Mailing Cigarettes - NY judge extends hold on mail-order cigarette law

BUFFALO, N.Y. (AP) – Seneca Indian Nation cigarette sellers remain free to fulfill orders by mail while a judge considers whether a law banning the practice is constitutional.

U.S. District Judge Richard Arcara on Wednesday extended until July 30 a temporary restraining order that allows 141 members of the Seneca Free Trade Association and another Seneca businessman to continue to operate without having to comply with the Prevent All Cigarette Trafficking – or PACT – Act.

The federal law that took effect June 29 bans using the U.S. Postal Service to ship cigarettes around the country and requires sellers to comply with states' and municipalities' varying taxing statutes.

The Senecas say the law unfairly targets them since member-owned businesses dominate the national mail-order industry. Between 100 to 200 Seneca businesses, from tiny two-person operations to large-scale enterprises, take orders online and by phone, shipping out truckloads of discount name-brand and Native American-brand cigarettes from the nation's western New York territories.

Authorities estimate that up to 80 percent of cigarettes sent through the mail originate from Seneca-owned businesses.

During a full day of arguments Wednesday, attorneys for those businesses outlined a multitude of provisions in the law they said were unconstitutional, including one which would subject sellers to three years in prison for selling cigarettes without complying with all federal, state and local taxing requirements in the buyer's locale.

Seneca members claim that as a sovereign nation, they are not required to collect state sales and excise taxes. They say the purchaser is responsible for paying any taxes owed to the state.

“Potentially 6,000 sets of laws could apply to one remote seller, thousands of undefined laws which are virtually impossible to understand let alone comply with,” said Howard Radzely, attorney for the Seneca Free Trade Association, who called the provision overly vague.

“Don't sell into that state if you can't figure out the laws of that state,” responded Justice Department attorney Gerald Kell. He said Congress passed the measure after finding that states were losing billions of dollars in tax revenues to so-called remote sellers and that taxpaying businesses were unfairly disadvantaged.

The law was supported by the tobacco industry, non-Indian retailers and an array of health organizations.

“Congress has put the delivery sellers on the same footing as all the other sellers,” Kell said.

But coming after private carriers FedEx and UPS voluntarily stopped shipping cigarettes under an agreement with New York's attorney general, Radzely said it's clear the statute, which takes away the only remaining shipping option in the state, was aimed at Seneca sellers.

“Much of this statute is a facade to shut down legitimate businesses,” Radzely said. He suggested Philip Morris supported the law because it was losing market share to cheaper Native brands.

Philip Morris has said the tobacco giant's support for the law was based on efforts to see that its products are sold through face-to-face retail transactions, where sales taxes are collected and the buyer's age is verified.

Arcara said he would decide by July 30 whether to grant the Seneca businesses' request to stop the government from enforcing the law as long as their legal challenge is ongoing.