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Taxing Indian Gas And Cigarette Sales Creates Thorny Problem For New York

March 13, 1996

TUSCARORA INDIAN RESERVATION, N.Y. (AP) _ Jay’s Place on the Tuscarora Indian Reservation in upstate New York is known for its deals _ cigarettes cost $7 less a carton than any local convenience store and gas is 20 cents cheaper per gallon.

But all that may change if the state goes through with a plan to start imposing taxes on products bought on Indian reservations by New Yorkers who don’t live there. And with the new tax in place, jobs are bound to be lost.

Linda Crogan, a single mother of three, is a waitress at Jay’s. She works at a diner in the complex, situated about 20 miles north of Buffalo, which also has a gas station, convenience store and jewelry department.

Although it sits on a lonely stretch of road, Jay’s has grown from a one-man operation to a 50-employee business with customers traveling there from miles away to cash in on the bargain prices.

But the cheap goods and the employees who sell them may soon be gone if the state government has its way. Gov. George Pataki’s administration plans to start enforcing a 1994 U.S. Supreme Court decision by taxing gas and cigarette sales to non-Indians starting July 5.

For employees of Jay’s and the dozens of other reservation stores around the state, such a move could kill business and result in many layoffs.

``Why are they trying to do this to us?″ Crogan asked. ``I was on welfare before I got this job. And I got it on my own.″

She questions whether it will cost New York more to put smokeshop employees out of work than to forego the sales tax revenue.

The tax issue began in the 1700s, when a treaty between the U.S. government and Iroquois nations recognized the tribes’ sovereignty and has kept the Indian reservations from being taxed ever since.

In 1994, the high court ruled that New York could collect taxes on reservation sales of gasoline and cigarettes to non-Indians, upholding a law passed by the New York Legislature.

Under the state’s current plan, wholesalers would include the sales tax in the price of the cigarettes and gas they sell to reservation stores. No sales tax would be charged on a portion of the items great enough to supply each reservation’s residents.

Retailers who operate stores near the reservations are pushing the state to enforce the law.

Mark Sidebottom owns 30 convenience stores in western New York. The competition from the shops on the Tuscarora and Seneca reservations has forced him to close five stores and another five may soon have to go.

``You can’t compete,″ said Sidebottom, chairman of the New York Association of Convenience Stores. ``No matter how good your store is. When you’re talking about these differences, you can’t do it.″

Gov. Pataki has said he wants to negotiate a compromise deal with the tribes before New York starts collecting the sales taxes.

``We are not looking for confrontation, but we are looking for common ground,″ he said. ``We have offered our open door and our willingness to negotiate in a cooperative way. On the other hand ... I also have an obligation to enforce the law and intend to do it.″

But compromise won’t be easy. More than 200 Indian business leaders, representing eight Iroquois and Algonquin tribes, have formed the First Nations Business League to fight New York on the issue.

``I don’t know how you negotiate with somebody that’s not willing to understand your position,″ said Ross John, a Seneca businessman who organized the group’s first meeting.

``We believe that we made a pact that we both stay on our own roads. To be honest, we’ve kept our promise. We’d like them to go back to that original and very basic concept and accept it,″ he said.

When a state court ruled in 1992 that the nonresident sales taxes were legal, Seneca Indians blocked New York highways and got into a weeklong standoff with police until both the state and tribe backed off.

Sid Anderson Jr., a Tuscarora Indian sipping coffee in Jay’s, wondered what else the state could do if tribes and Indian retailers refused to go along them.

``Are they going to come in here with the state police?″ he said. ``The National Guard? The state is definitely out of line. It has no jurisdiction here.″

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