Judge rules against NY tribe in cigarettes case

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February 20, 2009

Anonymous The Press Republican Fri May 14, 2010, 07:10 PM EDT

AUBURN, N.Y. (AP) — The Cayuga Indian Nation cannot continue selling untaxed cigarettes to non-Indians at its two upstate New York stores, a state judge has ruled.

In a decision released Wednesday, State Supreme Court Justice Kenneth Fisher said the Cayugas must obey his earlier order blocking the sales at the LakeSide Trading stores in Union Springs and Seneca Falls until a dispute with county officials is fully reviewed by an appeals court.

The Cayugas will appeal Fisher's ruling, said Lee Alcott, a tribe lawyer.

"The decision fails to recognize the root of the problem, which is that until Indian tax exemption coupons are issued, there is no way for the nation to determine whether it is selling to Indians or non-Indians, which was precisely the issue the appellate court has resolved in the nation's favor," Alcott said.

The state has not put in place the coupon system that will exempt Indians from cigarette taxes. A state appeals court has barred the state from enforcing the tax law until the coupons are available.

Alcott said the two stores will remain open, although nation officials haven't decided whether to continue selling untaxed cigarettes.

Local authorities raided the on Nov. 25, saying they were violating state law by selling cigarettes without charging the required tax and claiming $485,000 in state excise taxes.

The Cayugas say they are exempt from collecting the taxes because their businesses are protected by their sovereign nation status.

Fisher ruled in December that the tribe doesn't have sovereign rights to sell tax-free cigarettes at its stores. Fisher also said the counties could prosecute the Cayugas on tax-evasion charges. On Friday, local prosecutors revealed that grand juries in Cayuga and Seneca counties have returned sealed indictments in the dispute.

The Cayugas temporarily closed their stores and appealed Fisher's December ruling. The tribe reopened the stores Jan. 30 after the midlevel Appellate Division issued an injunction.

Fisher said the injunction did not mean the nation could resume selling untaxed cigarettes.

"It's a good day for the taxpayers of New York state," Cayuga County District Attorney Jon Budelmann said of Fisher's decision. "We never said (the Cayugas) can't sell cigarettes, just untaxed cigarettes. If they stop selling untaxed cigarettes, people will have to buy them lawfully and it will level the playing field for other small businesses."

In a separate decision, Fisher ruled the counties may keep the 17,600 cartons of cigarettes sheriff's deputies seized from the stores during raids in November. The Cayugas had asked for the return of the cigarettes, along with computers and business records.

Because cigarettes are considered perishable, Alcott said the nation will sue the counties for $500,000 to replace their products if they go stale.