ALBANY — The state tax department this afternoon will issue

regulations to collect taxes on cigarettes sold by Indian retailers.

The new plan envisions collecting the tax "upstream" and not at Indian retail shops. The

rules require tobacco manufacturers to sell cigarettes only to licensed stamping agents,

certifying that they don't do business with tax-free retailers.

The Buffalo News obtained in advance a copy of the proposed rules.

The action today occurs a month after Gov. David Paterson proposed to try to put an end to

the years of dispute over the issue.

The release of the proposed rules kicks off a 45-day comment period and a review period that

could see enactment in six months.

Government sources today said any agreements struck in the coming months to resolve the

issue with individual Indian tribes could supersede the new rules.

The regulations would result in licensed stamping agents, which basically serve as middlemen

between manufacturers and retailers, paying the taxes to Albany.

Paterson and Jamie Woodward, the state's acting tax commissioner, will announce the proposed

regulations later this afternoon.

The rules would permit perjury charges on wholesalers who violate their certification

agreements needed to sell cigarettes in New York. Wholesalers will have to list the source of

their cigarettes in filings with the tax department.

Manufacturers would have a legal burden, as well, because they would have to collect the

certifications from wholesalers — meaning they could not sell their products to any

wholesaler unless that supplier has certified to the tobacco companies that they do not sell

any illegal tax-free cigarettes.

The Paterson plan also seeks to lift a 2006 policy of not collecting taxes on cigarette

sales by Indian retailers to non-Indians.

"It seems reasonable to me," Russell Sciandra, director of the Center for a Tobacco Free New

York, said of the proposed rules.

The plan also calls for an "adequate" number of

cigarettes to be supplied tax-free to Indian tribes for personal consumption of its members.

In the case of the Senecas' 7,967 members, it would mean a total of 167,000 tax-free packs

being supplied to the tribe every quarter — or 21 packs every three months for every

man, woman and child as an enrolled Seneca.

In all, the state's nine tribes — with a total of 31,000 members — would

receive 648,000 packs of tax-free cigarettes per quarter. Licensed stamping agents would be in

violation of state law if they supply an amount beyond the approved allotment for each tribe.

Sciandra said the approximately 80 packs per person of tax-free cigarette allotments to the

Indian tribes across New York represents about the national consumption level.

"It's definitely a step in the right direction, but I've been through this movie before,"

Sciandra said.

The Seneca Nation could not be reached for immediate comment.

Paterson administration officials previously have said the issuance of the regulations will

be a major step to lift current court injunctions placed on enforcing tax collection efforts

already on the books.

Laws have been enacted over the years to end the tax-free sales, but Paterson and previous

governors have ignored them.

The proposed regulations come at a time some lawmakers have vowed to block implementation of

the governor's proposed $1 per pack tobacco increase until the Indian tax collection effort is

under way. They say there is already too much of a competitive disadvantage for non-Indian

retailers, who would see sales further slip to tax-free sources if the tax is raised first.

Peter Kiernan, the governor's counsel, said last month that Paterson is committed to ending

the dispute that has stretched back to the days of former Gov. Mario Cuomo.

"The governor will enforce the law, and we are taking steps necessary to do that. There

shouldn't be any doubt about that," Kiernan told The Buffalo News in January.