I'm a licensed cigarette stamping agent that sells to Indian Nations and reservation retailers for resale on reservations. Now that Tax Law § 471-e has been enacted, has the Department changed its long-standing policy of not enforcing cigarette tax collection on reservation sales, and will it start assessing stamping agents for unstamped cigarettes sold to reservation sellers?

Plain-English summary

This opinion was revoked by the Department effective February 23, 2010. The text below, and this summary, describe the original 2006 ruling; do not treat its enforcement conclusions as current law. The Department's own revocation notice (reproduced at the top of the source PDF) states only that "[c]urrent judicial injunctions that prevent the Department from enforcing the tax laws as they relate to sales by stamping agents to reservation sellers and reservation sales to non-Indians remain in place" as of the 2010 revocation -- it does not explain in the source text exactly why the opinion itself was withdrawn.

As originally issued in March 2006, a licensed cigarette stamping agent (Milhem Attea & Bros., Inc.) that sold cigarettes and tobacco products at wholesale to Indian Nations and reservation retailers for resale to the public asked the Department three questions: (1) what was the Department's current enforcement policy on such sales; (2) had the newly enacted Tax Law § 471-e changed that policy; and (3) did the Department plan to issue assessments to stamping agents for unstamped cigarettes sold to reservation sellers after March 1, 2006 (§ 471-e's effective date).

The Department described a long-standing policy of "indefinite forbearance" -- not collecting cigarette and sales tax on on-reservation sales to non-Indian consumers -- that had been upheld as rationally based in New York State Association of Convenience Stores v. Urbach and repeated in Department guidance over the years. Even though § 471-e had just taken effect, the Department said it had no intention of enforcing the new law immediately: the Commissioner had testified to the Legislature that enforcement would not begin on the March 1, 2006 effective date, the Executive Budget proposed amendments to fix deficiencies in the statute, and litigation challenging the new scheme was considered likely. The Department therefore concluded it would not issue assessments to stamping agents for transactions occurring during this forbearance period, while promising adequate notice before any future policy change.

What this means for you

Cigarette stamping agents and reservation retailers

This 2006 policy statement was revoked in 2010 and should not be relied on to determine current enforcement practice for reservation cigarette sales -- the legal and enforcement landscape around Indian reservation cigarette taxation has continued to evolve since 2006 through litigation and legislative amendments. Consult current Department guidance (TSB-Ms and later advisory opinions) rather than this one.

Researchers and tax historians

This opinion is a useful historical snapshot of the Department's forbearance-era reasoning under § 471-e in 2006, including its reliance on NYS Association of Convenience Stores v. Urbach and its stated intent to avoid "excessive State entanglement in Indian commerce" pending further legislative and judicial developments -- but it is explicitly superseded.

Common questions

Q: Is this ruling still good law on reservation cigarette sales?
A: No. The Department revoked TSB-A-06(2)M effective February 23, 2010. Do not rely on its enforcement conclusions for current transactions.

Q: What did the Department originally decide in 2006?
A: That the enactment of § 471-e had not changed its long-standing forbearance policy, and it would not begin enforcing cigarette tax collection on stamping-agent sales to reservation retailers or issue related assessments during the forbearance period.

Q: Why was it revoked?
A: The source document doesn't explain the Department's reason beyond noting that certain judicial injunctions remained in place as of the 2010 revocation date. Current guidance should be consulted for the Department's present-day position.

Q: Can I rely on the original 2006 analysis for my own reservation sales?
A: No -- both because it was issued only for this specific petitioner's facts, and because it has since been formally revoked.

Citations and references

Statutes:

• Tax Law § 471-e (qualified Indian reservation cigarette sales, Indian tax exemption coupons, and the tax treatment of reservation sales to qualified Indians vs. non-Indians)

Cited case law (as referenced in the original opinion):

• New York State Association of Convenience Stores v. Urbach (upholding the Department's forbearance policy as rationally based)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/cigarette_ao.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/misc/a06_2m.pdf

Original ruling text

TSB-A-06(2)M is revoked
As of February 23, 2010, TSB-A-06(2)M is revoked. Current judicial
injunctions that prevent the Department from enforcing the tax laws as
they relate to sales by stamping agents to reservation sellers and
reservation sales to non-Indians remain in place.

