Supreme Court of the State of New York

County of Erie

DANIEL T. WARREN,

                                       Plaintiff,

                  vs.

ARTHUR J. ROTH , Individually, and as Commissioner of the New York State Department of Taxation and Finance and his successors in office, and

GEORGE E. PATAKI , Individually, and as Governor of the State of New York, and

JOSEPH PASSAFIUME as Director of the Erie County Division of Budget, Management & Finance, and

COMMISSIONER OF THE ERIE COUNTY FINANCE DEPARTMENT, and

COUNTY OF ERIE, NEW YORK, and

CYRUS M. SCHINDLER, JR., Individually, and as President of the Seneca Nation of Indians, and as owner of Big Indian Smoke Shop, and on behalf of all similarly situated owners of retail enterprises,

R. K. KARTONS, BUCKTOWN TRADING a/k/a BUCKTOWNTRADING.COM, NATIVE PRIDE a/k/a FIRST AMERICAN TOBACCO a/k/a FIRSTAMERICANTOBACCO.COM, OJIBWAS TRADING POST a/k/a SENECAS TRADING POST a/k/a OJIBWAS.COM a/k/a SENECAS.COM and BIG INDIAN SMOKESHOP, individually and on behalf of all similarly situated enterprises,

MILHELM ATTEA & BROS., INC., Individually, and on behalf of all similarly situated wholesalers.

                                       Defendants

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Amended Verified Complaint

 

 

Index # I 2002-4880

 

            Plaintiff, Daniel T. Warren, as and for his complaint for declaratory and injunctive relief pursuant to State Finance Law Article 7-a, 42 U.S.C. § 1983, and CPLR § 3001 against the defendants herein allege:

As and for Plaintiff’s first cause of action against the Defendants herein

 

1.       Plaintiff, Daniel T. Warren is a resident of the Town of West Seneca, County of Erie and State of New York.

2.       Plaintiff owns property in the County of Erie, State of New York and pays New York State Income Taxes, Town and County property taxes on property with an assessed value of more than $1,000.00 and sales taxes on all purchases made within the State of New York including all applicable sales and excise taxes on all purchases.

3.       Plaintiff is a duly registered voter in the County of Erie and State of New York.

  1. Defendant GEORGE E. PATAKI is a resident citizen of the State of New York having his principal residence at the Governor's Mansion in the City of Albany, County of Albany and State of New York.
  2. Defendant GEORGE E. PATAKI is currently the duly elected Governor of the State of New York.
  3. Defendant ARTHUR J. ROTH is a resident citizen of the State of New York having his principal residence upon information and belief in the County of Albany and State of New York.
  4. Defendant ARTHUR J. ROTH is currently the duly appointed commissioner of the New York State Department of Taxation and Finance.

8.       Defendant JOSEPH PASSAFIUME is the duly appointed Director of the Erie County Division of Budget, Management & Finance.

9.       Defendant COUNTY OF ERIE, NEW YORK, is a municipality organized and existing by virtue of the laws of the State of New York with its principle place of business located in the City of Buffalo, County of Erie and State of New York.

  1. Defendant R. K. KARTONS is upon information and belief a sole proprietor or unincorporated enterprise with a principal place of business located at 13967 Four Mile Level Road, Gowanda, New York and is situated in the County of Erie.
  2. Defendant BUCKTOWN TRADING a/k/a BUCKTOWNTRADING.COM, is upon information and belief an unincorporated enterprise with its principle place of business located at 1007 Route 438, Irving, New York and is situated in the County of Erie.
  3. Defendant BIG INDIAN SMOKESHOP, is upon information and belief an unincorporated enterprise with its principle place of business located at 597 Milestrip Road, Irving, New York and is situated in the County of Erie.
  4. Defendant NATIVE PRIDE a/k/a FIRST AMERICAN TOBACCO a/k/a FIRSTAMERICANTOBACCO.COM, is upon information and belief an unincorporated enterprise with its principle place of business located at 11359 Southwestern Blvd, Irving, New York and is situated in the County of Erie.
  5. Defendant OJIBWAS TRADING POST a/k/a SENECAS TRADING POST a/k/a OJIBWAS.COM a/k/a SENECAS.COM, is upon information and belief an unincorporated enterprise with its principle place of business located at 1358 Cayuga Road, Irving, New York and is situated in the County of Erie.
  6. Defendant MILHELM ATTEA & BROS., INC., is a domestic corporation with its principle place of business located at 1509 Clinton Street, Buffalo, New York and is situated within the County of Erie.
  7. CYRUS M. SCHINDLER is the duly elected president on the Seneca Nation of Indians and owner of Big Indian Smoke Shop with a principal place of business located at 597 Milestrip Road, Irving New York and is situated in the County of Erie.

