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New York and Oneida Nation Reach Cigarette Tax Agreement

2 min readBy: Chris Stephens

Recently, Governor Cuomo and the Oneida Indian tribe announced a settlement that would end an ongoing dispute over cigarette taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. es between New York and the tribe. Under the terms of the settlement, the Oneida will be required to tax all cigarette sales to non-Indians at a rate equal to or greater than New York state and local rates. Also, the Oneida will be required to adhere to minimum pricing standards and are required to use the tax revenue from cigarette sales on the same types of programs that the state and counties devote their tax revenues.

In return, the revenue resulting from the sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. would stay with the Oneida rather than going to New York. The agreement also settles ongoing land disputes between the Oneida and New York and gives the Oneida exclusive casino rights in several New York counties. The agreement is pending approval from various state and tribal departments.

Under federal law, the Oneida have been able to sell cigarettes, both name-brand and Oneida manufactured, to Indians on their reservation free of state excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. es. However, because the cigarettes were far cheaper than those sold on non-Indian owned land (nearly half the price or less), non-Indians also came to the reservation to buy them tax-free. In 2010 New York voted to collect the state cigarette tax on name-brand cigarettes sold to non-Indians on Indian land. The following year, in Oneida Nation of New York v. Cuomo, 645 F.3d 154 (2d Cir. 2011), a federal appeals court lifted a stay put in place by a district court, allowing New York to enforce the state sales tax.

In 2008, the Oneida had moved its own cigarette factory onto the reservation and sold Oneida manufactured cigarettes tax-free to both Indians and non-Indians at a substantially lower cost to the consumer. The Oneida believed that the 2nd Circuit ruling did not apply to non-name brand cigarettes manufactured and sold on the reservation, even if sold to non-Indians. As a result, the Oneida said they would not purchase name-brand cigarettes from wholesalers to sell on their reservation, and instead would focus on selling Oneida manufactured cigarettes to avoid the state excise taxes. However, Governor Cuomo has long asserted that New York does in fact have the right to tax Indian-made cigarettes sold to non-Indians.

Indeed, the recently announced settlement would apply the cigarette tax to both name-brand cigarettes and cigarettes manufactured on the reservation and sold to non-Indians.

More about cigarette taxes here.