Title: Warehouse Market v. Oklahoma ex rel. Ok. Tax Comm.
Citation: 2021 OK 6
Docket Number: 
State: Oklahoma
Issuer: Oklahoma Supreme Court
Date: February 2, 2021

Warehouse Market v. Oklahoma ex rel. Ok. Tax Comm. Annotate this Case Justia Opinion Summary Plaintiff-appellee Warehouse Market subleased a commercial building from defendant Pinnacle Management, Inc. The building was on federally restricted Indian land. Subsequently, defendant-appellant, Oklahoma Tax Commission (OTC) and the Muscogee (Creek) Nation Office of Tax Commission (Tribe) both sought to collect sales tax from Warehouse Market. Warehouse Market filed an interpleader action in an attempt to have the court determine which entity to pay. However, the trial court dismissed the Tribe because it had no jurisdiction over it because of the Tribe's sovereign immunity. The trial court then determined that the OTC could not be entitled to the sales tax unless and until the dispute between the OTC and the Tribe was resolved in another forum or tribunal. The Oklahoma Supreme Court held that because the substance of Warehouse Market's action/request for relief was a tax protest, exhaustion of administrative remedies was a jurisdictional prerequisite to seeking relief in the trial court. Read more Want to stay in the know about new opinions from the Oklahoma Supreme Court? Sign up for free summaries delivered directly to your inbox. Learn More › You already receive new opinion summaries from Oklahoma Supreme Court. Did you know we offer summary newsletters for even more practice areas and jurisdictions? Explore them here . WAREHOUSE MARKET v. STATE ex rel. OKLAHOMA TAX COMM. 2021 OK 6 Case Number: 118504 Decided: 02/02/2021 THE SUPREME COURT OF THE STATE OF OKLAHOMA NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL. WAREHOUSE MARKET INC., Plaintiff/Appellee, v. STATE OF OKLAHOMA, ex rel. OKLAHOMA TAX COMMISSION, Defendant/Appellant, and MUSCOGEE (CREEK) NATION, ex rel. OFFICE OF THE TAX COMMISSION, and PINNACLE MANAGEMENT & CONSULTING, LLC., Defendants. APPEAL FROM THE OKMULGEE COUNTY DISTRICT COURT Honorable Kenneth Adair, Trial Judge ¶0 The plaintiff/appellee, Warehouse Market subleased a commercial building from the defendant Pinnacle Management, Inc. The building is on federally restricted Indian land. Subsequently, the defendant/appellant, Oklahoma Tax Commission (OTC) and the Muscogee (Creek) Nation Office of Tax Commission (Tribe) both sought to collect sales tax from Warehouse Market. Warehouse Market filed an interpleader action in the District Court of Okmulgee County, in an attempt to have the court determine which entity to pay. However, the trial court dismissed the Tribe because it had no jurisdiction over it because of the Tribe's sovereign immunity. The trial court then determined that the OTC could not be entitled to the sales tax unless and until the dispute between the OTC and the Tribe was resolved in another forum or tribunal. The OTC appealed and we retained the appeal. We hold that because the substance of Warehouse Market's action/request for relief is a tax protest, exhaustion of administrative remedies is a jurisdictional prerequisite to seeking relief in the trial court. MOTION TO RETAIN PREVIOUSLY GRANTED; TRIAL COURT REVERSED AND REMANDED WITH INSTRUCTIONS. James H. Ferris, Randy J. Lewin, Scott V. Morgan, Tulsa, Oklahoma. for Plaintiff/Appellee, Warehouse Market, Inc. Randall J. Yates, Oklahoma City, Oklahoma, Assistant Solicitor General, Oklahoma Attorney General for Defendant/Appellant, Oklahoma Tax Commission. KAUGER, J.: ¶1 The dispositive question presented is whether the trial court can address plaintiff's action/request for relief from OTC taxation? We hold that because the substance of the plaintiff's action/request for relief is a tax protest, exhaustion of administrative remedies is a jurisdictional prerequisite to seeking relief in the trial court. FACTS AND PROCEDURAL HISTORY ¶2 Two tribal members of the federally recognized tribe, the Muscogee (Creek) Nation (the Tribe), own real property within the jurisdiction of the tribe, within the town of Okmulgee, Oklahoma. A shopping center is located on the property. The property is "restricted Indian land," which Federal regulations define as land in which the title "is held by an individual Indian, subject to Federal restrictions against alienation or encumbrance."1 ¶3 The landowners leased the property