Tax drama continues

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A state appellate judge on Wednesday stayed Indian cigarette tax collections, as convenience stores renewed a call to suspend the tax hike altogether.

New York cannot collect cigarette taxes from any Indian businesses pending a hearing next week before the Appellate Division, Fourth Department. Justice Samuel Green on Wednesday issued a stay in Day Wholesale v. State of New York, in which a supreme court judge on Aug. 30 lifted previously issued injunctions against the state collecting the tax because it didn’t have a means in place for the collections. The state now maintains that its new regulations, effective Sept. 1, supply those means.

Justice Green’s ruling came a day after U.S. District Court Judge Richard J. Arcara issued a temporary restraining order in a lawsuit brought by the Seneca Nation of Indians, later joined by the Cayuga Nation. That order is in effect through Sept. 13.

The tribes claim they are sovereign nations and are exempt from paying state and local taxes.

In response to this week’s court rulings, the New York Association of Convenience Stores is calling on Gov. David A. Paterson to issue an executive order to suspend the 58 percent tax hike on cigarettes that took effect July 1.

The association for years has been called for the collection of taxes on cigarettes sold at tribal businesses to non-Indians, claiming it creates an unfair advantage and is a detriment to convenience stores and other businesses that are required to pay the tax.

In a letter to the governor,  association President James Calvin said the state created a “double-edged bargain” when it increased the per-pack cigarette tax from $2.75 to $4.25 and promised to mitigate the negative effect on tax-collecting retailers by collecting the same tax from Indian businesses.

“If one side of this bargain has been placed on hold, it’s only fair that the other should be put on hold as well,” Calvin wrote.
He said that, since the excise tax hike’s enactment, mom-and-pop stores have lost 25 to 45 percent of their cigarette unit sales, virtually all of it because of the ensuing wave of cigarette tax evasion it triggered.