ALBANY A midlevel state court on Thursday upheld the seizure of a truckload of untaxed cigarettes 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 Yorks tax of $4.35 per pack. They noted the St. Lawrence County District Attorneys 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 state Supreme Court Justice David R. Demarest, who concluded the cigarettes should be returned since no taxes were due, no search warrant was issued and no criminal or civil proceedings had been started.
The Appellate Division said it didnt reach any conclusion about whether the cigarettes ultimately should be taxed, only that state police didnt exceed their authority in seizing the shipment at the 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 wont be returned for sale or use in New York, she wrote.
The Nebraska distributor provided no evidence the untaxed cigarettes wouldnt 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.
Were keeping all our options open, HCI attorney Joseph Messineo said. They could appeal the ruling to New Yorks highest court.
The New York Department of Taxation & Finance declined to comment on Thursdays decision. The St. Regis Tribe didnt immediately reply to a request for comment.
Under state law, cigarettes can be sold to tribe members without the states tax, but should be taxed when sold to non-Indians.
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.