We have previously written about New York’s recent effort to collect taxes for cigarette sales on Native American reservations. We have also written about the ongoing arbitration between the states and the major tobacco companies regarding allegations that the states have not “diligently enforced” their state escrow statutes. A recent article in Native American Times theorizes that New York’s cigarette tax enforcement may be linked to the diligent enforcement issue.
The author explains that New York’s tax enforcement efforts are unlikely to generate the expected revenue. The author suggests that, if the state is interested in maximizing tobacco tax revenue, the preferred approach is tobacco tax compacts, as evidenced by Oklahoma’s experience with such compacts. The author suggests that the diligent enforcement dispute best explains New York’s approach because the spectre of lost MSA revenues incentivizes the states to enforce tobacco laws so as to insulate the large tobacco companies from competition by more recent entrants.