Oklahoma Governor Takes On Tribal Tobacco Taxes

Pushes for a new rate that would reduce competitive price advantage

Melissa Vonder Haar, Freelance Writer

OKLAHOMA CITY -- While tribal tobacco stores have long enjoyed a competitive advantage on traditional tobacco retailers, Oklahoma is looking to level the playing field with new tobacco compacts. Although American Indian Tribes are considered sovereign nations and therefore cannot be taxed, they make payments to the state through wholesalers in lieu of taxes. Oklahoma Governor Mary Fallin's staff has been negotiating with most of Oklahoma's federally recognized tribes over the past months in an effort to set all tribal taxes at the same $1.03 rate traditional tobacco retailers are taxed--in exchange, the state would return half the taxes charged on tribal lands.

"Basically, at the end of five years, in Oklahoma almost every tribe will be at that rate," General Counsel Steve Mullins told Oklahoma Watch. "They will buy a (tobacco) stamp for $1.03, but we will refund one half that amount of money. All cigarettes sold in Oklahoma will be sold at $1.03."

In theory, a tribe could choose to return some of the refunded tax dollars to tribal smoke shops to allow them to undercut retail prices outside tribal lands, Mullins said it is unclear if the tribes would be willing to give up some or all of the new revenue to support local businesses.

So far, the Kaw, Cheyenne and Arapaho, Otoe Missouria, Apache and Fort Sill Apache tribes have agreed to the new deal; compact agreements with the other tribes were set to expire on June 30; however, the state has granted a three-month extension for the 22 tribes currently in negotiations. Mullins is confident that the state will reach an agreement with these tribes in the allotted time period.

Although tribal leaders would have preferred to extend the existing compacts over renegotiating, Fallin was insistent on making tobacco taxes more consistent across the state.

"What the governor said was we're not going to just rubber-stamp and renew the tobacco compacts up for expiration," said Fallin spokesperson Alex Weintz. "But absolutely we want to sit down with every tribe interested in doing so to negotiate new compacts."

Representatives for Oklahoma's tribes credit growing complaints from larger retailers with Fallin's push for new contracts. 

"We've certainly enjoyed some years where we had a definite advantage," Muscogee (Creek) Nation Principal Chief George Tiger said. "Now that gap is closing and I have to think it's because of some of the bigger corporations who sell cigarettes and, of course, some of the retail associations in Oklahoma."