A federal appeals court upheld a ban on the mailing of cigarettes by Seneca Nation businesses Tuesday but left intact an injunction against the collection of taxes on those cigarettes.
The court, in siding with U.S. District Judge Richard J. Arcara, upheld most of a sweeping new federal law prohibiting the U.S. Postal Service from delivering commercial cigarette shipments.
The one aspect of the law, known as the Prevent All Cigarette Trafficking Act, or PACT Act, that the appeals court rejected, at least for now, is the requirement that companies that engage in out-of-state tobacco sales pay sales taxes on those products.
“This is a positive decision,” Seneca President Robert Odawi Porter said in a statement. “While restrictions on mailing remain in place, the method currently used by Seneca Nation merchants to send product — private shippers other than the major delivery companies — is back open.”
A year ago, Seneca officials decried the law and suggested that it would cripple their mail-order operations and result in hundreds of lost jobs.
One of the exceptions to that doom-and-gloom scenario was the Seneca Smokeshop and owner Aaron J. Pierce, who has been able to find new ways of distributing his tax-free cigarettes.
“He’s still shipping to customers out of state through means other than the U.S. Postal Service,” said Lisa A. Coppola, a lawyer for the company.
Coppola said Pierce, the lead plaintiff, is more concerned about the collection of taxes than the loss of mail service.
Signed into law by President Obama last year, the PACT Act is designed to end a practice that cost governments billions of dollars a year in lost taxes. It also is intended to prevent underage smokers from obtaining cigarettes through the mail.
“We’re happy,” said Michael Seilback, vice president of public policy for the American Lung Association in New York State. “The fact that the law will prevent the shipping of these products through the mail is certainly a win for public health.”
The PACT Act is viewed by both critics and supporters as landmark legislation with billions of dollars in tax revenue and thousands of jobs at stake.
Shortly after the law took effect, Seneca business owners challenged it in federal court, contending that it was unconstitutional and discriminatory.
In July of last year, Arcara upheld the federal government’s right to ban the mailing of cigarettes by Seneca Nation businesses but rejected for the time being the collection of taxes on those cigarettes.
The law also requires cigarette businesses to register with the state where they are headquartered and make periodic reports to state tax departments. It also requires that they check the age and identification of customers who buy tobacco products.
The judge ruled that the collection of taxes may violate the Senecas’ right to due process, or the principle that government must respect the legal rights of individuals.
It is not yet clear whether either side will challenge the U.S. Court of Appeals decision. They have 90 days to appeal to the U.S. Supreme Court.
U.S. Attorney William J. Hochul Jr. had no immediate comment on the ruling.
By Phil Fairbanks