scholars and rogues

Tribes trump tobacco tax—Cheaper cigarettes means more profits for Native Americans

The third in a five-part series examining the impacts of NY State’s recent tax hike on cigarettes

by Alex Cole

smoking03
photo by Talbot Eckweiler

Driving onto the Allegany Indian Reservation from the west, Ron’s Smoke Shop makes an inviting first stop.

It’s just one tax-free tobacco shop on Seneca Nation territory. And with state cigarette taxes on the rise, more Southern Tier smokers are making the trip an Indian reservation.

“Everyone I know goes down there,” says Jill Smith, a smoker from Olean. “A lot of people do. I would almost say they have to with [smoking] being so expensive.”

Cars bustle in and out of the shop’s parking lot. A steady stream of people makes its way into the store, eager to pick up some Saturday morning smokes.

Inside, the coarse scent of tobacco stings the nostrils. The stench of cigarettes and cigars lingers on clothing.
Stacks of cigarette cartons sit on several rows of shelves. They’re the focal point of the shop, conveniently located at its center. Winstons. Unions. Markets. The works.

Nothing is out of place. Nothing is mixed together.

One woman slides into the shop and immediately drives for a carton of Seneca Cigarettes. She squats down and glances at the price – $13.60 for 100 smokes.

Thanks to the demand for prices like that, the shop makes an estimated $11 million a year according to a Dun and Bradstreet report.

Drive across the street. Next stop: M & M Smoke Shop.

Cigarette billboards plaster the store’s exterior. Camels: $30. Old Gold: $27. Dorals and Kools also available.
Another vendor of Seneca Cigarettes. Big Flavor. Small Price. Huge Selection.

Piles of cigarette cartons add color to the store’s pure white interior. White walls, white ceiling, white lights – all thrown off-balance with dabs of red, blue, and brown.

It’s a smaller shop than Ron’s. But it’s still big enough to have a shrine dedicated to Mr. Joe Camel and his products. The brand is separated from the rest of the smokes by glass walls and a glowing Camel sign.

Take Route 417 farther west toward I-86. Final stop: Allegany Junction Truck Stop.

Wooden statues greet you at the door of the shop, each bearing traditional Native American headwear and garments. One of the statues extends his forearm and holds out an empty cup.

Maybe it’s a cup of coffee. Maybe it’s a cup of cheer. Or maybe it’s even supposed to have cigars in it like the old wooden Indians that stood vigil outside of tobacco stores in bygone days.

The Allegany Junction otherwise looks like a traditional convenience store. It sells drinks, snacks, and newspapers. It even has a Subway Restaurant inside.

That doesn’t mean it’s fooling around when it comes to tobacco.

The Junction has the cheapest smokes of all – $12 for a carton of Heron Cigarettes. Heaps of smokes cover every corner of the store.

Each store has a different atmosphere. Each has a different owner. Each has different employees, different product, and different billboards.

But one reality unites them – one fact that remains true for every Seneca Nation smoke shop.

None of them are forced to charge an extra $2.75 in cigarette taxes.

“The Seneca Nation, our people and our lands, have been immune from state taxation since the United States was formed,” says Maurice John, president of the Seneca Nation, in a 2008 testimony before a US House of Representatives committee. “Agreement after agreement has reiterated this tax immunity.”

And thanks to that sovereignty, the reservation is permitted to sell cigarettes for prices lower than the state’s traditional venues.

Taxes and Tribes

Cigarettes off-territory have never been more expensive. June’s cigarette tax increase by Gov. David Paterson and the state legislature bumped New York’s tax to the highest in the nation.

Why? Officials say they’re just trying to help people quit.

“Cigarettes taxes have the very real effect of getting people to quit smoking while pricing a highly addictive product out of the hands of kids,” says Donald Distasio, CEO of the American Cancer Society’s Eastern Division.

But not everyone is forking over the extra cash. Twenty percent of New Yorker smokers buy tax-free cigarettes from Indian reservations on a regular basis.

“The incentive for them to do that has just gotten a lot bigger in the form of this tax increase,” says Jim Calvin, president of the New York Association Convenience Stores.

That same incentive is saving heavy smokers considerable amounts of money.

“I stopped at Wilson Farms up here one day… and I seen cigarettes for $7 a pack,” says Jill Smith. “If you’re low-income and have kids, you can’t afford 50 or 60 bucks a week.”

And New York is left losing cash. New York City Mayor Michael Bloomberg says that the state’s reluctance to enforce cigarette taxation laws is costing it more than $500 million a year in tax revenue.

“I think the governor should go to the reservations and say, ‘As of tomorrow morning, stop this practice,’” Bloomberg said in the New York Times. “And if it requires law enforcement, that’s what the governor has the State Police for – to enforce the law.”

Native Americans are keeping mum about tobacco profits on reservations since the tax increase. The Seneca Nation chose not to comment for this series. The Oneida Nation declined to comment, as well.

The Onondaga Nation hints at increased profits on its reservation.

“I can tell you anecdotally from driving down there that it certainly seems to be quite busy,” reveals Joe Heat, general counsel of the Onondaga Nation. “My educated guess would be yes, it is helping their business.”

But how large of a role does tobacco profits play in Native American economies in general?

“I think the best way to handle that is just to say that it’s a significant role,” says Heath. “[The Onondaga] would not be very comfortable revealing the details of that.”

Different Nations, Different Ideas

Though each reservation sells tax-free tobacco, the political and financial policies of the nations can differ.
Take the Onondagas and Senecas, for example. Unlike the Seneca Nation, the Onondaga Reservation only has one smoke shop.

“The store is owned by the nation. There is no individual ownership,” Heath explains. “All of the profit from that store goes into the general revenue to fund the Nation.”

