Tobacco giant targets tax-free cigarette sales

Area stores unhappy with tax-free sales of cigarettes by the Oneida Indian Nation have found a powerful ally -- one of the world's largest tobacco companies.

“The state loses revenue. Retailers lose sales. Their employees could even lose jobs. And it adds to the burden on hard-working taxpayers,” reads a recent full-page advertisement paid for by Altria Client Services on behalf of Philip Morris USA. The ad was published in various Upstate New York newspapers.

The ad pictures large hands cradling sand, with grains falling between the fingers.

Oneida Nation officials say they feel betrayed by the stance Philip Morris has taken - saying it's a reversal of the company's previous position, which in the past has provided racking and signage to SavOn and other Indian stores.

“They were like a big brother almost, who has turned around and smacked us for some reason,” said Bob Hilburger, director of business development for the Oneida Indian Nation.

Tobacco industry officials say the ads and the website, Enforce The Law - Collect The Tax Coalition, are not questioning the sovereignty of Indian nations such as the Oneidas, who have built a commercial empire in the western portion of Oneida County and in eastern Madison County, complete with a casino, hotels, restaurants and convenience stores.

“It's really about the policy issue of tax collection,” said David Sutton, spokesman for Philip Morris USA. “It's about leveling the playing field.”

'Need for revenue'

There have been several similar coalitions formed throughout the years to peddle the same kind of message, said James Calvin, president of the New York Association of Convenience Stores.

Why does Calvin hope this one will have better results?

For one, he said, the effort now has “the leadership and participation of Altria,” which sells close to half of U.S. cigarettes.

Also, the state has a vested interest to collect these taxes now to close its potential $9 billion budget gap, Calvin said.

The sale of untaxed cigarettes from Indians to non-Indians has been a longstanding issue - especially in Upstate New York.

The initial promise to collect those taxes on Indian cigarettes was made by then-Gov. George Pataki, who pulled back from the measure in the 1990s after about 1,000 members of the Seneca Nation blocked the Thruway and other roads -- sometimes with burning tires.

Gov. Eliot Spitzer campaigned for governor on the same promise, but backed away once in office, leaving a gap in the 2007-08 state budget.

Now, Gov. David Paterson is giving collecting the revenue another shot, looking to enforce a law he signed in December 2008 in Utica.

Recently proposed state regulations would limit the quantity of tax-free cigarettes that may legally be supplied to Indian nations or tribes.

'Death notice'

But the longer this tax goes uncollected, the more it is hindering local convenience stores, Calvin said.

“You lose the sale of cigarettes, and you lose the sale of other products,” he said.

Sutton said his company is looking out for the interests of such stores.

“If you have one pool of retailers that we're obviously working with every day, and have another pool of retailers who are not colleting the tax, it's very difficult to compete,” he said.

As for the Nation, it has already made the decision to downplay product placement of Philip Morris' Marlboro cigarettes in SavOn stores, Hilburger said.

“Obviously you're not going to support someone to run expensive ads in the paper,” Hilburger said, adding of the advertisement, “It almost looked like a death notice. It was 85 percent black.”