on February 5, 2018, to Pinnacle Management & Consulting, Inc. (Pinnacle) for a period of twenty-five years with an option to renew one (1) twenty-five year period. The lease is titled as the "United States Department of the Interior Bureau of Indian Affairs Business Lease" (BIA Lease) and the purpose of the lease is for Pinnacle to manage the shopping center. The Superintendent of the Okmulgee Agency of the Bureau of Indian Affairs (BIA) approved the lease on February 13, 2018.2 The lease requires new businesses to obtain licensing and pay appropriate sales tax to the Tribe.3 ¶4 On October 1, 2018, Pinnacle entered into a Sublease with Warehouse Market, Inc., D/B/A Cox Cash Saver Cost Plus 10% (Warehouse Market). The initial term of the Sublease was for sixteen months, with four additional, optional sixty month terms. The tax provision of the Sublease required the sublessor to pay all attributable real property and assessments to the property.4 The Sublease also required it to be governed by tribal law.5 The Sublease was not approved by the BIA.6 ¶5 The record is silent as to whether or how long Warehouse Market may have occupied the premises before it entered into this particular Sublease with Pinnacle. Nevertheless, the Tribe sent a letter to Pinnacle dated September 6, 2018, which stated that effective October 1, 2018, pursuant to the BIA Lease, any retail sales located on the property would be required to pay 6% sales tax to the Tribe. The letter also states that "[t]here is no obligation to pay taxes to any city, county, or state agencies as the Muscogee (Creek) Nation Tax Commission is the only authorized taxation agency allowed to assess or collect taxes on restricted land." Subsequently, Pinnacle passed the information on to Warehouse Market. ¶6 Warehouse Market "had been collecting and remitting" 10.083% sales tax levied by the State of Oklahoma on taxable items at the store. However, for the month of October 2018, as requested by the Tribe, Warehouse Market sent the 6% which the Tribe assessed as sales tax to the Tribe. Warehouse Market also advised the Oklahoma Tax Commission (OTC) that the October 2018 payment would be the last sales tax payment to the State of Oklahoma.7 The OTC responded with a letter dated November 21, 2018, which stated that the full amount of the October taxes were due to the OTC and that future taxes would also be due. ¶7 With the prospect of losing its licensing and permits if it did not remit sales tax to both State and Tribal taxing entities, Warehouse Market filed an action in the District Court of Okmulgee County on December 21, 2018. The filing is labeled as a "Petition for Interpleader and Application for Temporary Restraining Order, Temporary Injunction, and Permanent Injunction." The action named the OTC, the Tribal Office of Tax Commission, and Pinnacle as defendants. ¶8 Warehouse Market sought to interplead the sales tax it had collected to the Court, and let the Court determine who was entitled to the funds.8 It also sought a determination from the Court as to whether the OTC could tax Warehouse Market at all. Warehouse Market requested restraining orders against both tax entities from pulling its license and/or shutting its store down. The trial court initially granted the interpleader, and granted a temporary restraining order. However, through the course of the proceedings, the trial court ultimately dismissed the Tribal Tax Commission due to sovereign immunity, and the court's lack of subject matter jurisdiction over it. Pinnacle also sought to be dismissed because it had no interest in the funds whatsoever. ¶9 On March 19, 2019, the trial court issued a judgment and order determining that the OTC was entitled to the funds, and dismissing Warehouse Market and Pinnacle from the proceedings. Also on March 19, 2019, Warehouse Market filed a Motion for Summary Judgment, requesting that the Court determine whether the OTC could collect any sales tax whatsoever from Warehouse Market because the business is on Federal restricted land. On March 29, 2019, Warehouse Market filed a Motion to Reconsider the March 19, 2019 order. It asked for an opportunity to respond to the OTC's arguments of entitlement to the funds and authority to tax it. ¶10 On April 15, 2019, the OTC responded to the Motion to Reconsider, arguing that what might have initially been guised as an interpleader for collected sales tax fund, is