Federal Judge Continues Ban on NY Indian Cig Tax

A federal judge in western New York indefinitely extended an order blocking the state from collecting taxes on some Indian cigarette sales, while noting he doesn't believe the tribes have made the case that the taxation unconstitutionally violates their sovereignty.

U.S. District Court Judge Richard Arcara ruled Thursday that the state's tribes and their businesses would suffer if he didn't continue a temporary restraining order that was set to expire Friday. He also cited the possibility of violence erupting in the dispute that has simmered for decades. The decision was first reported by the Buffalo News.

Arcara's order prevents the state from taxing the Seneca and Cayuga nations' sales to non-Indian customers while legal challenges to the levy are argued.

The tax "will almost certainly have an adverse impact upon the Nations' existing tobacco economies," Arcara wrote.

He cited the possibility of layoffs among the 3,000 employed in 172 Seneca Nation smoke shops and said he doesn't believe the state will be hurt by the delay.

The judge also noted predictions by both sides that there could be violence if the tax takes effect and decided it's in the public interest to suspend the plan.

The last time the state tried to collect the tax, in 1997, protesters lit tire fires and shut down a 30-mile stretch of the New York state Thruway that bisects Seneca land near the Pennsylvania line.

In another decision, Arcara denied the tribes a preliminary injunction against the tax because they "failed to demonstrate a likelihood of success on the merits of their claims" it unconstitutionally impinges on their sovereignty. The temporary order will give the tribes time if they decide to appeal that decision.

The state tax is $4.35 a pack, the highest in the nation.

State tax officials had planned to begin collections on Sept. 1 as a way to generate $110 million in revenue this fiscal year and $200 million a year after that.

Cigarette makers sold 24 million cartons of non-native-brand cigarettes to tribes in New York in 2009, with the Senecas buying the most at 10.2 million, the state Department of Taxation and Finance said. Tribes also sell millions of cartons of American Indian brands.

Copyright AP - Associated Press
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