Smoke Tax Flawed, Adviser Says

By MICK HINTON World Capitol Bureau

The current system and its tribal compacts promote what a wholesaler calls bootlegging of low-tax cigarettes.

OKLAHOMA CITY — The state’s current system of collecting cigarette taxes should be scrapped and “flushed down the toilet,” a wholesaler who serves on a state tobacco tax advisory committee said Monday.

Ron Cross, a committee member who sells cigarettes wholesale to tribal smoke shops and nontribal convenience stores, said problems started when Gov. Brad Henry signed compacts with American Indian tribes granting them special cigarette tax discount rates for border stores.

Cross is one of nine people who serve on the Cigarette and Tobacco Tax Advisory Committee, which issues recommendations to state government regarding the tobacco tax.

Cross said if everyone paid the same rate to the state tax commission, “there would be no more bootlegging of cigarettes.” Cross was referring to the practice of stores buying cigarettes with cheaper stamps from other stores.

Then the tax commission could rebate money to the tribes, based on their compacts with the governor, Cross suggested.

However, James Wilbanks, a spokesman for the state Treasurer’s Office, said compacts between the governor and tribes cannot be changed until they expire, which will be several years from now. Wilbanks said that in retrospect, “we can see that we maybe need some stronger enforcement mechanisms” in the compacts.

Surveys by the Tulsa World of 21 area smoke shops found all stores selling cigarettes with a 6-cent stamp, an apparent violation of their agreements with the state.

Although border smoke shops make up only 20 percent of the nearly 200 across the state, the sale of cigarettes with the cheap stamp accounts for 70 percent of the sales, according to the state Treasurer’s Office.

Wilbanks said Monday that tax commission officials do not believe they have authority to go into smoke shops located on Indian lands to check cigarette stamps. He said collections are less than expected because many Oklahomans have quit smoking due to the hike in cost of a pack of cigarettes.

The other major loss, which Treasurer Scott Meacham says could amount to at least $2 million a month, is due to smoke shops selling cigarettes with cheap border-rate tax stamps.

Latest figures from the tax commission show that so far this year, tobacco taxes should total about $221 million, but amount to only $147 million.

Meanwhile, the State Tax Commission ordered revocation of a wholesaler’s license. However, the wholesaler obtained a court order to continue operating for now.

An administrative hearing before the Oklahoma Tax Commission has been delayed for 60 days.

Mick Hinton (405) 528-2465

hinton@tulsaworld.com