On March 4, 2013, the Office of the New York Attorney General filed a lawsuit against Grand River Enterprises Six Nations, Ltd., Native Wholesale Supply Company Inc., Jerry Montour, Jr. and Kenneth Hill in the United States District Court for the Eastern District of New York. Grand River, a Canadian-based manufacturer, sells cigarettes throughout the United States. Native Wholesale Supply, a New York-based distributor, purchases Grand River cigarettes for resale in New York. The Plaintiff’s four-count complaint alleges violations of: (1) the Contraband Cigarette Trafficking Act; (2) the PACT Act; and (3) New York Tax Law.
The Contraband Cigarette Trafficking Act requires, as evidence of payment of the state excise tax, that cigarettes sold in a particular state bear that state’s tax stamp. The State alleges that Defendants violated the CCTA because Grand River shipped cigarettes to Native Wholesale Supply, an entity not authorized as a New York licensed stamping agent. The State further alleges that Grand River, in selling to Native Wholesale Supply, intended its cigarettes be sold in New York neither stamped nor taxed.
The PACT Act sets forth various registration, reporting and record-keeping requirements. The State alleges that Defendants violated this Act by failing to submit required tobacco tax filings to the New York Department of Taxation and Finance.
As for to the two New York Tax Law claims, the State alleges that Defendants violated § 471 and 471-e by possessing unstamped cigarettes for sale in New York upon which no state excise tax has been paid and that Defendants violated § 480-b by failing to file annual certifications with the Commissioner of Taxation and Finance.
In its complaint, the State seeks various remedies, including civil penalties and money damages under the Contraband Cigarette Trafficking Act and the PACT Act. Additionally, the State seeks permission to confiscate unstamped Grand River cigarettes found in New York in the possession of persons unauthorized to possess unstamped cigarettes.
Defendants have not yet filed an answer. We will report back as the case develops.