In the Matter of the Petition                               :

                                             of                                                  :

                        BARRY E. SNYDER, SR.                          :
                         D/B/A SENECA HAWK                                                  DETERMINATION
                                                                                                 :                          DTA NO. 809458
for Revision of a Determination or for Refund of Sales
and Use Taxes under Articles 28 and 29 of the Tax Law             :
For the Period January 1, 1989 through December 31, 1989.

Petitioner, Barry E. Snyder, d/b/a Seneca Hawk, Routes 5 and 20, Irving, New York 14081, filed a petition for revision of a determination or for refund of sales and use taxes under Articles 28 and 29 of the Tax Law for the period January 1, 1989 through December 31, 1989.

A hearing was held before Jean Corigliano, Administrative Law Judge, at the offices of the Division of Tax Appeals, 500 Federal Street, Troy, New York, on June 2, 1998 at 9:15 A.M., with all briefs to be submitted by December 21, 1998, which date began the six-month period for the issuance of this determination. Petitioner appeared by Toohey & Dowd, P.C. (Timothy J. Toohey, Esq., of counsel). The Division of Taxation appeared by Steven U. Teitelbaum, Esq. (Michael B. Infantino, Esq., of counsel).


I. Whether the Division of Taxation and Finance is authorized to impose sales tax liabilities on petitioner based upon petitioner's sales of motor fuel and cigarettes on an Indian reservation.

II. Whether the Division of Taxation and Finance is authorized to impose penalties for petitioner's failure to file sales tax returns and pay the tax required to be shown on those returns.


1. Petitioner, Barry E. Snyder, is a member of the Seneca Nation of Indians and the owner of a retail store operated under the name "Seneca Hawk." Petitioner's store is located on the Cattaraugus Indian Reservation in New York State. A variety of items are sold in the retail store including gasoline, diesel motor fuel, cigarettes and other tobacco products.

2. On or about January 12, 1990, Raymond F. Kenneson, Jr., a tax auditor in the Division of Taxation ("Division"), sent a letter to petitioner scheduling an audit appointment on March 14, 1990. Petitioner was asked to have available for the auditor's inspection all books and records pertaining to his motor fuel and tobacco product purchases for the period January 1, 1989 through December 31, 1989. Petitioner's attorney, Timothy J. Toohey, responded to this request in a letter dated February 20, 1990. As pertinent, that letter states: "Please be advised that books and records will not be produced for audit on March 1, 1990, or at any other time."

3. Because petitioner declined to cooperate with the Division's audit, the Division estimated petitioner's taxable sales and sales tax liabilities based upon the information available to it. The quantity of motor fuel and tobacco products purchased by petitioner was determined from the sales records of unrelated third parties. These records showed that those goods were sold to petitioner State tax-free. Prices charged by petitioner for motor fuel and tobacco products were estimated using information garnered by Division investigators and from third-party publications. Selling prices were applied to purchases to determine taxable sales. Petitioner was given credit for exempt sales made to Indians residing on the Cattaraugus Reservation. These sales were also estimated using third-party information regarding average per capita consumption of cigarettes and motor fuel and the number of persons residing on the Cattaraugus Reservation.

4. Based on its audit findings, the Division issued a Notice of Determination to petitioner, dated January 14, 1991, assessing taxes due in the amount of $1,402,596.27 plus penalty and interest. Petitioner then filed a petition alleging that the Commissioner of Taxation and Finance ("Commissioner") has no authority to assess petitioner for taxes due on retail sales of motor fuel and cigarettes made by him. He based this claim on the theory that the State is without jurisdiction to impose or collect taxes on sales made by an American Indian on an Indian Reservation. Alternatively, petitioner claimed that the Commissioner improperly calculated tax, penalty and interest. At hearing, petitioner stipulated that he was raising no issues regarding the conduct of the audit or the methodology which was used to calculate the taxes due.


