Gov. David Paterson is expected to sign bill on Monday that will require wholesalers to collect taxes on all tobacco and petroleum products before they are sold to businesses owned by American Indians, said state Sen. Michael Nozzolio.

"This bill will change the law to make it easier for the (state) tax department to collect taxes on products sold at Native American stores," Nozzolio said. "The only thing worse than taxes is taxes that are imposed unequally and unfairly."

After being passed by the state Assembly and Senate this past summer, the bill needs the governor's approval before it can take effect.

Under the current system, retailers are required to collect taxes when items are sold to a customer.

While American Indians are not required to collect taxes made on sales with other Indians, they are supposed to collect taxes on transactions with non-Indians.

The signing, which is scheduled to take place at 10 a.m. in Utica, comes a week after state Supreme Court Judge Kenneth Fisher rejected a lawsuit filed by the Cayuga Nation against the sheriffs and district attorneys offices in Cayuga and Seneca counties. The nation said law enforcement violated their sovereignty by raiding their Lake Side Trading stores in Union Springs and Seneca Falls for untaxed cigarettes on Nov. 25.

Several New York state tribes, including the Cayuga Nation, have said their sovereignty exempts them from collecting sales or excise taxes on products sold by their businesses.

Fisher ruled the stores are not on a recognized reservation and that even though the state refused to help with the investigation, local law enforcement officials could still conduct their own felony investigations.

Both district attorneys' offices are planning to go to a grand jury to seek felony tax evasion charges against the tribe and both stores were closed by the nation on Wednesday while the tribe appeals Fisher's decision.

Even though several state and federal Supreme Court decisions allow states to collect taxes on sales made between tribes and non-Native Americans, Nozzolio said former governors Eliot Spitzer and George Pataki failed to enforce the state's tax laws on the region's tribes.

"There have been several jobs driven out of the area as a result of the state's failure to enforce the tax laws equally on Native Americans and non-Native Americans," Nozzolio said. "This bill will allow the state to collect taxes on tobacco and petroleum before it gets delivered to Native Americans for sales."

While the bill will only affect tobacco and petroleum, Nozzolio said the state's tax department can inventory a business's records to collect sales tax.

"This will be a tax that's placed on Native Americans and non-Native Americans because everyone should be taxed equally and fairly," he said.