New Yorkers Have No Reservations on Tax-free Smokes

Discussion
Jul 09, 2002
George Anderson

The New York Times reports that Manhattanites travel as far as 70 miles east of Times Square to four smoke shops on the five-square-block Poospatuck Reservation, population 220, to buy tax-free cigarettes. Unwilling to pay $1.50 tax on a pack to the state, and now an additional $1.50 a pack in city taxes, these New Yorkers buy off-brand cigarettes for a little more than $2 a pack, as opposed to nearly $7 a pack for city smokers. Savings are similar for premium brands, which sell for less than $3.50 a pack on reservations.

The Unkechaugs are one of many Indian nations, including the Seneca Nation in upstate New York and the Shinnecock Nation in Southampton, that take advantage of their right as sovereign nations to buy and sell cigarettes without paying or charging the hefty taxes from the state and the city. They sell legally from their shops, over the phone and via the Internet.

They fought hard for this right, which they say has moved their nations from poverty to relative wealth, and have been in and out of court for years over the issue. “Before we had tobacco shops, we had a welfare economy — and the state was paying for that,” Chief Wallace says. “We couldn’t focus on our political, social and educational rights because we were focused on day-to-day survival. Now we’re not. Now we are empowered.”

One main opponent is the New York Association of Convenience Stores. Last December, the United States Supreme Court refused to hear a challenge to a lower court decision granting Indian sovereignty in this matter, seemingly exhausting the association’s attempts to force the state to collect the tax from Indian nations. The association is now trying to get federal or state legislation passed to ban what it terms the state’s “selective enforcement policy,” says James Calvin, the president of the association.

Governments say they are raising cigarette taxes not just to increase revenue, but also to discourage smoking. Tobacco companies argue that higher taxes encourage smuggling.

Moderator Comment: Tobacco is legal and many retailers count on the revenues the category delivers. How can retailers maximize tobacco product sales to adults in light of social, competitive and legislative pressures?

Tobacco sales don’t disappear when taxes are raised, they simply move to the reservation or across the river. In Manhattan, we’re told it costs roughly $7 to buy a pack of premium cigarettes. Just a short ride under or over the Hudson River and you’ll find the same product for $4.50. We don’t smoke, but if we did, buying a couple cartons in New Jersey or driving to the Unkechaug Nation seems like a personal finance no-brainer. [George Anderson – Moderator]

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