A. Section 1105 of the Tax Law imposes a sales tax on the retail sale of a broad range of tangible personal property and services, including motor fuel and tobacco products. The sales tax on motor fuel and cigarettes is designed to be passed through the chain of distribution to the ultimate consumer (see, Tax Law  1102, 1103). Sales made to certain Indian nations or tribes residing in New York State are exempt from sales tax, where the tribe or Indian nation is the ultimate user or consumer of the product or service (Tax Law  1116[a][6]). The tax exempt Indian nations and tribes are the: Cayuga, Oneida, Onondaga, Poospatuck, Saint Regis Mohawk, Seneca, Shinnecock, Tonawanda and Tuscarora. Sales by individual Indian vendors residing and selling on a qualified reservation are not covered by the statutory exemption for sales by or to Indians nations and tribes; therefore, an individual Indian vendor operating on an Indian or tribal reservation is subject to the same registration, tax collection and record-keeping requirements that apply to other vendors (see, Tax Law 1131-1137). Moreover, individual Indian vendors may be required to collect taxes on sales to non-Indians, although the taxes cannot be recovered directly from the tribe (Snyder v. Wetzler, 193 AD2d 329, 603 NYS2d 910, affd 84 NY2d 941, 620 NYS2d 813).

B. The Division rightly relies on the Court of Appeals decision in Snyder to support its position that petitioner was required by statute to collect sales tax from his non-Indian customers and to remit such tax to the State. Petitioner was the plaintiff in Snyder. The Division had assessed sales tax against him on retail sales made to non-Indians asserting that he was required but failed to collect and remit the tax. Petitioner sought a declaratory judgement that the State was without authority to impose or collect taxes on sales made within the Indian reservation. Petitioner based his challenge on the following arguments:

(1) the historical development of the immunity of Indian lands from taxation, (2) the prohibition against State taxation of Indians by the Supremacy Clause of the U.S. Constitution and Federal law, and (3) that New York lacks jurisdiction to collect taxes from non-Indians by assessments made against an Indian. (Snyder v. Wetzler, supra, 603 NYS2d at 912.)

These are the same arguments made by petitioner in this proceeding. They were soundly rejected by the Appellate Division, Third Department. The Court summarized the relevant United States Supreme Court opinions upon which it based its decision. In Moe v. Confederated Salish & Kootenai Tribes of Flathead Reservation (425 US 463, 48 L Ed 2d 96), the Supreme Court upheld a Montana statute which required the precollection of tax imposed upon the non-Indian purchaser of cigarettes. The Supreme Court found that a tax on that portion of receipts attributable to on-reservation sales to non-Indians is not proscribed by the Federal Indian trader statutes (25 USC  261 et seq) enacted pursuant to the United States Constitution. The Supreme Court noted that the non-Indian purchaser is the beneficiary of untaxed cigarettes and that wholesale violations of the tax law would go unchecked "without the simple expedient of having the retailer collect the sales tax from non-Indian purchasers" (Snyder v. Wetzler, supra, 603 NYS2d at 914, quoting Moe v. Confederated Salish & Kootenai Tribes of Flathead Reservation, supra, at 482, 48 L Ed 2d at 111).

In Washington v. Confederated Tribes of Colville Indian Reservation (447 US 134, 65 L Ed 2d 10), the Supreme Court upheld regulations of the State of Washington which required Indian tribal sellers of cigarettes to collect sales taxes from on-reservation sales to non-Indians. Five years later, in 1985, the Supreme Court held that a California excise tax on the distribution of cigarettes in which the tax falls on non-Indian purchasers could be enforced; in addition, the Court held that the burden of collecting the tax could be imposed on the Indian tribe (California Bd. of Equalization v. Chemehuevi Indian Tribe, 474 US 106, 88 L Ed 2d 9).

