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Collecting tobacco taxes delayed Legislature had said to start March 1

State tax officials are prepared to begin collecting taxes on tobacco and gasoline from Seneca merchants come March 1, but they won't, the state tax commissioner said Wednesday.

The Pataki administration wants to wait until the State Legislature considers a new plan to delay implementation of tax collection, Commissioner Andrew Eristoff said, even though the Legislature has directed that collection of the taxes begin March 1.

"As a matter of practical administration, we think it would be premature to begin implementing at the same time that the Legislature is reviewing substantive amendments to the law," Eristoff told Senate and Assembly fiscal committees at a hearing Wednesday on Gov. George Pataki's 2006 state budget plan.

Administration officials also say it would cost the state $1.5 million per day to enforce the tax collection if more unrest occurs similar to the last time the state tried to collect the taxes.

The deferral angered lawmakers, non-Indian store owners and health groups. They have been trying for years to push the governor to collect hundreds of millions of dollars in state taxes that Indian retailers do not charge their customers.

Past laws ordering the governor to collect the tax gave him some wiggle room to avoid the issue. But last year, the Legislature, as part of the state budget legislation that Pataki signed, in clear language said the state tax agency must begin the tax collection on March 1 this year.

Assemblyman Alexander Grannis, D-Manhattan, the Legislature's chief anti-smoking advocate, said the governor is afraid that Indian protesters would engage in violent demonstrations.

"They had a bad experience before," Grannis said of the 1997 protests in Western New York that led to injuries among state troopers and Indians and the closing of part of the state Thruway. "Pataki is crisscrossing the nation and he doesn't want an uproar at home. "He's trying to keep his head down in New York."

Eristoff said this year the administration wants time to develop an export tax stamp system that tribal retailers can use for selling cigarettes out of state. He said the administration also wants to negotiate deals with the Indian tribes, instead of forcing the issue by March 1.

But critics say the Seneca Nation has little reason to negotiate an end to the tax-free sales.

"If Pataki has nothing to trade, why should they give up on this?," said Russell Sciandra, director of the Center for a Tobacco Free New York.

Health groups say the tax collection on tobacco would sharply cut down on the number of minors who can illegally purchase cigarettes over the Internet from Indian retailers.

A majority of smokers in New York, in state surveys, acknowledge buying cigarettes from tax-free or low-tax outlets, such as Indian Internet sites or out-of-state stores.

Smokers in Western New York lead the pack: 71 percent reported buying cigarettes all or some of the time at tax-free and low-tax alternatives, a state health department-commissioned study recently found.

Non-Indian retailers, especially those in Western New York that have lost business to the tax-free sales, say the governor will only make matters worse for small businesses by not collecting the tax while at the same time proposing to increase the cigarette tax from the current $1.50 per pack to $2.50. On a carton of cigarettes, that would give tax-free Indian retailers a $25 price advantage.

Pataki is setting the stage for a "constitutional crisis" if his tax agency ignores the March 1 legal deadline to collect the tax on tobacco from wholesalers who supply Indian and other retailers, said James Calvin, head of the New York Association of Convenience Stores.

"Three times the governor has taken a solemn oath to faithfully execute all the laws of the state of New York. He doesn't get to pick and choose which ones to enforce," Calvin told lawmakers.


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