Tribes Manufacture Cigarettes to Side-Step State Tax

Tribes Manufacture Cigarettes to Side-Step State Tax

ICTMN Staff
8/19/11

Since New York began enforcing the collection of state excise taxes on premium cigarette brands sold on reservations to non-Indians in June, many tribes have started manufacturing their own smokes to curtail the fee, reported Convenience Store News (CS News).

The New York State Supreme Court Appellate Division lifted a temporary restraining order issued June 9 by the Appellate Division of the State Supreme Court that prevented New York from collecting a $4.35-per-pack tax on cigarettes sold to non-Natives on sovereign territory.

On the heels of that decision, Robert Odawi Porter, president of the Seneca Nation of Indians, said the tribes would make their own to avoid the levy, in addition to seeking "review of this decision by the state Court of Appeals," Porter said.

The ruling gives New York the right to start collecting sales taxes on all tobacco sales from the date the tax went into effect—last September—across New York. State officials expect to generate more than $100 million in annual revenues from the $4.35-per-pack tax—the highest cigarette tax in the country.

"While the state may be able to embargo through taxation premium brands from entering our territory, it cannot tax the brands made in our territory or any of the Six Nations," Porter said, reported CS News.

The state's push to require the tax has spurred tribal retailers to stop selling mainstream brands like Marlboro and instead push Indian brands like Seneca, Buffalo and Signal label, reported CSP.

Case in point: Justin Tarbell. He manufactures his own cigarettes on the St. Regis Mohawk Reservation in upstate New York and sells them at a lower price not found off reservation grounds. Even Florida, Texas and Washington prices do not beat Tarbell's low rate, reported the Wall Street Journal.

"We want to be in control of our destiny," said Tarbell, whose family has run convenience shops on the St. Regis reservation upwards of 50 years, reported the Journal.

Tarbell Management Group's trading post, Bear's Den, and other stores have always sold mainstream smokes. But in 2006, Tarbell's father, Eli Tarbell, began manufacturing cigarettes for sale only on the reservation without a federal license. He claimed he was protected by sovereign immunity. Four years down the road, the manufacturing operation finally settled claims with U.S. regulators of illegal manufacturing, applying for a permit and paying $1.75 million, reported CS News.

In June, Tarbell-run convenience stores ceased selling Marlboro and other major brands to avert the state's tax collection. Indian brands line the shelves and only a few remaining boxes of major brands are available for purchase at prices ranging from $50 to $80 as compared to a carton of Signal that sells for $23.50, reported CS News.

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