After doing some research, I discovered that in 05 the feds sent a letter to all FFL's in NYS stating that a valid pistol permit could no longer be used as an alternative to a NICS check.
That's happened a few times. In Georgia, there was a stretch of two years (IIRC), during which their permits did not qualify as a NICS exemption.
NICS is, and always has been, a Federal program. Your CCW is issued by the state. Most states do run a NICS check for priors while processing applications, which is the only overlap.
Without the exemption (which NY doesn't have), all dealers have to run background checks through NICS before transferring a gun. Federal encroachment on state commerce? Sure.
But we're stuck with it.