Wednesday, October 21, 2009

New York Governor Asks Feds For Help In Charging State Taxes On Cigarettes Sold On Indian Reservations

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New York Governor David Paterson has asked the federal government for help if confrontations result from the state's intent to collect state taxes on tax-free cigarettes sold on Indian reservations in that state.

Gov. Paterson's letter to U.S. Attorneys in Brooklyn, Syracuse and Buffalo noted the "likelihood of violence and civil unrest" if he began enforcing the state tax on Indian reservations in New York. Recent New York governors have chosen not to collect the tax but projected state budget deficits are adding pressure on officials to enforce the tax collection.

The following installment of The Tribes In The Media is an article in yesterday's Buffalo News:

Paterson asks feds to weigh risks of collecting taxes on Indian cigarettes
By Tom Precious
Buffalo News
News Albany Bureau
October 20, 2009

ALBANY -- Gov. David A. Paterson has asked the U.S. Justice Department for a "threat assessment" if he were to begin trying to collect taxes on cigarette sales by Indian tribes, including the Seneca Nation.

In a letter to top federal prosecutors, the governor also suggests he might need help from Washington in putting down any possible unrest by Indian tribes if the tax collection starts.

The unusual request, dated September 23 to the U.S. Attorneys in New York state, including Buffalo, seeks the federal government's assistance to the "likelihood of violence and civil unrest" if he began enforcing the state's collection on the tax-free cigarette sales.

"Furthermore, I would appreciate your operational commitment to help mitigate any disturbances that might occur in each of your districts if implementation were to occur," Paterson wrote to the U.S. Attorneys in Brooklyn, Syracuse and Buffalo. He did not elaborate.

"We are going to let the letter speak for itself," Morgan Hook, a spokesman for Paterson, said when asked today about the letter.

A copy of the letter was obtained by The Buffalo News.

The governor said it is his "intent" to continue to try to negotiate agreements with the tribes over their long-standing refusal to collect taxes on the cigarette sales, which amount to hundreds of millions of cigarettes sold tax-free each year at smoke shops, in the mail and over the internet.

But Paterson is under mounting pressure from some legislators to begin collecting the tax. Some lawmakers say the state is losing upwards of $1 billion by not collecting the taxes on the Indian sold cigarettes.

The state faces a $3 billion deficit and lawmakers are desperately looking for ways to slash the red ink without resorting to spending cuts, such as to education, that the governor proposed last week.

Word of the letter comes just a week before the state Senate is to hold hearings on the issue of the uncollected sales.

Sources said the Seneca Nation was told last month by Paterson's office about the letter to U.S. Attorney Kathleen Mehltretter of the Western District of New York, as well as Andrew Baxter in Syracuse and Benton Campbell in Brooklyn.

"We see the letter as nothing more than the Governor doing his job to assess the historic consequences of what happens when the state tries to violate our treaty rights,'' said Richard Nephew, chairman of the Seneca Nation Council.

Paterson begins his letter asking the top federal prosecutors for "your guidance as to the potential consequences" if the state were to begin collecting the tax. The U.S. Supreme Court in 1994 said the state had the legal right to collect taxes on cigarette sales by Indians to non-Indians.

The governor noted past unrest, including battles in 1997 along the New York Thruway when then-Gov. George Pataki tried to collect the taxes.

"As a result of such unrest, a policy of forbearance was put in place" by the state tax department, Paterson wrote.

Governors, going back to Mario Cuomo and continuing to Paterson, have avoided resolving the tax issue. The matter has intensified as the state over the years has sharply raised tobacco excise taxes, giving Indian retailers a major leg up on the competition, raising the criticism of non-Indian retails and health groups, who maintain the state's goal of raising taxes to help dampen consumption has been undermined.