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— A court order hasn't stopped a brisk business in tax-free cigarettes on a New York Indian reservation.
Customers looking for cheap smokes filled the narrow lanes of the Poospatuck Reservation on Long Island Friday, even as an injunction took effect shutting down some of the tribe's biggest smoke shops.
There are about 14 cigarette stores on the small reservation. A federal court order took effect Friday barring at least five shops from selling tax-free cigarettes to anyone who isn't a member of the tribe.
Those stores, which collectively sell millions of cartons annually to people looking to evade the nation's highest cigarette taxes in nearby New York City, appeared to have closed.
At one, the Peace Pipe smoke shop, a woman stood at the door turning away a steady stream of would-be customers.
The court injunction, however, was limited. It only applied to one group of shops that New York City sued.
Other smoke shops not included in the lawsuit weren't covered by the order and were still in business. Flaggers directed a steady stream of customers into their parking lots on Friday.
Employees at several shops refused to speak with The Associated Press and referred questions to Harry Wallace, the chief of the Unkechaug tribe.
Wallace, who has, for years, argued that the state can't force sovereign tribes to collect state taxes in their territory, said he is confident the injunction will eventually be lifted.
"We will win," he said, adding that the tribe was "in compliance with the court order."
New York Mayor Michael Bloomberg sued eight shops on the reservation last year, saying their tax-free sales were illegally cheating the state and city out of hundreds of millions of dollars in revenue.
Cigarette prices vary by brand and vendor in the city, but a carton of Marlboros, which includes 10 packs, costs around $95. That includes a state tax of $2.75 per pack and the city's tax of $1.50 per pack.
On the reservation, cigarettes often are priced at half what they would be in the city, or less.
There is a state law on the books requiring shops on tribal land to collect taxes on sales to non-Indians, but it has never been enforced. State courts have been unable to decide conclusively whether the shops can legally sell cigarettes without collecting taxes.
However, the federal judge hearing the city's case ruled last month that reservation smoke shops have no legal right to sell untaxed cigarettes to the general public. She gave them 30 days to cease such sales under the order that took effect Friday.
A few shops originally sued by the city have dropped out of the case and closed their doors. The rest have continued to fight and recently appealed the decision to the 2nd U.S. Circuit Court of Appeals.
The court refused two requests to issue an emergency stay of the injunction this week, but has scheduled further hearings for early October and could still allow the shops to reopen while the case continues.
Federal judges have held, in a pair of cases, that many of the shops' customers are smugglers who illegally take big loads of untaxed cigarettes off the reservation and resell them elsewhere at a huge profit.
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Associated Press Writer David B. Caruso contributed to this report from New York.
