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The Oneida Indian Nation is relocating a cigarette factory to its reservation in central New York as part of a broad effort to keep the state from collecting taxes on cigarettes sold by Indian tribes.
Oneida officials say the Sovereign Tobacco business near Buffalo that the tribe bought for $6.6 million in 2008 will begin manufacturing cigarettes next month at its new location on Oneida territory midway between Syracuse and Utica, about 170 miles east. The move was announced a week before Sept. 1, the date the state plans to begin taxing cigarettes sold by Native American retailers to non-Indian customers.
The tribe contends that federal law pre-empts state efforts to tax products that are manufactured and sold on Indian territories.
"Since the Oneida Nation will be manufacturing its own products and selling its own products on its own reservation, it would not be covered by the statute even if the state wished to extend its reach to the Oneida Nation, which it does not appear the state is looking to do," said Peter Carmen, chief operating officer of Oneida Nation Enterprises in Oneida.
Separately, the Seneca Indian Nation in western New York is seeking a federal order in Buffalo to stop the state from taxing cigarettes sold by Native American retailers to non-Indian customers.
Hit with financial woes, Gov. David Paterson positioned the state in January to revisit a budget issue perennially overshadowed by emotion. Previous efforts to tax reservation sales in 1992 and 1997 resulted in members of the Seneca tribe blockading state highways, setting fires and clashing with troopers.
Paterson spokesman Morgan Hook said Wednesday the governor "will continue with his stated policy of negotiation, litigation and implementation of the laws of New York when it comes to all dealings with New York's sovereign Indian nations."
Sovereign Tobacco produces Niagara and Bishop discount cigarette brands, which sell for around $39 a carton, a bit more than half the cost of taxed, name-brand cigarettes sold in non-Indian outlets.
The factory, at an off-reservation site in Angola, near Lake Erie, sells upward of 1.4 million cartons of cigarettes a year, distributing mostly to about 60 Native American outlets in upstate New York. It will employ at least 15 people in Oneida, the same number as in Angola.
"Some equipment already has been moved and is being put in place," Carmen said. "There will be testing of equipment and training of employees, and we expect it to be manufacturing cigarettes by middle to late September."
The nation already runs the Turning Stone Resort & Casino, including its five golf courses, and a dozen SavOn gas station-convenience stores and employs 4,800 people.
Tribes in New York have long claimed sovereignty from state and local laws and have refused to collect sales and excise taxes for the state on cigarettes they sell, despite a U.S. Supreme Court ruling in 1994 that states have the right to collect those taxes. Successive governors in New York have declined to enforce the tax laws.