 

CLASS ACTION ALLEGATIONS

 

  1. This action is brought against defendants as a class action, on their own behalf and on behalf of all others similarly situated, under the provisions of CPLR Article 9, for injunctive and declaratory relief and relief incident and subordinate thereto, including costs and disbursements of this action.
  2. This action will consist of three defendant classes.
  3. The first defendant class will be defined as all wholesalers subject to any required of pre-collection of a tax imposed by New York Tax Law and the regulations promulgated by the New York State Department of Taxation and Finance (hereinafter referred to as "WHOLESALER CLASS"). The class representative for this class is the defendant MILHELM ATTEA & BROS. INC., Upon information and belief the proposed class representative will zealously, adequately and competently represent the interests of this class. This class is numerous and its actual size is unknown to plaintiff at this time.
  4. The second defendant class will be defined as all enterprises having their principal place of business within indian land located in the State of New York (hereinafter referred to as "ENTERPRISE CLASS"). The class representatives for this class are defendants R. K. KARTONS, BUCKTOWN TRADING a/k/a BUCKTOWNTRADING.COM, NATIVE PRIDE a/k/a FIRST AMERICAN TOBACCO a/k/a FIRSTAMERICANTOBACCO.COM, OJIBWAS TRADING POST a/k/a SENECAS TRADING POST a/k/a OJIBWAS.COM a/k/a SENECAS.COM and BIG INDIAN SMOKESHOP. Upon information and belief the proposed class representatives will zealously, adequately and competently represent the interests of this class. This class is numerous and its actual size is unknown to plaintiff at this time.
  5. The third defendant class consists of individual shareholders, officers, partners or sole proprietors of enterprises located on indian lands. The class representative for this class is the defendant CYRUS M. SCHINDLER, JR., (hereinafter referred to as "OWNER CLASS". Upon information and belief the proposed class representatives will zealously, adequately and competently represent the interests of this class. This class is numerous and its actual size is unknown to plaintiff at this time.
  6. The alleged common questions of law and fact that are claimed to be common to the classes are its respective rights, duties, and obligations, if any, under the New York Tax Law and regulations promulgated by the New York State Department of Taxation and Finance and the State of New York’s jurisdiction over violations of the rights, duties and obligations imposed by the New York Tax Law as it applies to the respective defendant classes, as hereinafter more fully appears.

 

As and for a First Cause of Action

 

23.   That there is Indian Land situated within the County of Erie, New York.  This land has a number of retail establishments located therein.

24.   Consumers in the State of New York are subject to a state tax on each sale of tangible personal property, cigarettes and motor fuel under Articles 12-A, 20, 28, & 29 of the New York Tax Law.

25.   Each enrolled member of an Indian Tribe who purchases such items on reservations are exempt from this tax, but non-indians making purchases on Indian Land must pay it.

26.   Article 20 of the New York Tax Law imposes a tax on all cigarettes possessed in the State except those that New York is without power to tax. New York Tax Law § 471(1). The State collects the cigarette tax through licensed agents who purchase tax stamps and affixes them to cigarette packs in advance of the first sale within the State.

27.   The full amount of the tax is part of the price of stamped cigarettes at all subsequent steps in the distribution stream.

28.   The ultimate incidence of and liability for the tax is upon the consumer. New York Tax Law § 471(2). Any person who willfully attempts in any manner to evade or defeat the sales tax commits a misdemeanor. New York Tax Law § 1814(a).

29.   Cigarettes that are consumed on the reservation by enrolled tribal members are tax exempt and need not be stamped.

30.   On-reservation cigarette sales to persons other than reservation Indians, however, are legitimately subject to state taxation.

31.   Because unlawful purchases of unstamped cigarettes deprive New York of substantial tax revenues, estimated at between $65 and $500 million per year the New York State Legislature and the Department of Taxation and Finance adopted the statutes and regulations at issue in this case.

32.   The statutes and regulations recognized the right of Indian nations or tribes, which allow qualified Indian consumers and registered dealers to purchase, on qualified reservations, cigarettes upon which the seller has not prepaid and pre-collected the cigarette tax imposed pursuant to Article 20 of the Tax Law.- 20 NYCRR § 336.6(a) (1992).