Along with other sources of revenue, money from the shop helps fund dozens of social and governmental programs on the reservation.

“On other nations… there are dozens of stores, and none of the profit goes to benefit the general welfare,” Heath says. “It all goes into the pockets of the individual owners.”

But it hasn’t always been like that. The Onondagas used to have a number of smoke shops owned by individuals, just like the Seneca Nation.

“That’s the way it was in Onondaga until the early 90s,” Heath reveals, “when the people got together and said ‘This isn’t right. You aren’t even keeping your agreements with us. We’re going to shut you down.’”

The Nation also claims that having one store keeps prices consistent with the area around them.

“We don’t have ten different stores cutting their prices to compete with each other and driving the price down,” Heath says. “So our price isn’t that problematic. It’s closer to the price on the off-territory.”

Despite their differences, both nations don’t see tobacco sales at their reservations as tax evasion. The Onondagas argue that the state actually sees more money under their financial structure.

“Dozens and dozens of people earn money from the profits of this store,” Heath explains. “That money is all spent off the territory in ways that generate five or six times the amount of taxes.”

The Seneca Nation also says that it’s become an economic engine for the state. According to a recent economic report, the Nation pumps $779 million into Western New York’s economy.

That’s more money than the Buffalo Sabres and the Buffalo Bills combined. It comes partially from the nation’s casinos.

“This is an economic development plan, and that’s the way it needs to be seen. The money doesn’t just drop into the ground, particularly in Onondaga. That money all comes back out,” Heath stresses. “[The Onondaga] spend it where it’s taxed.”

Forcing the Tax

Nations insist that they are entitled to tax-free products on their territory. But New York State has been debating that right for more than a decade.

During a special one-day session last August, New York’s legislature passed a bill requiring tobacco vendors on reservations to tax their products. The bill has yet to reach Gov. David Paterson’s desk.

The initiative doesn’t directly target reservations. It aims to tax distributors of tobacco products rather than the nations themselves.

“[The bill] says a distributor must file a formal statement that he or she will comply with all laws,” Heath explains. “And if they don’t, they can’t get the product.”

Nations across the state would receive rebates in exchange for complying with the bill.

“New York’s structure now is that they would tax everything but issue coupons to the nations, which could then be redeemed back from the state,” says Heath.

Implementing an effective coupon system has been a problem. And until that happens, the state legislature can’t change a thing.

“The [State Supreme Court] has ruled that the law cannot be enforced until they do the administrative work necessary to put that protection on the Native Americans,” Heath says. “No matter what little nudges the legislature wants to push, it won’t matter.

That’s not to say Native Americans would comply with the bill if it passed. Former Gov. George Pataki tried to enforce a tax initiative in 1997 and was met with stark resistance from the Seneca Nation.

“The Indians shut off part of the expressway, which was on their land. They were burning tires along the expressway,” Jill Smith recalls. “State troopers were coming in from everywhere. It was bad.”

Heath served as the only lawyer for the Native Americans during that time. He says Pataki quickly walked away from the situation and never touched it again.

“In the intervening ten years he was in office, he would not enforce this law,” Heath reveals. “And his way of not enforcing it was not to put the coupons in.”

The Onondagas don’t deny that future attempts could be made to enact a tax initiative. But they say they’re willing to work with Paterson’s office and reach a mutual agreement.

“It won’t be easy. It never is. But it can be done,” Heath admits. “We’re waiting to see what he does with the legislation and whether or not we can have a meeting with him to resolve this to everyone’s satisfaction.”

Peaceful Profits

Nations aren’t purposely taking tobacco profits away from the state. Tribes like the Onondaga are using the profits to secure the age-old tradition of looking out for their people.

“Back before the Europeans got here, whatever came into a village was shared as equally as it could be,” Heath says. “Because it’s the nation’s sovereignty that creates this business opportunity, the benefits go back to the nation and its people equally.”

That doesn’t mean Native Americans deny that certain reservation smoke shops are taking away convenience store profits.

“I know that…near the Cayuga store, there are businesses across the street that it has an impact on,” Heath says.”

But it affects some areas more than others. The Onondagas argue that the convenience stores in Central New York aren’t feeling the effects of reservation tobacco sales.

“At least in this area, there are no individually owned stores that are suffering from the one Onondaga store,” Heath explains.

The Onondagas also claim convenience stores exaggerate reservation tobacco profits.

“They inflate the amount of income that they think is collected from us,” Heath argues. “So their figures are not accepted by anybody other than them.”

Convenience store owners. State officials. Fellow nations. The Onondagas insist that they’ll mediate with anyone to find a peaceful solution.

They just want to put this issue to rest for all nations and all peoples.

“We’ll sit down and talk to them about it,” Heath says. “We can make this work for everybody.”

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Alex Cole is a freelance writer and recent graduate of St. Bonaventure University in New York. He currently resides in Syracuse, NY.

1 reply »

  1. This is not the only revenue coming into our nation,we have alot of contracts with different
    corporations and NYS right-of-way contracts, also with Nationalgrid as only a few people are on this contract that get “only” certain people get their utility bills paid. And for sure there isn’t any Onondaga’s on it! Joe Heath and the illegakl council members don’t tell the truth so they can have their unlimited credit cards, new cars, new trailers, food on their table. Joseph Heath was never hired by any Onondaga and will have to reinburse the people their money that he has taken illegally. As they say they are not accountabile to the people, but they will be accountabile to the U.S. government for letting the Onondaga’s live in an “OPPRESSIVE STATE” when it is our money they are spending and the children of our nation could have a community building instead of walking the roads looking for their next drug fix. They don’t care about the WELFARE of the people, they only care about themselves….. Let’s “TRUTH UP!!!