Tuesday, August 31, 2010

Indian Judgment Day Approaches

The tax avoiding Indian retailers are reaching the end of their legal rope-as a state judge has shot down their request for injunctive relief against the enforcement law that is scheduled to be implemented tomorrow. The NY Post reports: "A Buffalo judge sided with Gov. Paterson yesterday and refused to block the state from taxing cigarettes sold on Indian reservations to non-Native Americans. Paterson wants to start taxing the previously tariff-free tobacco starting tomorrow, but local tribes have mounted a vigorous campaign to stop the taxes, which they consider an attack on their sovereignty. Lawyers for the Seneca Indian Nation argued that the state didn't properly implement rules outlining how the taxes would be imposed. But the judge sided with the state, which argued that new regulations allow them to slap taxes on cigarettes sold on Indian reservations, which previously could sell cigs without taxes."

The lost legal hope for the tribal scofflaws is federal court-but even there the judiciary hasn't been friendly: "The Senecas also are trying to get the taxes banned in federal court. That challenge is pending." In our view, if the Indian legal case collapses-and the tribes are playing sweet for the moment-watch out for the any means necessary crowd. As the Journal News tells us (via Liz): "State officials most likely do not want a repeat of 1997, when tribal members blocked the interstate in Cattaraugus County, leading to several hospitalizations in response to Gov. George Pataki’s attempt to collect the tax. This year, state officials say they are going about it differently: the tax will be collected from the wholesaler and not directly from the reservations. While Indian officials hope there won’t be any violence, the real battle may be in court."

So, as tomorrow's tax day approaches, the legitimate retailers and wholesalers are holding their breathe-they've been disappointed too often in the past to be totally optimistic that the government won't simply cave. But every indication so far is that the move to enforcement is inexorable. We'll see if that's true tomorrow.