The state of New York has begun enforcing its new regime for taxing cigarettes sold on Native American reservations.  The regime, enacted last summer but stalled by numerous court challenges, generally requires New York-licensed distributors to sell only tax-paid cigarettes to reservation retailers, with certain exemptions for sales to tribe members. 

Earlier this week, Governor Cuomo announced that New York was aggressively enforcing the new tax regime.  Enforcement apparently has included seizures of cigarettes destined for reservations and surveillance of reservation smoke shops.   (It is extremely questionable whether the state has the authority to conduct enforcement activity within reservation boundaries.)

In the meantime, the state’s enforcement policy with respect to Native-made cigarettes sold between reservations is unclear.  In response to the new tax regime, many reservation merchants began focusing exclusively on Native-made cigarettes, produced either on their own reservation or on others in New York.  Many believe that New York lacks authority to tax Native-made cigarettes sold on New York reservations.  Consistent with this position, there are rumors that the New York Department of Taxation has adopted a policy of not enforcing the cigarette tax with respect to Native-made cigarettes sold on reservations.

Stay tuned for updates as New York’s tax enforcement policy continues to evolve.

For questions and/or comments, please contact Bryan Haynes, at 804.697.1420 or by email.