(CN) – The 2nd Circuit asked a state appeals court to clarify how New York tax law applies to reservations, saying the answer would inform its review of a federal judge’s order barring smoke shops from selling untaxed cigarettes on Long Island’s Poospatuck Reservation.
Several smoke shops challenged a federal judge’s order blocking them selling untaxed cigarettes on the reservation, after New York City accused them of supplying bootleggers with tax-free cigarettes in bulk. The bootleggers allegedly resold the untaxed cigarettes in the city, causing significant revenue loss for the city and the state.
U.S. District Judge Carol Amon had issued the injunction after finding that vendors violated federal law by selling hundreds of cartons of untaxed cigarettes at a time.
On appeal, the 2nd Circuit said it first “must decide the applicability and scope” of New York tax law before ruling on the injunction. The judges want to know if state law imposes a tax on reservation cigarettes that aren’t sold to members of the Unkechauge Nation.
It certified the following questions to the New York Court of Appeals:
“Does N.Y. Tax Law § 471-e, either by itself or in combination with the provisions of § 471, impose a tax on cigarettes sold on Native American reservations when some or all of those cigarettes may be sold to persons other than members of the reservation’s nation or tribe?
“If the answer to Question 1 is ‘no,’ does N.Y. Tax Law § 471 alone impose a tax on cigarettes sold on Native American reservations when some or all of those cigarettes may be sold to persons other than members of the reservation’s nation or tribe?”