Two Buffalo tobacco distributors learned Friday that they had won one more round in their battle with the state over the collection of excise taxes on cigarettes sold on Indian reservations.
The Appellate Division of State Supreme Court upheld a lower court ruling Thursday stopping the state's plan to collect the taxes, which was to have started in 1989.
Karl Felsen, spokesman for the state Department of Taxation and Finance, said the ruling will be appealed to the Court of Appeals, the state's highest court.
"This decision recognizes that our position was correct in every respect. The Indians can continue to purchase tobacco and motor fuel products from their distributors tax free," said Joseph Zdarsky, attorney for Buffalo tobacco distributors Milhem Attea & Bros. and Elias H. Attea Jr.
Rosemary Attea Saffire, secretary of Milhem Attea, said the ruling "should convince the state tax people to leave the Indians alone and let them earn a living on their own land."
The two Attea firms do business with Indian retailers on about a half-dozen reservations statewide, including the nearby Cattaraugus and Allegany reservations of the Seneca Nation of Indians.
Almost two years ago, the state adopted new regulations that would have required wholesalers of tobacco and motor fuel products to collect excise taxes from the Indian retailers or be responsible for the monies not collected. The Attea firms challenged the regulations as unconstitutional, arguing that the state did not have the power to regulate or tax sales on Indian reservations.
In January 1989, Zdarsky obtained a permanent injunction prohibiting the state from enforcing the collection. The state appealed that decision and lost.
A few years ago, Zdarsky also blocked the state's attempt to force Herzog Bros. Trucking of Smethport, Pa., to collect excise tax on motor fuels it delivered to Indian reservations.
One of Herzog's customers was Maurice "Moe" John, who operates a major gas and cigarette business on the Allegany Reservation.
John has carried his tax battle one step further, to the federal level, by refusing to pay federal income taxes. The Internal Revenue Service has placed a $3.5 million lien on his property.