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County raid on Cayuga stores continues cigarette tax war

AUBURN, N.Y. – A Cayuga Indian Nation attorney told a state Supreme Court judge Dec. 4 that a raid of two tribal convenience stores and confiscation of cigarettes by county law enforcement agents a week earlier violated both the tribe’s sovereignty and a state injunction against enforcing cigarette tax laws on American Indians.

Cayuga Nation attorney Dan French asked state Supreme Court Justice Kenneth Fisher to order the county to return the cigarettes, which he said were seized under unlawfully obtained search warrants. He also asked the court to declare that the tribe was not in violation of the state’s tax laws, and to prohibit county officials from saying they were.

Fisher said he needed time to consider the case before issuing an expedited decision next week. He will issue a summary judgment based on the evidence presented by the parties.

“I think out of deference to this judge and his willingness to move this case quickly, they’ve (the Cayugas) taken a forbearance policy, but that could change and they may resume sales, but I think for the current time they will forgo sales,” French said.

The case is the latest foray in the ongoing sovereignty battle over untaxed cigarette sales on tribal land in New York.

The nation was forced to stop selling cigarettes Nov. 25 after Seneca and Cayuga county sheriff’s deputies raided the tribe’s Lake Side Trading convenience stores in Union Springs and Seneca Falls and seized 17,600 cartons of cigarettes.

County officials claimed the stores were violating state law by selling cigarettes without charging the required tax and owed $485,000 in state excise taxes. They claim that the stores are not on sovereign land.

The Cayugas and other Indian nations in New York say they are exempt from collecting sales and excise taxes because their businesses are protected by their sovereign nation status.

Cigarette sales to tribal members on reservations are not taxable by law. New York legislators have been trying for years to force tribal smoke shops to collect taxes on cigarettes sold to non-Indians, but the tribes say that as sovereign nations they are not obligated to act as tax collectors for the state. According to state law, non-tribal members who buy cigarettes on reservations are obligated to report and pay the taxes on those purchases.

Seneca County District Attorney Richard E, Swinehart and Cayuga County District Attorney Jon E. Budelman wrote to Robert L. Megna, the commissioner of the State Department of Taxation and Finance, in September that they were investigating the Cayugas’ “illegal sale and felony possession of untaxed cigarettes, gasoline and/or other products,” and seeking his assistance in the “appropriate enforcement actions that we expect will follow.”

Megna warned them of doing anything rash.

“As I am sure you are aware, Governor Paterson is currently engaged in discussions with New York’s Native American nations and tribes in an effort to resolve the many complex and important issues that have confounded multiple administrations for decades. Given these circumstance, we are constrained not to participate in your investigation,” Megna wrote on Oct. 1.

He told the county district attorneys that they were free to pursue their investigation.
“It is our hope, however, that you exercise care to avoid taking actions that might disrupt or undermine the Governor’s current global negotiations,” Megna wrote.

Dozens of people from both sides of the case gathered outside of the courtroom to protest.

Tribal supporters carried signs that said “Honor Indian treaties,” “200 years later and they are still stealing from the Indians,” “We are not tax collectors,” and the more obscure “Seneca County doesn’t like Indians, but they sure do love garbage.”

The anti-sovereignty protesters’ carried signs addressed to the governor that said “Don’t cut health care, collect the taxes” and “Enforce the law.”

Phillip Spellane, the attorney representing the counties, argued that the convenience stores are not located on sovereign land.

“Essentially after 200 years of holding land not by the Cayuga Nation, the land can’t automatically revert into a reservation status simply by the purchase of the land by the Cayuga Nation,” he said.

French said the stores lie within a 64,000-acre reservation established by treaty with President George Washington in 1794 and are located within the tribe’s land claim, thus making it Indian land.

In a comment to the press outside the court, Karl Hill, Heron Clan sub-chief, said he has confidence that Fisher will judge fairly “and never ignore that the reservation is still qualified territory. If you look at it simplistically, the other side is trying to claim that the Cayuga Nation no longer has a reservation, that the reservation of 64,000 acres has been disestablished. According to U.S. law, that can only happen by an act of Congress.”

Tribal opponents also argue that the state is obligated “to enforce this cigarette tax while providing coupons to Native Americans so they can buy tax free cigarettes.”

The referred tax law is a 2006 amendment to the tax law that would have required all cigarettes sold on reservations to be tax stamped and would have imposed a coupon system for tribal retailers to get tax refunds on cigarettes sold to tribal members.

But the law never took effect. A state appellate court slapped a preliminary injunction against it after a court challenge brought by attorney Margaret Murphy on behalf of her client in Day wholesale Inc. vs. State of New York. The injunction is still in effect.

A similar law passed last summer has not been signed by Paterson.

This is the second, non-state, local government action against cigarette sales on sovereign Indian land in the past few months. At the end of September, New York Mayor Michael Bloomberg filed a lawsuit against the Unkechaug Indian Nation alleging that “massive quantities” of illegal cigarettes are being sold at reservation smoke shops. The lawsuit is pending.

In an interview outside of the courtroom, Cayuga Heron Clan mother Bernadette Hill said it was heartbreaking to watch police raid the two Cayuga owned stores on the tribe’s sovereign land.
“The bottom line is there is just no understanding of the fact that we were here first,” Hill said.