Some tribal stores are running low on top-brand cigarettes because of a Philip Morris policy change.
A contract policy by Philip Morris USA is causing some tribal-affiliated smoke shops to run low on premium-brand cigarettes and may force the Muscogee (Creek) Nation to work out a deal with the state.
Tribal officials, wholesalers and smoke shop owners all say that Philip Morris USA warned wholesalers in March that the company would limit the amount of cigarettes it can sell to retailers who in turn sell those cigarettes to other retailers.
They say that under the cigarette maker’s contracts, the company could penalize wholesalers that sell more than a certain number of cigarettes to retailers that engage in retail-to-retail sales, a measure that has led to lower supplies at some tribal stores.
Creek Nation smoke shops do not have a tobacco compact with the state and therefore have been surviving on low-tax cigarettes shipped to them by Cherokee and Osage stores along the Oklahoma border, a Tulsa World investigation has shown.
The low-tax cigarettes come with a 6-cent tax stamp and are meant to be sold along the Oklahoma border so the stores can compete against states with a lower tax rate.
Nontribal stores must purchase cigarettes with a $1.03 tax stamp.
When the Philip Morris USA contract requirement became active at the end of March, some smoke shops licensed by the Creek Nation started running low on premium-brand cigarettes such as Marlboro, said Dana Johnson, tax commissioner for the tribe.
"It will affect our supply," Johnson said Wednesday. "My shops are resourceful; it won’t put them out of business, but it will have an effect on sales."
Philip Morris USA is the nation’s largest tobacco company, making up more than 50 percent of the retail cigarette market share.
Johnson told the Creek Nation’s National Council in March that the policy by Philip Morris would make it difficult for the tribe to continue to buy premium-brand cigarettes with the 6-cent tax stamp from other tribal stores.
"The only way we can get around what (Philip Morris) . . . is doing is to enter into a compact with the state so we can buy directly from the wholesalers," Johnson said.
The National Council likely will be presented a compact for approval at its April meeting; the compact then would be sent to the Governor’s Office, Johnson said.
State Treasurer Scott Meacham said his office had been contacted by the Creek Nation within the past month; before that, it appeared compact talks had stopped.
While the Creek Nation has no compact with the state, both the Osage Nation and Cherokee Nation do, allowing tribal smoke shops to buy cigarettes with an 86-cent tax stamp from wholesalers except in stores near the state line. The situation comes during a time when the state just won an arbitration decision against the Cherokee Nation. Last month, arbiters determined that the Cherokee Nation and its smoke-shop owners violated the tobacco compact with the state.
Cherokee-affiliated smoke shops on the Oklahoma border were purchasing large quantities of low-tax cigarettes and shipping them to higher-tax markets like Tulsa and undercutting nontribal stores by $3 to $4 a carton.
Meanwhile, the Cherokee Nation has announced it will enforce stiff penalties on Cherokee stores that sell low-tax cigarettes to a high-tax zone, said Mike Miller, Cherokee Nation spokesman.
The Philip Morris contract requirement also is affecting the supply of premium cigarettes to Cherokee Nation- licensed smoke shops, Miller said. "Yes, some retailers are having to deal with that rule, and it’s limiting their supply," Miller said. Miller said the Cherokee Nation would not get involved in retailers’ relationships with wholesalers or cigarette makers. "We hope they are able to work it out in a way that keeps our licensees in business," he said.