Cherokees say they’re entitled to lower tobacco tax rate

Tulsa, Oklahoma (AP) 4-08

The Cherokee Nation has told state officials it believes the tribe is entitled to a 25-cent flat tax rate on the sale of tobacco products, a claim the state is disputing.

Cherokee Principal Chief Chad Smith sent a letter during April to Gov. Brad Henry outlining the tribe’s reasoning.

Smith said under the “Most Favored Nations” clause in the 2004 compact the tribe signed with the state, the tribe can receive the same terms as another tribe that entered into a compact with the state after Feb. 9, 2004, if those terms are more favorable than those of the Cherokees.

Smith said the Kaw Nation is paying a 25-percent flat tax rate for tobacco products under its compact, although that compact is under dispute in court. Under their current compact, the Cherokees must pay 25 percent of all applicable excise taxes and the entire amount of tax increase on tobacco that took effect in 2005.

If the Cherokees’ claim is correct, it could lower taxes on some packs of cigarettes by 60 cents, and tribal spokesman Mike Miller said the tribe’s smoke shops would pay 25 percent of the state’s $1.03 tax on a pack of cigarettes, or 26 cents.

Miller said it also would eliminate a special 6-cent tax-exception rate for smoke shops in areas near the state’s borders.

But State Treasurer Scott Meacham said the tribe’s reasoning is flawed and that the matter likely will be decided by an arbitrator.

The Kaw Nation signed a 10-year compact with the state on Feb. 26, 1998. Under the terms of that deal, either side had to give six months notice of termination.

In a lawsuit filed in March, the Kaw Nation and the Otoe-Missouria Tribe, which also operates smoke shops in the state, said the tribes did not receive sufficient notice from the state that the compacts were being terminated.

While that lawsuit is decided, those two tribes are operating under the old tax rate. Meacham said that does not constitute a new compact, which is what he believes the Cherokees are essentially arguing.

Meacham called the lawsuit “a pretty weak argument to start with, and to say it is a new compact is stretching it. I think a new compact would take some affirmative action by the state; we have not renewed or extended any compacts.”