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Tobacco Tax Rule to Be Implemented: A Judge Rejects a Challenge to the State's Emergency Tax-Stamp Rule.

Posted on: Saturday, 21 January 2006, 15:00 CST

By Omer Gillham, Tulsa World, Okla.

Jan. 21--The Oklahoma Tax Commission can implement a new rule that limits the sale of low-tax cigarettes to tribal smoke shops, a Tulsa County court ruled Friday. District Judge Rebecca Nightingale rejected a request for a temporary restraining order filed by Campbell Wholesale Co. Inc. Campbell Wholesale of Tulsa was joined as a plaintiff in the case by Briggs Tobacco and Speciality Co. Inc. of Memphis, Tenn. The request for a restraining order was filed Tuesday in Tulsa County District Court. The two companies sought to block the implementation of an emergency rule that limits the sale of cigarettes with cheaper 6-cent tobacco stamps. Drawn up by the Oklahoma Tax Commission, the rule places pressure on tobacco wholesalers to restrict the sale of low-tax cigarettes to tribal smoke shops. The number of low-tax stamps purchased by wholesalers increased by 39 million in 2005 over 2004, said Kay Burkhalter, supervisor of the Tax Commission's excise tax section. Since the beginning of last year, tribal smoke shops in eastern Oklahoma have been getting around a new tobacco compact with the state by moving cigarettes from a low-tax zone along the border for resale by smoke shops in a high-tax zone in Tulsa. The state has been losing an estimated $4 million a month in tobacco revenues meant for health initiatives. Signed by Gov. Henry on Jan. 13, the emergency rule limits the sale of low-tax cigarettes to smoke shops to 2004 levels plus 10 percent. The emergency rule takes effect at 7:30 a.m. Monday, said Larry Patton, assistant general counsel for the Oklahoma Tax Commission. Beginning Monday, tobacco whole salers must get approval from the Tax Commission to sell more than the quota for a given smoke shop. Wholesalers purchase the tax stamps from the Tax Commission and affix them to packs of cigarettes. Any wholesaler violating the emergency rule could face a stiff monetary penalty or license revocation. "All I can say is that Monday is going to be chaos," said Campbell Wholesale owner M.R. Campbell. "We can't stay in business like this." Campbell Wholesale serves about 65 smoke shops in Tulsa and northeastern Oklahoma. It is common for smoke shops to have more than one tobacco supplier, and Briggs Tobacco serves about 40 smoke shops, with some overlap with those served by Campbell. Smoke shops in Tulsa should be selling cigarettes with 86-cent stamps or 77-cent stamps, according to their agreements with the state. Surveys by the Tulsa World have found that 21 area smoke shops were selling cigarettes with 6-cent stamps, while their nontribal competition must affix a $1.03 stamp to cigarettes. The smoke shops are licensed by the Cherokee, Creek and Osage nations. Henry spokesman Paul Sund said the governor "thinks the rule makes good sense and will help with state tobacco enforcement efforts." The Tax Commission has no jurisdiction on tribal land and has struggled for months to get a handle on the sale of low-tax cigarettes in Tulsa and eastern Oklahoma. Many tribes signed a new tobacco compact with the state in connection with a new cigarette tax that took effect Jan. 1, 2005. The new compact created six different compact rates, including a 6-cent rate for border stores in competition with low-tax states. The Cherokee Nation has said the state reneged on its promise not to restructure the tobacco tax system. The restructuring decreased the Cherokees' tax advantage on tobacco products. Cherokee smoke-shop owners believe that they are allowed to sell cigarettes between tribal stores based on a loophole in a new compact with the state. During the temporary injunction hearing, Mastin faced lengthy questioning by attorney John Jarboe, who represents Campbell. "We contend that the rule has no basis in state law and clearly places the wholesalers in the position of having to police a law the state cannot enforce," Jarboe said. ------------ Omer Gillham 581-8301 omer.gillham@tulsaworld.com

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Copyright (c) 2006, Tulsa World, Okla.

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Source: Tulsa World

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