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Taxation of non-Indians on Indian land

Judge Arcara has issued a Decision and Order denying the motions of the Cayuga and Seneca Nation's motion for a preliminary injunction against collection of New York cigarette taxes Click here to read it!

Judge Arcara has issued a stay pending appeal of his decision denying the Seneca and Cayuga's motion for a preliminary injunction Click here to read it!

Judge Hurd has issued a Decision and Order granting the motion of the Oneida Indian Nation's motion for a preliminary injunction against collection of New York cigarette taxes Click here to read it!

The tax burden on the People of the State of New York is too high and must be reduced. However, the selective enforcement of the New York Tax Laws to give relief to a few while raising the burden imposed on others is no answer to this problem. This is particularly so when this policy was not made by the people's representatives in our State Legislature, but by the executive branch of our government in contravention of the expressed policy of our State Legislature which requires the collection of the sales and compensating use taxes from non-Indians making purchases on Indian land.

Starting in federal court in 2001 Daniel Warren commenced an action to compel then Governor Pataki and then Tax Commissioner Roth to collect taxes from non-Indians making purchases on Indian lands. This action was dismissed based on comity and the action was then re-commenced in the Supreme Court of the State of New York and was subsequently dismissed for a lack of standing.

Then in 2003 the New York Legislature took action to end Governor Pataki's illegal and unconstitutional policy of non-enforcement of our Tax Laws on Indian Land on non-members by amending the Tax Law to require the Commissioner of Taxation and Finance to promulgate and implement regulations to carry this out. Despite this State Legislative mandate the Governor and Tax Commissioner refused to carry out their constitutional and statutory duties. In 2004 UCE began a petition campaign to urge the New York Legislature to impeach Governor Pataki for his illegal refusal to enforce the New York Tax Laws on non-members on Indian Land (see http://www.upstate-citizens.org/Impeachment-Drive-Pataki.htm) This campaign was successful in persuading our Legislative representatives to act in removing any discretion the Executive Branch has in this area rather than removing him from office (see http://www.upstate-citizens.org/UCE-s6822.pdf and http://www.upstate-citizens.org/bruno-tax-response.pdf) Even after this Governor Pataki refused to enforce the law (see http://www.upstate-citizens.org/UCE-Pataki.pdf) However, as part of the FY 2005 State Budget our Legislative leaders again amended the Tax Laws to compel the collection of these taxes equally on all to whom they apply. Absent more illegal and unconstitutional conduct by the Governor and State Tax Commissioner Eristoff these taxes should have been collected starting March 1, 2006. (see Click here to see Tax Department Bulletin).

When March 1, 2006 came and went without the executive branch of our State Government carrying out its constitutional duty to enforce all laws two proceedings were commenced to compel the executive branch to comply with the legislatively enacted mandates. On of these proceedings was commenced by Seneca County and it was ultimately dismissed (Click here to read the court decision) as well as the New York Association of Convenience Stores which was also dismissed (Click here to read the court decision). In light of these decisions and other developments Daniel Warren has movved to vacate the judgment dismissing his prior state court action. The pleadings and proceedings in this action including the recent motion to vacate the judgment of dismissal is available by clicking here.

By Memorandum Decision dated January 2, 2007, Justice Sconiers granted the Plaintiffs in Day Wholesale, Inc., et al v. New York, et al, a preliminary injunction enjoining the State from enforcing Tax Law 471-e until regulations are in place providing for tax exemption coupons or other mechanism for use by enrolled tribal members. You can read a copy of this decision by Clicking here!

On November 25, 2008, the Seneca and Cayuga County Sheriffs' Departments acting pursuant to a search warrant seized all the cigarettes at two locations of the Lakeside Trading Post owned by the Cayuga Indian Nation. The Cayuga Indian Nation in turn sought to enjoin the authorities from initiating any prosecution and to compel them to return the seized cigarettes. Justice Kenneth Fisher denied the motion for a preliminary injunction and dismissed the action in a 30 page decision which can be read by clicking here.

