Tribal Manufactured Cigarettes Sold out of NYS Not Taxable
In the ongoing war over cigarette taxes between the State of New York and its federally recognized tribes, the latter scored a victory in the most recent battle.
Supreme Court Justice David Demarest issued an order last week requiring the State to return cigarettes seized last January by state police. The 26,160 cigarette cartons and 72 bags of tobacco were sold by the St. Regis Mohawk Tribe to HCI Distribution, Inc., a political division of the Winnebago Tribe of Nebraska.
Some of the State’s tribes began to manufacture and sell their own cigarettes after losing a court case requiring them to pay the $4.35 per pack cigarette tax on their purchase of name-brand cigarettes from wholesalers located off reservation.
NY Tax Law imposes a cigarette tax on on-reservation sales of cigarettes to non-members of an Indian tribe. The consumer bears the responsibility to pay the tax.
In this case, however, the cigarettes were sold to out-of-state purchasers, which, according to Justice Demarest, are not subject to the State’s cigarette tax. Therefore, the State had no authority to seize the cigarettes and loose tobacco en route to Nebraska.
A spokeswoman for NY Attorney General Eric T. Schneiderman confirmed the AG will appeal the decision.