OK Smoke Wholesalers Unhappy With New Rules

Say plan would shift enforcement responsibilities to them

OKLAHOMA CITY -- Wholesalers in Oklahoma last week protested proposed emergency rules that they say would shift the state's problem of collecting cigarette taxes from tribal smoke shops to them, reported the Tulsa World.

It appears the Tax Commission is transferring their enforcement responsibilities to the business community by requiring vast amounts of paperwork and endless red tape, Paula Glidewell, president of the Oklahoma Wholesale Marketers Association, told the newspaper.

Proposed rules unveiled by the Oklahoma Tax Commission [image-nocss] would require tobacco wholesalers to limit their sales of cigarettes bearing cheaper six-cent border stamps to tribal smoke shops, based on 2004 sales, plus 10%.

The commission was to consider adoption of those rules again January 3.

Tony Mastin, director of tax policy for the commission, said he does not understand why wholesalers think the new rules would burden them with more paperwork. The wholesalers already are required to provide the commission with information about how many stamps they sell to each tribal shop.

The proposed rules indicate that if a wholesaler wants to start selling to a new customer, the wholesaler would be required to get the written consent of the tribal shop operator before information about sales in 2004 could be released by the Tax Commission.

Currently, smoke shops near the border are allowed through compacts signed with the governor to sell cigarettes with only six-cent tax stamps in an effort to level competition with out-of-state vendors, said the report; however, surveys by the Tulsa World show that most smoke shops in the Tulsa area have been selling cigarettes with the cheap stamps. The Cherokees and Osages should be selling packs of cigarettes bearing 86-cent stamps, the paper said, citing state officials.

Tribal leaders said that when they signed compacts with the governor, they were paying only a fourth as much as nontribal convenience stores paid in sales tax on tobacco products. Now that those taxes are being considered as excise, rather than sales tax, the state said they owe more.

Glidewell said that the state needs to eliminate the six-cent stamp altogether, along with five other tribal stamp rates, and require wholesalers to stamp every pack of cigarettes sold in Oklahoma with the regular $1.03 tax stamp. Nontribal c-stores are required to sell cigarettes with that single tax rate.

The controversy over what rate is fair has caused rampant escalation in contraband and black market trade, Glidewell said. The Tax Commission could audit the sales from tribal shops and rebate what is due, she said. This will ensure the tribes receive their earnings, increase the revenues to the state and stop corruption, she said.

State Treasurer Scott Meacham, chief negotiator on the tribal compacts, said the state had included the six-cent rate for border stores because there was a problem of cigarettes being sold without any Oklahoma tax stamp.

Meacham said the sale of cigarettes with no tax stamps is still occurring, but he does not think to such a large extent, the report said.

Click here to view the Oklahoma Tax Commission's Proposed Emergency Rule: Chapter 70 Tobacco & Tobacco Products.