On Decmber 15, 2008, Governor Paterson signed into law an amendment to the Tax Law that requires manufacturers and wholsalers to certify under penalty of perjury that the untaxed cigarettes will not be sold to retailers that sell tax-free. This bill was passed in August, but the Assembly was holding onto it and delivering it to the Governor as required by its own rules based on a request from Governor Paterson.

The only step left is for the New York State Tax Commissioner to produce and distribute the tax exempt coupons as directed by Tax Law 471-e. Unless this is done this policy of non-enforcement remains unchanged.

This illegal and unconstitutional acts of the executive branch is a direct threat to the power of our vote and ability to hold our elected officials accountable and threatens our very form of state government by elevating the executive branch over our State's Legislature in violation of the separation of powers doctrine and rule of law.

This illegal and unconstitutional acts of the executive branch is damaging the economy of the counties which have Indian land within them because the state is also not collecting their sales and compensating and use tax as well. In Erie County the county's sales tax receipts are distributed pursuant to a sales tax distribution agreement to the municipalities and shool districts within it whach are also being deprived of their respective distributive share. Currently Erie County is under a the control of The Erie County Fiscal Stability Authority and the County]s largest city us under the control of the Buffalo Fiscal Stability Authority and the City of Lackawanna is near its constitutional taxing limit.

This illegal and unconstitutional policy is also placing honest taxpaying businesses near Indian land at a severe competitive disadvantage which will reduce the value of retail property and employment opportunities that help grow our economy.

The sales tax revenue collected from these reservation sales to non-Indians will benefit the County of Erie and all counties that have reservations within them as well as all municipalities. This is so regardless if it results in reduced sales on the reservation or not. The purchases will still be made the question is where? Erie County will increase its sales tax revenue because county resident who would normally purchase these goods on the reservation will now have less of an incentive to do so and will purchase them neighborhood stores. By making these purchases in neighborhood stores they help a local merchant contribute to their neighborhood while at the same time the increased sales tax revenue is used to help keep police and firemen well equipped and on the road. This is because of the way the sales tax revenue is shared. In Erie County the county keeps 2.25% and 2.5% is distributed to all the municipalities in Erie County. In times where the City and County is reducing police and fire personnel we have a choice of helping keep some retail positions or having more police and firefighters.

The trafficking of contraband cigarettes are used by some to help fund terrorist organizations such as Hezbollah, Hamas and Al Qaeda ( see The fact sheet from Tobacco Free Kids) The Indian Nations and tribes are either unwittingly aiding in the unlawful trafficking of contraband cigarettes and the funding of these organizations or are tacitly condoning this conduct. At least one racketeering indictment was filed where the funds derived from contraband cigarette trafficking was funneled to Hezbollah through the Cattaraugus Reservation of the Seneca Nation of Indians ( see the Akhdar indictment ) In another incident concerning the link between trafficking in contraband cigarette smuggling and terrorist organization Aref Ahmed was convicted in 2004 for on charges of conspiracy to commit money laundering and smuggling contraband cigarettes. "Ahmed was ordered detained pending sentencing in part based upon evidence that he helped finance the travel of the so-called Lackawanna Six from Buffalo to Afghanistan to attend an Al Qaeda-affiliated training camp. ( http://www.usdoj.gov/opa/pr/2004/March/04_ag_141.htm )

The Seneca Nation has embarked on a media campaign that is marked with misinformation in order to keep an illegal and anti-competitive advantage over honest businesses. In their recent advertisement they cite The 1842 Treaty of Buffalo Creek as the source of the tax free status they claim precludes taxation of non-Indians on Indian land. This is simply not true. In fact Barry Snyder, a former president of the Seneca Nation and then owner of Seneca Hawk raised this treaty in his defense against the imposition of taxes and penalties due for his failure to collect these taxes from non-Indians. This position was rejected by the Appellate Division of the New York Supreme Court, Third Department in Snyder v. Wetzler, 193 A.D.2d 329. In that decision the court held that the provisions of that treaty regarding taxation was only with regard to property taxes. This decision was affirmed by the New York Court of Appeals on December 1, 1994, in Snyder v. Wetzler, 84 N.Y.2d 941 . What the advertisements also do not tell you is that the Seneca Nation by its attorney Joseph Crangle filed a friend of the Court brief and argued their case in support of Mr. Snyder and Mr. Snyder still lost.

