OK Tax Commission Approves Tribal Tobacco Tax Rule

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A unanimous Oklahoma Tax Commission on Tuesday approved an emergency rule requiring all tribal smoke shops licensed by compacting tribes to remit an 86-cent tobacco tax, then apply for refunds based upon their tribe's compacted tax.

The rule is bitterly opposed by compacting tribes, many of which voiced their displeasure to the commission.

A previous related rule, capping sales of cigarettes with low, 6- cent tax stamps at 10 percent above 2004 levels, was taken to federal court by the Osage Nation.

Tribal attorneys at Tuesday's meeting said they anticipate the new rule will also end up in court.

State officials say that some smoke shops are circumventing tax regulations and the intent of new compacts by improperly buying, selling or placing on cigarette packs the wrong tax stamps, including the 6-cent stamps intended only for smoke shops in some border areas.

They say this improper use of discounted stamps is costing the state about $4 million per month in tobacco-tax revenue.

Depending on compact details and their location, smoke shops may be required to pay taxes ranging from 6 cents to 86 cents per pack.

Tribal officials say the state is infringing on their sovereignty and circumventing compact requirements for arbitration and negotiation.

The new rule also prohibits refunds on packs of cigarettes in excess of 120 percent of purchases by a tribal retailer in 2004, unless the retailer provides proper documentation.

Tony Mastin, research and policy director for the Tax Commission, said the rule would not affect smoke shops owned by tribes themselves, just those licensed by compacting tribes.

He said tribes without compacts are required to pay a 77-cent tax, with no refund.

He also said 40-cent refunds would go to the tribes themselves.

There are about 73 tribe-owned smoke shops and 102 with tribally licensed retailers, he added.

Mastin said there have been tobacco tax-stamp abuses by some wholesalers and smoke shops operators, which the new rules are intended to address. …