As part of the State's 2005 budget the New York Legislature enacted a number of amendments to the Tax Law to compel the collection of sales taxes from non-Indians on Indian land. For a detailed explanation of the history of our efforts and the law see our Taxation Page In recent weeks various stories appeared in the press in which we feel incorrectly reports the state of the law as well as history.
First the State is not seeking to tax Indians, it is seeking to enforce already existing laws on their non-Indian patrons. Currently, non-Indians purchasing any goods or services on Indian land where the taxes are not collected at the time of purchase must fill out a tax form (either a CG-15 or ST-130 depending on what was purchased) and pay the appropriate tax due within 24 hours of the purchase. Failure to do so is a misdemeanor and may result in fines and/or imprisonment. Let us be clear who is being taxed in this tax scheme, it is non-Indians not Indians. The Indian retailer is merely a conduit for the tax to be collected and remitted to the state. Indians making purchases on their land are still tax exempt. Also there is no treaty or statute that provides non-Indian consumers with an exemption from taxation on or off Indian land. The loss of this tax revenue increases the burden of honest taxpayers in Erie County as well as the State. It is also harmful to our local economy in that honest businessmen are put at a competitive disadvantage.
Secondly, the often used analogy that puts Indian governmental entities on the same level with Canada is not accurate. The United States Supreme Court has stated in Nevada v. Hicks that "Our cases make clear that the Indians' right to make their own laws and be governed by them does not exclude all state regulatory authority on the reservation. State sovereignty does not end at a reservation's border. Though tribes are often referred to as "sovereign" entities, it was "long ago" that "the Court departed from Chief Justice Marshall's view that "the laws of [a State] can have no force" within reservation boundaries. Ordinarily, it is now clear, an Indian reservation is considered part of the territory of the State." In fact Congress has given the State of New York criminal and civil jurisdiction on Indian land (25 USC §§ 232, 233). Additionally, in June 2002 Judge Arcara dismissed the Grand Island Land Claim in part because this was not the aboriginal land of the Seneca (who sided with the British in the Revolutionary War).
The U.S. Supreme Court stated in its 1980 decision, Washington State v. Confederated Tribes, "We do not believe that principles of federal Indian law, whether stated in terms of pre-emption, tribal self-government, or otherwise, authorize Indian tribes thus to market an exemption from state taxation to persons who would normally do their business elsewhere." The Court also noted that the State of Washington had the right to seize unstamped cigarettes to enforce its valid taxes.
Given the fiscal crisis we are facing in New York, the State's policy of enforcing its lawful tax laws on only non-Indian businesses can no longer be tolerated nor accepted. The New York Court of Appeals in Snyder v. Wetzler and a unanimous United States Supreme Court held in Department of Taxation & Fin. of N.Y. v Milhelm Attea & Bros., that the State may place minimal burdens on Indian retailers and tribes to collect taxes from non-Indians on Indian Land. With the exception of actions taken in the Spring of 1997 nothing has been done to collect this revenue. Some reports have placed this lost revenue in the billions. Governor Pataki acknowledged the need for legislative approval of his policy of non-enforcement in his press release of May 22, 1997, where he stated "Let me make my message to all Indian Nations clear: It is your land, we respect your sovereignty and, if the Legislature acts as I am requesting, you will have the right to sell tax-free gasoline and cigarettes free from interference from New York State." The governor even introduced a bill to effect this change. In a Buffalo News article dated July 18, 1997 by Tom Precious entitled "Pataki's sales tax plan for Indian reservations gets pushed aside" that appeared in The Buffalo News Speaker Silver was quoted as saying that this is a "complex issue" and that "[b]efore we deal with it, we have to take a significant look at it, so I don't think anything is going to happen on it this year." Speaker Silver was correct, in fact nothing has happened for the last 6 years. This despite our State Constitution prohibition against any tax exemption that is not enacted by a general law (Article XVI § 1). This section also separately prohibits any attempt to contract away the power of taxation unless sanctioned by the people themselves.
A number of times in recent years the legislature passed and the governor allowed to become law various bills that increased the taxes on cigarettes and other tobacco products to help fund health care programs in the state as a result of the ailments associated with such products. However, the state's policy of non-enforcement undermines this admirable intention.
Although this action may have dire effects on the retailers that are marketing this form of illegal tax evasion, it does not entitle them to any consideration. Do we provide compensation or retreat from enforcing existing laws on drug dealers or money launderers because such enforcement will effect their earnings? As for the allegations that this measure will not result in increased revenue for the state because these retailers will close it is simply not true. Although it will not be reflected in the remittance from the Indian retailers it will be reflected in the overall revenue remitted for these taxes to the state. Because the price difference will not be as great there will be less motivation for smokers to purchase from the Indian retailers rather than their local non-Indian retailers. This will actually result in a snowball effect in that the increase in revenue to the local non-Indian retailers will result in more profit to them and thereby generate higher franchise taxes on the profits (or less of a tax loss) which will further increase county and state tax revenue.
Lastly, as for the threats of violence coming from various Indian groups. The various Indian governmental entities should be ashamed of the manner in which they handled this issue in 1997. If they desire to be treated on a government to government basis they should act like a government. They should have acted on their own to prevent such violence and to end such violence if it should occur. That is not to say the protestors do not have a right to speak their position, but they cannot disturb the peace and act in a violent manner. If they fail to do this they may be considered condoning this violence against the state and the President of the United States may be called to invoke his powers under 25 USC 72 to declare all treaties abrogated with such tribe.
Daniel T. Warren
Chair, Niagara Frontier Chapter