The Oneida Indian Nation’s Sav-On gas stations are about to begin selling cigarettes manufactured by the nation itself, the Syracuse, N.Y. Post-Standard reported.
The Oneida Indian Nation sells $34 million in untaxed cigarettes each year. In Oct. 2008, it purchased a cigarette manufacturing plant in Erie County for $6.6 million, two months after the state Legislature passed a law to collect taxes on cigarettes sold by Indian tribes.
Under the law cigarette manufacturers have to ensure wholesalers who buy from them pay the $27.50-per-carton excise tax before selling the cigarettes to retailers, including Indian tribes.
Indian tribes don’t follow state laws and have refused to collect sales and excise taxes for the state on cigarettes they sell, despite a U.S. Supreme Court ruling in 1994 that gives the state the right to collect those taxes, the Post-Standard reported.
By producing their own cigarettes, tribes eliminate the wholesalers who are licensed by the state.
The trend of making cigarettes to prevent the state from collecting taxes through a wholesaler is a current trend among Indian tribes. “I suspect that they are making the decision that this will protect their supply of cigarettes when and if the state of New York begins to enforce the tax collection law,” said Jim Calvin, executive director of the New York Association of Convenience Stores.
Bob Hilburger, who runs the nation subsidiary that bought the plant, said the tribe is looking to diversify. “The Oneidas from time to time would look to grow beyond the gaming business, and they use me to help them,” said Hilburger, who has helped the nation set up a textile plant and buy two gas stations in Chittenango.
Nation outlets sell cigarettes at prices from $30 a carton for their own brands to $57 per carton for national brands.
The cigarette plant employs about 28 people, and there are plans to add another 20 next year. The plant produces two brands, Niagara’s and Bishop, which are distributed to about 60 Native American outlets from Oneida County to Western New York. At SavOn stores, the two brands are promoted with bright yellow signs that read “Lowest Price.”
“There’s a concerted effort by the tribes to flip Marlboro and Newport and Camel customers who are coming into their stores to native-made brands of cigarettes,” Calvin said.
