Federal Court of Appeals Rules against NY

Indian nations located across the New York State have won another round in the continuous cigarette tax legal battle against the state: The tribal nations have the right to continue sales of tax-free cigarettes to non-members of the tribes within the territories of the sovereign tribes whereas the court examines whether the new NY tax legislation is constitutional.

Smoking tobacco tax program

Earlier this month the Second Circuit Court of Appeals ruled against the state solicitation to impose an injunction which prohibit the state from taxing cigarette sales on Nations’ land whereas several challenges to the new tax code are pending.

However the court decided to consolidate appeals filed by several Indian Nations in one case. The tribes initiated lawsuits and filed appeals against New York state tax legislation that would oblige them to collect taxes from sales of cigarettes to non-Indians by demanding wholesalers to pay $4.35-per-pack tax on all cigarettes sold across the state and impose the tax on Native tobacco shops.

“Of course this is not final decision, but the ruling by the appeals court permits our stores to continue operation for the near future,” admitted Robert Odawi Porter, leader of Seneca Indian Nation. “We are going to continue the legal fight against this unconstitutional effort by the state that violates our treaty rights and destroys our business as well as the jobs it provides.”

During the past several months, two separate courts ruled to reject the state from imposing its latest tax strategy.

In October, the U.S. District Court Judge David Hurd, gave a preliminary injunction in a lawsuit initiated by the Oneida Indian Nation against Gov. David Paterson and New York State, requesting the court to decide whether the new tax code is illegal. The tax law, approved last summer, ended the state’s long-term “forbearance” policy that permitted the Indian Nations tobacco business to prosper, earning billions of dollars for the state budget and opening thousands of work positions in the state.

This ruling was hailed by Oneida Nation.

“The Oneida Nation welcomes the decision of the federal appeals court that is continuing to reject New York state’s attempts to infringe the nation’s sovereignty by collecting taxes from wholesalers of products sold across the Oneida reservation as well as other Indian lands throughput this state,” state Mark F. Emery, director of communications. “Although we are convinced that such matters should be decided by negotiation, the Oneida nation is read to protect its freedoms in court.”

In the 25-page ruling, Judge Hurd gave significant evidence against the New York state amendments in tax law.

The judge agreed with Oneida that the legislation would cause irretrievable damage by demanding the nation to pay a $4.35-per-pack tax, which he named “unconstitutional,” since a sovereign nation tribe is not subject to taxation.

The state has filed an appeal against Hurd’s ruling.

Another ruling against the New York state was issued by Judge William Arcara of the Western District Court, who rejected the Seneca and Cayuga Nations’ motion for a preliminary injunction and provided a stay against the state imposing the tax legislation.

Arcara ruled that the nations’ tribal rights “are not unconstitutionally burdened” by the latest cigarette tax legislation, and that Indian nations failed to prove a likeability of success on the merits of their claims.

However, the judge admitted that the tax legislation is likely to have an adverse effect on the nations’ current tobacco businesses.

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