NY's Tobacco Tax Tiff
C-store group fights for equality, demands governor uphold the law
Published in CSP Daily News
ALBANY, N.Y. -- The New York Association of Convenience Stores (NYACS) has not had much luck, so far, in getting the state to uphold its own law and collect taxes on gasoline and tobacco products sold by Native American retailers. And while the organization, which launched a two-month-long email campaign encouraging tax fairness, is mulling taking legal action against the state, it has already taken it upon itself to warn distributors against selling tax-free cigarettes to Indian reservations.
It is illegal for your company to deliver or sell cigarettes to Indian nations or tribes without either pre-paying state taxes on such product or receiving valid, state-issued exemption coupons from those customers, NYACS president James Calvin said in a letter to wholesalers dated March 1. In fact, it is our understanding that since the state has not issued any such exemption coupons, taxes must be collected and remitted on all sales without exception.
Governor George Pataki and state tax commissioner Andrew Eristoff have requested a postponement in the effective date of the new law. And until the state legislature answers their request, they have refused to collect the tax, a fact that has irked Calvin and NYACS.
Our No. 1 goal is to compel Gov. Pataki to enforce the state law that went into affect March 1, Calvin told CSP Daily News. The more you know about this issue, the more you begin to share our outrage that the governor is refusing to uphold the law and refusing to enforce tax collection in a fair and even and lawful way.
Eristoff, state commissioner of taxation and finance, said last month that his agency would hold off on enforcing the tax-collection law because Pataki, as part of his 2006 budget plan, has proposed to delay enforcement for one year to give the administration time to negotiate the matter with Indian tribes, according to a report in the Buffalo News.
Critics say Pataki, afraid of the kind of violence that occurred in 1997 when he last tried to collect the tax, is trying to punt the issue until after he leaves office in December. It is estimated the lost taxes to the state total about $300 million a year.
In another strongly worded statement sent out by Calvin on March 1, he noted that NYACS leaders are exploring legal options to compel enforcement of the law. As of yesterday, no further action had been announced on the legal front.
In the wake of the March 1 deadline, Calvin sent out daily talking points to NYACS members, New York legislators and the media. With titles such as When is a Law Not a Law?, Full-Court Stall: A Recent Chronology of Governor Pataki's Stall Tactics and More Pain in $tore for Mom-and-Pop Retailers Under 1-2 Pataki Punch, Calvin did not mince words or try to disguise his feelings.
The goal, he said, was to educate those who affected by the financial lossessentially every taxpayer in the state. No. 1, we're trying to keep this issue in the forefront; that's why we're doing it on a daily basis, he said. We believe there is a very compelling story to tell. There's a lot of angles to this. There are stories behind the story here that the average person may not be aware of, and we just wanted to bring all of those to people's attention.
Adding insult to financial injury, state leaders also are considering a cigarette-tax increase as part of the current budgeting process. Currently, Native American shops enjoy a $15-per-carton price advantage. That price advantage would grow if lawmakers adopt Pataki's plan to raise the per-pack tax to $2.50 without resolving the tax collection issue.
In other New York cigarette tax news, New York City Mayor Michael Bloomberg, finance commissioner Martha Stark and corporation counsel Michael Cardozo announced yesterday that the city has obtained detailed information on Internet cigarette sales that will facilitate the recovery of up to $33 million in unpaid sales tax revenue.
The settlementagainst eSmokes Inc., a Virginia-based Internet seller now in bankruptcyis the largest settlement to date, resulting from a 2003 lawsuit filed by the city in Federal District Court in Manhattan. The lawsuit was filed against corporations and individuals who evade sales taxes through the operation of Internet sites that ship cigarettes to New York City residents.
Internet cigarette merchants who misrepresent themselves and evade the law cheat local businesses and New Yorkers, said Bloomberg. They mislead the public; they break the law; and they will be held accountable. When you buy cigarettes over the Internet, you have to pay New York City and New York state taxes, regardless of what any web seller advertises. We have an obligation to level the playing field for retailers who play by the rules and collect taxes that support vital services for all New Yorkers.
The sales information obtained by the city through this settlement includes the names, dates and quantities of cigarettes purchased by New York state residents from 2000 to mid-2003. Prior collection effortsusing lists of Internet buyers turned over by web sellers sued by the citythrough the Department of Finance have resulted in voluntary payments by city residents of approximately 65% of sales taxes owed, with more coming in as compliers continue to make payments on installment plans.