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Tax Dept. lets wholesaler resume shipping cigarettes to Indians

The state Department of Taxation and Finance has advised a Buffalo cigarette wholesaler it can ignore a new law that kicked in earlier this month, requiring that taxes be collected on tobacco products sold to Seneca Nation and other Indian businesses.

The tax agency's opinion led to an immediate easing of tensions on area Indian reservations since nervous suppliers cut off shipments to smoke shops earlier this week.

In Albany, though, friction between Gov. George E. Pataki and the Legislature is escalating, and State Attorney General Eliot L. Spitzer says a new Indian tax collection effort should be enforced.

By noon Friday, the major supplier that received the green light had resumed the flow of cigarettes to Seneca smoke shops, said Rosemary Saffire, spokeswoman for Milhem Attea & Bros. "The Indians are so happy."

In a statement, Seneca President Barry E. Snyder Sr. praised the development. "I am especially pleased that this action allows for both [the Senecas] and privately owned businesses to avoid economic disaster," he said. "For now, our people will be able to get back to business. Our work to provide a protected source of tobacco products for the long term has only just begun. Under no circumstances will I let our treaty rights be undermined."
On the Cattaraugus Reservation, where dozens of smoke shops are located near the Thruway, several shop owners and workers expressed optimism Friday.

"It's a relief, I'll tell you that," said Arnold Breaux, whose family operates Triple J's.

"Pataki is trying to hold up to his word," said Cyrus M. Schindler Jr., a tribal councilor.

On the Tuscarora Reservation, Joseph "Smokin' Joe" Anderson said his legal team is negotiating with a firm and expects cigarette shipments to resume next week.

Friday night, Tuscarora residents gathered near a bonfire off Upper Mountain Road, near Randy's Smoke Shop, displaying signs urging support of treaties to passing motorists.

Anxiety levels on the Seneca and Tuscarora reservations had been rising in recent days, with American Indians accusing the state of ignoring their sovereignty. Angry Indians recalled the violent protests in 1997, the last time the state tried to collect the tobacco taxes, when confrontations between Senecas and state troopers led to the closing of a section of the Thruway.

But the matter is far from resolved.

Spitzer has warned wholesalers that, no matter what the Tax Department claims, the cigarette tax collection law is in effect. His aides have said wholesalers who ship untaxed cigarettes to Indian retailers face possible prosecution, whether or not the tax agency enforces the law.

"The ability to just ignore a law, though, is something I think we all question," Spitzer said Friday during a stop in Buffalo. "You can't announce to the world that a law will simply be ignored and not enforced."

He said he would talk to the Pataki administration and that he would "act in a very measured, careful manner, hopefully in conjunction with the executive" branch.

Joseph Crangle, a Buffalo lawyer and counsel to the Seneca Nation, dismissed objections raised by Spitzer.

"The fact of the matter is, the state Tax Department disagrees [with Spitzer], and they're the ones in charge of saying what the state tax law is, not the attorney general," he said.

The tax agency's advisory opinion to Milhem Attea came days after the firm halted cigarette shipments to Seneca tobacco shops.
The company is now confident the tax agency's official opinion protects renewed shipments, Saffire said. "We have no reason not to ship," she said. "We have it in writing, so we can take it to a judge and say, 'Look, we have permission.' "

Richard E. Nephew, chief executive officer of the Seneca Nation, said the Tax Department's letter "sounds like probably a temporary fix."

"We would prefer something long term. We'd all like to have a final resolution of our differences with New York State, of course that recognizes our treaty rights," he said.

The Senecas have long maintained that 19th century treaties protect them from the state taxing the nation's products.

The U.S. Supreme Court, however, ruled in 1994 that the state could collect taxes on sales to non-Indians.

Critics lashed out at the Tax Department's letter to Milhem Attea.

"It's one thing for the department to passively look the other way. It's another for them to issue a letter stating 'Don't worry, you count on us to continue to look the other way for a long, long time,' " said James Calvin, head of the New York State Association of Convenience Stores, whose members must charge the state tobacco taxes.

In the letter to Attea, the Tax Department said it had a "long-standing policy of allowing untaxed cigarettes" to be sold to Indian retailers.

The agency noted Pataki had proposed changing the law that kicked in March 1. One of those ideas was to delay implementation of the tax collection until next year.

The State Senate and Assembly earlier this week rejected that request.
Niagara Bureau Reporter Bill Michelmore contributed to this report.
e-mail: tprecious@buffnews.com

and lmichel@buffnews.com

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