Monday, July 13, 2009

Florida Tribes To Charge State Tax On Cigarette Sales

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This installment of The Tribes In The Media is a Miami Herald article on a decision made by the Indian tribes in Florida to begin charging their non-Indian customers state sales taxes on cigarette sales.

No more tax-free smokes; Seminoles, Miccosukees start charging state levy
By Josh Hafenbrack
Miami Herald Sun Sentinel
July 12, 2009

TALLAHASSEE - Smokers, beware: If you have relied on the Seminole and Miccosukee tribes' smoke shops as a tax-free haven for cigarettes, think again.

The tribes have begun charging the state tax on cigarettes for the first time since Florida imposed it 66 years ago, coinciding with the $1-a-pack state tax hike that took effect July 1. The new tax is $1.34 a pack.

Tribal members still can get untaxed cigarettes for their personal use, but non-Indian visitors to the reservations must now pay the levy.

Florida began taxing cigarettes in 1943, but no Indian tribe collected it until now.

Gary Bitner, spokesman for the Seminoles, said the tribe hoped to reach an agreement with the state on how to divvy up the tax revenues, a concept similar to the gambling compact now being negotiated with Gov. Charlie Crist. ''While that process is coming together, I think the tribe just in good faith has moved ahead to charge the tax,'' Bitner said.

Cigarette sales at Indian smoke shops are a big business. About 25 million packs of cigarettes a year are sold on tribal reservations in Florida, the state Department of Business and Professional Regulation says.

State economists estimate tribal cigarette sales could produce an extra $20 million in revenue, based on 15 million packs being sold with the $1.34 tax.

For South Florida smokers, though, the tribes' decision is more unwelcome news. It shuts down a convenient source of discounted smokes at a time their habit is becoming more and more expensive. The federal tax also went up 62 cents, to $1.01 a pack, in April.

'When I went the other day [to the Seminole smoke shop] and saw the sign, I went, `What? Another $13 -- $56 for a carton?' '' said Cathy Hoffman of Hollywood. ``I was shocked. I think I'm going to have to switch to a cheaper brand.''

The Seminoles have reservations outside Hollywood and Coconut Creek, and four others elsewhere in Florida. The smaller Miccosukee tribe is based in Miami-Dade County.

''If we left it [untaxed], you would have more people going to the tribe to go buy their cigarettes and you wouldn't accomplish the goal'' of giving smokers a financial incentive to quit, said Rep. Jim Waldman, D-Coconut Creek, a backer of the cigarette tax whose district includes a Seminole reservation. 'That was one of the big criticisms: `All you're going to do is encourage black-market cigarettes.' This closed that loophole.''

State lawmakers created a system so native Indians won't have to pay the tax. On June 30, the state began issuing 1.9 million coupons for tax-free cigarette packs to the Seminole and Miccosukee tribes. The figure is based on a formula that provides 1,825 coupons per tribal member each year -- or five packs a day, every day of the year for each tribe member. The tribes use the coupons when they buy cigarettes at the wholesale level and then sell untaxed packs to their members.

''We wanted to come up with a formula that no one could argue was unfair to the Indians,'' said Sen. Ted Deutch, D-Boca Raton, the primary author of the cigarette bill.

Legal precedent seems to back up the state's system. A 1985 U.S. Supreme Court decision, based on a California dispute, held that states could collect cigarette taxes from sales on tribal lands, but only from non-Indian customers.