The Onondaga Nation is building a warehouse, possibly a cigarette factory, to keep its supply flowing
Syracuse Post Standard
By Mike McAndrew
The Onondaga Nation is planning on making its own cigarettes next year to protect its tax-free tobacco sales from New York’s efforts to collect taxes.
The Onondaga began constructing a warehouse on their territory because of concern that the state will force cigarette manufacturers and wholesalers to stop delivering untaxed cartons to the Onondaga’s smoke shop, confirmed Joseph Heath, the nation’s attorney.
The Onondaga expect to manufacture cigarettes at the site, located on Route 11, about eight miles south of downtown Syracuse.
But Heath said the Onondaga leaders have not made a final decision on the building’s use.
The Onondaga chiefs and clan mothers are discussing other possible ventures, such as an organic grocery store, pharmacy, or lumber store, he said.
“Is there a front-runner? Probably. I’d say that if we can sort out the legal problems and supply problems, they’d tend to go with making cigarettes,” Heath said.
Onondaga Nation Chief Irving Powless and Faithkeeper Oren Lyons declined to comment on the Onondaga Nation’s plans.
Heath said the Onondaga’s began construction plans because it appeared the state was going to attempt to enforce tax laws on Indian cigarette sales.
“We were looking at several lawsuits that, had they been successful, would have stopped the flow of cigarettes (from wholesalers) to the store,” Heath said. Heath said the Onondaga have not purchased the equipment needed to mass-produce cigarettes.
But Onondaga leaders have been reviewing possible brand names and package designs for cigarettes.
‘White Pine’ brand A brand name under consideration is “White Pine,” according to a source involved in the process.
The Onondaga have not applied to the U.S. Treasury Department for a federal permit to manufacture tobacco products, Heath said. He said the Onondaga are exploring legal issues surrounding the permit requirement.
The Treasury Department requires tobacco manufacturers to obtain a permit and pay a federal excise tax on their products, said Art Resnick, a spokesman there. He said the Treasury Department does not consider manufacturers on Indian territories exempt from that requirement.
The Treasury Department in February announced an agreement with Native Trading Associates, a cigarette manufacturer on the Mohawk reservation at Akwesasne. Native Trading agreed to forfeit $2 million and to pay taxes on all cigarettes it makes to get the federal permit.
No Native American businesses are manufacturing cigarettes in Central New York.
A handful of privately owned cigarette factories are located at Native American territories in western and northern New York, including at the Tuscarora territory, the Seneca Nation territory and the St. Regis Mohawk territory at Akwesasne.
The construction of a factory at Onondaga would be the latest in a tug of war between state politicians, Native businesses, and the state’s convenience store lobby.
The state excise tax on cigarettes has been $15 per carton since April 3, 2002.
Native American nations and businesses in New York claim the state cannot force them to collect a state tax because they are sovereign governments.
In 1994, the U.S. Supreme Court ruled that New York could tax cigarette sales by Native American stores to non-native customers.
Since then, the state has been under pressure from the New York Association of Convenience Stores to collect the tax.
The legislature passed a law, effective March 1, that barred wholesalers from selling cigarettes to reservation retailers who sell them tax-free. Gov. George Pataki’s Department of Taxation and Finance has refused to enforce that law.
Lobbyists for the state’s convenience stores claim native businesses are getting an unfair advantage.
This week, a carton of Marlboro was selling at the Onondaga Nation Smoke Shop for $38. A mile away, in Nedrow, Eckerd’s Drugs was selling the same carton for $43.
A recent study by the state Health Department estimated New York is losing $436 million to $576 million a year from the untaxed sales of cigarettes.
Heath said the state will destroy the Onondaga’s economy if it forces the Onondaga to collect the state tax.
The Onondaga depend on its cigarette shop revenue to pay for its fire department, youth sports programs, a home rehabilitation program, and assistance for senior citizens, he said.
In 2005, wholesalers delivered 1.1 million cartons of cigarettes to the Onondaga Nation for resale, according to state tax department records. If the Onondaga sold every carton, at a conservative price of $25 apiece, the nation would gross $28 million a year.
Onondaga leaders have declined to disclose how many cartons their single smoke shop sells or the revenue it generates.
‘Smokin Joe’ The first native cigarette factory, opened in 1994 on the Tuscarora territory near Niagara Falls, is producing one billion cigarettes per year, said its owner, Joe Anderson.
Anderson’s factory produces “Smokin Joe,” “Market,” and “Lewiston” brand cigarettes. He said he sells a carton of “Smokin Joe” cigarettes for as low as $10 in his shop.
Even if the Onondaga build a cigarette factory, New York can stop trucks from bringing them tobacco shipments if the state wants to press the tax issue, Anderson said.
The state police did that once to his factory, he said.
“The government can disrupt your materials,” he said..