ALBANY — The state has begun a crackdown on tax-free sales of cigarettes by American Indian retailers, including seizure of thousands of tobacco products in recent weeks and secret surveillance of reservation smoke shops, officials of Gov. Andrew M. Cuomo's administration Wednesday told The Buffalo News.
This marks the state's first attempt to collect the taxes since 1997, when a short-lived experiment ended in violent confrontations between state troopers and protesters along the Thruway.
Since June 21, the state has seized cigarettes with a state and local tax value of more than $1.5 million, administration officials said. State officials could not provide a figure for new tax money collected as a result of the enforcement effort but reported an initial increase in tax stamps sold by the state to tobacco wholesalers who supply Indian merchants.
Some major tobacco wholesalers, meanwhile, said they have stopped supplying tribes, including the Seneca Nation, with the cigarettes.
The state still is setting up plans for a fuller enforcement of the law, which kicked in last month after a state appeals court dropped a restraining order that had allowed the tax-free sales to continue.
But the collection effort has prompted Native Americans to step up production of their own cigarette brands, which, they contend, the state has no right to tax. This may result in another court battle.
The Cuomo administration maintained Wednesday that the state has a legal right to collect the tax not just on such domestic brands as Marlboro, but also on the growing number of Indian-made brands, such as those produced at four facilities on Seneca land.
Indian leaders strongly dispute those claims.
A policy dealing with all facets of the tobacco trade still is evolving, state officials said.
"The Department of Taxation and Finance is moving aggressively on a number of different fronts to collect the taxes owed to the state," said Josh Vlasto, a Cuomo spokesman. "Enforcement began after the temporary restraining order was lifted. It is ongoing, and it will continue."
Preliminary information shows an increase in the sale of tax stamps — which wholesalers must purchase for $4.35 per pack to cover state excise charges — and rising prices of domestic brands at Indian shops.
Native Americans say supplies of tax-free domestic brands are starting to run out as they focus on cheaper, reservation-made brands such as Seneca — and one even named Senate.
But the state is pressing ahead with its enforcement effort.
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