Oklahoma Tax Commission hears proposal for emergency rules concerning cigarette tax stamps

Tuesday, December 27th 2005, 4:41 pm
By: News On 6

OKLAHOMA CITY (AP) -- The Oklahoma Tax Commission heard a proposal Tuesday that would establish emergency rules that would prohibit wholesalers from selling large quantities of cigarettes with a cheap tax stamp to American Indian smoke shops.

The three-member commission had been expected to vote on the proposal, but commissioner Jerry Johnson said the rules likely will be voted on during a special meeting, likely next Tuesday. Johnson said the delay will allow wholesalers and Indian tribes to offer input on the proposal. No representatives from either group spoke at Tuesday's meeting.

Under the proposal, wholesalers would be allowed to sell the same number of cigarettes at a reduced tax rate to smoke shops as they did in 2004, plus 10 percent, said Tony Mastin, the director of the commission's Tax Policy Division. If a wholesaler desires to sell more than 10 percent than it did in 2004 to a retailer, it can seek approval from the commission to do so.

Wholesalers wouldn't be able to sell cigarettes to any tribal retailer unless the retailer is on a list compiled by the commission. If a sale is made to a tribal retailer not on the commission's list, the wholesaler would be responsible for the payment of any extra tax.

"We are not telling that wholesaler that he can't buy those stamps," Mastin said. "We're just limiting the amount of stamps he can sell to any one single retailer without sufficient documentation. It's not much different, really, than any other tax exemption that we require documentation for from any other taxpayer."

Wholesalers could have their cigarette licenses revoked if they violated the rule, Mastin said.

If the commission approves the proposal, Gov. Brad Henry would have to sign it before it became law.

Some smoke shops located along Oklahoma's borders have bought cigarettes with 6-cent tobacco stamps and resold them to stores, especially in the Tulsa area, according to records obtained by the Tulsa World. State Treasurer Scott Meacham has estimated that the state is losing as much as $2 million a month because of the volume of those sales.

Nontribal stores must charge a tax of $1.03 per pack. Tribal smoke shops pay between 6 cents and 86 cents per pack. Those rates took effect in January.