Gov. George Pataki yesterday vetoed a bill that would have taxed cigarettes and gasoline sold to non-Indians from reservations around the state, saying the measure went against his policy of negotiating voluntary solutions with tribes.

"Rather than taking actions that will undoubtedly be viewed as an assault on tribal sovereignty, it has been the policy of my administration to negotiate in good faith," Pataki wrote in his veto message.

The news was greeted warmly by Long Island's two state-recognized Indian tribes.

"That's wonderful," said Beverly Jensen, communications director for the Shinnecock Nation in Southampton town. "It's just great and it will help Native American businesses a great deal."

Unkechaug chief Harry Wallace, who owns a smoke shop on the tribe's Mastic reservation, praised the governor's decision. "I think it's a reasonable response in view of the fact that the various nations have been in ongoing discussions with the governor's office," he said, adding that the tribe has been negotiating a solution with the state for months.

The state has not historically collected taxes from tribes because they are considered sovereign nations, allowing Indian-owned smoke shops to sell cigarettes at rates far lower than non-Indian competitors.

One of the options being considered would slightly raise their cigarette rates, bringing them closer but not level with the prices offered by neighboring convenience stores.

Supporters of the bill argued that by not collecting taxes, the state was missing out on about $1 billion a year. The state Department of Taxation and Finance has said the number is far lower, with about $60 million going uncollected. The bill would have taxed cigarette distributors before the goods were shipped to the reservation stores.

"Once again, the governor is turning his back on this issue, which is a very valid issue," said Assemb. Bill Magee (D-Nelson), the bill's sponsor, who said he would seek to override the veto. In June, the measure passed in the Assembly 139-8 and in the Senate 56-1. A two-thirds majority in both houses would be needed to override.

John McArdle, a spokesman for Senate Majority Leader Joseph Bruno (R-Brunswick), said Bruno will meet with senators on Thursday to decide whether to attempt an override.

This is not the legislature's first attempt to force the governor to collect taxes from Indian tribes. Last year, it instructed Pataki to begin collecting taxes on Dec. 1, but in January Pataki ordered the Department of Taxation and Finance to delay the collection, in order to give him more time to negotiate.

The Associated Press contributed to this story.

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