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Court Order Suspends New Smoke Rules for Some: A Mayes County Court Halts an Order, Challenged By Six Shops, That Limited the Sale of Low-Tax Cigarettes.

Posted on: Thursday, 26 January 2006, 15:00 CST

By Omer Gillham, Tulsa World, Okla.

Jan. 26--PRYOR -- A Mayes County court granted a limited restraining order Wednesday to a group of smoke shop owners who are challenging the state's new rule on tobacco sales.

District Judge James Goodpaster temporarily suspended an emergency rule that limits the number of low-tax cigarettes that can be sold by tribal smoke shops.

The emergency rule was signed by Gov. Brad Henry on Jan. 13 and was implemented Monday by the Oklahoma Tax Commission.

Goodpaster's ruling means six Cherokee smoke shops can replenish their dwindling tobacco inventories based on December levels.

The judge scheduled a hearing for Friday in Pryor to determine whether the limited, temporary order should stand.

"We are running out of product," said Wayne Stull, owner of Two Turtles Inc., which has a low-tax store in Adair. "They approved me for 1,800 cartons of cigarettes this month when I need 50,000 to keep the doors open."

The Tax Commission's emergency rule limits the sale of low-tax cigarettes to smoke shops to 2004 levels plus 10 percent.

Wholesalers must get approval from the Tax Commission to fill an order above a smoke shop's quota for a given month.

Two Turtles sold an estimated 500,000 cartons of cigarettes in 2005, compared to 29,000 cartons in 2004.

Low-tax cigarettes bear 6-cent tax stamps, while those at nontribal stores have $1.03 stamps.

The smoke shops challenging the Tax Commission rule are low-tax stores primarily along the Oklahoma border in competition with low-tax states or other tribal stores.

The low-tax rate is part of a new tobacco compact between the tribes and the state. The compact created six compact rates and has proved difficult to enforce, primarily in northeastern Oklahoma.

Two Turtles and other low-tax smoke shops have supplied 6-cent cigarettes to Tulsa-area smoke shops that should be using 86-cent or 77-cent stamps, according to a Tulsa World investigation.

Stull is one of five other smoke shop operators and plaintiffs who are seeking a temporary restraining order against the Tax Commission.

The other smoke shops and their owners or partners are: Pipestone Smoke Shop, partner Valerie Powell; Loyal Shawnee Smoke Shop, partner Joe C. Lane; Grand Lake Smoke Shop, partner Jerome Hooker; Tallchief LLC, President Tara Hargrove; and A-Wa-Gin Inc., doing business as Little Deer Smoke Shop., President Fawn Roye.

Oklahoma has 196 Indian-owned tobacco retail stores.

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.

The state says it is losing about $4 million a month in tax revenues because smoke shops are seizing markets where higher-tax cigarettes should be sold.

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. Stull said he refused to sign the agreement.

"I am with a sovereign nation, and I do not have to sign away any sovereignty," he said.

The Tax Commission granted eight out of an estimated 10 requests received Monday from wholesalers seeking permission to sell more cigarettes than allowed by the new rule.

Last week, two tobacco wholesalers lost an attempt for a restraining order in Tulsa County District Court.

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Copyright (c) 2006, Tulsa World, Okla.

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Source: Tulsa World

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