ALBANY - A midlevel court on Thursday upheld the seizure of a truckload of untaxed cigarettes in northern New York, a shipment that was ordered by an Indian tribe in Nebraska from a manufacturer on the St. Regis Mohawk reservation.
The four Appellate Division justices said HCI Distributors, a subdivision of the Winnebago Tribe, failed to show there was "a genuine out-of-state transaction" exempt from New York's tax of $4.35 per pack. They noted the St. Lawrence County District Attorney's Office eventually released the truck that was seized by state authorities in January 2012. Authorities also released most of the 26,000 cartons of cigarettes and cigars following a court order in July 2012.
On Thursday, the higher court reversed that ruling by Justice David Demarest, who had concluded the cigarettes should be returned since no taxes were due, no search warrant issued and no criminal or civil proceedings had been started.
The Appellate Division said it didn't reach any conclusion about whether the cigarettes should ultimately be taxed or not, only that state police didn't exceed their authority in seizing the shipment at prosecutors' request.
In claiming the sale was nontaxable, HCI relied on regulations that say no tax may be imposed on cigarettes sold to an out-of-state buyer, Justice Leslie Stein wrote. However, the regulations also require a certificate from the purchaser, who must be a duly licensed cigarette agent, saying they won't be returned for sale or use in New York, she wrote.
The Nebraska distributor provided "no evidence" the untaxed cigarettes wouldn't wind up back in New York, while corporate shipment records and a statement by the truck driver suggest HCI regularly transports cigarettes back into New York that are bought from the same manufacturer on the Mohawk reservation along New York's Canadian border.
"We're keeping all our options open," HCI attorney Joseph Messineo said Wednesday. They could appeal the ruling to New York's highest court.
The New York Department of Taxation & Finance declined to comment on Thursday's decision.
The St. Regis Tribe didn't immediately reply to a request for comment.
Under New York law, cigarettes can be sold to tribe members without the state's tax, but should be taxed when sold to non-Indians. That has resulted in a booming discount cigarette business for some tribes who say that as sovereign nations they shouldn't pay state tax at all.
In September, prosecutors from St. Lawrence County and three other counties announced agreement by Ohio-based Greenwood Motor Lines, which does business as R&L Carriers, to take steps to avoid hauling untaxed cigarettes from Indian reservations to locations in New York.