Tribal Cigarette Taxes in Question in Oklahoma

Legislators urge special session action

OKLAHOMA CITY -- Support grew Wednesday for adding a tobacco tax issue to the Oklahoma legislature's special session, according to a report in The Oklahoman, and one legislative leader said the state must make sure tribal smoke shops are selling cigarettes with the appropriate tax stamps.

"Until we have a legislative solution, I urge the governor and the attorney general to continue to seek remedies through enforcement actions, including arbitration," said Senate President Pro Tempore Mike Morgan.

Morgan said he is willing [image-nocss] to work with House Speaker Todd Hiett to come up with a solution so tobacco tax-parity legislation could be considered in the special session. Hiett asked Gov. Brad Henry earlier this week to address the tobacco tax issue in the special session.

The Oklahoma Tax Commission continues to meet with the attorney general's office to determine whether tax agents have legal jurisdiction to check cigarette tax stamps in the state's 197 tribal smoke shops, commission spokeswoman Paula Ross said. Agents are about halfway done checking the state's 4,500 nontribal retailers, she said.

Some tribes are using the wrong, cheaper tax stamp or not collecting a state tax at all. Henry said he plans to meet with tribal leaders. Morgan said private retailers have told him the noncompliance puts their stores and tribal smoke shops that are following their compacts with the state at an unfair disadvantage.

Henry said he will meet next week with Hiett to talk about the status of the special session.

Rep. Ron Peterson, one of 10 Tulsa-area legislators who asked in June for the tobacco tax issue to be added to the special session, said thousands of Oklahoma retailers are near the brink of bankruptcy.

Oklahoma voters approved an 80-cent per-pack increase in cigarette taxes last fall, raising the tax from 23 cents to $1.03 per pack in nontribal stores. Tribal smoke shops are allowed to sell the cigarettes with a lower tax stamp.

Some tribal smoke shops, instead of putting on tax stamps of between 75 cents and 86 cents on each pack of cigarettes, are selling cigarettes with 6-cent stamps, which are for shops within 35 miles of bordering states with lower tobacco rates. The tax increase was supposed to generate an additional $200 million annually, but it has fallen far short of projections.

Peterson said the 197 tribal smoke shops each sold an average of 64,399 packs of cigarettes in June at an average tax rate of 17 cents per pack, according to Tax Commission figures. Sales at the 4,500 nontribal retailers in Oklahoma averaged 3,265 packs per store in June at the full tax rate of more than $1 per pack.