Indians Cigarette Tax Fight Smolders

Feb. 27 -- The last time the Seneca and New York State squared off, it ended with the Indians closing highways across the reservation with blazing mountains of tires.

In that 1997 confrontation, the state finally gave up on its effort to force the Seneca to turn over taxes from sales of cigarettes to non-Indians. But with New York facing a projected budget deficit of $5.1 billion, some lawmakers see the hundreds of millions of dollars estimated lost each year on Indian cigarette sales as money it now needs.

It's an issue being faced all across the country, and it's not just a question of tax revenue. Non-Indian stores near reservations that rely on cigarette sales as a large part of their business say they are hurting because they cannot compete. And anti-smoking groups have joined the fight, too, saying the lower prices charged by the Indian stores encourage people to smoke.

In Idaho, the state has tried without success to force Indian stores to collect the $5.70 per carton sales tax on cigarettes, but several tribes have introduced their own taxes. The Shoshone-Bannock, for example, charge $3 a carton.

In Rhode Island, the Narragansett are appealing a federal court ruling that they must collect state sales tax. The conflict came to a head last July, when the tribe stopped collecting the $1.72 per pack tax, and state police raided their store, arresting several members.

Oklahoma state officials are trying to get around the issue by revoking the sales tax on cigarettes and instead increasing the excise tax 52 cents per pack. The change would have to be put to a statewide vote. Backers say $100 million of the $130 million it is expected to raise will be put into health care, including the construction of a new cancer center.

Seeking Good Faith

In New York, the fight is in limbo. The state legislature passed a measure requiring that taxes be collected from Indian store owners last year, and Gov. George Pataki vowed to begin having the tax of $1.50 per pack collected from Indian-run stores on Indian lands on March 1.