New York Zoning and Municipal Law Blog
In an action brought to prevent prosecution of members of an Indian nation for failure to collect cigarette sales taxes on sale to non-members of the nation, the Court of Appeals issued judgment in favor of the plaintiffs. In Cayuga Indian Nation v. Cayuga County Sheriff, the court noted that Federal law precludes collection of cigarette sales taxes on sales by Indians to members of their own tribe on reservation lands. The court found that the two parcels in question were qualified reservation land.
Noting that the ultimate responsibility for payment of sales tax rests on the consumer, but that the practice has been for wholesalers to purchase tax stamps from the state and for the cost of those stamps to be passed up the chain to retailers and then consumers the court concluded:
“Thus, the issue in this case is not whether sales taxes are due when non-Indian consumers purchase cigarettes from Indian retailers – they are. The issue is whether Indian retailers can be criminally prosecuted for failing to collect the sales taxes from consumers and forward them to the Department. In the absence of a methodology developed by the State that respects the federally protected right to sell untaxed cigarettes to members of the Nation while at the same time providing for the calculation and collection of the tax relating to retail sales to non-Indian consumers, we answer this question in the negative”.
Noting that the State Tax Law provision for collection of such taxes from the Indian Nations required implementation of regulations which were never put in place, the court held:
“restrictions that limit the state’s efforts to collect cigarette taxes from Indian nations or their members in this context are derived from federal law and this prompted the Legislature to address the need for a specialized tax collection scheme by adopting Tax Law § 471-e. Since section 471-e was never operative, and no other comparable statutory or regulatory scheme has filled that gap, the Nation is entitled to declaratory relief.”