Bill to increase license fees for sale of cigarettes, create formula for allocating tax stamps
Author:  Bryan Smith 
Date:  06/08/2009

(OK) The Oklahoma Cigarette and Tobacco Tax Advisory Committee on Monday discussed a new law that will allocate only a finite number of tax free stamps for cigarettes sold by tribally owned stores to tribal members based on a formula for determining "probable demand."

The formula, which aims to remedy problems associated with taxing tobacco products while meeting legal obligations to the state's Native American tribes, is part of a larger tobacco tax reform bill, SB 608, by Sen. Patrick Anderson, R-Enid, and Rep. Mike Jackson, R-Enid.

Tony Mastin, Oklahoma Tax Commission administrator, said during a Monday review of the legislation that the formula would determine "probable demand" for tax free stamps on packs of cigarettes by taking the total number of Oklahoma members of a given tribe, multiplied by the percentage of smokers in Oklahoma or the country - whichever is greater - multiplied by the average yearly consumption.

The product is a set number of stamps that can be used to allow the tax free purchase of cigarettes by members of a non-compacting federally recognized tribe from a store licensed by a non-compacting federally recognized tribe located in "Indian country," so long as the purchase is for personal use only.

The Tax Commission will furnish wholesalers and the affected tribes with its determination each year.

Mastin said that it will take some time to get new stamps in, which have been changed to ensure consistency. The first allocation will also take some time to determine.

SB 608, which was signed on June 2 and has been some six years in the making, also states that all revenue from fees and penalties collected from certain tobacco-related provisions of the Oklahoma tax code shall be apportioned to the Oklahoma Tax Commission Reimbursement Fund for administrative and data processing expenses incurred in connection with electronic reporting requirements.

The bill also increases the annual fee for cigarette wholesaler and manufacturer licenses from $25 to $250 and establishes the form for applying for the license. It eliminates references to cigarette warehousemen, jobbers and distributors. It establishes the form and requirements to obtain a retail license for the sale of cigarettes. The bill also prohibits the Oklahoma Tax Commission from issuing a license to a cigarette manufacturer, wholesaler or retailer who has been convicted of or entered a plea of no lo contender to a felony. It prohibits the sale of cigarettes from one licensed retailer to another licensed retailer and prohibits the purchase of cigarettes by a retailer for anyone other than a licensed wholesaler.

The bill eliminates an exemption allowing consumers pay an in-lieu of fee to buy untaxed cigarettes and clarifies language related to the transportation of cigarettes by commercial carriers. It also clarifies language related to record keeping by those subject to the cigarette tax and requires that reports be submitted electronically. It modifies the requirement for wholesalers to report shipments to Indian tribes to include licensees of the tribes. It permits the Tax Commission to share records it seizes as part of investigations with state and local law enforcement authorities. The bill clarifies language related to unstamped cigarettes by individuals other than consumers. It also establishes a $200 fine for consumers who possess, consume or sale unstamped cigarettes. It sets an administrative fine of up to $10,000 for the first offense and not more than $25,000 for the second offense for wholesalers or retailers who violate certain provisions related the cigarette stamp tax.

The bill requires the Tax Commission to revoke the license of wholesalers or retailers who violate certain provisions related to the cigarette stamp tax and prohibits the issuance of a new license for five years. The bill clarifies the definition of unstamped cigarettes to include cigarettes bearing an improper tax stamp. It also states that in the case of a nonparticipating manufacturer located outside of the United States, the certification shall certify that the nonparticipating manufacturer has provided a declaration from each of its importers. It provides for a $1,000 fee to be paid by the manufacturer, upon the submission of its yearly certification, to the attorney general. It states that any non-participating tobacco company or manufacturer that fails to comply shall not be included in the attorney general's directory. It requires companies listed on the directory to appoint an agent within the state. The bill also requires every dealer and wholesaler of tobacco products to obtain a license from the Tax Commission at a cost of $250.

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