* * * * * *

Click here to read UCE's statement on the issues between the Seneca Nation and New York State over the thruway and taxation of non-Indians.

Click here to read the decision of the New York Division of Tax Appeals that rejected Barry Snyder's arguments on his obligation to collect taxes from non-members purchasing cigarettes at Seneca Hawk.

Two recent decisions by the United States District Court for the Western District of New York signal the courts position on the taxation and regulation of Indian sales of cigarettes to non-Indians. The first is United States of America v. 1,920,000 cigarettes, Case # 02-437A, in which Judge Arcarra denied the claimants motion to dismiss based on arguments that Cigarette Contraband Trafficking Act (CCTA) was not applicable to Indians. The court held that if the government proves what it alleged in its complaint it would have a prima facie case for seizure of the cigarettes under the CCTA and Wire Fraud (18 USC 1343) statutes. Click here to read the decision. The second decision was handed down by Judge Skretny in OLTRA, Inc. v. Pataki, Case # 03-cv-319, where Judge Skretny denied the plaintiff's motion for a temporary restraining order that would prohibit the State of New York from enforcing New York Public Health Law section 1399-II which prohibits mail order shipment of cigarettes. Judge Skretny held that in light of the United States Court of Appeals for the Second Circuit's decision in Brown & Williamson Tobacco, Corp. v. Pataki, 320 F.3d 200, that it is unlikely that the plaintiffs would succeed on their dormant commerce clause challenge to the statute. Click here to read the decision.

The Contraband Cigarette Trafficking Act makes it unlawful for any person to knowingly ship, transport, receive, possess, sell, distribute, or purchase 60,000 cigarettes (300 cartons) or more that bear no evidence of the payment of applicable State cigarette taxes in the State where such cigarettes are found. New York requires a tax stamp on all cigarettes. If you find any retail establishment that has more than 300 cartons of cigarettes that do not have this tax stamp please e-mail The Bureau of Alcohol, Tobacco, Firearms and Explosives at NYDiv@atf.treas.gov

When and where taxes are applicable to Indians

Federal Taxes - individual Indians must pay Federal income taxes (unless a treaty/statute gives special exemption). Tribes have the same immunity from federal taxation as a state.

Two exceptions to this are:

  • Income from a land allotment (timber, minerals, farming)
  • Proceeds from a judgment

State Taxes - individual Indians and tribes are generally exempt from state taxation within their own territory (on their reservation). This includes no taxation on:

  • Real estate
  • Income
  • Sales tax (goods purchased on the reservation or delivered to the reservation
  • License fees (autos, boats, snowmobiles, ATVs, and RVs)
  • Inheritance (except with congressional consent)

On the reservation these taxes must be paid:

  • Sales tax on purchases by nonmember Indians and Non Indians
  • Sales tax on liquor sold to Indians
  • Property taxes on privately owned, deeded land

Indians off the reservation must pay:

  • Income tax
  • Sales tax (except on autos, boats, snowmobiles, ATVs, and RVs)or goods delivered to the reservation
  • Real estate taxes on privately owned, deeded land
  • Inheritance taxes
  • Taxes on individual Indian or tribal business

Right to Hunt, Fish, Gather, and Trap (all wildlife)

  • Hunting/fishing rights also refers to gathering and trapping rights
  • Individual Indians and tribes have the right to hunt, fish, gather and trap within the territory it controls, even if a treaty does not mention it.
  • Indian tribes can regulate both on-reservation and off-reservation activities that threaten tribal resources. It is a federal crime to hunt or fish on tribal land (Cayuga Indians' aboriginal 3 million acres) without tribal permission.
  • Indians have the rights to cross private land, or to hunt and fish from private land.
  • Indian tribes must catch 50% share of fish - the state must prevent Non-Indians from taking too many fish, or compensate the Indians.
  • Boundaries include all original tribal lands (Cayuga Indians' 3 million acres).
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