N.Y. Tax on Tribal Cigarettes Blocked by Federal Judge

U.S. District Court judge Richard Arcara extended a temporary order blocking the state of New York from collecting taxes on cigarette sales by Seneca and Cayuga nations to non-Indian customers, the Associated Press reported Oct. 15. 

Arcara wrote that the tax “will almost certainly have an adverse impact upon the Nations' existing tobacco economies,” pointing to potential layoffs at the 172 Seneca nation stores, which employ about 3,000. He said he did not believe the state would be hurt by the delay. 

He also referred to predictions of violence if the tax was levied. In 1997, when the state last attempted to impose the tax, protesters blocked a 30-mile stretch of highway that crosses Seneca land by setting tires on fire. The restraining order, which has no expiration date, gives time for the tribes to complete legal challenges to the tax.

State officials had planned to start collecting the tax Sept. 1, and expected to collect $110 million this fiscal year and $200 million annually thereafter. According to the New York state Department of Taxation and Finance, tribes bought 24 million cartons of non-native cigarettes from tobacco makers in 2009. In addition, the tribes sold millions of cartons of native brands.

In a related case, the tribes lost their bid for an injunction against the tax on constitutional grounds when Arcara denied their claim that the tax violated their sovereignty. He stated that they had “failed to demonstrate a likelihood of success on the merits of their claims.” The tribes could appeal that decision.