Opinion: Tribal governments as state tobacco tax collectors

Wednesday, June 22, 2011  

"Anyone following the news in Indian Country is painfully aware of the most recent stream of headlines like this one from the Syracuse Post-Standard: State Vows to Collect Taxes on Indian Reservation Cigarette Sales. These articles have evoked comments and op-eds, like this one from the Cayuga County Citizen: Indians Should Pay Their Fair Share of Taxes.

This media brouhaha is the result of a recent court decision out of the U.S. Court of Appeals for the Second Circuit, holding that Indian merchants selling cigarettes to non-Indians in Indian country have to collect sales tax for the State of New York. Subsequent to the Second Circuit’s opinion, the Seneca Nation applied for a temporary restraining order barring enforcement of the law, arguing that the State violated procedural requirements in adopting its tax regulations. As it stands, the State is enjoined from requiring tribes to carry the tax burden at least until June 20th, when the parties will make their case in front of a judge.

Contrary to popular belief indicated in media accounts, the State is not doing any tax collecting. The State is actually completely barred, pursuant to well-established federal law, from collecting anything from tribes or their citizens. Rather, the statute at issue is meant to “precollect” the New York sales tax from cigarette wholesalers, who pass that cost on to individual merchants, who pass the cost along the distribution chain to the non-Indian consumer. In essence, the statutory scheme forces tribal retailers – and in those instances where tribes themselves are the retailer, tribal governments – to collect taxes for the State of New York. If the law stands, tribes will have been reduced to either staying out of the tobacco market or being an administrator and executrix of another sovereign’s laws. A tax collector."

Get the Story:
Ryan Dreveskracht: Cigarette tax: Not about money? (The Native American Times 6/21)