Cherokee Nation Passes New Tobacco Compact With State of Oklahoma

Brian Daffron
11/18/13

The Cherokee Nation Council has passed legislation to create a new tobacco compact with the State of Oklahoma. Titled “Cherokee Nation-State of Oklahoma Tobacco Tax Compact Act of 2013,” the bill was signed into law by Principal Chief Bill John Baker on November 14.

The overall wording of the new compact gives a more competitive edge to smoke shop owners within Cherokee tribal jurisdiction in northeast Oklahoma and greater revenue to the Cherokee Nation as a whole. The State of Oklahoma is also allowed to collect 100 percent of its share of tax revenue upfront.

“It is going to be a win-win-win for all parties involved,” said Baker in a released statement. “The state will get its share, local smoke shop owners will do better than they ever did under the previous compact, and the Cherokee Nation will recapture some of the lost market share within our jurisdiction.”

Under the previous compact, “the Nation was required to collect a $1.50 tribal tax, and the State collected 50 percent of all applicable State taxes on cigarettes for sales to most tribal retailers,” according to Cherokee Nation senior assistant attorney general Sara Hill. fAdditionally, the tribe was not allowed to rebate any part of the tribal tax to tobacco retailers.

Under the new compact, there is a gradual decrease of tribal tax rates on cigarette cartons by retailers. From November 1 to December 31 of this year, the tax rate will be $3.65 per carton, with an eventual tax rate of $.80 per carton by October 1, 2014.

The compact also has dates in which Cherokee Nation and the State of Oklahoma collect varying percentages of revenue on cigarette cartons between 2013 and 2018. By May 1 2018, tax revenues will be spilt 50/50 percent by May 1 2018 through the end of the compact, which is scheduled to end December 31, 2024. Tax revenue splits between all other tobacco products—ranging from cigars to chewing tobacco—will be 65/35 percent between Cherokee Nation and the State of Oklahoma through December 31 2017, and a 50/50 revenue distribution beginning January 1 2018 through the end of the compact.

Issues of tobacco revenue between Oklahoma and the sovereign nations within its borders was ultimately decided with the 1991 U.S. Supreme Court case of Oklahoma Tax Commission v. the Citizen Band Potawatomi Indian Tribe of Oklahoma. With this decision, the state was authorized to collect state taxes on tobacco products sold by tribal businesses to non-tribal members. By the following year, four tribes signed tax revenue agreements with the State of Oklahoma to protect tribal revenue shares.

“The new tobacco compact shows our support as a government for these smoke shop owners and all the people they employ,” said Cherokee Nation Deputy Speaker Janelle Fullbright in a released statement. “Our hope is that the agreement will boost sales revenue to benefit tribal retailers and retain hundreds of jobs within the tribal jurisdiction.”

At press time, Oklahoma Governor’s Office spokesperson, Alex Weintz, said there was no final date set for Gov. Mary Fallin and the Cherokee Nation to formalize the compact.

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