Guv gets power to talk cigarette taxes with tribes

ALBANY - The Legislature on Monday gave Gov. David A. Paterson the power to negotiate agreements to collect cigarette taxes from individual Indian tribes that have refused to pay for more than 20 years.

The agreements, which lawmakers or a federal judge must approve, could clear a path for the state to collect at least $200 million a year, state officials said. Some estimates put the lost revenue at more than $1 billion a year.

Administration officials said the legislation spelled the end of the state's official policy of "forbearance" - during which it essentially gave up collecting the taxes since the mid-1990s when tribes had violent clashes with State Police troopers and shut down Interstate highways to protest the taxes.

"Governor Paterson is doing that which previous governors either would not or could not do: He is enforcing the law," his spokesman, Morgan Hook, said in a statement.

The Seneca Nation, the state's largest Native American seller of cigarettes, denounced the legislation last night, arguing treaties prohibit the state from imposing taxes on goods sold on Native American lands. But other tribal leaders said they welcomed a chance to talk directly to the administration."If there is an effort by the governor to achieve some level of accommodation through a government-to-government negotiation, that would be a good thing," said Harry Wallace, chief of the state-recognized Unkechaug tribe in Mastic who owns the Poospatuck Smoke Shop.

Poospatuck shops have been the subject of several civil and enforcement actions, many by New York City, seeking to limit the sale of untaxed cigarettes.

Tobacco industry officials said Paterson's plan would not produce promised revenues from Indian tribes. Nor would it guarantee that Native American shops pay the same tax as most convenience stores, whose businesses have been hurt by cut-rate Indian cigarettes as taxes have spiraled upward.

"It leaves the issue very open and subject to the governor's discretion," said David Catalfamo, a spokesman for a coalition of tobacco companies, retailers and unions called Enforce the Law, Collect the Tax.

Critics argued it was unconstitutional to give the governor power to negotiate deals with Indians when he already has the authority to collect the taxes through a system developed in 2005. That system allows reservations buy tax-stamped cigarettes from wholesalers and then be reimbursed for tobacco sold to exempt tribal residents. The state Department of Taxation and Finance is waiting for Paterson to allow the reimbursement to move forward, officials said.

The Legislature approved on Monday a program allowing tribes to opt out of the reimbursement system and instead get a number of untaxed cigarette sales each year, based on the tribe's population.

But tribes said Monday they would oppose such efforts.

"Any attempt to tax tribes is in direct disregard for tribal sovereignty and the constitution which says that only congress has the right to deal with tribes on these issues," said Lance Gumbs, senior trustee of the Shinnecock Indian Nation and owner of the Shinnecock Indian Outpost.

Richard Briffault, a Columbia University professor who has studied the taxation issue, said Paterson was trying to walk a fine line between getting essential revenue during a fiscal crisis without provoking the tribes.

"It's not as tricky legally as it is politically," he said.

With Mark Harrington