Eric Proshansky, Deputy Chief, Division of Affirmative Litigation, NYC Law Dept

1. Eric Proshansky, Deputy Chief, Division of Affirmative Litigation, NYC Law Dept

2. State-Sponsored Cigarette Bootlegging Cigarette Bootlegging Is Enabled By Unlimited Wholesale Supplies of Unstamped Cigarettes To New York Reservations

3. Wash. v. Confed. Tribes of Colville Indian Res., 447 U.S. 134, 155 (1980) • It is painfully apparent that the value marketed by … smokeshops to persons coming from outside is not generated on the reservations by activities in which the Tribes have a significant interest. … • What … smokeshops offer these customers … is solely an exemption from state taxation. … • We do not believe that principles of federal Indian law, whether stated in terms of pre-emption, tribal self-government, or otherwise, authorize Indian tribes thus to market an exemption from state taxation to persons who would normally do their business elsewhere.

4. New York City Litigation City of New York -v.- Smokes-Spirits.Com, Inc., 541 F.3d 425 (2d Cir. 2008) • Internet cigarette sales combined with non-filing of Jenkins Act reports constitute federal mail and wire fraud City of New York - -v.- Milhelm Attea & Bros., Inc., Day Wholesale, Inc., Gutlove & Shirvint, Inc., Mauro Pennisi, Inc., Jacob Kern & Sons, Inc., Windward Tobacco, Inc., and Capital Candy Company, Inc., 550 F. Supp. 2d 332 (E.D.N.Y. 2008) • Sales of unstamped cigarettes by state-licensed wholesalers can violate the federal Contraband Cigarette Trafficking Act City of New York v. Golden Feather Cigarette Express, Inc. et al. 08 cv 3966 • Motion to Enjoin sales of unstamped cigarettes by Native American cigarette sellers on the Poospatuck Reservation

5. City v. Milhelm Attea, 550 F. Supp. 2d 332 (E.D.N.Y. 2008) • “The CCTA makes it ‘unlawful for any person knowingly to ship, transport, receive, possess, sell, distribute, or purchase contraband cigarettes’ 18 U.S.C. § 2342(a).” • “Contraband cigarettes are defined as ‘a quantity in excess of 10,000 cigarettes, which bear no evidence of the payment of applicable State or local cigarette taxes in the State or locality where such cigarettes are found ….’8 U.S.C. § 2341(2)”. • “A violation of a state or local cigarette tax law, therefore, is a predicate to a CCTA violation; the state or local government must "require" a stamp to be placed on cigarette packages as evidence of payment of an applicable tax.” • “The clear language of [N.Y. Tax L.] § 471(1) imposes a ‘tax on all cigarettes possessed in the state’ except those cigarettes the state lacks the power to tax. Section 471(2) goes on to require that stamping agents ‘purchase stamps and affix such stamps in the matter prescribed to packages of cigarettes to be sold within the state.’ ” • “The plain, mandatory phrasing of the statute sets forth a requirement that stamping agents affix tax stamps to all cigarettes the state has the power to tax, which includes those sold by reservation retailers for re-sale to the public.” • “Whether the [NYS] Department [of Taxation and Finance] chooses to enforce it in a particular instance does not nullify the statute's requirements.”

6. Annual Purchases By Seneca Retailers

7. Seneca Reservation Deliveries By One Wholesaler

8. Seneca Reservation Deliveries By A Second Wholesaler

9. One of Two Wholesaler’s Deliveries to the Poospatuck Reservation

10. Second of Two Wholesaler’s Deliveries to the Poospatuck Reservation

11. Peaches Smoke Shop -- Poospatuck Reservation14,370 cartons Jan-June ‘08

12. Peaches Smoke Shop -- Poospatuck Reservation13,360 cartonsJan-June ‘08

15. “I sell about 1200 cartons a day”“This is my job”

16. Residence of Arrestees Near the Poospatuck Reservation

17. State of Residence of Customers of an Internet Cigarette Seller

18. “We will not report taxable information to any source”

19. In 2007, Defendant businesses purchased enough cigarettes to supply every man, woman and child on the Poospatuck reservation with 960 packs per day. Since 2004, cigarette sales by Poospatuck sellers alone amount to $360,000,000 in lost State taxes and up to an additional $360,000,000 in lost City taxes.