New York Wins Round in Fight Against Indian Tobacco Vendors

A federal judge ruled on Tuesday that a group of tobacco vendors on an Indian reservation on Long Island cannot sell tax-free cigarettes to the general public until a court rules in a closely watched legal battle between the reservation and New York City.

A temporary injunction issued by Judge Carol B. Amon of Federal District Court in Brooklyn gave the city at least a temporary victory in its efforts to collect hundreds of millions of dollars in tax revenue.

“The city will go after every dollar that is owed to city taxpayers,” Mayor Michael R. Bloomberg said in a statement on Wednesday. Under Judge Amon’s ruling, a group of cigarette businesses on the Poospatuck Indian Reservation near Mastic can sell tax-free cigarettes only to tribe members, for personal use, until a verdict is reached in a federal lawsuit the city filed in September.

The judge stayed the ruling for 30 days to give the vendors time to appeal.

“The judge’s ruling is completely wrong,” said Harry Wallace, a lawyer and the chief of the Unkechaug Indian Nation, which is on the Poospatuck reservation, adding that it ignored the Indian nation’s sovereignty.

The city says the reservation businesses are illegally selling large amounts of cheap cigarettes to people outside of the tribes, including bootleggers who bring cartons upon cartons into the city for resale. City officials estimated that the sales deprived the city of $420 million from 2004 to 2008.

The loss of tax income to tribal tobacco businesses has taken on greater urgency for many officials amid state and municipal budget cuts. A state court ruled in July that the Cayuga Indian Nation could not be prosecuted for failing to collect cigarette taxes, and the application of that decision is at issue in Mr. Bloomberg’s federal suit, which could have nationwide implications.