BUFFALO, N.Y. (AFX) - Tobacco wholesalers frustrated by mixed messages from the state over whether they are still allowed to supply Indian retailers with untaxed, unstamped cigarettes are ready to ask a court to intervene.
At issue is a law that went on the books March 1 that bars wholesalers from selling cigarettes to reservation retailers who sell them tax-free. Attorney General Eliot Spitzer says the law is in effect; the state Department of Taxation and Finance says it is not yet being enforced.
The conflicting positions have meant headaches for businesses like Day Wholesale in Franklin County, which finds itself scrambling to preserve its supply of cigarettes for reservation and non-reservation customers.
According to a lawyer for Day, Philip Morris USA has given wholesalers that supply New York Indian tribes until noon Wednesday to promise to stop selling unstamped cigarettes on reservations or provide written proof that such sales are legal. Otherwise, a July 11 letter said, Philip Morris would stop shipping cigarettes.
The wholesalers say they are in the middle of a political fight between the attorney general's office and the Pataki administration's Department of Taxation and Finance over an issue that has sparked violence in the past.
'It's the state of New York that doesn't seem to have everybody together as to what they're supposed to do,' said attorney Margaret Murphy, who represents Day Wholesale.
The letter from Philip Morris came two weeks after an attorney from Spitzer's office sent letters to tobacco companies, including Philip Morris, telling them that Day and other wholesale clients were continuing to sell tax-free cigarettes to Indian retailers in violation of state law.
'By this letter, we are putting you on notice of this conduct and asking for your cooperation in ending it,' the letter from Assistant Attorney General David Weinstein, said.
Philip Morris USA spokesman Bill Phelps declined to comment Monday except to say that the company supports the legislation governing sales by wholesalers to reservations.
Murphy said a lawsuit to be filed this week will seek to end the uncertainty. In the meantime, she said, her client will stop selling unstamped cigarettes to avoid being shut off by Philip Morris.
'We're bringing a lawsuit against the state of New York, against the attorney general, asking a court to resolve the issue,' Murphy said. 'Is the law in effect? What is the obligation of licensed wholesalers?'
Murphy contended the legislation is not active because certain provisions -- including the issuance of coupons that would allow Indian retailers to sell untaxed cigarettes to tribal members while taxing other customers -- have not been met.
A spokesman for Spitzer said that doesn't matter.
'The sale in New York of unstamped cigarettes is a clear violation of the law, regardless of who is doing it,' Marc Violette said, 'regardless of whether it's a private individual or an Indian nation or anybody else.'
A spokesman for the Department of Taxation and Finance did not return a call for comment Monday.
The law aimed at wholesalers is among the latest attempts by the state to collect millions of dollars of tax revenues on cigarettes sold by Indian retailers to non-Indian customers.
Tribes such as the Seneca Indian Nation, which operates numerous smoke shops in western New York, say centuries-old treaties shield them from having to collect taxes on their sovereign territories. That allows them to sell at lower prices than their non-Indian competitors. Seneca retailers sold $347.5 million worth of tobacco products in 2003.
A 1997 attempt by the state to collect tax on reservation sales resulted in violent clashes between state police and tribal members in western New York.
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