Osage File Second Federal Lawsuit over State Cigarette Tax Laws: Citing Declining Tax Revenue, Osage Nation Seeks Permanent Injunction

By Davis, KirLee | THE JOURNAL RECORD, April 21, 2006 | Go to article overview

Osage File Second Federal Lawsuit over State Cigarette Tax Laws: Citing Declining Tax Revenue, Osage Nation Seeks Permanent Injunction


Davis, KirLee, THE JOURNAL RECORD


The Osage Nation returned to Tulsa federal court Thursday, filing its second lawsuit this year to block controversial state cigarette taxation rules.

But this time, the petition by attorneys Gary S. Pitchlynn and O. Joseph Williams said the Osage Nation Tax Commission had recorded proof of harm from the emergency rules enacted this year by the Oklahoma Tax Commission and signed into law by Gov. Brad Henry.

After the Jan. 13 rules took effect, the lawsuit claims Osage Nation Tax Commission cigarette tax revenue fell 50 percent in February from the average over the previous four months. Two licensed Osage smoke shops also went out of business.

The tax rule is causing a significant and irretrievable loss of tax revenue, with its licensed retailers suffering significant reductions in product sales at all the retail locations, and a loss of customers, the lawsuit alleged. The Nation also suffers irreparable harm to its sovereign authority to regulate the sale of cigarettes within its jurisdiction, and to encourage free trade and commerce between its licensed wholesalers and licensed retailers and purchasers.

Calls for such evidence reverberated through the first lawsuit. In that case, filed Feb. 1 after the state failed to respond to Osage requests for arbitration of the dispute, the tribe requested a temporary restraining order to block those rules and enforcement of the arbitration clause in its 2003 compact with the state.

On Feb. 27, U.S. District Judge Terence Kern ordered Henry and the OTC into arbitration with the Osage, but he issued a stay in the case rather than a restraining order - despite the tax commission's approval of a second, even tougher line of emergency rules. Henry signed those into law April 7, spurring this lawsuit.

Both sets of rules sought to stop what the state considers illegal sales of exception rate cigarettes at non-exception rate tribal smoke shops - sales the commission said cost the state millions in lost tax revenue each month.

A press release by the Osage Nation admitted the state has not begun to enforce the rule yet and has called for negotiations with the tribes before it begins enforcement.

The Osage, however, see the dispute as a challenge to their sovereignty. Thursday's filing requested not only a temporary restraining order to block these emergency rules, but also preliminary and permanent injunctions against Henry and the Oklahoma Tax Commission from creating or enforcing any future rules to regulate the sale or transportation of cigarettes or tobacco products in Indian Country, pending arbitration of the first Osage lawsuit.

The state is showing their disregard for dealing with the Indian tribes by passing these restrictive rules, in direct contempt for the agreements they have already made, said Principal Chief Jim Gray of the Osage Nation. Under these circumstances, the Osage Nation has no choice but to protect commerce on our reservation by filing this claim in federal court.

Complications

The exception rates reflect the complexity of the smoke shop business. …

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