New York Rekindles Indian Ingenuity
- Sales Tax News
- Feb 29, 2012 | Susan McLain
New York’s attempts to stand firm on cigarette sales tax has brought about an “…enormous tax-evasion problem to be addressed,” according to James Calvin, executive director of the New York Association of Convenience Stores.”
To date, roughly “…a dozen Indian cigarette manufacturers [are] operating across upstate New York, more than in the other 49 states put together.” Each factory is developing and making their own brand of cigarettes to replace ordering and reselling popular brand-name cigarettes.
The growth of the Indian cigarette manufacturing industry in New York grew when the state began to “…demand tax payments from the American wholesalers that were supplying cigarettes to tribes for resale. The tribes then stopped buying the name-brand cigarettes and resolved instead to stock the shelves of their convenience stores with their own cigarettes.”
But cigarettes, though state sales tax-free to tribal members, are not sales-tax free to non-tribe members. David Sutton, spokesman for the parent company of the country’s largest cigarette maker, Philip Morris, says, “All cigarettes sold to non-Native American New Yorkers need to be tax-paid—regardless of who manufactures them—or New York State will continue to lose legitimate and significant tax revenue, and law-abiding retailers will continue to be impacted by cigarette tax evasion.”
The numbers being talked about are substantial. In the first half of 2011, “…the state’s Indian nations imported 9.6 million cartons of brand-name cigarettes.” The locally made cigarettes “…sell for as little as $39.95 for a 10-pack carton,” (emphasis added) and don’t apply the state’s $4.35-a-pack excise tax (confirmed as the highest rate in the United States). Name brands average between $8 - $10 per pack (not carton) in New York City. That's before tax.
Little is being done at the moment to tackle the sales tax compliance issue and the proceeds of the sales tax-free transactions go to “…support programs like college scholarships, housing assistance and a health clinic,” on the lands of one of the Indian nations. The move by the Indian nations isn’t necessarily one that they wanted. According to Ray Halbritter, of the Oneida Nation, “It’s not what we wanted to do. It’s all we could do.”