In a decision that could put a significant crimp in untaxed cigarette sales from the Poospatuck tribal reservation in Mastic, a federal judge has granted New York City's request for an injunction against sales to nonmembers of the Indian tribe.
U.S. District Judge Carol Amon, following a four-day hearing in May, found that sales from reservation smoke shops fueled a massive bootlegging trade of cheap smokes in New York City that deprived the city of tax revenue and reduced the effectiveness of anti-smoking programs.
Although untaxed sales to tribal members for their personal use are legal, Amon said the privately run smoke shops named in the suit had abused the privilege with bulk sales of massive quantities and efforts to help buyers evade police.
"Defendants' principal business model is to provide customers with the opportunity to purchase cigarettes at significantly reduced prices, without paying taxes," Amon wrote in the decision, issued late Tuesday.
The judge stayed the injunction for 30 days to give the defendants a chance to file an appeal.
New York City, in its lawsuit filed in 2008, alleged that reservation smoke shops had sold 24 million cartons since 2004 - more than 19,000 a day for the 300 residents of the 55-acre reservation. The city said Wednesday that untaxed sales from the reservation had cost it about $225 million in revenue from 2004 to 2008, and cost the state and city combined $840 million.
"The city will go after every dollar that is owed to city taxpayers," Mayor Michael Bloomberg said in a statement lauding the ruling.
Earlier in the case, Amon rejected an argument that the smoke shops and their owners, which are licensed by the Unkechaug tribe, could not be sued because they are part of a sovereign nation.
Lawyers for the smoke shops and their operators did not return calls Wednesday, but Harry Wallace, chief of the Unkechaug Indians who live on the reservation, predicted an appeal.
He said the decision was an unjustified intrusion into tribal affairs, and denounced Amon for ignoring a state court ruling issued last month by an appeals panel in Rochester that said state tax laws don't prohibit Indians from selling untaxed cigarettes to nontribal members on reservations.
"She ignored every legal precedent in our favor," said Wallace. "I'm curious about how a federal judge can simply ignore a state court on state law."
The injunction covers five smoke shops - Monique's, Peace Pipe Smoke Shop, Red Dot & Feather, Smoking Arrow and TDM - and nine individuals. Other reservation smoke shops settled earlier in the case.