Tribe Can Continue to Sell Untaxed Cigarettes, N.Y. Court Rules

Mail-order shipments of cigarettes may have been done in by a new federal law, but the New York Court of Appeals has ruled that Native American tribes can continue to sell untaxed cigarettes at convenience stores located on tribal lands.

Indian Country Today reported May 18 that the court ruled that the Cayuga Indian Nation does not have to pay state sales taxes on cigarettes sold at its stores and can continue such sales without fear of prosecution. The ruling also halted attempts by local county district attorneys to pursue criminal tax-evasion charges against the tribe.

In 2008, county sheriffs raided the Cayuga smoke shops and seized half a million dollars worth of untaxed cigarettes, saying the tribe was violating state law because it does not have an official reservation. The appeals court rejected that argument and ruled that consumers, not the tribe, were responsible for paying cigarette sales taxes.

“The ultimate obligation to pay cigarette sales taxes rests on the consumer, although in most cases that duty is fulfilled, consistent with the tax-stamping scheme, by payment of the tax to the retailer, who passes it up to the distributor and wholesaler, who remits it to the department through the purchase of tax stamps,” the court ruled. “If, for any reason, a sales tax that is properly owed is not collected in this manner, the consumer remains under the obligation to remit it through other means.”