A TRIBAL WAR AVERTED

In Day Wholesale, Inc. v. State of New York, Day Wholesale asked a court to stop New York State's enforcement of an amended version of Tax Law section 471-e.

This law required all non-Indians to pay a tax on cigarettes purchased on Native American reservations and also implemented a process by which Indians who purchased cigarettes for their own use would be exempt from the tax.

Although the law was scheduled to take effect on March 1, 2006, the Department of Taxation and Finance (DTF) failed to "take any action or promulgate any rules or regulations necessary to implement the statute." Despite that omission, the New York State Attorney General prohibited Philip Morris from selling cigarettes to Day Wholesale -- "a wholesale dealer of cigarettes" who operated on land owned by Seneca Nation of Indians -- until there was compliance with the law and tax stamps were placed on cigarettes.

After the Erie County Supreme Court granted Day Wholesale's request for a preliminary injunction, the government appealed to the Appellate Division, Fourth Department, which affirmed.

The AD4 found DTF failed to take all necessary measures to implement the law. Since a coupon system identifying exempt purchasers had not been developed by the statute's effective date, the law's enforcement had to be stayed.

How will the Court of Appeals smoke out this issue?

To download a copy of the Appellate Division's decision, please use this link: Day Wholesale, Inc. v. State of New York