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Key tobacco supplier halts sales to Senecas Indian retailers struggle to keep cigarette trade flowing in wake of new tax law

ALBANY -- The major supplier of cigarettes to Seneca Nation smoke shops has halted shipments to the reservations.

Milhem Attea & Bros., a Buffalo firm whose business is almost exclusively supplying Indian retailers with cigarettes, said it can't risk being forced to pay cigarette taxes if state or local prosecutors try to enforce a new law that went on the books March 1.

But the company is considering a suit against the state to keep its tobacco sales flowing to Seneca and other Indian retailers, such as the Tuscarora Nation in Lewiston. Such a legal move could delay a resolution to the tax dispute.

The suspension of sales by Attea was seen as a major development by those trying to end the tax-free cigarette sales.

"This might be the break that finally puts an end to this issue," said Russell Sciandra, director of the Center for a Tobacco Free New York.

Other cigarette suppliers also have stopped shipping to the Seneca retailers in the past several days, state officials and executives in the wholesale tobacco industry say. Those suppliers did not return calls for comment.

If true, industry sources said, the Seneca retailers could find themselves running short on tobacco products by next week.

The situation has left Seneca and Tuscarora retailers scrambling to keep the tobacco trade flowing.

The tobacco business has made many Native American businessmen wealthy, appealing to smokers trying to avoid the state's cigarette taxes that add $1.50 per pack before local sales taxes.

A lawyer for Attea said the sales could resume if the state Tax Department sends a new signal that the law is not in force.

A spokesman for Attorney General Eliot Spitzer said Wednesday that wholesalers risk possible criminal prosecution if they continue the sales.

"The tax department can say whatever it wants, but the law is in effect," said Darren Dopp, a spokesman for Spitzer, who has insisted the tax collection law became effective March 1 whether or not the tax agency implements its provisions.

Seneca President Barry Snyder Sr., in a prepared statement, accused Spitzer of threatening and intimidating wholesalers in a move that is "interfering with official state policy" of the Pataki administration.

"It has become obvious that the [Seneca] Nation must do more to protect its economy," Snyder said.

"We are left with no choice but to develop a protected source of tobacco products to ensure that the nation and its people are not denied the ability to consume and trade these products in our territory," Snyder added.

He did not elaborate and did not return calls for comment, but tribal leaders are looking into setting up some sort of Seneca-owned tobacco business to keep state tax collectors away.

The Legislature last year inserted into the state budget a provision requiring the state Tax Department to collect the taxes on cigarettes sold by Indians to non-Indians by getting the tax from wholesalers before the products are shipped to retailers.

Gov. George E. Pataki's tax department, however, said it would not enforce the new March 1 law because the governor was trying to negotiate a one-year delay in its implementation.

The recent move by Spitzer has angered employees of cigarette stores on the Tuscarora Indian Reservation.

Although employees were tight-lipped late Wednesday at the Smokin' Joe's complex on Saunders Settlement Road, Lewiston, a female employee -- who would not give her name -- said she expects tensions to escalate by Friday.

"I'm leaving New York State. This is the final straw," said the woman, who also said she feared for her job.

Smokers buying cigarettes Wednesday discovered the price rose by $6 a carton and 60 cents a pack.

The clerk at Smokin' Joe's said a carton of Marlboros regularly sold for $22.95. On Wednesday, the price was $28.95.

Crystal R. Avery, a clerk at Smokin' Joe's Indian Hill location, said even the Smokin' Joe's brands, which are made on the Tuscarora Reservation, have increased $6 a carton. Before the price spike, Smokin' Joe's cartons would sell for $9.10 -- now they're $15.10.

Efforts to reach Joseph "Smokin' Joe" Anderson or a business representative were unsuccessful Wednesday.

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