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Osage Tax Commission sued over tobacco shop border tax

Commission raises questions over lawsuit after license holder passes away
Osage Tax Commission on Sixth Street in Pawhuska. Photo by Chalene Toehay/ Osage News

The Osage Tax Commission is questioning the status of a lawsuit filed against the entity in July by an Osage smoke shop operator who is challenging the border tax levied against the tobacco shop.

The July 6 lawsuit filed by “Highway 123 Smokeshop” in the Osage Nation Tribal Court objects to the border tax charged by the Tax Commission. The border tax is levied against smoke shops within 20 miles of the Kansas border. The Highway 123 Smokeshop, just west of Bartlesville, is one of two shops falling into that category.

The Highway 123 shop’s owner and/ or operator is not listed as the plaintiff in addition to the shop’s name, according to the lawsuit. The Tax Commission issued the shop’s tobacco retail license to the late Norma Jean Mays who passed away on May 25. Her surviving son Roscoe Mays operates the Highway 123 shop, but the Tax Commission notes he is not listed on the tobacco license.

At its Aug. 9 meeting, the five-member Tax Commission raised questions on whether the lawsuit could continue and asked its attorney to follow-up with legal counsel representing the Highway 123 Smokeshop to check on its status.

“If they’re suing us, who’s in charge?” Tax Commission Chairwoman Beverly Brownfield asked during the meeting. “Is the license even valid?” asked Tax Commission member Teresa Rutherford.

Tax Administrator Mary Mashunkashey agreed, adding: “We need to know who’s running the smoke shop.”

New chapter

The lawsuit filing is the latest chapter in the argument the Highway 123 Smokeshop is having with the Nation over the border tax. According to the Tax Commission, the border smoke shops are charged an additional tribal tax of $1.57 per carton of 10 packs of 20 cigarettes – on top of the minimum $1.50 in tribal tax charged for cigarettes in accordance with the current tobacco tax compact the Nation signed with the state of Oklahoma.

The smoke shop challenged the border tax in a written protest to the Tax Commission on April 27 after the Second Osage Nation Congress failed to pass a bill seeking to repeal the border tax during the 2011 Hun-Kah Session.

The bill, ONCA 11-33 sponsored by Congressman Geoffrey Standing Bear, was initially passed by majority vote of the Congress on April 8, but Principal Chief John Red Eagle vetoed the bill after the Tax Commission protested. The Tax Commission opposed ONCA 11-33, arguing that Roscoe Mays would receive a $100,000-plus tax break if the border tax is repealed – if Mays sells the same number of cigarette cartons this year as he did in 2010.

On April 15, the Congress voted on whether to override Chief Red Eagle’s veto of ONCA 11-33. The override failed with five “yes” votes and seven “no” votes, so the border tax remains.

Lawsuit

According to the July 6 lawsuit, Highway 123 Smokeshop “is one of two retail tobacco shops located within 20 miles of the Kansas border. However, plaintiff is the only licensed tobacco retailer against whom the tobacco border tax is being assessed.”

The lawsuit argues the Tax Commission’s “actions in assessing and collecting a higher tax rate upon plaintiff’s retail tobacco shop is discriminatory and in violation of the equal protection clauses of the Osage Nation and United States Constitutions.”

The Highway 123 Smokeshop lawsuit states: “The additional Osage border tax rate bears no substantial relationship to any legitimate government purpose and it is arbitrary, capricious and unenforceable.”

In seeking relief after exhausting administrative remedies, according to the lawsuit, the Highway 123 Smokeshop is asking the tribal court to rule against the Tax Commission and to “issue an order enjoining the Tax Commission from assessing or collecting the tobacco border tax” from the shop.

Tax break

Before Chief Red Eagle took action on ONCA 11-33 in April, the Tax Commission objected to repealing the border tax. In an April 7 letter, the Tax Commission said Mays could pocket up to $100,968 if the border tax is repealed and if the store sells the same number of cartons this year as he did in 2010. “This is, in essence, taking $100,968 of the Nation’s annual income and giving it to one individual Osage,” the letter states.

Also in the letter, the Tax Commission commented on the border tax issue. The Highway 123 Smokeshop, pays the $1.50 minimum tax rate per carton plus the $1.57 additional border tax “to make the total tax more even” because the border stores pay 50 percent less in sales tax than the other stores. The second border smoke shop near Ponca City pays the minimum $1.50 per carton tax because it competes with the neighboring Kaw Nation, which does not have a signed tobacco tax compact.

By Aug. 30, Mashunkashey said the Tax Commission had yet to hear updates on its requests for information on the Highway 123 Smokeshop.

The Tax Commission meets the second Tuesday of each month.

The Osage News did not receive comment from Mays before this story was printed in the September 2011 issue.

Location

Osage Tax Commission
126 E. 6th St.
Pawhuska, OK
United States