The Kaw Nation is the first of 28 to renew their expiring tobacco compact with the state of Oklahoma
OKLAHOMA CITY – Under a new compact signed Monday with the state of Oklahoma, Kaw Nation smoke shops will no longer sell tobacco products at a reduced tax rate starting later this year.
Under the current compacts that expire in June, lower sales tax rates are available for tribal smoke shops within 20 miles of Oklahoma’s borders with Arkansas, Kansas or Missouri, which have lower tobacco tax rates than non-tribal Oklahoma smoke shops.
The Kaw Nation, whose headquarters is less than 30 miles from the Oklahoma-Kansas border, currently charges a $0.2575 per pack sales tax on cigarettes. In 2011, the northern Oklahoma tribe sold 2.7 million packs of cigarettes among its wholesale outlet, two smoke shops and two convenience stores. However, starting July 1, the tribe’s stores will instead be charging the full state sales tax rate on all tobacco purchases as per the terms of the compact.
If cigarette sales remain consistent in spite of the price hike, the Kaw Nation could potentially quadruple the amount of tax revenue they currently collect.
However, the tribe will be competing with non-tribal tobacco retailers who are also charging the full state tax rate, which is $1.03 per pack of cigarettes.
Smoke shops operated by tribes that do not have a compact are also required to charge that rate when selling to non-tribal citizens.
With Monday’s agreement, the northern Oklahoma tribe became the first of 28 tribes to renew its 2008 tobacco compact, set to expire in June. Nine tribes do not have tobacco compacts with the state and the Muscogee (Creek) Nation signed one last year that is in effect through Aug. 30, 2107.
During preliminary compact discussions with tribal leaders last fall, Steven Mullins, Gov. Fallin’s general counsel, announced that the state did not want to continue offering border rates and most favored nation clauses in new compacts if at all possible, claiming they created an unfair advantage for some tribes.
Under the terms of the compact, the tribe’s share of the compact tax revenue will also decrease over time.
From July 1 through Dec. 31, 2014, the tribe will keep 75 percent and the state of Oklahoma will get the remaining 25 percent.
On Jan. 1, 2015, the Kaw Nation’s share drops to 70 percent and on Jan. 1, 2016, it decreases again, to 65 percent. Starting Jan. 1, 2017, the tribe and state will split the proceeds evenly. The new compact is scheduled to expire on June 30, 2017.
“We recognize and appreciate the unique cultural and economic contributions of the tribes to our state. My administration is committed to working with tribal government in a productive manner for the benefit of all Oklahomans,” Gov. Mary Fallin said. “The signing of these compacts will provide both the state and Kaw Nation with new revenue that will enhance the availability and quality of government services for all Oklahomans, especially the tribal and non-tribal members in north central Oklahoma which the Kaw Nation already serves. I appreciate Chairman Munroe and the Kaw Nation for working with state officials on the signing of these compacts.”
The tribe also signed a burn ban compact with the state Monday, the first such agreement between the state of Oklahoma and a tribal government. Valid through Dec. 31, 2015, the agreement applies to all land within the tribe’s jurisdiction in northern Oklahoma and allows for coordinated investigation efforts in suspected arson cases.
“The Kaw Nation is very pleased to have concluded negotiations with Gov. Fallin related to burn bans and tobacco sales,” Chairman Guy Munroe said. “The Kaw Nation appreciates the effort and understanding that Gov. Fallin and her staff have brought to these negotiations. These compacts provide certainty to the Kaw Nation and provide a foundation for a continuing strong relationship between the Kaw Nation and the state for the benefit of our members and the members of our local community.”
Oklahoma Governor Mary Fallin and Kaw Nation Chairman Guy Munroe sign the tribe's renewed tobacco compact March 11.