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Positions:  Requiring Native American Tribes to collect Applicable Taxes

S.219-a by Senator Nozzolio
An act to amend the tax law, in relation to sales on native American nation or tribe lands

The United States Supreme Court, in the 1994 case of NYS Department of Taxation and Finance v. Milhelm Attea & Bros., held that goods purchased by non-Native Americans from Native American retailers are subject to applicable state sales and use taxes, and that Native American retailers can be required to collect such taxes.

Utterly disregarding that ruling, and defying the New York State Legislature's intent that the tax law be applied fairly and equally, the Department of Taxation and Finance refuses to require Native American retailers to collect sales and use taxes on tobacco and motor fuel sold to non-Native American customers.

The result is an all-out tax evasion stampede - hundreds of thousands of non-Native American New Yorkers flocking to Native American stores in Central New York, Western New York, the Southern Tier, Long Island, and the St. Lawrence Region to buy cigarettes and/or gasoline at prices that are substantially (and artificially) lower solely because no taxes are included.
This phenomenon costs the state and its local governments hundreds of millions of dollars annually in lost tax revenue. Additionally, many neighborhood stores have lost 30 to 50 percent of their legitimate cigarette business to "tax-free" Native American outlets, a crippling blow since the sale of legal tobacco products to adult customers typically was their biggest in-store traffic builder. At least several dozen stores have closed, scores more have had to sell, and those that remain are struggling to stay afloat.

And now the state excise tax on cigarettes will increase again, making a total increase of 168% in just two years. Effective April 1, 2002, the differential between the tax-included price and the tax-free price of cigarettes will widen from $11.10 per carton to $15.00, creating an even greater incentive for price-conscious smokers to patronize Native American outlets, draining away even more of our customers.

S.219-a would halt the tax evasion stampede and end the shameful policy of selective non-enforcement by requiring the Tax Department to promulgate rules and regulations necessary to implement the collection of sales and use taxes on goods sold by Native Americans to non-Native Americans.

The New York Association of Convenience Stores, a private, not-for-profit trade association representing the interests of nearly 5,000 law-abiding neighborhood stores from Seneca Falls to Saratoga Springs to Staten Island, whole-heartedly supports passage of S.219-A to restore fundamental fairness to New York's retail marketplace.

NYACS and its members harbor no ill will toward Native American tribes. We respect their attributes of sovereignty, as well as their right to operate commercial enterprises. But with every right comes a responsibility. Anyone who profits from doing business with New York residents has an obligation to abide by laws and regulations governing the conduct of commerce in New York.
That means collecting and remitting sales and use taxes, preparing and filing tax reports, enduring tax audits, and subjecting oneself to potential tax penalties. Further, it means obtaining the applicable licenses and permits, observing statutory environmental safeguards, undergoing unannounced health department compliance checks to make sure tobacco is not being sold to minors, allowing weights-and-measures inspections, and collecting deposits on beverage containers.

How can any elected official look one of our members in the eye and tell them they must comply with all of these requirements under penalty of law, while their competitor down the road does not?
NYACS member retailers do not seek preferential treatment. All they ask is a level playing field that gives them a fair chance to compete for retail trade.

The Senate should not allow the Tax Department to continue usurping legislative authority, thwarting public policy goals, decimating small businesses, and depriving local jurisdictions of much-needed tax revenue by selectively exempting certain retailers from tax enforcement.
NYACS commends Senators Nozzolio, Alesi, Hoffmann, McGee, Meier, Padavan, Seward, and Wright for introducing this legislation, and strongly urges its immediate passage and enactment.

February 6, 2002

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