assistant attorney general.
“It’s been a long time coming and the state has decided to enforce this tax,” Siegfried told the judge. “The Legislature has spoken, and I have my marching orders.”
Paterson will require cigarette wholesalers to prepay the taxes before supplying reservation stores. He says state troopers will be kept off the state’s Indian reservations to avoid conflict.
The last time the state tried to collect the tax, in 1997, protests erupted and tires were burned on the Thruway, shutting down a 30-mile stretch of the state’s main thoroughfare that bisects Seneca land south of Buffalo.
Seneca Indian President Barry Snyder has repeatedly said “violence is not on our agenda,” but the nation’s leadership acknowledges that some tribe members might disagree.
The tax on Indian cigarettes is expected to generate about $200 million a year in revenue. Tribal retailers would still be able to sell cigarettes tax-free to members.
The tribes argue that the tax plan infringes on treaties with the federal government dating to 1794 and would force them to abandon their own regulatory system. The tribes impose their own tax of 75 cents a carton to fund health and education programs.