The owner of a First Nations smoke shop in Manitoba, along with an employee, face more than $2 million in fines and penalties after nearly a million untaxed cigarettes were seized two years ago.

Craig Blacksmith, who owned the smoke shop at the Dakota Plains First Nation, and employee Tammy Walters were convicted on Thursday of numerous offences under the provincial Tobacco Tax Act and Tax Administration and Miscellaneous Taxes Act.

Both were accused of possessing and selling non-Manitoba marked cigarettes and snuff at the shop, located southwest of Portage la Prairie, Man.

Blacksmith was fined $8,500 and was assessed tax penalties totalling $1.2 million, while Walters received $6,500 in fines and $868,000 in tax penalties.

They have 10 years to pay off the fines and penalties, which total $2.04 million, the province said in a news release Friday.

It's not the first time Blacksmith has defied provincial authorities on the issue of tobacco sales.

In 2012, he was involved in the case of the Dakota Chundee Smoke Shop in southwestern Manitoba. A number of people were charged for selling untaxed cigarettes without a licence.

The Dakota Chundee shop, which was run by eight First Nations on off-reserve land near Pipestone, Man., had been raided numerous times by authorities from the time it opened in 2011.

Blacksmith has said the First Nations smoke shops are not beholden to provincial law and therefore have the right to sell tobacco from Quebec for half the price of a legal carton in Manitoba.

Project Debit

In the latest case, Blacksmith and Walters were charged in connection with Project Debit, a joint police and Manitoba Finance investigation of contraband tobacco sales.

The RCMP, working with the Dakota Ojibway Police Service, seized 951,225 non-Manitoba marked cigarettes, 1,845 tins of chewing tobacco, six firearms, some cash and one vehicle from the shop and a locker rented by Blacksmith in January 2014.

By law, all cigarettes and tobacco must have Health Canada warnings on them, as well as a stamp indicating that required taxes and duties have been paid. As well, cigarette packages in Manitoba must show a stamp indicating that taxes have been paid to the Manitoba government.

"Millions of dollars that could fund social programs, education, employment programs and health care are lost when tax revenue to federal and provincial governments is not paid," the province said in a news release.