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Onondaga considers cigarette-making to enhance revenues

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By William Kates -- Associated Press

ONONDAGA NATION TERRITORY, N.Y. (AP) - The Onondaga Indian Nation is considering opening a cigarette factory in a warehouse it is building on its territory south of Syracuse.

The cigarette factory is one of several possible ventures the Onondaga are discussing, Joseph Heath, the tribe's attorney, said Dec. 13.

Other possibilities include an organic grocery store, a pharmacy or a lumber store, he said. At this time, though, the cigarette factory is the front-runner.

''The tribe needs to maintain an income. If the opportunity is there with cigarettes, the tribe will reluctantly continue. It's not the ideal business the Onondagas want to be in, but it's something that has worked well,'' Heath said.

The tribe began building the warehouse in November and expects to complete it by late spring. It sits next to the tribe's smoke shop and million-dollar lacrosse arena.

The decision on whether to go ahead with a cigarette factory depends on whether the tribe can work out an agreement with the federal government, Heath said.

Cigarette manufacturers, including those operating on Indian territory, are required to obtain a federal permit from the U.S. Treasury Department, agency spokesman Art Resnick said. The Onondaga are still exploring legal issues involving the permit requirements, Heath said.

''We are seeking a government-to-government arrangement. But there are complications. That's why we are also looking at other possible uses,'' Heath said.

Earlier this year, the Treasury Department announced an agreement with the Native Trading Association to manufacture cigarettes on the St. Regis Mohawk Reservation. Native Trading agreed to forfeit $2 million and to pay taxes on all the cigarettes it makes.

Other privately owned cigarette factories are located on the Tuscarora and Seneca Nation territories in western New York.

Heath said the Onondaga Nation is considering manufacturing their own cigarettes because it appears the state may try to enforce tax laws on Indian cigarettes.

Indian tribes and businesses in New York have argued that the state cannot force them to collect a state tax because they are sovereign governments. The state excise tax on cigarettes has been $15 per carton since April 2002.

In 1994, the U.S. Supreme Court ruled that New York could tax cigarette sales by Indian stores to non-Indian customers. Non-Indian businesses claim they are at a disadvantage because they must charge customers more to cover the excise tax.

State legislators passed a law effective March 1 that barred wholesalers from selling cigarettes to reservation retailers who sell them tax-free. But then-Gov. George Pataki refused to enforce the law.

Heath said it would create an economic hardship if the Onondaga have to add the state tax to the cost of its cigarettes.

The Onondaga depend on its cigarette shop revenue to pay for the tribe's fire department, youth sports programs, a home rehabilitation program and assistance for senior citizens, Heath said.

Onondaga chiefs do not disclose how much money the smoke shop generates or how many cigarettes it sells. However, state tax records showed that wholesalers delivered about 1.1 million cartons to the Onondaga Nation in 2005.