The bill passed both the State Senate and Assembly by overwhelming margins but would have driven an unnecessary divide between the state and its Indian tribes, the governor's veto message stated.
The bill, which would have taken effect on January 1, 2005, would have required Native American retailers to obtain cigarettes and other goods, like gasoline, from licensed New York State wholesalers, thereby requiring them to pay the same tax as their neighboring convenience stores and gas stations. The bill would have required that goods be taxed before being distributed to reservation stores.
Also included in the bill was a provision to provide tribal governments with coupons to distribute to Native Americans so they could continue to purchase cigarettes and other goods on a tax-free basis.
"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," Mr. Pataki wrote. "Now more than ever, I am convinced that a positive outcome to the sales tax collection issue and other issues of mutual importance will only be achieved through cooperation, not confrontation."
Representatives from Long Island's two Indian tribes on Tuesday said they were pleased with the governor's decision.
"It was a reasonable action by the governor in light of the fact that various nations have been in negotiation with the governor's office," said Unkechaug Tribal Chief Harry Wallace, who runs a smoke shop on reservation land in Mastic.
Mr. Wallace said Mr. Pataki's veto allowed the situation to be settled without a "confrontational situation." "That's what he said, and that is what we have tried to pursue, and what we will continue to pursue," Mr. Wallace said.
Beverly Jensen, communications director for the Shinnecock Indian Nation, called the news on Monday "wonderful" but declined to comment further.
State Assemblyman Fred W. Thiele Jr. on Tuesday said he was one of eight in the Assembly to vote "no" on the bill, which was approved 139-8 in the Assembly and 56-1 in the Senate.
"I think that the logistics of trying to collect this tax are impossible," Mr. Thiele said, adding that similar legislation had been extremely contentious in the past, even causing violence in some parts of upstate New York. "It's very hard to enter into the reservations, where they have their own sovereignty, and administer a state tax. The majority [of legislators] have gone the other way with it, because of budget difficulties. They look for revenue under any rock they can."
Mr. Thiele said he has found no problems with the current situation, specifically with regard to the Shinnecock Nation in Southampton.
"I haven't gotten any complaints about the status quo," the assemblyman said. "It's been a source of revenue, and a source of economic development for the Shinnecocks. I see no reason to disrupt that."
There is still a possibility for an override to the veto, but Mr. Thiele said that would require the Republican-controlled Senate to vote against the decision from Mr. Pataki, also a Republican.
"I'm not saying an override attempt couldn't occur, but it might be more difficult than the numbers would indicate," Mr. Thiele said.
Carissa Pleiss contributed to this story.