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Court Grants Seneca Nation Motion Stopping Tax Collection in Indian Country

A day after the U.S. Court of Appeals for the 2nd Circuit said that New York State can begin collecting taxes on cigarettes sold to non Indians on sovereign Indian land, the Seneca Nation of Indians obtained a court ruling that says, “No, it can’t.”

On May 9, the 2nd Circuit Court of Appeals lifted injunctions that were blocking the state from applying a law passed last year that requires wholesalers to pay for and affix a $4.35-apack tax stamp on all cigarettes sold in the state. Indian nations would have to pre-pay the tax on all cigarettes coming onto their reservations, and then apply to the state for reimbursement of the taxes paid on cigarettes sold to Indians. The tax law is the latest scheme in the state’s decades-long attempt to force Indian nations to collect state taxes on their land.

The next day, Seneca Nation President Robert Odawi Porter and members of the Seneca Nation Council went to State Supreme Court in Erie County and filed a motion for a Temporary Restraining Order (TRO) and a preliminary injunction to stop the state from immediately implementing the tax laws. The court issued a three-week TRO until June 1 when the state will be required to “show cause” why the court should not block the state from implementing its cigarette tax law while the litigation is pending and “in the absence of validly promulgated regulations during the pendency of this litigation.” The judge will hear arguments on the cross motions for summary judgment on the merits of the nation’s State Administrative Procedure Act claim case.

“We have been saying all along that the state has it wrong on this issue and today the state Supreme Court sent an important message by issuing this temporary restraining order,” Porter said. “For more than 20 years, New York State has attempted to devise a way to collect what they’ve said would be hundreds of millions of dollars in taxes from tobacco sales sold on Indian reservations. The fact of the matter is that the state will not collect a dime from the Seneca, nor I suspect from any other Indian Nation. This prolonged effort will amount to an unnecessary struggle that will provide no return or benefit to the state coffers, but result in the loss of jobs and loss of income to hundreds of non-Native and Native families across the state. And as I said yesterday the Seneca Nation will not be tax collectors for the State.”

Earlier in the day the Seneca Nation Council and executives met with Seneca business people, tobacco retailers and manufacturers in the Cattaraugus Council Chambers to discuss how the nation’s private sector economy will move forward.

“The state of New York has run roughshod over the Seneca and other tribes across New York State,” said Richard Nephew, the chair of the Seneca council. “Throughout history the state has violated our treaties, diminished our lands, and is now attempting to dismantle our economy. The state will not succeed in destroying us. Have no doubt, we will continue to operate businesses and we will survive.”

After the TRO was issued, New York Attorney General Eric Schneiderman wrote to the 2nd Circuit confirming that, “the state does not intend to proceed with enforcement before both Courts clarify or resolve the pending disputes about enforceability.”