Home-grown solution to tax problem

IRVING — JC Seneca watched as one of his workers poured finely chopped tobacco into a machine that feeds the tobacco into Senecacigarette papers, rolls the papers and makes 2,300 cigarettes a minute.

“These machines cost me millions of dollars,” Seneca said, “but they’re worth it.”

Seneca, 51, is one of a growing number of Native American business people throughout the state who believe making their own bargain-priced cigarettes is the key to their business survival, now that a federal court said the state can collect taxes on Big Tobacco cigarettes that Indians sell to non-Indians. A state justice in Buffalo has issued an order that prevents collections until at least June 1.

The state has never tried to tax cigarettes that Native American businesses manufactured on Indian land, Seneca and many other Indian business owners say, and they are convinced the state never will try to do so.

“Right now, I’d say 70 to 75 percent of the cigarettes I sell in my smoke shop are native-made,” Seneca said. “That number keeps going up. More and more people are taking advantage of the bargain. This is the wave of the future for us.”

Seneca, an Air Force veteran who sits on his nation’s Tribal Council, is one of several cigarette manufacturers in the Seneca Nation of Indians.

Joseph “Smokin’ Joe” Anderson, a Tuscarora Indian entrepreneur, has made his own brands of cigarettes in Niagara County since 1994. The Oneida Indian Nation and several other tribes in the state also make their own cigarettes.

At his smoke shop on Route 20, Seneca charges about $2 a pack for his Buffalo, Gator or Senate brand cigarettes, and customers buy them by the ten-pack carton.

By comparison, Marlboros — a popular name brand — sell for about $5.30 a pack in the same store. In non-Indian stores that are required to charge state taxes, Marlboros often sell for more than $9 a pack.

Will the state try to collect taxes on Indian-made cigarettes?

Contacted repeatedly by The Buffalo News in the past week, State Attorney General Eric T. Schneiderman declined to comment.

But James S. Calvin, president of the state association of convenience stores, said the state should pursue taxation of Indian-made cigarettes.

“It’s a matter of opinion, and eventually we believe it will come to the courts,” Calvin said. “As far as we’re concerned, any cigarettes sold by Indians to non-Indians are taxable.”

The state has been trying for years to collect taxes on cigarettes that are not Indian-made but are sold by Indian retailers to non-Indian smokers.

A federal appeals court last week cleared the way for the state to collect those taxes,For the relatively few Indians who can afford to start their own factories, making and selling cigarettes can be a big business.

While Seneca did not say how much money he makes selling his brands, he and his plant manager, Mark Corrao, said the small plant behind Seneca’s Native Pride smoke shop each week makes about 6.25 million cigarettes — they’re “sticks” in the tobacco trade.

That’s more than 15.6 million packs of cigarettes a year, which, at $2 a pack, comes out to annual gross revenues of more than $31 million for Seneca’s company.

In addition to selling at the three retail smoke shops he runs, Seneca said, his company, Six Nations Manufacturing, ships cigarettes to other cities and states. He said his factory is licensed by the federal government, through the Tobacco & Trade Bureau, which is part of the Treasury Department.

“My plant is subject to inspection by the federal government, and I pay federal taxes on my cigarettes — more than $11 a carton,” Seneca said. “I could probably operate as a renegade, without a federal license, but the federal government could shut me down if they found out. I have big aspirations of selling my brands all over the world.”

Why does Seneca pay federal taxes on his cigarettes while vehemently fighting state taxation?

“I’m licensed and regulated by the federal government …I don’t want them to indict me, or come in and shut down my factory,” Seneca said. “Also, as a Seneca, I look at the federal government as our treaty partner. I look to the federal government to defend us against other sovereigns, including New York State.”

Ten people work at Seneca’s cigarette-making plant, and they are paid salaries that range from $9 to $15 an hour, Corrao said.

Calvin, from the convenience store group, said his organization is not trying to put Indian entrepreneurs like Seneca out of business.

“We’re just trying to make them compete on an even playing field, with everyone paying the same taxes,” Calvin said.

Seneca said he is proud of the fact that his cigarettes are American-made, produced with tobacco grown in Virginia and the Carolinas. The processed tobacco arrives in 220-pound boxes. Seneca said some of the nation’s major cigarette companies make their cigarettes outside the country with foreign workers and foreign-grown tobacco.

Seneca’s late father, William Seneca, was a Seneca Nation president, and his late mother, June Seneca, was a former clerk for the Seneca Nation.

JC Seneca served four years in the Air Force and worked as a disc jockey for a classic rock radio station before getting into the cigarette business around 1990. He is now one of the Senecas’ most outspoken leaders and prominent cigarette makers, retailers and wholesalers.

His growing business empire also includes gasoline stations, a gasoline-hauling operation, a health club and restaurants. He promotes mixed-martial-arts fights. His businesses have about 100 employees in all.

Noting that his father was a longtime heavy smoker who suffered from health problems as a result, Seneca said he does not smoke and does not encourage anyone else to smoke.

Tobacco use kills more than 25,000 New Yorkers a year, according to the American Cancer Society. Anti-smoking groups advocate for higher taxes on cigarettes, saying the availability of cheaper, untaxed cigarettes at Indian-run stores helps to increase the number of people afflicted with lung cancer.

“I don’t advocate smoking, but it’s a legal product in this country,” Seneca said. “I tell friends of mine, ‘Don’t smoke, and if you don’t smoke now, don’t start. But if you do smoke, I have a great line of products.'”

By Dan Herbeck
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