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Indian smoke shops to collect taxes or shut down

Published on October 12, 2009 6:27 AM

The epoch of tax-free cigarettes selling in small tobacco shops across Indian tribal lands can soon be over, as the smoke shops owned by the Poospatuck tribe may have to start levying taxes on their tobacco products for the first time in their history complying with the decision of a federal court, which ruled that sales of untaxed cigarettes are an illegal activity.

Untaxed cigarettes purchased in Indian smoke shop currently make up almost 30 percent of all cigarettes sold in the State of New York; however the future of the business that generates millions in net revenues each year for the tribes is unclear now.

New York Indian Nations have been avoiding the taxes for a long time, and starting from the 1990’s many governors decided to permit them to violate the law because of their sovereignty.

The cheap prices made the Indian smoke shops become one of the largest vendors of cigarettes.

The NY’s Cayuga Indian Tribal Nation distributes tax-free cigarettes from its smoke shops in Seneca Falls and Union Springs.

When the mayor of New York City filled the lawsuit against tribal smoke shops citing billions in lost revenue, the federal district court decided last month that Poospatuck cigarette sellers committed illegal actions by selling enormous amounts of tax-free cigarettes.

The federal judge gave the shops owners a month to either begin levying taxes or restrict sales to members of the tribe only.

The defendants filled a request for an emergency stay in the end of September; however, the Circuit Court of Appeals refused them.

The shops owners were not available to speak about their next actions.

James Simermeyer, a lawyer for the shop owners admitted they still have time to revise their options and believe that the appeals court would cancel give them alast-minute stay.

The chairman Unkechaug tribe, Harry Wallace, refused to comment on the case, but stated that the officials have not been authorized to demand compliance with state laws from a sovereign Indian nation.

The New York City attorney, Eric Proshansky stated in the filling that neither of the Indian shops has been worthy of the postponement.

He said that the greed of the defendants stripped the New York City treasury of millions of dollars in revenues, because of their tax-avoidance and huge number of cigarettes sold to criminals, smugglers and even teenagers, what would have negative consequences for public health and annul the efforts of officials applied in order to reduce smoking rates.

The court ruling only covers eight smoke shops owned by the Poospatuck Indian Nation, however, the decision could lead to more similar legal proceedings by the state and municipal officials against the Indian smoke shops throughout the country.

In another suit, the federal jury panel pleaded one Poospatuck cigarette store owner of racketeering for selling huge amounts of tax-free cigarettes to smugglers. The sentencing is scheduled for January, 2010.

Five of the smoke shops appealed the ruling, but id could up to a year or even more to hear the case in the Federal Court of Appeals.

The volume of cigarette sales across the Indian smoke shops have reached approximately 300 million packs last year, New York State fiscal agency said.

Indian smoke shops to collect taxes or shut down

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