| NEW YORK
NEW YORK May 9 Two Native American tribes have
lost a round in their court battle to block New York state from
collecting cigarette taxes from reservation stores.
The U.S. Court of Appeals for the Second District, in a
decision released on Monday, annulled an injunction that had
prevented New York from enforcing cigarette tax laws that had
been due to go into effect on Sept. 1, 2010.
A spokeswoman for the state Department of Taxation was not
immediately available to say if New York might now start
collecting cigarette taxes.
In 1997, then-Governor George Pataki backed down on an
effort to collect the reservation store cigarette taxes after
tire-burning protests by two upstate tribes left 12 state
troopers with injuries.
The injunction on enforcing the cigarette tax laws had been
granted by the Northern District's federal court, but the
appeals court rejected that decision, saying the tribes failed
to demonstrate that they were likely to succeed on the merits
of their case.
The appeals court, which lifted all court stays pending
appeal, also upheld the Western District federal court's
decision to deny a request by the Seneca Nation, the Cayuga
Nation, the Unkechauge Nation and the Mohawk Tribe to stop the
state from levying the cigarette taxes.
New York's decades-long battle to collect taxes on
cigarettes bought by smokers who are not members of Native
American tribes could grind on because the appeals court sent
the cases back to the lower courts.
State Attorney General Eric Schneiderman in a statement
estimated that lost tax revenue amounts to $500,000 a day.
"Today's decision respects tribal rights and at the same
time represents an important victory for the state to collect
deserved revenue and to protect public health," said
New York, like many states, has yet to see tax revenue
rebound to pre-recession levels, which heightens its desire to
collect the lost cigarette tax revenue.
The tribes say they do not have to charge cigarette taxes
-- or fuel taxes either -- because of their sovereign
New York state tried to sidestep the issue on sovereign
immunity by requiring the wholesalers, which sell reservation
stores millions of cigarettes a year, to collect the taxes.
Native American smokers would not have to pay the taxes as each
tribe would get a set amount of tax-free cartons for them to
The Oneida, Cayuga and Unkechauge had argued that forcing
the wholesalers to charge the tax "imposes an impermissible
direct tax on tribal retailers, or alternatively, imposes an
undue and unnecessary economic burden on tribal retailers," the
appeals court said in its decision.
But the appeals court noted the U.S. Supreme Court has
decided that Native American governments are not authorized "to
market an exemption from state taxation to persons who would
normally do business elsewhere."
(Reporting by Joan Gralla; Editing by Leslie Adler)