33.   To ensure that non-exempt purchasers do not likewise escape taxation, the regulations limited the quantity of untaxed cigarettes that wholesalers may sell to tribes and tribal retailers. The limitations may be established and enforced in alternative ways. A tribe may enter into an agreement, subject to Congressional and legislative approval, with the Department to regulate, license, or control the sale and distribution within its qualified reservation of an agreed upon amount of untaxed cigarettes, in which case wholesalers must obtain the tribe's approval for each delivery of untaxed cigarettes to a reservation retailer. 22 NYCRR § 336.7(c)(1). In the absence of such an agreement, and upon information and belief there have been none to date with the Seneca Nation, the Department itself limits the permitted quantity of untaxed cigarettes based on the probable demand of tax-exempt Indian consumers 22 NYCRR § 336.7(d)(1).

34.   The specific kind of state tax obligation that New York's regulations are designed to enforce which falls on non-Indian purchasers of goods that are merely retailed on a reservation stands on a markedly different footing from a tax imposed directly on Indian traders, on enrolled tribal members or tribal organizations, or on value generated on the reservation by activities involving the Tribes.

35.   States have a valid interest in ensuring compliance with lawful taxes that might easily be evaded through purchases of tax-exempt items on reservations; that interest outweighs the tribes' modest interest in offering a tax exemption to customers who would ordinarily shop elsewhere. The balance of state, federal, and tribal interests, in this area thus leaves more room for state regulation than in others.

36.   New York legislature's decision to stanch the illicit flow of tax-free cigarettes early in the distribution stream is a reasonably necessary method of preventing fraudulent transactions, one that polices against wholesale evasion of New York's own valid taxes without unnecessarily intruding on core tribal interests.

37.   A similar statutory and regulatory scheme has been enacted respecting the sale on Indian reservations by Indians to non-Indian consumers for collection of motor fuel excise and sales taxes in Articles 12-A, 28,and 29 of the New York State Tax Law.

38.   Defendant County of Erie, New York pursuant to New York Tax Law § 1210 has enacted a local law that establishes a sales and compensating use tax.

39.    The New York State Department of Taxation and Finance is charged with the administration and collection of the taxes imposed by local laws enacted pursuant to Tax Law § 1210 by Tax Law § 1250.

40.   That on or about April 28, 1998, the defendants repealed the regulations relating to the enforcement of the subject enabling tax statutes as it relates to purchases on Indian reservations, by executive or administrative action.

41.   In its Notice of Adoption the Defendants stated “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.)’

42.   In formulating and implementing the custom or policy as stated in their Notice of Adoption the defendants have acted, and continues to act, in excess of their constitutional and statutory powers.

43.   Defendant Pataki has admitted that legislative approval for this policy is necessary.  In his May 22, 1997 press release Defendant Pataki stated “Let me make my message to all Indian Nations clear: It is your land, we respect your sovereignty and, if the Legislature acts as I am requesting, you will have the right to sell tax-free gasoline and cigarettes free from interference from New York State.”

44.   Defendants Joseph Passafiume, Commissioner of the Erie County Finance Department, and County of Erie, New York, has intentionally, knowingly and willfully adopted and/or condoned this policy or custom of non-enforcement and have taken no steps to collect its compensating and use tax on sales to non-indians on Indian Land.

45.   Articles 12-A, 20, 28, and 29 of the New York State Tax Law and the regulations promulgated thereunder where duly enacted into law by the lawful acts of the New York State and Erie County Legislature.

46.   That to date these subject statutes, rules and regulations have not been implemented and/or enforced on sales to non-indians on Indian Lands by the WHOLSALER CLASS, ENTERPRISE CLASS or OWNER CLASS.

47.   The constitutional principle of separation of powers, implied by the separate grants of power to each of the coordinate branches of government requires that the Legislature make the critical policy decisions, while the Executive Branch's responsibility is to implement and enforce those policies.

48.   In the area of taxation the legislature levies the taxes and the executive branch assesses and collects the taxes levied.

49.   This act was performed without the New York State or the Erie County Legislature amending the Tax or Local Law to provide an exemption to retailers and/or non-indian purchasers on Indian Reservations in violation of the separation of powers doctrine.

50.   This action usurped the New York State and the Erie County Legislature’s policy making powers and is in violation of Article 16 § 1 of the New York State Constitution by granting a tax exemption without the state or county legislature passing on this policy.

51.   Allowing, by the aforementioned acts and omissions in their enforcement, the wholesale evasion of these tax laws by the Indian businesses and their non-Indian consumers despite clear statutory mandate and interpretive case-law is in violation of the New York State Constitution Article 7 § 8 and Article 8 § 1 prohibiting the gift or loan of state or county credit or money in aid of a public corporation or private enterprise.

