Millions of cigarettes are sold every year in New York State.

But when it comes to those sold on Native American reservations, the state says they're losing billions in tax revenue.

That's according to a unanimous judgment handed down by the state's court of appeals Thursday.

It says that it is legal for the state to tax cigarettes sold to non-Native Americans on statewide reservations.

According to a treaty and a statute with the Seneca Nation, the state is supposed to be prohibited from taxing "Indian reservation activities."

But the court made its decision based on a revised version of state law 471, which now allows for that type of taxation.

The judges in the case say Seneca Nation business owners will now have to purchase pre-taxed cigarettes in bulk to be sold to any non-Native American who comes to purchase them on the reservation.

They claim the pre-tax is not actually a tax—but a fee—that can be rolled into the final price of the cigarettes, thus putting the tax-burden on the non-Native American customer.

Lawyers for the Seneca Nation say they are going to ask Supreme Court to take this case and review it.