City sues tribal smokeshops over untaxed Cigarettes

Mayor says 'butt-leggers' cost the city millions in revenue; asks governor to enforce the law
STATEN ISLAND, N.Y

If that's the case, in the past five years, 279 tribe members smoked 970 packs of Cigarettes a day, or about 13 Cigarettes every minute. Even Staten Island chainsmokers would have to admit, that's a lot of smokes. City officials aren't buying it. They're suing eight businesses located on the Mastic, Long Island, reservation on the grounds they broke the treaty and sold 24 million cartons of untaxed Cigarettes to people outside the reservation and cheated the city and state out of $525 million in state taxes and $195 million in city taxes. Mayor Michael Bloomberg announced the suit in a press conference at City Hall yesterday. The lawsuit was filed yesterday morning in Federal District Court in Brooklyn under the Contraband Cigarette Traffic Act, which allows New York to attempt to recoup its losses from illegal sales. This is the third such lawsuit filed by the Bloomberg administration, including one filed against online retailers in 2003, and another earlier this month seeking to prevent wholesalers from providing reservation retailers with supplies of unstamped Cigarettes. The lawsuit accuses the Poospatuck shops of selling massive quantities of Cigarettes to "butt-leggers" who resell them throughout the metropolitan area. The average price of a carton of Cigarettes in the city is about $70, while tribe members can purchase a carton tax-free for about $35. Bloomberg said the lost tax revenue could go a long way into fixing the city's and state's current budget woes. For $195 million, the city could modernize a public hospital, hire 2,700 new police officers, 2,800 firefighters or 3,000 new teachers; or pay nearly three-quarters of the Parks Department's annual operating budget, he said. He took aim at Gov. David Paterson and the state legislature for being unwilling to enforce the law. "The governor should go to the reservations and say, 'As of tomorrow morning, stop this practice,"' Bloomberg said. "And if it requires law enforcement, that's what the governor has the state police for, to enforce the law." Linda Palumbo, co-owner of Discount Smoke Shop in New Springville, agreed with the Mayor. In the last five years, the price of a pack of smokes has skyrocketed to about $10 -- that includes $1.50 city tax, $2.75 state tax and 39 cents federal tax -- while her sales have dropped sharply. She believes that has compelled some of her customers to buy from bootleggers. "It sure doesn't help business. I think they should do whatever they have to do to slow it down,' Ms. Palumbo said. The issue has long been one of Albany's most difficult. Tribes held violent protests in 1995 when the state tried to collect the tax on sovereign land using state police. Conflict with state police briefly closed the Thruway, leaving some of it scorched by protesters burning tires. Tribal authorities have long acknowledged that smuggling is a problem, but they have defended the right of the shops to sell Cigarettes without collecting state tobacco taxes. Reservation cigarette dealers have also claimed repeatedly that any bootlegging happens without their knowledge, but in its lawsuit, the city accused the Poospatuck shops of being willing partners in such schemes. It said the shop owners actively structure and conceal illegal bulk sales, help load contraband Cigarettes into vans headed for New York City, and even make their own bulk deliveries off the reservation. City lawyers are seeking an injunction barring the shops from selling untaxed Cigarettes in any quantity to people who aren't members of their tribe. The suit also seeks money damages equal to the lost city tax revenue. It doesn't specify an amount, but the total could be in the millions, based on state sales figures. The eight shops named as defendants in the suit are the Golden Feather Smoke Shop, the Kimo Smoke Shop, the Smoke and Rolls Smoke Shop, Monique's Smoke Shop, the Red Dot and Feather Smoke Shop, the Smoking Arrow Smoke Shop, TDM Discount Cigarettes and the Peace Pipe Smoke Shop. TAG: ASSOCIATED PRESS material was used in this report.

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