Suit seeks straight answer on tobacco taxes
Company sues N.Y. to clear up whether selling Indians untaxed cigarettes is legal.

Syracuse Post-Standard
Tuesday, August 08, 2006
The Associated Press
by Staff writer Mark Weiner

Buffalo Tobacco wholesalers frustrated by mixed messages from the state over whether they are still allowed to supply Indian retailers with untaxed, unstamped cigarettes are ready to ask a court to intervene.

At issue is a law that went on the books March 1 that bars wholesalers from selling cigarettes to reservation retailers who sell them tax-free. Attorney General Eliot Spitzer says the law is in effect; the state Department of Taxation and Finance says it is not yet being enforced.

The conflicting positions have meant headaches for businesses like Day Wholesale in Franklin County, which finds itself scrambling to preserve its supply of cigarettes for reservation and non-reservation customers.

According to a lawyer for Day, Philip Morris USA has given wholesalers that supply New York Indian tribes until noon Wednesday to promise to stop selling unstamped cigarettes on reservations or provide written proof that such sales are legal. Otherwise, a July 11 letter said, Philip Morris would stop shipping cigarettes.

A lawyer for the Onondaga Nation said any halt to sales would be a bad business decision for Philip Morris.

"Philip Morris is going to lose a lot of business," said Joseph Heath, a Syracuse lawyer for the Onondagas.

"There are other cigarettes that people will buy," Heath said. "The reason people come to native stores is for the price. And they will still get a quality product for a fair price."

The Oneida Indian Nation also sells tax-free cigarettes at its 12 Sav-On gas stations in Oneida and Madison counties and at its Turning Stone Resort and Casino in Verona.

"Nothing has happened yet," nation spokesman Mark Emery said. "Philip Morris is just one supplier, and the nation remains in the tobacco business."

A 2004 survey of Madison County smokers found about 73 percent had purchased cigarettes from Indian shops at least once in the past year.

The letter from Philip Morris came two weeks after an attorney from Spitzer's office sent letters to tobacco companies, including Philip Morris, telling them that Day and other wholesale clients were continuing to sell tax-free cigarettes to Indian retailers in violation of state law.

Philip Morris USA spokesman Bill Phelps declined to comment Monday except to say that the company supports the legislation governing sales by wholesalers to reservations.

Margaret Murphy, who represents Day Wholesale, said a lawsuit to be filed this week will seek to end the uncertainty. In the meantime, she said, her client will stop selling unstamped cigarettes.

"We're bringing a lawsuit against the state of New York, against the attorney general, asking a court to resolve the issue," Murphy said.

Murphy contended the legislation is not active because certain provisions including the issuance of coupons that would allow Indian retailers to sell untaxed cigarettes to tribal members while taxing other customers have not been met.

A spokesman for Spitzer said that doesn't matter.

"The sale in New York of unstamped cigarettes is a clear violation of the law, regardless of who is doing it," Marc Violette said, "regardless of whether it's a private individual or an Indian nation or anybody else."

A spokesman for the Department of Taxation and Finance did not return a call for comment Monday.