SENECAS PLEDGE TO RESIST ATTEMPT TO COLLECT SALES TAX

But those legislators are going to be sorely disappointed, Seneca leaders and residents said last week.

"I will fight, whatever it takes, to protect our sovereignty and prosper. There's got to be an ultimate cost," said Barry E. Snyder Sr., the Seneca Tribal Council chairman who owns smoke shops and gasoline stations on the Cattaraugus and Allegany reservations.

There are fears of a return to the battles of a few years ago, when Senecas fought state troopers, closed the Thruway and burned tires in protest of state attempts to collect taxes.

"If they try to get taxes, the Thruway would be completely blocked off. It's Seneca land, and it will happen," said Jennifer Jamison, who works at her cousin's smoke shop, Triple J.

"I was there when we picketed on the Thruway in 1997," she said of one confrontation when 1,000 Native Americans and their supporters battled state troopers. "They were stealing the troopers' hats and stomping on their patrol cars."

But state lawmakers, who sought new revenues to pay for several billion dollars they added to the state budget, say it is time for Senecas and other Native Americans to start collecting taxes on cigarette and gasoline sales.

The old wounds have reopened quickly. And Senecas, the most active of New York's tribes when it comes to tobacco marketing, warn that the state will not be allowed to impose its will on Native Americans.

"The state's looking to take our resources to cover their losses. That's typically what happens throughout history with Native Americans," said Seneca President Rickey L. Armstrong Sr.

Snyder and Armstrong said they believe the state is trying to foist its economic problems caused by the Sept. 11, 2001, terrorist attacks onto the backs of Native Americans.

The tax battle is, in part, an economic issue for the Senecas. The cigarette and gasoline businesses are booming for Native American retailers, who attract customers because they don't charge any taxes in their shops, Internet sites and mail-order houses.

But it is also about a principle. Sovereignty - the federally recognized notion that Native American reservations are nations and that only the U.S. government can deal with them - is a major theme for the Senecas.

"We're expected to give up land and sovereignty for the benefit of their government's failures," Snyder added.

Senecas are expected in Albany on Tuesday to protest the tax levy.

Snyder would not rule out the same types of protests that occurred in 1997.


Senecas refuse to deal

The fight over levying taxes could have major consequences beyond the reservation. Already, Senecas are talking of a delay in selecting a site for their second casino in Western New York, which many local politicians had hoped would be in Buffalo.

"I've authorized the hiring of lobbyists in Albany and Washington, and our employees are sending out mailings to New York State legislators," Armstrong said of the tribe's opposition to the State Legislature's budget.

But other tribes are striking deals with New York to collect taxes on their reservations, and that has Seneca leaders fuming.

The St. Regis Mohawks in northern New York are close to settling their land claims against the state in return for a Las Vegas-style casino in the Catskills; the deal also includes taxing cigarette and gasoline sales to bring parity in prices with non-Native American retailers.

The Oneidas, too, are negotiating a sales tax deal with Gov. George E. Pataki as part of their push for a Catskills casino. They already run a casino, Turning Stone, in Verona near Utica.

No matter what the Mohawks or Oneidas do, a source close to the Senecas said their leaders will never agree to a tax deal. And Seneca retailers know that, if the Mohawks and Oneidas do agree to raise prices by charging taxes, it will benefit the Seneca smoke shop operations - which could monopolize tobacco sales without taxes.

Armstrong said he has received assurances from Pataki's staff that the governor will veto the portion of the Legislature's budget requiring Native Americans to levy sales tax. However, the Legislature has vowed to override any Pataki budget vetoes.


State is desperate

The U.S. Supreme Court in 1994 gave the green light to New York to collect state taxes from Native American retailers.

But New York has not done so. Senate Majority Leader Joseph Bruno, R-Brunswick, said the Pataki administration lacks the will.

Now, with the state facing money demands from school districts, hospitals and others, Bruno and Assembly Leader Sheldon Silver, D-Manhattan, pushed through a budget provision to resolve the tax collection issue.

The Senate and Assembly budget orders the governor's tax commissioner to write new regulations for collecting sales and excise taxes on Native American reservation sales of tobacco products, gasoline and all other goods sold to non-Native Americans. The Legislature believes this effort will bring the state $165 million in new revenue this year and $330 million next year.

It also will level the competition field for non-Native American retailers, the lawmakers believe. Those retailers say the state loses $1 billion or more annually by the tax-free Native American sales.

Pataki, under pressure from these retailers following the 1994 Supreme Court decision, began making moves to collect the tax about a year after he took office in 1995.

But he later backed down, in the face of violent protests, mainly by Seneca demonstrators.

The legislative bill passed May 2 does not stipulate how to collect the tax. Some states collect the tax due at the wholesale level, getting the money before the product is even shipped to Indian retailers.

Others have worked out "parity" deals with Native Americans, in which the Native American retailers levy taxes. In some cases, the tax revenue is shared with the states. In others, the money can be kept by the Native Americans under the theory that their prices will then become more in line with non-Native American retailers.

The governor says he does not believe the State Legislature's revenue projections are viable because of "lawsuits, challenges and court battles and enormous enforcement difficulties."

But he says he will do his best to enforce the terms of the budget if it becomes law, though he has notified Senecas he thinks it will be "extraordinarily difficult and not generate the revenue they are talking about."

