BUFFALO, March 20 — Across the street from Randy's Smoke Shop on the Tuscarora reservation near Niagara Falls sits a pile of tires and wood pallets, a reminder of the fires set during American Indian demonstrations against state tax policies in 1997 that closed several Interstate highways. Hoping to avoid a repeat of those protests, the Pataki administration has said it will not enforce a law taxing cigarettes and other goods sold to non-Indians at stores on Indian reservations across the state. Gov. George E. Pataki's budget proposal calls for delaying enforcement of the law, which took effect on March 1, until next year."Our goal has always been to solve this matter through cooperation instead of confrontation," said Kevin Quinn, a spokesman for the governor. "The Tax Department has indicated it will continue its current policy as the governor and Legislature discuss these matters."
Administration officials have said they are concerned that a repeat of the 1997 protests could slow interstate commerce, divert trucks carrying hazardous loads through heavily populated communities if the Interstates are blockaded again, and cost the state millions of dollars in state police expenses.Indian business owners assert that the tax law infringes on Indian sovereignty, is virtually unenforceable and will hurt stores that generate important economic activity on the reservations.
"How are we supposed to live?" said Pauline Chrysler, whose son, Randy Chrysler, is a smoke shop owner.But the Pataki administration's decision to delay enforcement of the new law has also fueled a partisan debate in Albany, where many Democrats have criticized the Republican governor for ignoring a significant source of revenue, because the state is not getting the $1.50-a-pack taxes it collects on cigarettes sold everywhere else in the state.
Last month, Attorney General Eliot L. Spitzer suggested that wholesalers who continued supplying cigarettes lacking a tax stamp, which sell for as little as half as much as cigarettes in nonreservation stores, to Indian merchants could lose their licenses. Mr. Spitzer, a Democrat, is running to replace Mr. Pataki, a Republican who is leaving office at the end of the year.The latest budget bill passed by the Democratic-controlled State Assembly also calls for tax collections to begin immediately, with wholesalers facing penalties that could include loss of their licenses.
"You can't announce to the world that a law will simply be ignored and not enforced," Mr. Spitzer has said. Marc Violette, a spokesman for Mr. Spitzer, declined comment on Friday's clarifications by the Pataki administration.The United States Supreme Court ruled in 1994 that states have the right to collect sales tax on purchases by non-Indians at reservation stores.
The conflicting messages from Albany have created confusion among Indian business owners and their wholesalers.
Last Tuesday, one of the largest wholesalers to stores on the Seneca and Tuscarora reservations notified store owners there that it would stop shipping the unstamped cigarettes. But by Friday, a lawyer for the wholesaler said he had received word from the Tax Department that shipments of unstamped cigarettes could continue.Mr. Chrysler said he laid off about a dozen of his 30 employees shortly after being notified by the wholesaler that it was stopping shipments last week. By Thursday afternoon, customers were limited to one carton each in an effort to stretch dwindling supplies.
"All we're concerned about is knowing one way or another whether that policy (of nonenforcement) is going to continue," said Joseph E. Zdarsky, a lawyer for the wholesaler, Milhem Attea and Sons of Buffalo. "If it didn't, theoretically, someone could assess taxes against our client in crippling amounts."The profits from sales of tax-free cigarettes and gasoline have helped spawn other Indian businesses. One of Mr. Chrysler's brothers started a bottled-water supplier, while another opened a sneaker shop, both on the same property as his store.
"They know there's no pot of gold at the end of the rainbow here," Mr. Chrysler, who has owned the store for 16 years, said of his employees, many of whom are related to him. "But it gives them pride and dignity, so they can go home and be a father or a mother — they can be a provider."State Senator George D. Maziarz, a Republican whose district includes the Tuscarora reservation, said postponing a resolution doesn't solve the issue."It's like a train wreck that everybody sees coming, but nobody knows how to avoid it," Mr. Maziarz said.