It's a part of our Niagara area culture that people drive to the Tuscarora Reservation to buy cigarettes at a cheaper price than what they pay in local stores.
New York State Gov. Andrew Cuomo wants to enforce an existing law permitting the collection of state taxes on cigarettes on reservations that would end the price disparity The governor's proposed budget assumes the state will collect $130 million in taxes on cigarettes sold by Indian retailers.
This will make barely a nibble in the deficit. New York will spend $10 billion more this year than it collects in taxes, in spite of being the highest-taxed state.
Cuomo is the fifth New York governor trying to end tax-free Indian tobacco sales. No governor has succeeded in enforcing the law, and the matter is presently in federal court.
At issue is the fact that Native Americans on reservations, while they pay federal taxes, do not pay state taxes. But a New York law -- which the state has yet to enforce -- requires tobacco wholesalers to sell their cigarettes to Indian retailers with state excise tax stamps already affixed to their packaging. This will make cigarettes sold on reservations "pre-taxed," since Indians would buy them after taxes are added. Last year, New York state boosted the excise tax on cigarettes by $1.60 per pack to $4.35 -- making it the nation's highest levy.
Nationwide, the median state excise tax on a pack of cigarettes is $1.25. In most states, the savings at reservations is $1 to $2 a pack, as opposed to $5 in New York.
At a typical local convenience store last week, the price of a pack of Marlboro cigarettes was $9.50, plus sales tax, making the cost $10.26. At smoke shops on the Tuscarora Reservation, the same pack was $5.55. There is no sales tax on reservations.
The state made its last serious attempt to collect taxes on Indian cigarettes in 1997, on orders from then-governor George Pataki. A clash between a handful of Indian protesters and New York State Troopers reduced the timid Pataki to cowering in a closet, afraid of his political shadow. After a shutdown of a small portion of the Thruway by Native Americans on the Cattaraugus Reservation, cowardly Pataki reversed his order.
As the Seneca Nation fights the current governor in court -- and with Thomas Mattox, the tax commissioner, declaring New York is "prepared to enforce immediately," once the appeals court rules -- Tuscarora businessman Joseph "Smokin' Joe" Anderson seems singularly insulated from the dispute. Anderson said if the law to pre-tax cigarettes becomes enforceable, he believes people will buy more of his native-made cigarettes. He thinks more factories will be built on reservations and that this will be the growth industry for Indians everywhere.
Tens of thousand of people already drive to Smokin' Joe's, Patterson's Smoke Shop or No Blanket Smoke Shop to save as much as $50 a carton. The drive from downtown Niagara Falls is about nine miles. If the law is enforced, and people get no discount on brand-name cigarettes, many will switch to Indian-made cigarettes.
"There's a cut-off for everybody," Anderson said. "And I think that cut-off is around $55 or $60 for a carton. You'll get some stragglers at $75."
Anderson said Smokin' Joe's already outsells major brands by a margin of six to one at his stores. Anderson sells a carton of Marlboro for $55. Indian-manufactured cigarettes range from $25 to as low as $14 per carton. Marlboro costs about $100-per-carton at off-reservation stores.
Since the sale of cigarettes manufactured and sold on Native American reservations cannot be legally taxed under federal law, the handwriting would seem to be on the wall.