substantively a tax protest. As a tax protest, Warehouse Market has not exhausted administrative remedies as a jurisdictional requirement before the Court can determine the OTC's taxing authority over Warehouse Market. The OTC cross-motioned for dismissal/summary judgment. After a November 14, 2019 oral argument, the trial court issued a somewhat confusing order on Summary Judgment on November 21, 2019. In it, the trial court appears to have granted Warehouse Market's Motion for Summary Judgment, at least in part, and denied the OTC Request for Dismissal/Motion for Summary Judgment. ¶11 The order states: . . . Plaintiff's Motion for Summary Judgment is GRANTED only to the extent Defendant Oklahoma Tax Commission is not currently entitled to retail tax proceeds at Plaintiff's subject matter retail establishment unless and until the legitimate dispute between the Muscogee (Creek) Nation and the Oklahoma Tax Commission as to taxation authority is resolved in another forum or tribunal. To allow the Oklahoma Tax Commission to obtain funds or to have exclusive administrative authority over sales tax proceeds would result in catastrophic, permanent and irreparable harm to the innocent party Plaintiff who merely wants to pay its taxes. Defendant's Cross-Motion for Dismissal or Summary Judgment is DENIED. The OTC filed an appeal on December 20, 2019. We retained the cause on February 18, 2020, and then we ordered additional briefing which was completed on July 28, 2020. The cause was assigned to this chamber on August 6, 2020. BECAUSE THE SUBSTANCE OF THE PLAINTIFF'S ACTION/REQUEST FOR RELIEF IS A TAX PROTEST, EXHAUSTION OF ADMINISTRATIVE REMEDIES IS A JURISDICTIONAL PREREQUISITE TO SEEKING RELIEF IN THE TRIAL COURT. ¶12 Because the trial court had no subject matter jurisdiction over the Tribal Tax Commission due to sovereign immunity, the Tribal Tax Commission was dismissed and is no longer a party to this cause. Nor is Pinnacle a party because it only served as the sublessor to Warehouse Market. Since the OTC filed this appeal, Warehouse Market has filed a similar action in federal court against the OTC, also seeking relief from that court.9 Nothing in the record indicates that Warehouse Market has pursued any administrative remedies in either the OTC, or the Muscogee (Creek) Nation Tax Commission, to protest either entity's respective tax imposition on Warehouse Market. A. The Substance of The Plaintiff's Action/Request For Relief is a Tax Protest. ¶13 Warehouse Market asks the trial court to determine whom to pay the taxes to and to stop either the OTC or the Tribe from interfering in its business. The OTC argues that this matter is not merely an interpleader, but really a tax protest. An interpleader is viewed with favor by this Court as a means of avoiding multiple and vexatious litigation. It is an appropriate proceeding whenever (1) two or more claims arise out of the same or related subject matter and (2) the stakeholder is exposed to double or multiple litigation as a result of these claims.10 Without doubt, Market Warehouse's initial petition was in the nature of an interpleader. It specifically requested that it be allowed to deposit the sales tax it had collected, and would continue to collect, which both the OTC and the Tribe asserted claim to, and that the trial court then determine who was entitled to the taxes. ¶14 However, once the trial court dismissed the Tribe because of its sovereign immunity, and the trial court was without any authority to take any further decisive action towards the Tribe, the cause no longer met the basic definition of interpleader and, instead, quickly became nothing more than a tax protest. A tax protest is generally defined as a tax assessment complained to have been illegally levied, alleging that such taxes were illegal because they had been levied without authority.11 Market Warehouse protests the OTC tax assessment and complains that it was illegally levied. It alleges that such taxes were illegal because they had been levied without authority. Consequently, this cause fits squarely within the definition of a tax protest. B. As a Tax Protest, Administrative Remedies Must Be Exhausted Before a Protestant May Resort to Relief in the Courts. ¶15 Warehouse Market argues that because this action is not a tax challenge, the trial court may decide to which entity the sales taxes belong. The OTC argues that because the