The Bloomberg administration is seeking an injunction to stop cigarette sales from wholesalers on the Poospatuck Indian Reservation on Long Island, N.Y., the closest Indian reservation to New York City.
New York City officials claim that cigarettes can only be sold by these wholesalers to residents living on the Reservation and is asking a federal court to bar eight of the largest cigarette wholesalers from selling to the general public.
City officials allege that bulk sales of cigarettes by these smoke shops are delivered by van to the city and distributed for resale, costing the city millions of dollars in lost tax revenues. According to the New York Times, "the State Department of Taxation and Finance said that the Poospatuck cigarette trade grew to 11.3 million cartons last year, up from 406,000 cartons in 1996."
The eight wholesalers listed as defendants in the lawsuit are said to control 95 percent of cigarette sales on the Reservation.
"In making off-reservation sales, including bulk transactions in which defendants sell vanloads of cigarettes on a daily basis, which are then trafficked into New York City for resale, defendants grow rich at the expense of tax-paying retailers and city and state taxpayers," lawyers for the city said in their papers seeking an injunction.
New York state and NYC city excise taxes on cigarettes are $4.25 per pack, pushing the price of cigarettes sold off the reservations as high as $9 per pack. Since the cigarettes sold on the Indian reservations do not charge taxes, many of these cigarettes are then re-sold in the city for $5 per pack or for fifty cents per individual cigarette.
N.Y. Mayor Bloomberg said cigarette sales on all of the Indian reservations in the state are costing the city and state $1 billion each year in tax revenue. The Poospatucks and Senecas sell most of the cigarettes of the seven tribes in the state.
The state has not tried to halt cigarette sales on Indian reservations in N.Y. since a 1997 Seneca Tribe protest that briefly closed the New York Thruway. The State Legislature recently passed a bill that enforce tax collection of cigarette sales on the reservations. The bill is now awaiting the signature or veto of Governor David A. Paterson.
Law enforcement closed down smoke shops run by a state-recognized Indian tribe in Connecticut, the Paugussett Tribe, and the federally-recognized Narragansett Tribe in Rhode Island.
Poospatuck Tribe Chief Harry Wallace sees the lawsuit as the city trying to interfere with lawful retail trade on the Reservation.
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