The State of New York is appealing a court order requiring it to return native-made cigarettes seized by the State. In the meantime, the State has declined to return the cigarettes that are the subject of the order.
Since a 2010 law allowing the State of New York to collect taxes for cigarettes sold on Native American reservations, the State’s enforcement policy has been unclear. An internal memo from the State Department of Taxation and Finance indicated that the State would not seek to collect taxes for cigarettes manufactured by tribal entities and sold on reservations. However, in recent months, State law enforcement has taken action to seize cigarettes manufactured on one reservation and destined for another.
The seizure at issue involved cigarettes manufactured on the Akwesasne Reservation of the St. Regis Mohawk Tribe in New York and destined for the Winnebago tribe in Nebraska. The State’s articulated basis for the seizure was that any unstamped cigarettes found in New York outside the possession of a licensed stamping agent are contraband, even if those cigarettes are destined for ultimate purchase in another State.
The court disagreed with the State’s position, finding that the State did not have the authority to tax the out-of-State sale of cigarettes. The court ordered the immediate return of the 26,000 cartons of cigarettes. The court did not address whether the State had the authority to tax the sale of native-manufactured cigarettes between reservations within New York State boundaries.
The State has declined to return the cigarettes pending its appeal of the court’s ruling.
For questions and/or comments, please contact Bryan Haynes, at 804.697.1420 or by email.