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Cherokees on Spot in Tobacco Tax Flap: The Tribe Must Join Six Smoke Shops' Battle With the State or the Case Could Be Dismissed, a Judge Says.

Posted on: Saturday, 28 January 2006, 15:00 CST

By Omer Gillham, Tulsa World, Okla.

Jan. 28--PRYOR -- An emergency rule limiting the sale of low-tax cigarettes to tribal stores will go back into full effect unless the Cherokee Nation joins a lawsuit filed in Mayes County. District Judge James Goodpaster, who granted a limited restraining order Wednesday to six smoke shops in Vinita, Bartlesville, Big Cabin and Adair, on Friday continued a hearing at the Mayes County Courthouse in Pryor to determine whether the temporary restraining order should stand. The six Indian smoke shops want to stop an Oklahoma Tax Commission rule that drastically limits the number of low-tax cigarettes the stores can purchase for resale. The smoke shops are low-tax stores licensed by the Cherokee Nation. Goodpaster said the Cherokee Nation is a major stakeholder in the tobacco dispute between the Oklahoma Tax Commission and the tribal smoke shops. In continuing the hearing a second time, Goodpaster gave the Cherokee Nation 15 days to join the restraining order complaint. "The tobacco compact was entered into by the Cherokee Nation and the governor of Oklahoma," he said. "It would be impossible for me to give a just decision without the nation's involvement. If the Cherokee Nation will not enter the suit, I am inclined to dismiss the complaint, and the rule will go back into full effect." If the Cherokee Nation joins the smoke shops in their battle with the Tax Commission, Goodpaster more than likely would send the dispute to arbitration, he said.

The tribe's tobacco compact with the state calls for a three-member arbitration team. The team would include one member selected by the tribe, one selected by the state and a neutral person chosen by both the tribe and state. Cherokee Nation Tribal Councilor Meredith Frailey said the Cherokees will discuss joining the lawsuit at their next council meeting. The emergency rule was signed Jan. 13 by Gov. Brad Henry and was implemented Monday by the Oklahoma Tax Commission. The Tax Commission's emergency rule limits the sale of low-tax cigarettes to smoke shops to 2004 levels plus 10 percent. Cigarette sales soared in 2005 at many of the low-tax stores, situated near the Oklahoma border, records show. Some of the smoke shops average sales of 50,000 to 100,000 cartons of cigarettes a month and would be cut back to 3,000 or fewer under the new rule. Wednesday's restraining order allowed the six stores to replenish their dwindling tobacco inventories based on December levels. With Friday's ruling, the smoke shops get 15 more days to continue to replenish stock at the higher quota. Under the new state rule, tobacco wholesalers must get approval from the Tax Commission to fill an order above a smoke shop's quota for a given month. Low-tax cigarettes bear 6-cent tax stamps, while those at nontribal stores have $1.03 stamps. The low-tax rate is part of new tobacco compacts between the tribes and the state. The compacts created six compact rates and have proved difficult to enforce, primarily in northeastern Oklahoma. Low-tax smoke shops have supplied 6-cent-stamp cigarettes to Tulsa-area smoke shops that should be using 86-cent or 77-cent stamps, according to a Tulsa World investigation. The Tax Commission has said the emergency rule will allow the state to collect the proper amount of tax based on tobacco compacts signed between the state and the various tribes. Smoke shop owners who want to buy more than their monthly allotment of cigarettes must agree not to resell low-tax products to other smoke shops, which typically are in high-tax zones.

------------ 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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