Armstrong commended the governor.

"He has a lot of guts to take the stance he has," the Seneca president said.

Meanwhile, the Seneca's second casino - the first is the Seneca Niagara Casino in Niagara Falls - might hang in the balance. Armstrong said the Senecas still hope to decide on a location, possibly Buffalo, and begin construction by the end of this year or early in 2004.

"That's still our plan, but it depends on our focus, and right now the same people involved in planning and setting up the new casino are involved in this," Armstrong said of the nation's efforts to block sales tax collections at the estimated 173 gas stations and smoke shops on Seneca territories.




Growing cybersales

Meanwhile, another front in the tax battle is opening: Internet and mail-order sales of tobacco products, a rapidly growing industry that the Senecas dominate.

Concerned about a sharp rise in bootlegging, a practice that has taken off since the state began raising tobacco taxes over the past few years, lawmakers in 2000 approved legislation that cracks down on Internet and mail-order sales of cigarettes, which don't include the state excise and sales taxes.

One way the crackdown would work, lawmakers believed, was by hitting carriers, such as United Parcel Service and Federal Express. Big penalties, including criminal sanctions, can be levied for delivering cigarettes that do not meet New York's tax regulations.

In February, a federal appeals court upheld the law, and two cigarette companies have since dropped their appeals.

But since then, the Pataki administration has made no overt moves to enforce the law. The state Tax Department declined to say what, if any, steps it has or will take to begin enforcing the law.

The delivery companies say they have gotten no notification from the state that the Internet law will be enforced.

"So there is nothing that has changed in our general operation," said Norman Black, a spokesman for UPS.

Since February, two new lawsuits have been filed - one by trucking interests, the other by Internet retailers, including a Seneca firm - to block the 2000 law.

The slow reaction to the law banning such sales, which Pataki signed with some fanfare in 2000, pleases Native American retailers but angers lawmakers, health groups and non-Native American store owners.

Lawmakers say they are exhausted by excuses from Pataki on why the taxes can't be collected.

Assemblyman Jeffrey Klein said he voted against the bill permitting the Senecas to open casinos solely because Pataki failed to use the casino deal as a way to end the cigarette tax dispute.

"He just doesn't want to confront the issue," Klein said of Pataki. The Bronx Democrat said he believes Pataki is giving in to threats of violence.

The lawmaker said there still is room for negotiations with some Native American nations. But for tribes that refuse to resolve the dispute, Klein said the state must beef up enforcement to collect the money that is owed and needed.

Mohawk officials say the state appears serious this time about collecting taxes.

"It's coming," Mohawk spokesman Ray Cook said of the taxes.

Senecas shouldn't be upset with the Mohawks for negotiating a deal that will benefit their tribal members, Cook added.

"They need to negotiate a deal for themselves that, hopefully, is as good as ours, and ours is a sweet deal," Cook said of the pending casino.


Maintaining market edge

But Seneca smoke shop and gas station owners believe they would lose their competitive edge if they charged sales taxes on transactions with non-Native Americans, who are the bulk of their business.

"What will the state do when our economy dwindles? Maybe they'll give us welfare again. We can go back on the welfare rolls and sell beads and moccasins along the road," said Sally Snow, owner of Wolf's Run, a gasoline, tobacco, restaurant and giftware complex that employs 30 workers.

Jamison, who works at the Triple J smoke shop, said state authorities could expect fierce protests if the state goes through with tax collections on Seneca lands.

"It's all about money. Indians were here first, and the state wants to take that away," Jamison said.

Armstrong expressed concern over the possibility of violence.

"I don't like to see violence. I'd hate to see that happen," the Seneca leader said.

Theresa Cruz, an employee of the tribal-owned Seneca One Stop gasoline station and smoke shop, says the nation's land belongs to the Senecas, and no other entity can infringe upon its sovereignty.

She, in fact, takes it a step further.

"We should put a tollbooth on the Thruway that runs through the reservation. Let the tribe collect toll money," Cruz said.

Jan Patterson, manager of the Native Pride smoke shop, said the state has an obligation to abide by treaties the tribe has with the U.S. government prohibiting taxes on reservation land.

"If they break the treaties, what good is their word? They'll just turn around and do what they want," Patterson said.

Bo Jackson, owner of 2Clans Smoke Shop and gas station, says the thought of the state trying to force him to collect taxes angers him so much that he can barely discuss it.

"It costs us an arm and a leg for the lawyers to fight this. The only one to make money are the lawyers. The last time this happened, Pataki was supposed to put in a law that there be no taxes and they'd leave us alone," Jackson said. "Now, six years later, they're coming at us again. The state's in hot water and thinks we can bail them out."

On the sign outside First American Tobacco smoke shop are the words "No NYS taxes now or ever." Inside the shop, employee Jerry Crise worries about his future.

"If sales go down, some of the stores will close, and there's a lot of mom-and-pop operations. Jobs could be hurt," said Crise, a non-Native American.

Deborah Spruce, who lives on the reservation, says the state should back off. "They've taken enough from us already. We're just starting to get on our feet."

Her husband, Frederick Spruce, was even more direct on his feelings toward the state officials who are forcing the sales tax issue: "They can go to hell."