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-06(2)M
Miscellaneous Tax
March 16, 2006

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION PETITION NO. M060316A
On March 16, 2006, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Milhem Attea & Bros., Inc., 1509 Clinton Street, Buffalo, New York
14206.
The issues raised by Petitioner, Milhem Attea & Bros., Inc., are:

1. What is the Department of Taxation and Finance’s current policy with respect to the
   sale of cigarettes from stamping agents to Indian Nations and Indian retailers making
   sales from reservations?
2. Has the Department of Taxation and Finance altered its long-standing policy as a
   result of the enactment of section 471-e of the Tax Law?
3. In light of section 471-e of the Tax Law, does the Department of Taxation and
   Finance have any plans to issue assessments to stamping agents regarding the sale of
   unstamped cigarettes to Indian Nations and Indian retailers making sales from
   reservations after March 1, 2006?
   Petitioner submitted the following facts as the basis for this Advisory Opinion.
   Petitioner is a licensed stamping agent which sells cigarettes and other tobacco products
   at wholesale to Indian Nations and Indian retailers on reservations for resale to the public.
   Applicable law
   Section 471-e of the Tax Law provides, in part:
4. General. (a) Notwithstanding any provision of this article to the contrary
   qualified Indians may purchase cigarettes for such qualified Indians' own use or
   consumption exempt from cigarette tax on their nations' or tribes' qualified reservations.
   However, such qualified Indians purchasing cigarettes off their reservations or on another
   nation's or tribe's reservation, and non-Indians making cigarette purchases on an Indian
   reservation shall not be exempt from paying the cigarette tax when purchasing cigarettes
   within this state. Accordingly, all cigarettes sold on an Indian reservation to non­
   members of the nation or tribe or to non-Indians shall be taxed, and evidence of such tax
   will be by means of an affixed cigarette tax stamp.

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TSB-A-06(2)M
Miscellaneous Tax
March 16, 2006

(b) In order to ensure an adequate quantity of cigarettes on Indian reservations
which may be purchased by qualified Indians exempt from the cigarette tax, the
department shall provide Indian nations and tribes within this state with Indian tax
exemption coupons as set forth in this section. A reservation cigarette seller shall be able
to present such Indian tax exemption coupons to a wholesale dealer licensed pursuant to
this article in order to purchase stamped cigarettes exempt from the imposition of the
cigarette tax. Qualified Indians may purchase cigarettes from a reservation cigarette
seller exempt from the cigarette tax even though such cigarettes will have an affixed
cigarette tax stamp.

2. Indian tax exemption coupons.
   (a) Indian tax exemption coupons shall be provided to the recognized governing
   body of each Indian nation or tribe to ensure that each Indian nation or tribe can obtain
   cigarettes upon which the tax will not be collected that are for the use or consumption by
   the nation or tribe or by the members of such nation or tribe. The Indian tax exemption
   coupons shall be provided to the Indian nations or tribes on a quarterly basis for each of
   the four quarters beginning with the first day of December, March, June, and September.
   It is intended that the Indian nations or tribes will retain the amount of Indian tax
   exemption coupons they will need each quarter to purchase cigarettes for official nation
   or tribal use, and will distribute the remaining Indian tax exemption coupons to
   reservation cigarette sellers on such nations' or tribes' qualified reservations. Only Indian
   nations or tribes or reservation cigarette sellers on their qualified reservations may
   redeem such Indian tax exemption coupons pursuant to this section.
   *

