Oklahoma Supreme Court rules in tobacco dispute
The Associated Press
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Published: October 5, 2009
The state Supreme Court has issued a ruling that would allow the state to collect higher taxes on cigarettes sold by Osage Nation tobacco stores.
However, the Oklahoma Tax Commission said Monday that it already has a new deal with the Osage Nation requiring it to pay a tax of 66 cents per pack.
The state tax on cigarettes is $1.03, but tribal stores pay lower rates, ranging from 6 cents per pack for those along Oklahoma's borders to 86 cents per pack for some tribes. The state had wanted to charge the Osage Nation 86 cents per pack, but the tribe argued that it should be paying much less.
The Supreme Court last week overturned an injunction that barred the state from collecting the higher rate. The justices ruled that a lower court didn't have jurisdiction to stop the Tax Commission from collecting 86 cents per pack from the tribe's licensed tobacco retailers.
"We are pleased with the results and consider the matter closed," commission spokeswoman Paula Ross said.
"In this case, and there are so many, we said the court lacked jurisdiction to stop us from doing what we're doing. Since then, we have negotiated a new compact with the Osages for a general compact rate of 66 cents."
The Osage Nation did not immediately return a call seeking comment Monday.
The tribe had been paying 58 cents per pack based on a so-called "favored nation" clause in its compact with the state. That provision allowed Osage Nation retailers to pay a lower tax rate if another tribe within 35 miles of its smoke shops was paying less.
The Osage Nation's rate was based on the Pawnee Nation's, which ended its compact in 2008. The state then started charging Osage Nation retailers 86 cents per pack.
Osage-licensed retailer Feather Smoke Shops LLC sued, saying the favored nation clause entitled it to the most favorable tax rate enjoyed by any other tribe. The retailer contended the most recent such compact was for the Kaw Nation and allowed for a 26-cent tax rate.
In the court's majority opinion, Justice Joseph Watt wrote that the Osage compact required that any dispute not resolved by good-faith negotiations within 30 days be submitted to binding arbitration.
"The Tribe and the State agreed to federal arbitration under these circumstances, and we will not rewrite the compact," Watt wrote.
Justice John Reif concurred with portions of the majority opinion but disagreed that the dispute was subject to arbitration.
"I reach this conclusion because the undisputed material facts show that the state, through the actions of the Oklahoma Tax Commission, is simply in breach of the unambiguous 'favored nations' provision of the compact," Reif wrote.
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