Who Can Buy Tax-Exempt Cigarettes in New York?
- Sales Tax News
- Sep 1, 2015 | Gail Cole
All fifty states impose an excise tax on cigarettes, albeit at greatly varied rates. Because rates vary so wildly, smokers regularly cross state lines—and even national borders—to pay fewer taxes for their fix. For non-Native New York smokers living close to an Indian reservation, tax-free cigarettes are tantalizingly close and yet frustratingly out-of-reach.
Smokers in New York State pay to satisfy their habit: a statewide rate of $4.35 per 20-pack and a combined rate of $5.85 for the same in New York City. It is illegal for consumers to purchase cigarettes that are not affixed with New York State cigarette tax stamps, and only licensed cigarette agents have the right to purchase and affix those stamps. Failure to do so can result in prosecution for tax fraud.
Yet members of Indian nations and tribes may purchase cigarettes tax-free when the sale takes place on Native American lands. Non-natives purchasing cigarettes on tribal lands do not qualify for that exemption and must pay tax on tobacco products.
Since September 1, 2010, “wholesale dealers are required to collect the cigarette excise tax and the prepaid sales tax for all cigarettes sold for resale on an Indian reservation to non-Indians and non-members of an Indian nation or tribe.” To ensure there is “an adequate quantity of tax-exempt cigarettes available for the use or consumption of the nation or tribe and its members,” the state provides “two alternatives for Indian nations and tribes and their members to obtain tax-exempt cigarettes” (See TSB-M010(6)M).
The New York State Tax Department recently released a Notice Regarding Indian Tax-Exempt Cigarette Annual Amounts, which lists the number of cigarette packs available to each nation or tribe for quarters occurring September 1, 2015 – August 31, 2016. Annual amounts are based on the probable demand for tax-exempt cigarettes, which is based on average cigarette consumption per capita and the number of “qualified Indians for each of the Indian nations or tribes.”
It is a fascinating document. For example, the Poospatuck or Unkechauge Nation, with a 2000 population of 376, is eligible for 5,100 tax-exempt cigarette packs per quarter. By contrast, the Saint Regis Mohawk Tribe, with a 2000 population of 13,784, is eligible for 179,100 tax-exempt packs.
Additional information about New York cigarette and tobacco products tax.