Finally, the Appellate Division addressed the opinion of the United States Supreme Court in Oklahoma Tax Commn. v. Citizen Band Potawatomi Indian Tribe (498 US 505, 112 L Ed 2d 1112), summarizing that opinion as follows:

[T]he United States Supreme Court held that the doctrine of sovereign immunity did not excuse a tribe from all obligations to assist in the collection of a validly imposed Oklahoma tax on sales of cigarettes made at a convenience store owned and operated by the tribe on land held in trust for it by the Federal Government. The court observed that under Moe v. Confederated Salish & Kootenai Tribes of Flathead Reservation (supra) and Washington v. Confederated Tribes of Colville Indian Reservation (supra), the requirement that tribal sellers collect the taxes from non-Indian purchasers was a minimal burden justified by the State's interest in assessing payment of lawful taxes. In response to Oklahoma's complaint that tribal protection from suit under principles of sovereign immunity gave the State a "right without any remedy", the Supreme Court said, "We have never held that individual agents or officers of a tribe are not liable for damages in actions brought by the State . . ." (Snyder v. Wetzler, supra, 603 NYS2d at 914-915, quoting Oklahoma Tax Commn. v. Citizen Band Potawatomi Indian Tribe (supra, 112 L Ed 2d at 1123) .

The Appellate Division rejected Snyder's contention that the Moe, Washington, and Potawatomi cases are distinguishable because the treaties between New York and the six Iroquois Nations of the Iroquois Confederacy are unique in that ownership of their lands is original, absolute and enforceable, unlike those in the other states. In sum, the Appellate Division held that the Commissioner has the authority to impose sales tax on the retail sales to the non-Indian customers of Indian retailers doing business on reservations and that an Indian retailer may be required to collect such tax. (Snyder v. Wetzler, supra.)

The decision of the Appellate Division was affirmed by the Court of Appeals which, however, did not consider petitioner's contentions that the State tax statutes violate either the Supremacy Clause or New York law finding that these arguments were not preserved on appeal (Snyder v. Wetzler, supra, 84 NY2d at 942, 620 NYS2d at 814).

Here, petitioner claims that neither the Snyder decision nor the Supreme Court decision in Department of Taxation and Finance of New York v. Millhelm Attea and Bros., Inc. (512 US 61, 129 L Ed 2d 52) are binding in this proceeding, because those decisions did not address his contentions that the State tax statutes and regulations violate the Supremacy Clause of the United States Constitution and New York law and merely held that the statutes and regulations then in effect did not violate the Commerce Clause or the Indian trader statutes enacted pursuant thereto. This argument is unpersuasive. The Supreme Court cases summarized by the Appellate Division in Snyder form the basis for the Appellate Division's conclusion that individual Indian vendors may be required by the State to collect taxes on sales to non-Indians. In Potawatomi, the United States Supreme Court held that the doctrine of tribal sovereign immunity does not excuse a tribe from all obligations in assisting the State to collect sales taxes. The Potawatomis' tribal immunity notwithstanding, the Court held that Indian retailers on an Indian reservation may be required to collect sales taxes on sales to non-Indians (Oklahoma Tax Commn. v. Potawatomi Tribe, supra, 112 L Ed 2d 1122). Since petitioner has not elaborated on his Supremacy Clause argument, I find the decision of the Supreme Court dispositive. Moreover, petitioner failed to cite any cases, specific treaties provisions or laws that are violated by imposition of sales tax liabilities on his sales to non-Indians. Accordingly, I find that the Division properly determined that petitioner is required to collect sales taxes applicable to retail sales to non-Indians and is liable for sales tax due on purchases made by non-Indians on the Cattaraugus Reservation.

