Tobacco tax take to top $90-million

Sunday, January 1st 2006, 1:28 pm
By: News On 6

OKLAHOMA CITY (AP) _ New tobacco taxes paid in 2005 are expected to boost health care programs by more than $90 million, despite problems with collecting those taxes from tribal smoke shops, especially in Tulsa.

Leaders estimated that an increase in the tobacco tax that kicked in last January would produce about $110 million per year.

In addition to the problem of tax collections on Indian lands, revenue also has fallen short because more people than expected have quit smoking. Early projections indicated about 20,000 would kick the habit, but health officials about 30,000 have quit.

Many of the new health programs that were to benefit from the tax are just starting, so there haven't been shortfalls in revenue yet.

``Overall, I'm very pleased that through the tobacco tax we have been able to raise so much extra money for health care programs,'' State Treasurer Scott Meacham said. ``It has been very successful from that standpoint.''

Whether the tobacco tax increase has been successful in other ways undoubtedly will be debated in 2006 as politicians in both parties are asked by the governor to help pass laws aimed at improving collections from tribal smoke shops.

Meacham estimates that the state could be losing $2 million a month in uncollected cigarette taxes from smoke shops that are selling cigarettes with cheap tax stamps.

Compacts signed by the tribes and the governor authorize the sale of cigarettes with a 6-cent stamp in border stores, allowing them to compete with stores in other states.

However, three surveys by the Tulsa World show that most stores in the Tulsa area are selling cigarettes bearing the cheap stamps when they should be selling packs of cigarettes bearing stamps of either 75 or 86 cents.

Meacham said changes in collections may be on the way, based on a U.S. Supreme Court decision dealing with a Kansas case.

The high court declared in October that states can collect taxes that tribes owe by assessing wholesalers for like amounts. The Kansas case dealt with motor fuel sold to Indian reservations, but Meacham said the ruling is applicable to tobacco sales to tribal smoke shops.

Meacham and Gov. Brad Henry are working with lawmakers to propose a law that would place the burden of collecting tobacco taxes onto wholesalers.

In the interim, the Oklahoma Tax Commission is devising similar emergency rules intended to step up collections from tribal sales by assessing the taxes on wholesalers.

The Tax Commission got off to a bad start by failing to inform wholesalers and tribal leaders that it planned to enact the new rules last week. The commission delayed action until Tuesday to allow interested parties to comment on the rules.

The rules also would subject the wholesalers to revocation of their operating licenses if they do not abide. In addition, the wholesaler could be fined up to 500 percent of the amount of unpaid taxes.