Counties' lawyer disputes tribal claims

Friday, February 12, 2010 11:04 AM CST

To no one’s surprise, the lawyer representing Seneca and Cayuga counties in the Cayuga Indian Nation cigarette sales tax case disputes arguments made by tribal lawyers.

In a reply brief filed Tuesday, Philip G. Spellane of the Harris Beach law firm in Rochester has these goals:

• To reiterate why the counties’ position in requesting the Cayugas’ two convenience stores charge sales tax on cigarettes it sells to non-Indians is correct and should be upheld by the state’s highest court.

• To again state why the Appellate Division Court ruling in favor of the Cayugas is flawed and should be reversed.

• To explain why the brief filed by lawyers for the tribe to the Court of Appeals is also flawed and “fails to save that decision from several fatal deficiencies.”

One point the Cayuga Nation lawyers attempt to make is that the tribe is not prohibited from seeking civil relief to head off criminal proceedings initiated by the counties.

“The Nation fails to support this extraordinary claim, completely overlooking the record in the Kelly’s Rental case, which demonstrates that the Court of Appeals meant what it said,” Spellane argued.

“The decision must be reversed to allow a criminal court to deal with the interpretation and application of criminal matters.”

Both counties have sealed grand jury indictments against tribal officials for violating state tax law.

The opening of these indictments and the beginning of criminal proceedings awaits the pending court ruling.

Another issue is whether the Nation’s parcels in Seneca Falls and Union Springs, the sites of their LakeSide Trading convenience stores, are exempt from the cigarette tax.

Spellane said the Nation attempts to import federal common law concepts into the state’s statutory definition of a reservation as used in state tax law.

He argued that New York law applies, and that confirms that the Cayugas don’t possess a reservation under tax law.

Spellane said the Cayugas pay local property taxes on the land they have purchased in the two counties and their lands are subject to local zoning regulations.

He also said the U.S. Supreme Court decision in the City of Sherrill vs. Oneida Indian Nation case “makes it clear that ancient, repurchased Indian lands are subject to state taxation, even absent the formality of an act of Congress disestablishing a reservation.”

The Nation may not sell tax-free cigarettes to anyone because it has no recognized reservation, Spellane argues.

He claims that tax law “clearly states that an Indian retailer may only sell tax-free to its own members.”

“The purpose of the tax statutes is not to make Indian retailers extremely wealthy by allowing them to sell tax-free to the public at large,” he said.

He rejects the Nation’s argument that the burden should be placed on non-Indian customers to send their tax on cigarettes purchases from the tribal stores to the state.

“That argument is contrary to the plain language of the statute, which imposes the tax at the wholesale level and subjects retailers, Indian or not, to criminal prosecution if they sell tax-free cigarettes to the general public,” Spellane said.

In conclusion, Spellane tells the Court of Appeals that the Appellate Court decision should be reversed for the following three reasons:

• The Nation may not collaterally attack a criminal proceeding with a civil action.

• The Nation has no reservation in Seneca or Cayuga county from which it may sell unstamped, tax-free cigarettes to anyone.

• The Nation’s possession and sale of unstamped, tax-free cigarettes to the general public violates state tax law.

The Court of Appeals will now review the legal briefs filed by both sides.

Oral arguments are scheduled for March 25 in the Onondaga County Courthouse in Syracuse.

AG Cuomo should just raid the stores to collect the unpaid taxes