C. In 1988, the Division adopted a series of regulations to facilitate the collection of sales and excise taxes on reservation sales. The 1988 regulations allowed Indian tribes, traders and on-reservation retailers to purchase and sell a specific quantity of cigarettes and motor fuel for which the taxes had not been prepaid in accordance with sections 1102 or 1103 of the Tax Law. The allotted amounts were to be based on estimates of demand for otherwise taxable goods by Indian consumers purchasing on a qualified reservation (see, 20 NYCRR 561.17 [prepaid sales tax on motor fuel]; 562.2 [prepaid sales tax on diesel motor fuel]; 564.2 [prepaid sales tax on cigarettes]). A rather complex system of dealer registration, exemption certificates and record keeping was imposed on Indian traders, qualifying Indian nations and tribes and Indian retailers. In the absence of an agreement between an exempt Indian nation or tribe and the Division (and there have been no agreements), registered distributors were required to obtain permission from the Division prior to each sale and delivery of fuel or cigarettes on a reservation. The implementation of these regulations was stalled pending the disposition of litigation challenging the validity of the motor fuel and cigarette tax regulations (see, Department of Taxation and Finance of New York v. Millhelm Attea and Bros., Inc., supra; Herzog Bros. Trucking, Inc. v. State Tax Commn. 69 NY2d 536, 516 NYS2d 179, vacated and remanded 487 US 1212, 101 L Ed 2d 898, on remand 72 NY2d 720, 536 NYS2d 416). Ultimately, the United States Supreme Court held that the State's regulations were not preempted by the Federal Indian Trader Statutes ( Department of Taxation and Finance of New York v. Millhelm Attea and Bros., Inc., supra).

Following the Attea Bros. decision, enforcement of the regulations was suspended pending discussions between the State and several Indian Nations regarding the implementation of those regulations in light of the Supreme Court's decision (see, Matter of New York Ass'n of Convenience Store Owners v. Urbach, 92 NY2d 204, 677 NYS2d 280). On April 28, 1998, the Division repealed the regulations that were challenged in Attea Bros. stating in its Notice of Adoption as follows:

Recent events have shown that the implementation of the system contained in the existing regulations is inconsistent with the State's objectives with regard to both the sovereignty of the Indian nations and to the general welfare of the people of this state. Additionally, statutory deficiencies impede our ability to administer the system contained in the existing regulations . . . finally, repeal of these regulations is in keeping with federal policies promoting tribal sovereignty. These factors make apparent the necessity for the repeal of these regulations. (20 NY Reg, April 29, 1998, Issue 17, Book 1, at 22-24.)

Petitioner argues that the repeal of the regulations and the reasons given for the repeal in the Division's Notice of Adoption supports its position that the regulations placed impermissible regulatory and tax burdens directly on tribes and individual Indians who are immune from State tax. The Division asserts that the repeal of the regulations is irrelevant because the regulations were in effect during the audit period.

At the outset, I would note that there is no evidence that the assessment in issue results from the implementation of the repealed regulations. The overall design of the regulations was intended to cut off the flow of tax-free motor fuel and cigarettes to Indian retailers on reservations. The quantity of tax free motor fuel and cigarettes purchased by petitioner in 1989 is evidence enough that the regulations were not being enforced during this period and are irrelevant to the assessment issued to petitioner. This assessment was calculated using a purchase markup audit. The audit diverged from a traditional audit in that the Division estimated the probable demand for cigarettes and motor fuel of qualified Indian consumers living on the Cattaraugus Reservation and provided a credit for these sales. Otherwise, the audit was conducted using routine audit methodologies. Petitioner has not challenged any aspect of the audit itself. Consequently, it must be assumed that the Division's estimates of sales, credits for Indian consumers and sales tax due were reasonable.

D. Petitioner has offered no rationale for canceling the penalties assessed against him other than his primary argument that the State lacks jurisdiction to assess taxes or penalties against him. Based on the decision in Snyder v. Wetzler (supra), I find that petitioner is liable for the assessed taxes, penalties and interest.

E. The petition of Barry E. Snyder, Sr., d/b/a Seneca Hawk is denied, and the Notice of Determination issued on January 14, 1991 is sustained.

DATED: Troy, New York
               February 11, 1999


                                                                                        /s/ Jean Corigliano                           
                                                                                       ADMINISTRATIVE LAW JUDGE



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