Marlboro-maker backs NY bid to tax Indian sales

ALBANY, Aug 14 (Reuters) - Cigarette-maker Philip Morris, supports a New York state Assembly bill that would solve a long battle over collecting taxes on cigarettes sold by Indian reservation stores by making wholesalers pay the levy, a company spokesman said on Thursday.

The Indian tribes would then seek refunds for the taxes paid on any cigarettes that were sold to other Indians, explained David Sutton, a spokesman for Altria Group MO.N, which owns Philip Morris.

“But if you or I went as non-Native Americans consumers, the tax on the product would have already been paid on the wholesale level and they would not be entitled to a refund of that tax under this bill because you and I are not tribal members,” he explained.

New York’s tax revenues have dropped with Wall Street’s profits, and the legislature returns next week for a special session to tackle the three-year, $26 billion deficit.

Estimates of how much the state loses by failing to collect the cigarette taxes range from several hundred million dollars a year to as much as $1 billion.

The tribes have asserted their immunity from the taxes, which springs from their status as sovereign nations. The issue has not been resolved despite lawsuits by convenience stores that compete with the Indian reservation stores and criticisms by New York City Mayor Michael Bloomberg, an independent.

Spokesmen for the Democratic governor and the Assembly Speaker, Sheldon Silver, another Democrat, were not immediately available. The Assembly bill was introduced on Wednesday.

In 1997, former Republican Governor George Pataki backed down on a bid to collect the taxes after tire-burning protests by two upstate Indian tribes left 12 state troopers with injuries.

A counsel for the Senecas, Robert Odawi Porter, said on Thursday said the tribe has asked Governor David Paterson to oppose such taxes.

“We are demonstratively a contributor to the economy and that is what our treaties would protect,” Porter said, estimating tobacco sales were as much as $200 million in 2007.

He added: “The 5,000 jobs we have created through gaming or through our tobacco trade really all gets spent in western New York. Albany’s effort to take that money and redistribute it downstate is probably not something most people realize, that they are going to appreciate.”

New York’s Republican-led Senate has enacted a competing tax bill, and Senate Majority Leader Dean Skelos has urged the state to collect cigarette taxes from Indian stores.

Philip Morris wants the taxes collected, the spokesman said. “We want all of our brands sold through legitimate distribution channels with taxes paid, laws respected.”

New York accounts for about 8 percent of its national cigarette sales, which total 185 billion a year, he said.

Sutton continued: “For us also, in (the) absence of collecting the tax, the state can come back and look to raise excise taxes again.” Raising taxes on cigarettes tends to throttle smokers’ purchases, according to anti-smoking advocates, including New York City’s mayor who also wants the state to avoid budget cuts that could hurt the city. (Reporting by Elizabeth Flood Morrow in Albany, additional reporting by Joan Gralla in New York)