The Cayuga Nation of New York suffered another legal setback on Wednesday after the state's Appellate Division ruled that the tribe cannot continue selling untaxed cigarettes to non-tribe members until after a felony tax evasion appeal is handled next month.
The decision upholds state Supreme Court Judge Kenneth Fisher's Feb. 18 decision, where he ruled that the nation must respect a prior ruling where he decided the nation could be charged with felony tax evasion for selling untaxed cigarettes to non-Native American Indians.

Fisher is the same judge who approved the search warrants allowing the counties to raid the Lake Side Trading stores in Union Springs and Seneca Falls on Nov. 25. A couple of weeks later, when the Cayugas took the counties to court challenging the legality of the raids and the investigation, Fisher ruled that the district attorneys can pursue a felony tax evasion prosecution against the tribe because the nation does not have a recognized reservation according to New York state tax laws.

The Cayugas have appealed that decision, and an appellate court will hear the case on April 3. The case was originally scheduled for a hearing in late May.

Lee Alcott, an attorney for the tribe, said that the Cayugas will respect Wednesday's decision, and that the stores have not sold cigarettes since the Feb. 18 ruling.

“While we are obviously somewhat disappointed that the court did not impose a stay as the nation had requested, the nation remains optimistic by the fact that the appellate court has moved up the appeal which will be heard in less than a month,” Alcott said.

Cayuga County District Attorney Jon Budelmann said the ruling confirms that a temporary injunction issued by the appellate court on Jan. 21, which prevents him from filing sealed grand jury indictments the nation until the after the appeal is heard, was only meant to maintain the status quo.

“Whatever talk (the nation) had into past appellate court decisions indicating which way the court was leaning have been blown away,” Budelmann said. “Our reading into this decision is that the court wants to maintain the status quo.”

At the heart of the appeal is what section of the tax law can the nation be charged with violating.

The tribe maintains that it cannot be charged with violating felony tax laws because a coupon waiver that is supposed to be used to exempt Native American Indians from paying taxes has not been implemented by the state. Because those coupons have not been created and distributed, an appellate court issued an injunction against that section of the law in a different case in western New York, preventing it from being enforced.

The district attorneys in both counties believe that the coupon waivers do not apply to the nation because the tax law does not recognized any Cayuga-owned reservations, allowing them to be charged with felony tax evasion under a different section of the law.

The Cayugas have argued that their reservation was established and recognized by the 1794 Treaty of Canandaigua.

Staff writer Nate Robson can be reached at 253-5311 ext. 248 or