Tax Commission snuffs out tribal tobacco rules for now
Tax Commission snuffs out tribal tobacco rules for now

By Michael McNutt
Published: May 31, 2007

A state rule that angered tribal leaders for what they said circumvented tobacco compacts with Oklahoma has been pulled back because "it was not a good idea,” the main compact negotiator for the state said Wednesday.

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Possible outcomes in arbitration

If the state loses...

•Tribes would win their point that the state cannot pass a rule to change a tribal compact; as a result, a new compact probably would have to be negotiated, state Treasurer Scott Meacham said.

If the state prevails ...

•The state would prove its case that cigarettes with the cheapest tribal tobacco stamps cannot be sold anywhere but specific areas along the state's border, Meacham said.

The tax structure

•Nontribal retailers must use tobacco stamps that cost $1.03 per pack.

•Tribes with a tobacco compact pay an 86-cent rate.

•Tribes without compacts are to pay for a 77-cent tobacco stamp on each pack of cigarettes.

Reaction

•Osage Principal Chief Jim Gray said he still questions whether the state-tribal compacts — with different levels of tribal stamps — are effective. He prefers a formula that has one rate, similar to compacts in place for 10 years before the current compacts were negotiated "I don't know of a single person affected by this compact that is happy,” he said.

Arbitrators are deciding two separate matters on whether the state violated tobacco compacts by having a state agency pass emergency rules to crack down on cigarettes being sold with the wrong, cheapest tribal stamps, state Treasurer Scott Meacham said.

In 2006, the Cherokee Nation requested arbitration over one rule and the Osage Nation filed a federal suit over another approved by the state. A federal judge ordered the Osages and the state to follow their compact and settle the matter by arbitration.

Diane Hammons, general counsel for the Cherokee Nation, said she expects a ruling by late summer or early fall.

A ruling on the Osage Nation's lawsuit isn't expected until after that, probably early next year, Principal Chief Jim Gray said.

The rules' demise

The Oklahoma Tax Commission last year passed two sets of rules designed to prevent tribally licensed tobacco stores from improperly selling cigarettes with the cheapest tax stamp. The 6-cent stamps are to be sold only in specified areas near Oklahoma borders. Some tribally licensed stores are shipping cigarettes with the 6-cent stamps to other areas, especially around Tulsa, state officials said

The first rule was suspended after the Osage Nation filed its lawsuit. The second rule, which went into effect in June, has been withdrawn.

"It would have created other problems and more litigation,” Meacham said. "It was not a good idea.”

Meacham made the comments during a symposium on tribal sovereignty at the Skirvin Hilton Hotel in Oklahoma City. This year's session on the tobacco tax was considerably tamer than one on the same subject at last year's symposium. Then, several tribal members complained the state rules would put small tribal tobacco store owners out of business.