Snyder says Paterson admitted cigarette tax law is flawed
Governor signs cigarette bill, but implementation in doubt
Seneca Nation President Barry Snyder said today that Gov. David A. Paterson recently told him that the law signed Monday to collect taxes on Native American cigarettes is flawed.
Snyder said Paterson told him he needed to sign it anyway because he was not the elected governor.
"I have to sign this bill. It's political," Snyder quoted Paterson telling him during a meeting earlier this month in New York City.
"I didn't have to go to New York City. He could have told me that in a phone call," Snyder said at a news conference this morning on the Cattaraugus Indian Reservation.
Snyder said he felt Paterson, by suggesting the law was flawed, was giving the nation a clue that it might be able to somehow overturn it. He said the nation will examine all options over the next 60 days, before the law becomes effective.
"The reality is, it's not a cigarette issue. This is a treaty issue," Snyder said in referring to the Buffalo Creek Treaty that the Senecas have long maintained exempts them from taxes being collected on retail sales.
At a news conference surrounded by the Tribal Council, Snyder urged the Seneca people to give their leaders a chance to peacefully work out a solution with New York State. He said the nation does not advocate violence.
Snyder said he sent a letter to Paterson, asking for another meeting. He also sent one to President Bush to notify him of the treaty violation. On Monday Paterson insisted that the state has the legal right to collect the tax — as determined by a 1994 U. S. Supreme Court ruling — and that it will reduce the consumption of cigarettes, and presumably their negative impact on health, by driving up prices for packs and cartons that are now tax-free.
The law would affect the $2.75 in state excise taxes charged on each pack of cigarettes but would not affect sales taxes.
The governor signed the bill one day before unveiling his plans to close a gap of about $15 billion in the state budget, a proposal that will include revenues from collecting the cigarette taxes.
“This is a new approach, and we hope this will be the effective approach in terms of fighting this problem,” Paterson said at a bill-signing event in Utica.
Indian tribes vowed to block the tax-collection effort.
“Attacking tax-free commerce in our territories is shortsighted and disastrous for us and all of Western New York,” Snyder said of a Seneca industry that employs 1,000 people. “The nation has a complicated and intertwined relationship with the state. Since this is the direction that the governor wants to take things, then we have no choice but revisit every aspect of our relationship with the state.”
Mark Emery, a spokesman for the Oneida Nation, said, “The only thing assured by the bill being signed into law today is ongoing litigation. Rather than collecting money for the state, this bill collects money for lawyers who will be litigating the legality of this law.”
While health groups cheered the governor’s approval, critics and even some supporters say that there are legal flaws to the new approach that could doom the collection effort.
“It will not result in one dime of tax being collected on sales made on Indian reservations,” said Buffalo attorney Margaret A. Murphy, who represents a Tupper Lake tobacco wholesaler, Day Wholesale, as well as Seneca tobacco merchant Scott Maybee.
Murphy halted a previous effort by the state to collect taxes, successfully arguing that the state’s failure to distribute coupons so Indians can still buy cigarettes tax-free was illegal. That injunction remains in place today against the 2005 law, and Murphy said the new law lacks the same provisions.
New York law and past Indian treaties, Murphy said, prohibit the state from taxing Indians on their reservations.
To get around that, the law signed Monday requires wholesalers to provide certification — under penalty of perjury — to the state tax department that they have complied with state tobacco tax law.
Philip Morris, which supports the tax-collection effort, said Monday that the new law will not work to resolve the situation. David Sutton, a company spokesman, said wholesalers are being asked to certify that they will not violate a provision of the tax law — but that section of law has not been enforced by the state itself. He said the state’s issuance of coupons to Indian smokers could help resolve the matter.
“The law has simply not been put in place to collect these taxes,” Sutton said.
That, backers of the collection say, could make it easier for the tribes to scuttle the new law in court.
State officials are confident that the new law is legal. “I think the issue has already been litigated in the Supreme Court of the United States,” said Assembly Speaker Sheldon Silver, D-Manhattan, whose house passed the bill in June.
R. J. Reynolds Tobacco Co., in a Nov. 25 letter to Seneca tobacco merchants, said that as of Dec. 28, all of its products must have a state tax stamp affixed. And Philip Morris has recently stopped selling products to a Buffalo wholesaler that supplies Seneca merchants.
Paterson was under enormous pressure to sign the bill. With the state facing a $15 billion budget deficit, lawmakers, unions, health groups and various stakeholders in the budget in recent weeks said he had to sign the measure in order to bring what many believe will be at least $400 million in annual tax revenues to the state.
The bill does not include gasoline sales.
Industry officials believe that far in excess of $1 billion is lost in all the cigarette and gasoline sales by Indian retailers.
Over the years, state officials have raised concerns about renewed violence if the tax is collected. The last time the state tried, in 1997, protesters shut down the Thruway and engaged in violent clashes with state troopers.
Monday, Paterson said that it is “not acceptable to us” that non-Indian retailers are unable to compete with the tax-free operations, which are able to undercut competitors by at least the amount of the state’s excise — $27.50 per carton. He said he is willing to continue talks with Indian leaders.
“We’re not trying to antagonize them as neighbors. We want them to understand the problems we have,” Paterson said, “[but] we have the right to collect taxes when our citizens buy cigarettes.”
Health groups say the cheap supply of cigarettes from Indian merchants has kept more people smoking, especially teenagers. “Untaxed cigarettes provide a cheap way to feed a deadly addiction,” said Donald Distasio, chief executive officer of the American Cancer Society of New York and New Jersey. “Because higher cigarette prices discourage smoking, collection of this tax will prompt 150,000 smokers to quit, save the state future smoking-related health care costs and provide revenue to sustain vital health programs.”
A group representing New York tobacco wholesale agents said the state could simply require every pack of cigarettes to have a tax stamp affixed. “This is a first step,” said Arthur Katz, executive director of the Association of Wholesale Marketers and Distributors.
“Collect the taxes. The state’s in bad shape,” Katz said of the long-stalled attempt to end the dispute. “Seventeen years is too long to negotiate with anybody about anything.”
News Staff Reporter Michael Beebe contributed to this report.
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