52.   Through the aforementioned acts and omissions defendants have and continue to waste, secrete, withhold, or is otherwise appropriating to their own use, or that of any person(s) other than the State of New York and/or the County of Erie, New York, or persons entitled thereto, the money that should have been collected on the subject transactions through their possession or custody by virtue of their office.

53.   The sovereign rights of the Indian Governmental Entities located within the State of New York do not prohibit application of the subject tax laws to sales by retailers on Indian Land to non-Indians.

54.   There is no provision in Articles 12-A, 20, 28, and 29 of the New York Tax Law granting any exemption to retail transactions involving non-indians occurring on Indian Land.

55.   That due to the absence of the legislative branch enacting a general statute this custom or policy violates New York Constitution Article 16 § 1.

56.   That due to the loss of this revenue by the acts and/or omissions of the defendants the State of New York has been, and is continuing to be deprived of, this revenue and must continuously recoup this lost revenue by either raising personal income taxes, or shifting some of the programs it would normally fund to the counties and cities of the State of New York thereby causing an increase in property taxes and taxes on sales of items other than those sold to non-indians on Indian land (or less of a tax reduction) to the detriment of the plaintiff. Additionally the County of Erie relies on the State of New York to collect its share of sales taxes imposed on these subject items. Thereby, the County of Erie, State of New York, has been and is continuing to be deprived of this revenue and must continuously recoup this lost revenue by either raising property taxes and taxes on sales of items other than those sold to non-indians on Indian land (or less of a tax reduction) to the detriment of the plaintiff.

57.   There is no adequate remedy at law.

 

As and for Plaintiff’s Second Cause of Action against the Defendants herein:

 

  1. Plaintiff repeats and realleges the allegations contained in paragraphs 1 to 57 of this complaint as fully as if set forth herein.
  2. Plaintiff is the sole shareholder and an officer of BKPrep Services, Inc. A domestic corporation formed and existing under the laws of the State of New York.
  3. BKPrep Services, Inc. ceased operations on or about June 30, 2001.
  4. Plaintiff will be held personally liable to the New York State Department of Taxation and Finance for any penalties, interest or taxes that is or may be due by BKPrep Services, Inc.
  5. Plaintiff is a "person" as that term is defined in New York Tax Law §§ 1101, 1131.
  6. Plaintiff is held personally liable for any tax assessment by the New York State Department of Taxation and Finance for the failure to report, collect and/or remit any sales tax under Articles 28 & 29 of the New York Tax Law pursuant to Tax Law § 1133.
  7. The ENTERPRISE CLASS, OWNER CLASS and WHOLSALER CLASS are liable for the failure to report, collect and/or remit any sales tax due on a retail transaction until the customer pays the tax pursuant to Articles 12-A, 20, 28, and 29 of the Tax Law.
  8. Section 1 of the 14th Amendment to the United States Constitution and New York State Constitution Article 1 § 11 mandates that no person shall be denied due process and the equal protection of the laws of the United States and the State of New York.
  9. The Defendants have and continue to intentionally, willfully and knowingly, refuse to impose these lawful obligations on the WHOLESALER CLASS, OWNER CLASS and ENTERPRISE CLASS on sales to non-indians on Indian Lands.
  10. The defendants acting under color of state law intentionally, willfully, and knowingly, issued orders not to enforce the subject laws in order to favor the Native-American race, nationality and/or religion.
  11. By the Defendants intentionally usurping the power of the state legislature in the area of taxation policy in violation of the separation of powers doctrine, and in violation of the State and Federal Constitutions, by favoring the Native-American nationality, race and/or religion, in contravention of duly enacted tax statutes violates plaintiffs civil rights.
  12. That this policy or custom of non-enforcement is open-ended and continuing in nature.

70.   Plaintiff has no adequate remedy at law

 

As and for Plaintiff’s Third Cause of Action

  1. Plaintiff repeats and realleges the allegations contained in paragraphs 1 to 70 of this complaint as fully as if set forth herein.

72.   Plaintiff is a duly registered voter in the County of Erie and State of New York.

73.   That due to the aforementioned violations of plaintiff’s civil rights, violation of the separation of powers doctrine and the defendants custom or policy establishing and implementing a de facto tax exemption in violation of state and federal constitutions as hereinbefore alleged, plaintiff’s constitutional right to vote as secured by the 15th Amendment to the United States Constitution and New York State Constitution Article I § 1  and has been unconstitutionally impaired, diluted and abridged.

