New York City is suing the state over its failure to enforce cigarette taxation laws that Mayor Michael Bloomberg said has cost the city $195 million a year in tax revenue and the state $525 million, the New York Times reported Sept. 30.

Residents of Indian reservations are entitled to buy cigarettes tax free for their own use, according to state law. However, Bloomberg said bootleggers have abused the law for years by buying cigarettes in bulk on reservations and selling them in the city.

The lawsuit focuses on eight stores on a reservation on Long Island. "I think the governor should go to the reservations and say, 'As of tomorrow morning, stop this practice (of selling bulk cigarettes),'" Bloomberg said. "And if it requires law enforcement, that's what the governor has the State Police for -- to enforce the law."

The lawsuit is part of the city's effort to cut $500 million from this year's budget, Bloomberg added. "This one step alone could go a long ways in closing our budget gap," he said of cracking down on bootleggers.

Errol Cockfield, a spokesman for New York Gov. David Patterson said the governor was negotiating with the state's Indian nations "to preclude the need for more endless litigation."