VERONA, N.Y. (AP) – The Oneida Indian Nation has bought a cigarette manufacturing plant in western New York and plans to make its own cigarettes.
The tribe has agreed to purchase Sovereign Tobacco in Angola for $6.6 million, according to sales documents filed with the federal government. The transaction is expected to be completed by October 2010, Bob Hilburger, a business development director for the nation, said Thursday.
The nation already runs the Turning Stone Resort & Casino, a dozen SavOn gas station-convenience stores, a gaming software company and five golf courses. It sells about $34 million of untaxed cigarettes a year at its stores.
Sovereign Tobacco produces Niagara and Bishop discount cigarette brands that sell for $30 a carton, about half the cost of taxed, name-brand cigarettes sold in non-Indian outlets.
The Erie County cigarette plant employs about 28 people and sold 1.4 million cartons of cigarettes last year, distributing mostly to about 60 Native American outlets in upstate New York. Hilburger said the plant expects to add another 20 workers as it expands during the next year.
The Oneidas are following a trend of Indian tribes making their own cigarettes to prevent the state from collecting taxes on the middlemen, said Jim Calvin, executive director of the New York Association of Convenience Stores.
The nation agreed to buy the cigarette plant last year, two months after the state Legislature passed a law requiring cigarette manufacturers to make sure that wholesalers that buy from them pay the $27.50-per-carton state excise tax before selling the cigarettes to retailers, including Indian tribes.
Tribes in New York have long claimed sovereignty from state and local laws, and they 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 states have the right to collect those taxes. Successive governors in New York have all declined to enforce the tax laws.