74.   Plaintiff has no adequate remedy at law

WHEREFORE, plaintiff prays for an Order and Judgment of this court:

 

A) Declaring that there now exists de facto exemption from taxation on any sales to non-indian consumers on Indian Land under Articles 12-A, 20, 28 and 29 of the New York Tax Law;

B) Declaring that the defendants usurped the powers of the New York and Erie County Legislature by making a custom or policy establishing and implementing a de facto tax exemption on sales to non-indians on Indian Land.

C) Declaring that the defendants’ custom or policy establishing and implementing a de facto tax exemption on sales to non-indians on Indian Land violates the separation of powers doctrine.

D) Declaring that the defendants’ de facto tax exemption on sales to non-indians on Indian Land constitutes a gift or loan of state and county money or credit in violation of New York State Constitution Article 7 § 8 and Article 8 § 1.

E) Declaring that the defendants’ custom or policy establishing and implementing a de facto tax exemption on sales to non-indians on Indian Land violates New York State Constitution Article 16 § 1.

F) Declaring that the repeal of the enforcement regulations through the Notice of Adoption, 20 NY Reg, April 29, 1998, Issue 17, Book 1, at 22-24, is null and void and without effect and the regulations purportedly repealed have been and continues to be in full force and effect..

G) Declaring that the defendants’ custom or policy establishing and implementing a de facto tax exemption on sales to non-indians on Indian Land constitutes a waste or misappropriation of assets that belong to the State of New York and the County of Erie, New York.

H) Declaring that the defendants’ custom or policy establishing and implementing a de facto tax exemption on sales to non-indians on Indian Land violates the due process and equal protection clause of the New York State Constitution.

I) Declaring that the defendants’ custom or policy establishing and implementing a de facto tax exemption on sales to non-indians on Indian Land violates the due process and equal protection clause of the U.S. Constitution.

J) Declaring that the defendants violation of the separation of powers doctrine by establishing and implementing a de facto tax exemption on sales to non-indians on Indian Land bear so heavily on plaintiff’s right to vote as guaranteed by the 5th,14th,& 15th Amendments of the United States Constitution and New York State Constitution Article 1 §§ 1 & 6 and Article II § 1 as to dilute or impair it.

K) Permanently enjoining defendants, GEORGE E. PATAKI as Governor of the State of New York and ARTHUR J. ROTH as Commissioner of the New York State department of Taxation and Finance and their successors, to perform their mandatory, statutory and regulatory obligations to implement, collect, and enforce imposed by New York Tax Law Articles 12-a, 20, 28 and 29 applicable to purchases by non-indians from retailers located on Indian Land;

L) Permanently enjoining the defendant ARTHUR J. ROTH as Commissioner of the New York State Department of Taxation and Finance to assess and collect from the Indian retailers unpaid sales taxes, penalties and interest due the State of New York from sales to non-Indians for the period from the enactment of the subject statutes to date that are not outside of any applicable statute of limitation and to investigate and refer to the Attorney General of the State of New York for prosecution all businesses who have violated and are violating the subject statutes and regulations in accordance with his constitutional, statutory and mandatory duties;

M) Enjoining the defendants from granting or permitting any exemption from taxation unless it is authorized by a general statute.

N) Temporarily enjoining the defendants from assessing, collecting or enforcing the taxes, penalties and interest imposed under New York Tax Law Articles 12-a, 20, 28 and 29 until such time as the defendants have implemented regulations to assess, collect and enforce such tax laws on retail sales to non-indians on Indian Land or until a general statute is enacted by the legislature exempting such sales from the taxes imposed therein;

O) Enjoining defendants and their respective agents, servants, officers, directors, employees, and all other persons, from taking any steps to deter, defeat, obstruct and/or hinder the State of New York and its employees, agents and servants from collecting the taxes on tobacco and motor fuel sales by non-indians through-out all of the State of New York including those sales to non-indians on Indian lands;

P) Awarding reasonable costs and disbursements, as the Court deems just and equitable;

Q) Any and all other relief which this court deems just and proper.

Dated:              July 29, 2002

                        Buffalo, New York

 

                                                                                    Yours, etc.

 

                                                                                    Daniel T. Warren

                                                                                    Plaintiff, Pro Se

                                                                                    836 Indian Church Road

                                                                                    West Seneca, New York 14224

                                                                                   


 

State of New York        )

County of Erie               )  ss:

City of Buffalo              )

 

I Daniel T. Warren, am the Plaintiff in the within action.  I have read the foregoing complaint and know the contents thereof.   The contents are true to my own knowledge except as to matters therein stated to be alleged upon information and belief, and as to those matters I believe them to be true.

 

 

                                                                                    ________________________________

                                                                                    Daniel T. Warren

Sworn to before me this

__ day of July, 2002

 

 

__________________________

Notary Public