Budget & Tax , Law & Principles
Even without compacts, state will collect taxes
Jonathan Small, Curtis Shelton & Ryan Haynie | June 23, 2023
A common misunderstanding has arisen about what would happen if the current tobacco compacts expired. Some believe that all the revenue being collected through these compacts would disappear. That is not correct.
Federal law exempts tribal members from tobacco taxes when purchasing products on tribal land. However, non-tribal members who purchase products on tribal lands are still subject to these taxes. The current compacts are meant to simplify this process.
Under the compacts, instead of each tribe identifying purchases between tribal and non-tribal members, each seller collects 100 percent of the taxes from sales and remits it to the state. The state then rebates 50 percent of that back to the tribes. This creates a 50/50 split between the state and the tribes. Without the compact, tribes would then be required to operate under the current statute (68 O.S. § 349.1) when selling tobacco products. This statute creates a calculation that includes things like tribal membership counts and the smoking and purchasing rates of the state of Oklahoma. Any tribe that fails to operate under statute would face a lawsuit from the state.
Under this model, Oklahoma would still see tobacco sales tax revenue from tribal smoke shops. It’s possible this model would actually bring in more revenue than the current 50/50 split, as only 10 percent of the state’s population is exempt from the tobacco tax at tribal shops.
Jonathan Small
President
Jonathan Small, C.P.A., serves as President and joined the staff in December of 2010. Previously, Jonathan served as a budget analyst for the Oklahoma Office of State Finance, as a fiscal policy analyst and research analyst for the Oklahoma House of Representatives, and as director of government affairs for the Oklahoma Insurance Department. Small’s work includes co-authoring “Economics 101” with Dr. Arthur Laffer and Dr. Wayne Winegarden, and his policy expertise has been referenced by The Oklahoman, the Tulsa World, National Review, the L.A. Times, The Hill, the Wall Street Journal and the Huffington Post. His weekly column “Free Market Friday” is published by the Journal Record and syndicated in 27 markets. A recipient of the American Legislative Exchange Council’s prestigious Private Sector Member of the Year award, Small is nationally recognized for his work to promote free markets, limited government and innovative public policy reforms. Jonathan holds a B.A. in Accounting from the University of Central Oklahoma and is a Certified Public Accountant.
Curtis Shelton
Policy Research Fellow
Curtis Shelton currently serves as a policy research fellow for OCPA with a focus on fiscal policy. Curtis graduated Oklahoma State University in 2016 with a Bachelors of Arts in Finance. Previously, he served as a summer intern at OCPA and spent time as a staff accountant for Sutherland Global Services.
Ryan Haynie
Criminal Justice Reform Fellow
Ryan Haynie serves as the Criminal Justice Reform Fellow for the Oklahoma Council of Public Affairs. Prior to joining OCPA, he practiced law in Oklahoma City. His work included representing the criminally accused in state and federal courts. Ryan is active in the Federalist Society, serving as the Programming Director for the Oklahoma City Lawyer’s Chapter. He holds a B.B.A. from the University of Oklahoma and a J.D. from the University of Oklahoma College of Law. He and his wife, Jaclyn, live in Oklahoma City with their three children.