nature of this proceeding is a tax protest, the trial court is without jurisdiction to decide the matter because Warehouse Market has not exhausted its administrative remedies in either the OTC or the Tribe12 or both. We have already determined that Warehouse Market's action/request for relief is a tax protest. This Court has noted on multiple occasions that taxpayers who protest tax assessments must follow the administrative review process before an appeal stands ready for a court's decision.13 ¶16 Furthermore, the Oklahoma Legislature has legislatively mandated a specific procedure for taxpayers to challenge any tax assessment levied against them. It does not include initiating the protest in the district courts.14 The procedure includes: the opportunity for a taxpayer to request a hearing before an administrative law judge to challenge the OTC's tax assessment against the taxpayer;15 then an appeal;16 and the possibility of a refund of any unlawfully collected taxes with interest.17 ¶17 Taxation is an exclusively legislative function that can be exercised only under statutory authority and in the manner specified by statute.18 The law had long been established that a taxpayer must exhaust the administrative remedies before the courts may act on the matter.19 Such a requirement is a jurisdictional prerequisite to the district court.20 If the law requires an administrative determination precedent to judicial action, the administrative process may not be short-circuited.21 Even the OTC itself cannot circumvent this process. In State ex rel. Okla. Tax Com'n v. Texaco Exploration & Production, Co., 2005 OK 52, ¶7, 131 P.3d 705 , a case in which we addressed a pure legal question concerning the method to determine gross value of gas where there is no arm's length sale of the gas at the wellhead, we said: ¶13 The amendments in the 1965 legislative measure to §§ 215 and 221 demonstrate intent that the tax laws be enforced through the administrative process prior to suit in the court. Accordingly, we conclude that 68 O.S.2001, § 215 does not authorize the OTC to forego the administrative assessment process required by 68 O.S.2001, § 221 and file suit for a judicial determination of taxes. This conclusion is consistent with the legislative history of Oklahoma's Uniform Tax Procedure Code and our decisions in taxpayer suits holding that OTC has primary jurisdiction, Cimarron Industries, Inc. v. Oklahoma Tax Commission, 1980 OK 190, 621 P.2d 539 , and requiring a taxpayer to exhaust the administrative remedies before the courts may act. Request of Hamm Production Co., 1983 OK 92, 671 P.2d 50 . Consequently, we must reverse the trial court and remand with instructions for the trial court to dismiss the cause. Warehouse Market must exhaust administrative remedies before seeking relief in the courts. ¶18 Upon the dismissal of the action in the district court, there will remain the question of the monies collected as state sales tax by Warehouse Market. Six-hundred-thousand-five-hundred-sixty-five dollars and four cents ($600,565.04) was deposited with the Court Clerk of Okmulgee County at the beginning of this matter and denominated as interpleader. We have determined that this cause is properly a tax protest. The provisions of the statutes governing protests apply.22 Monies originally collected pursuant to the laws governing the collection of state sales tax must be sent to the OTC. The court clerk may charge poundage fees and any other statutory fees for this action.23 CONCLUSION ¶19 Once the trial court dismissed the Muscogee (Creek) Nation because of its sovereign immunity, Warehouse Market's district court action became a tax protest. As a tax protest, administrative remedies must be exhausted before a protestant may resort to relief in the courts. Warehouse Market has administrative remedies available in both the Oklahoma Tax Commission and the Muscogee (Creek) Nation. The Trial Court is reversed and the cause is remanded with instructions to the trial court to dismiss the cause and to order the transfer of the funds deposited with the Okmulgee County Court Clerk excluding poundage and appropriate fees, to the Oklahoma Tax Commission. MOTION TO RETAIN PREVIOUSLY GRANTED TRIAL COURT REVERSED REMANDED WITH INSTRUCTIONS Darby, C.J., Kauger, Edmondson, Combs, Gurich and Rowe, JJ., concur; Kane, V.C.J. and Winchester, J. (by separate writing) concur in result. FOOT