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Despite the dangers of tobacco, Native-owned smoke shops sell national-brand cigarettes at cut-rate prices. They are able to do this because New York state doesn’t test or enforce the claim that the reservation-based businesses must charge $4.35 per pack in state excise taxes. Instead, it allows tribes to transport the cigarettes across the state without paying any taxes on them, a practice known as “native-tobacco sales.”
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The sparsely populated New York reservations can’t possibly absorb all the Marlboros, Camels and Newports that the smoke shops purchase from wholesalers. So most of them end up over the Internet or bootlegged, largely by minivan, to New York City for sale, tax free, in bodegas and on the streets. A low-level smuggler can walk away with up to $7,000 a day.
The tobacco business is central to the economic health of the Oneida Nation, which has dozens of stores and two casinos in upstate New York. The proceeds provide jobs and fund programs like college scholarships, housing assistance and a health clinic. But state officials worry that if the Oneida don’t collect and pay the excise taxes, they could lose their ability to attract outside investment. Some states are trying to solve the problem by entering into agreements with the tribes to collect taxes or establish quotas for cigarette shipments.
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