Opinion ID: 8407619
Heading Depth: 3
Heading Rank: 2

Heading: The District Court’s Rejection of the Justifications Offered in Support of the Statute

Text: Having found that the Statute discriminates against interstate commerce, the court then sought to determine whether the State had satisfied its burden of “ ‘justify[ing] it both in terms of the local benefits flowing from the statute and the unavailability of nondiscriminatory alternatives adequate to preserve the local interests at stake.’” Id. at  (quoting Hughes v. Oklahoma, 441 U.S. 322, 336, 99 S.Ct. 1727, 60 L.Ed.2d 250 (1979)). The State asserted two local benefits in its effort to survive strict scrutiny: (1) the prevention of cigarette sales to minors, and (2) the prevention of untaxed cigarette sales. Id. at .
The State argued to the district court that the Statute would reduce cigarette sales to minors because it requires face-to-face transactions in which sellers can verify the purchaser’s age. The court rejected this assertion, finding that the State ■ did not demonstrate “(1) that minors use direct sales channels to a significant degree to acquire cigarettes and, thus, that any material benefit will accrue, from the statute; or (2) that the State has no less discriminatory means available to reduce smoking among minors.” Id. at . In concluding that the Statute would not meaningfully address the problem of underage smoking, the court emphasized “loopholes” in the Statute that it found “fatal to its effectiveness.” Id. at . The court identified these loopholes as: (1) the four-carton delivery exception; (2) sales made by Indian nations; and (3) shipments made by the United States Postal Service. As noted above, the district court interpreted the delivery exemption to permit local businesses to deliver cigarettes to New York consumers while prohibiting out-of-state- sellers from doing the same. The district court construed this -to be a loophole because, under its interpretation of the exemption’s language and effect, minors still would be able to purchase cigarettes for home delivery- — and avoid the age verification of a face-to-face transaction — by ordering cigarettes-from local brick-and-mortar vendors, utilizing their own delivery services. As to sales by Indian nations, the court stated that they represent a “de facto exemption” because “Indians living on-reservation are not subject to New York excise or sales taxes, and New York does not require retailers on Indian reservations to collect and remit to the State excise and sales taxes owed by such retailers’' non-Indian customers.” Id. at . As a result, the court was “persuaded that no enforcement efforts under [the Statute] will be directed to direct sellers on Indian reservations.” Id. at . With respect to cigarette shipments by the United States Postal Service, the court observed' that “the Postal Service, not the states, has exclusive authority to designate what can and cannot be sent through the mails.” Id. at . The court was therefore similarly “persuaded that the Postal Service will not and cannot assist in enforcement of [the Statute].” Id. n. 17. The district court concluded that, absent the ability to restrict deliveries by the Postal Service, the Statute would be ineffective in preventing deliveries of cigarettes to minors. Id. These loopholes, coupled with the court’s finding that the State failed to show that minors purchased cigarettes to any significant degree by direct shipment, led the court to conclude that the Statute was not sufficiently tailored to achieve the goal of reducing direct cigarette sales to minors. Id. at . The court also concluded that the State had not demonstrated that less discriminatory means were unavailable because “there [was] no evidence in the record that New York has developed or tried any alternative less discriminatory means of preventing minors from obtaining cigarettes through direct sales channels rather than completely banning these sales.” Id. at .
The State also argued to the district court that one of the Statute’s purposes is to require purchasers, by virtue of the face-to-face transaction, to pay the state excise tax. The State claims that the high excise tax decreases demand for cigarettes and thereby protects the health of New York consumers. The district court credited the State’s argument, finding that the evidence “demonstrated that an increase in the price of cigarettes will lead to a decrease in the demand for cigarettes.” Id. at . The court concluded, however, that the State failed to show that the Statute would advance this “worthy goal” or that no less discriminatory means were available. Id. at . Citing the loopholes discussed above, the court concluded that the State did not satisfy its “burden of demonstrating that [the Statute] will effect the benefit of reducing smoking through the maintenance of high cigarette prices” because “Indian retailers can and will continue to sell cigarettes by direct sales to New York consumers,” and because the Statute “cannot be enforced against the U.S. Postal Service.” Id. at . The court also found that the Statute failed strict scrutiny because the State did not demonstrate a lack of less discriminatory means for collecting the cigarette excise tax. Id. The court explained that the New York State Department of Taxation and Finance “has chosen not to make any effort to collect taxes on cigarettes sold from out-of-state to New York consumers by telephone, mail and Internet.” Id. As an example of available alternative means for collecting cigarette excise taxes, the court described the scheme adopted in California for the collection of taxes and concluded that “[t]he evidence shows that there are other nondiscriminatory alternatives to a complete ban on the direct sale of cigarettes.” Id. at . The court then declared that the Statute fails strict scrutiny and permanently enjoined its enforcement. Id.