*

*

3. Tax exempt purchaser. (a) An Indian nation or tribe may purchase cigarettes for
   its own official use or consumption from a wholesale dealer licensed pursuant to this
   article without payment of the cigarette tax to the extent that the Indian nation or tribe
   provides such wholesale dealer with Indian tax exemption coupons entitling the Indian
   nation or tribe to purchase such quantities of cigarettes as allowed for on each Indian tax
   exemption coupon without paying the cigarette tax.
   (b) A qualified Indian may purchase cigarettes for his or her own use or
   consumption without payment of the cigarette tax, provided that the qualified Indian
   makes such purchase on a qualified reservation.
   (c) A reservation cigarette seller may purchase cigarettes for resale without
   payment of the cigarette tax from a wholesale dealer licensed pursuant to this article:

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TSB-A-06(2)M
Miscellaneous Tax
March 16, 2006

(i) provided that such reservation cigarette seller brings such cigarettes or
causes them to be delivered onto a qualified reservation for resale on such
reservation;
(ii) to the extent that such reservation cigarette seller provides such
wholesale dealer with Indian tax exemption coupons entitling the reservation
cigarette seller to purchase such quantities of cigarettes as allowed for on each
Indian tax exemption coupon without paying the cigarette tax; and
(iii) provided that such cigarettes are affixed with a cigarette tax stamp.
(d) A wholesale dealer shall not collect the cigarette tax from any purchaser to the
extent the purchaser gives such wholesale dealer Indian tax exemption coupons entitling
the purchaser to purchase such quantities of cigarettes as allowed for on each such Indian
tax exemption coupon without paying the cigarette tax.
Opinion
As Petitioner is probably aware, the New York State Department of Taxation and Finance
(the Department) has a long-standing policy of allowing untaxed cigarettes to be sold from
licensed stamping agents to recognized Indian Nations and reservation-based retailers making
sales from qualified Indian reservations. In a challenge to the State’s policy (New York State
Association of Convenience Stores v. Urbach), the Court held that the policy of indefinite
forbearance was rationally based, and therefore, the petitioners’ Article 78 proceeding attempting
to compel the State to enforce the collection of excise and sales taxes pertaining to onreservation sales of cigarettes and motor fuel to non-Indian consumers was dismissed. This
policy has been reiterated on several occasions by the Department over the years since the
decision in NYACS.1
The Petition specifically asks whether the enactment of section 471-e of the Tax Law has
resulted in a change in policy. The Commissioner indicated in his testimony to a joint session of
the Legislature’s fiscal committees on February 15, 2006 that the Department would not begin
enforcement on March 1, 2006 (the effective date of section 471-e). In the Executive Budget,
several amendments were proposed to correct deficiencies in the law. Specifically, the
amendments include the creation of an Indian export decal system relating to out-of-state sales, a
provision to allow qualified Indians to purchase tax exempt products from any qualified
reservation and changes to facilitate the negotiation of tax agreements with the various Nations.
These amendments will respect Indian sovereignty and avoid excessive State
entanglement in Indian commerce. Pending resolution of these issues, it would be premature to
1

See, for example, Department affidavit dated February 10, 2006 in Milhelm Attea & Brothers, Inc v. Spitzer;
Department affidavit in Ward v. Spitzer dated July 7, 2003; Department Office of Counsel letter dated June 12,
2003; and Department TSB-M-00(4)M dated October 20, 2000 (superseded by TSB-M-03(1)M)

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TSB-A-06(2)M
Miscellaneous Tax
March 16, 2006

begin enforcement. Moreover, it is likely that a party will commence a lawsuit or otherwise
challenge the new law, which could have the effect of invalidating or postponing the new
statutory scheme.2 Therefore, the Department has no intention to alter its long-standing policy
until such issues are fully addressed and considered. However, if the Department decides to
revise its policy in the future, it will provide adequate notice to all affected stamping agents.
Addressing Petitioner’s last question with respect to the possibility of issuing assessments
in light of the enactment of section 471-e, the Department will not issue such assessments with
respect to transactions occurring during the period of forbearance as that would be inconsistent
with the State’s long-standing policy.

2

DATED:

March 16, 2006

NOTE:

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.

A lawsuit was, in fact, recently commenced against Department and Attorney General Spitzer challenging section
471 and the entire cigarette taxing scheme, but was withdrawn on the eve of a Temporary Restraining Order hearing.