In the past five years, the owners of five of seven Osage-owned smoke shops operating within the Nation’s boundaries have received over $11 million in tax rebate payments from the Nation, which roughly factors to about $440,000 per year.
Those payments are coming from the Nation’s Revolving Tax Relief Fund, which is part of the Nation’s 10-year Tobacco Tax Compact with the state which was signed in 2013. The Tax Relief Fund was increased by the ON Congress in 2015 via legislation (ONCA 15-22) with the purpose of easing the tax burden for the smoke shop owners after the state began to require prepayment of additional state taxes on cigarettes and other tobacco products. The Fund was supposed to sunset on Dec. 31, 2016.
However, in 2017, the 5th Osage Nation Congress once again wrote legislation to extend the assistance, this time for the life of the compact and further reduce the amount of tobacco tax retained by the Nation and increase the rebate amount going to the smoke shop owners.
According to the current Tax Commission Board, which is chaired by Teresa Bates Rutherford, the concept of the Fund has never sat well with them and they fear it has become a very lucrative system for the smoke shop owners. Rutherford wrote in an Oct. 9 three-page letter to the Congressional Commerce, Gaming and Land committee, that the Fund needs to be repealed or ended as soon as possible.
“Over the last five years, the Osage Nation has received about $12.8 million in taxes from tobacco sales. Of this amount, the Tax Commission has paid about 85.8% of tobacco tax collections to five Osage-owned smoke shop owners – over $11 million – because of the Fund,” she wrote. “The Osage Nation kept just $1.8 million. In this fiscal year alone, the Tax Commission has paid over $1.64 million to the five smoke shop owners; the Osage Nation has kept only $314,000.”
The current Tobacco Tax Compact with the state was set to expire on Dec. 31, which would have ended the fund. However, after tribal negotiations for a new tobacco compact went south with Gov. Kevin Stitt, lawsuits were filed, and the case is currently in the Oklahoma Supreme Court. Rutherford said with the compact tied up in litigation, the current tobacco compact could be extended for another year and that’s why it’s important for the ON Congress to act now.
“To our knowledge, the Osage Nation is the only Tribe in Oklahoma that has legislated a monopoly to individual smoke shop owners. In the Tax Commission’s view, this tax revenue should be used to support Osage Nation priorities, not enrich Osage individuals,” she wrote.
Rutherford said the Fund has always been on the Board’s radar, but it was only until recently she and her colleagues, Beverly Brownfield and Rhonda Wallace, could do anything about it.
The Board was dissolved in 2014, shortly after Principal Chief Geoffrey Standing Bear took office. In 2019, the Nation created a Tax Advisory Board which Rutherford, Brownfield and Wallace were appointed to but their advisory role did not include administrative or supervisory functions. In 2022, the Tax Commission Board was re-established and all three women appointed.
Currently, there are seven smoke shops in operation within Osage boundaries. The Osage News filed an open records request with the Tax Commission for the names of the shops and their owners:
- Big Deer Smoke Shop: Laura Lookout
- Fairfax Smoke Shop: Jo Bowman and Joey Grigg
- Firewalker Smoke Shop: GR and Shaena Carter
- HWY123 Smoke Shop: Roscoe Mays
- Osage Trading Co. 1, 2, and 3: Paul Mays III and Christi Mays
Rutherford said the Tax Commission Board urges the Osage Nation Congress to support their legislative proposal to end the Fund and the rebate system immediately.
Rutherford said that without prompt legislative action the fund will continue to make the payouts for as long as the Tobacco Compact is extended. The Tax Commission Board feels it is not fair to the Osage people for this “relief fund” to continue to give the Nation’s tax dollars to a handful of Osage individuals when there are so many greater needs.
Ending the rebate could put smoke shops out of business
According to PJ Mays, who owns Osage Trading Co. 1, 2, and 3, he first read the letter by Rutherford after Congressman Billy Keene posted it to his Facebook page about a month ago. Mays said he thought the letter was “inflammatory.”
“I think it was written in a way to divide people, to get something accomplished,” Mays said. “No smoke shops, as far as I know, receive more money percentage wise than the other smoke shops. In total dollar amounts, yes, they do, but that has to do more with the volume each store sells.
“I think it [the rebate] allows all smoke shops, not just my family’s store, to be competitively priced with other smoke shops out there. The reason I say that is because some of the smoke shops that border our Nation actually take that rebate and put it in the price and create a cheaper price, a more competitive price. And without that rebate, we cannot be competitive with the neighboring tribes.”
Mays said his family got into the smoke shop business 29 years ago when his father, Paul, opened their first store. He said the mid-1990s, a carton of cigarettes was $3 to $5, and the profit margin was between 45% and 55%, which meant they made an average of about $2.50 per carton.
“[Thirty] years later, we’re making that same $2 to $2.25 per carton, and that profit margin without the rebate is somewhere around 3% to 4%. With the rebate, the profit margin is 17%. Now, 17%, I don’t know if you know anything about running a business, is a very low profit margin,” he said. “Most convenience stores, grocery stores, and most parts stores run off a 30% to 40% profit rate.
“But, we’ve been good stewards, we paid off most of our stuff early, we don’t have any outstanding debt, and therefore we can operate on that 17%. But if they take away the rebate, we’re looking at 3% profit.”
Mays went on to explain what it takes to run three smoke shops, to pay 20 people, to maintain the community they’ve made. How they’ve had highs and lows, especially in a growing society smoking less and less cigarettes. They’ve had to pivot to stay in business.
He said if the tribe ends the rebate fund, he knows there will be smoke shops, especially smaller smoke shops, that will close.
“It may seem like a lot of money because they’ve totaled it up,” Mays said. “But if you divide it out by years, by months and you factor it by price per carton, it’s not a lot of money.”
