TAX NEWS - June 2010

Per-pack tax on cigarettes and other tobacco products

The leader of the Seneca Nation issued a strong condemnation of the plan to collect taxes from cigarettes sold to non-American Indians on reservations.

"We are not a piggy bank the state can break open to grab extra cash. We are a sovereign nation protected by federal treaties and we will defend those treaties by whatever means necessary," said Barry Snyder, president of the Seneca Nation in a statement sent Monday evening.

The impact of the tax on reservations and employment will be extreme, he said.

"Thousands of Senecas and non-Senecas will lose their jobs," he said. "Hundreds of millions of dollars in spending will cease. This is a quick fix no New Yorker can afford."

He was reacting to the passage of a plan to collect taxes from cigarettes sold on reservations, a long-sought source of revenue for New York state. Gov. David Paterson believes the state will be able to collect $150 million from the plan. The bill was linked to an increase in per-pack tax on cigarettes and other tobacco products.

Under the legislation passed by lawmakers Monday, reservation residents can enter into a coupon program to continue to purchase tax-free cigarettes. Or, they can join a prior approval program that would require the wholesale dealer to ship a fixed number of cigarettes to a reservation.

Sen. Jeff Klein, D-Bronx, said the plan is fair.

"We're a nation of laws and we're a state of laws," Klein said. "The law is on our side."

Klein, a smoker himself, has sought legislation to crack down on the sale of cigarettes over the Internet and reduce tax-free cigarettes being sold on the street.

"When you look at any constitutional argument or any law I've seen, when non-Native Amercians buy cigarettes, they have to pay the tax," Klein said. "They point to all types of treaties, all the types of treaties I've seen deal with real property. They don't deal with the taxation of goods like cigarettes."

Klein said he would like to quit smoking, but has no immediate plans.

"Not until after this budget is done," he said.