Attorney General Schneiderman Wins Major Victory To Collect Taxes From Non-tribal Members On Indian Reservations

Court's Unanimous Decision Allows for the Collection of Hundreds of Millions of Dollars in Tax Revenue

Schneiderman: Today’s Decision Respects Tribal Rights and at the Same Time Represents an Important Victory for the State to Collect Deserved Revenue and Protect Public Health

NEW YORK - Attorney General Eric T. Schneiderman today announced that the United States Court of Appeals for the Second Circuit issued a unanimous decision upholding the authority of New York State to collect taxes on cigarette sales made on reservation land to non-Indian Tribe members. The Second Circuit recognized that New York’s law carefully balances the interests of Tribal sovereignty with the State’s legitimate interests in taxing all cigarette sales made to non-Tribal members. The State estimates that the decision will enable the State to collect approximately $500,000 per day in additional tax revenue.

"Today’s decision respects Tribal rights and at the same time represents an important victory for the State to collect deserved revenue and to protect public health," said Attorney General Schneiderman. "The decision closes an enormous tax-evasion loophole that was depriving New York of hundreds of millions of dollars in tax revenue. I'd also like to commend all of the attorneys in the Attorney General's office whose extraordinary efforts on this case helped us achieve the best outcome for New Yorkers."

In 2010, the New York State Legislature passed a law requiring the collection of cigarette taxes on cigarette sales to non-Tribal members. The law provided Indian Tribes with several options for collecting those taxes while ensuring that cigarette sales to qualified Tribal members would remain tax free. The law is important for protecting the public health of New Yorkers as well as raising hundreds of millions of dollars in revenue during a time of economic hardship.

The law was intended to go into effect on September 1, 2010. However, in August 2010, several Indian Tribes sued the State in federal district court to enjoin enforcement of the new law. The Tribes asserted that the law violated their tribal sovereignty and caused them irreparable harm. Two federal trial courts stayed the enforcement of the law. The New York Attorney General’s Office filed an expedited appeal with the United States Court of Appeals for the Second Circuit.

Today's unanimous decision accepted the arguments made by Attorney General Schneiderman. The Second Circuit determined that under settled United States Supreme Court law, the Tribes have no likelihood of success on the merits. Accordingly, the Second Circuit vacated all orders staying enforcement of New York’s tax law.

Deputy Solicitor General Andrew D. Bing argued the case for the Attorney General's office. Special Counsel to the Solicitor General Alison Nathan and Assistant Solicitor General Steven C. Wu also handled the case, all under the supervision of Solicitor General Barbara D. Underwood. The initial case was also handled by Assistant Attorneys General Robert Siegfried, David Roberts and Darren Longo.

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