The fiercest fights of the years-long war over cigarette taxes happened this year when the federal and NY governments imposed stringent laws against tobacco businesses run by Indian nations.

In February, as New York state was dealing with an unprecedented $200 million budget deficit and facing pressure from anti-Indian state lawmakers, Gov. David Paterson, who had stated he respected Indian sovereignty, requested the state’s fiscal department to draft an amendment to current tax law to require the collection of excise taxes on cigarettes sold on Indian lands.

The introduced tax system was subject to public reading and was adopted June 21 by the Assembly vote of 77-64 and 32-30 vote in the Senate. The measure that was scheduled to enter into effect Sept. 1, demands that cigarettes selling across Indian lands to bear “a tax stamp” confirming that a $4.35 per pack state duty has been paid. The objective of the legislation is to collect state taxes on cigarettes sold to non-members of Indian nations in Indian smoke shops.

The legislation includes an onerous scheme by means of which Indian nations might choose between a coupon system to be subject for tax refund they have paid earlier on cigarettes purchased by members of the tribes, or an allocation system where wholesalers could tie up a the total allocation of cigarette shipments.

Gov. Paterson stated the law should be fair to all retailers across the state.

Yet, the new law resulted in to a bunch of lawsuits and from several Indian Nations, living across the state.

Currently, the Indian nations managed to get an injunction preventing the state from introducing the new tax law. In December, an Appeals Court ruled against the state motion to move the injunction on tax collections from cigarettes sold on Indian reservations whereas several lawsuits related to the new tax scheme are pending, and have already been consolidated in one case set to be considered by federal appeals court.

Whereas the nations might be able to beat New York State’s latest tax law, there is no chance to get around the most crushing blow to the hugely profitable Internet cigarette mail order Indian nations were running for many years.

The federal law called Prevent All Cigarette Trafficking (PACT) Act which had been considered by the lawmakers for over a decade was adopted by the Congress last March and signed by President Obama in April.

Under the PACT Act, the U.S. Postal Service is banned from mailing cigarettes and tobacco. This measure put an end to mail orders trade operated by many Indian smoke shops located on Nations lands.

The Seneca Nation, which had created that system and successfully run it during 20 years, has employed approximately 3,000 people – now mostly unemployed – and giving the state budget more than $1 billion during the past decade.

Sally Snow, ex-chairwoman of the Seneca Free Trade Association named the PACT Act as the economic genocide of Indian Nations and free business in the country.