Just The Facts…

New York’s Dirty Secret:

New York’s 70-year-old tobacco black market exploded after 2002, as cigarette tax hikes encouraged smuggling from out of state and through reservations. The traffic is part of a nationwide boom in smuggled cigarettes, but the trade has reached a peak in New York. In 2007, one in three cigarettes sold in New York was channeled untaxed through Indian smoke shops, robbing the state and New York City of nearly $1 billion in tax revenue.

The Law

In 1994 the U.S. Supreme Court ruled that tribal sales of tobacco by Native American-owned businesses to non-natives, even when they occur on reservations were not subject to the tax exemption Native Americans are entitled to.

Lost Revenues in Tough Economic Times

Since 1996, over 168 million cigarette carton have been purchased buy the Indian Nations from licensed cigarette agents.

In 2002, sales of cigarettes in the state declined by at least 28 million cartons. At $1.50 tax per pack or $15  per carton, that equates to $420 million in lost revenue in one year alone.

In 2007, New York state and New York City lost more than $850 million in cigarette tax revenue, according to an analysis by ICIJ. That money would have cut the state’s 2008 fiscal deficit by half.

Terrorists Cashing In

In 2003, members of Lebanese militant group Hezbollah were indicted for purchasing more than $500,000 worth of cigarettes in North Carolina, transporting them to Brooklyn and later selling them tax-free to Seneca Indian retail stores.


Why does the misguided and mystifying avoidance of $1.6 billion annually in taxes from the illegal sales of cigarettes by Native American outlets to non-Indians remain unsolved by this administration? The answer has been before us since 1994: Tax stamp all cigarettes and issue tax refund coupons for Tribal use.

Why have we given away another $150,000,000 to terrorists and criminals since our last letter fi ve weeks ago, when our budget crisis demands courage and conviction over greed and politics?

Why did New York State fight for and win the right to tax cigarette purchases by our non-Indian citizens, all the way to The United States Supreme Court in 1994 and to this day not collect the tax when our State Tax law, under article 20, requires that we do?

Why has the New York State Legislature twice passed legislation that the executive branch has not implemented? The state courts have ruled that the tax department must issue the tax exempt coupons for Tribal consumption and then the law will take effect.

Why does the administration continue to permit 40 million cartons annually of untaxed cigarettes to fl ow to the reservation stores when Congressman Peter King, Congressman Anthony Weiner, Mayor Bloomberg, the FBI and others have uncovered massive funding of terrorists and other criminals from the illegal sales of cigarettes that are purchased from these outlets?

Why do we frustrate the effectiveness of health programs by making cigarettes more affordable and available to teenagers by permitting the illegal sales of untaxed cigarettes by Indian outlets through the mails?

Why in the past year did 3,000 stores close their doors and not renew their cigarette licenses, resulting in the loss of thousands of good New York retail jobs, did our administration not ‘close the door’ on this illegal trade?

Solution: As prescribed by law; tax stamp all cigarettes with a New York State tax stamp for sales outside New York City, apply a New York City ‘joint stamp’ for consumption within New York City and issue the tax exempt coupons for all tribal consumption

A Bootlegging Conviction – Yet Still Smuggling

October 2003 – Page Martin and A.D. Bedell Company pled guilty to racketeering charges that stemmed from a three-year investigation. Investigators uncovered an operation that smuggled untaxed cigarettes to a store located on the Cattaraugust Indian REservation in New York. There, the product was then transported to retail stores in Detroit, Buffalo and other New York areas. Over 2, 275,000 cartons of cigarettes were smugglesd through the reservation. New York lost in excess of $12.75 million in cigarette tax revenue. Michigan lost close to $17.1 million.

Health Benefits Cannot Be Ignored

The Center for Tobacco Free New York estimates that if the regulations implemented and the cigarettes tax equitablly collected from vendors, the total consumption of cigarettes in New York State would decline by five percent.  This could translate to 1,250 lives saved anually and would lead to $215 million in annual medicaid savings.

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