Title: Oklahoma Automobile Dealers Assoc. v. Oklahoma ex rel Oklahoma Tax Comm.
Citation: 2017 OK 64
Docket Number: 
State: Oklahoma
Issuer: Oklahoma Supreme Court
Date: August 31, 2017

Oklahoma Automobile Dealers Assoc. v. Oklahoma ex rel Oklahoma Tax Comm. Annotate this Case Justia Opinion Summary Petitioners are a not-for-profit trade association of automobile dealers, an automobile dealer, and a prospective consumer in Oklahoma. All challenged House Bill 2433, alleging that it was a revenue bill enacted outside of the procedure mandated in Article V, Section 33 of the Oklahoma Constitution. The parties agreed the passage of HB 2433 did not comply with Article V, Section 33; so the case turned on whether HB 2433 was a "revenue bill" to which Article V, Section 33 applies. Applying the test utilized since 1908, the Oklahoma Supreme Court concluded that, HB 2433 "does not levy a tax in the strict sense" because it removed a tax exemption from an already levied tax rather than levying any new tax. As such, HB 2433 was not a revenue bill subject to Article V, Section 33's requirements. 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 . OKLAHOMA AUTOMOBILE DEALERS ASSOC. v. STATE ex rel. OKLAHOMA TAX COMM. 2017 OK 64 Case Number: 116143 Decided: 08/31/2017 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. OKLAHOMA AUTOMOBILE DEALERS ASSOCIATION, an Oklahoma corporation, L AND J ACQUISITIONS, LLC d/b/a BATTISON HONDA, and CAITLIN CANNON, an individual, Petitioners, v. STATE OF OKLAHOMA, ex rel. OKLAHOMA TAX COMMISSION, Respondent. APPLICATION TO ASSUME ORIGINAL JURISDICTION AND PETITION FOR WRIT OF PROHIBITION ¶0 Petitioners, who are a not-for-profit trade association of automobile dealers, an automobile dealer, and a prospective consumer in Oklahoma, challenged House Bill 2433, alleging that it is a revenue bill enacted outside of the procedure mandated in Article V, Section 33 of the Oklahoma Constitution. The parties agree that the passage of HB 2433 did not comply with Article V, Section 33; so the case turns on whether HB 2433 is a "revenue bill" to which Article V, Section 33 applies. Applying the test we have utilized since 1908, we conclude that, HB 2433 "does not levy a tax in the strict sense" because it removes a tax exemption from an already levied tax rather than levying any new tax. As such, HB 2433 is not a revenue bill subject to Article V, Section 33's requirements. ORIGINAL JURISDICTION ASSUMED. PETITION FOR WRIT OF PROHIBITION DENIED. Clyde A. Muchmore, Melanie Wilson Rughani, and Paige A. Masters, Crowe & Dunlevy, P.C., Oklahoma City, Oklahoma, for Petitioners. Mithun S. Mansinghani, Abby Dillsaver, and Ethan Shaner, Office of the Attorney General, State of Oklahoma, Oklahoma City, Oklahoma, for Respondent. Wyrick, J.: ¶1 This is the second of several cases challenging various measures enacted by the Legislature this past session in response to the State's budget crisis. In the first of those cases we unanimously held that a measure imposing a new $1.50-per-pack assessment on cigarettes was a "revenue bill" subject to Article V, Section 33's requirements that revenue bills (1) originate in the House of Representatives, (2) be enacted prior to the final five days of the legislative session, and (3) be approved by either the people or by a three-fourths majority of each legislative chamber.1 This was so because the cigarette measure fit squarely within our century-old test for "revenue bills," in that it both had the primary purpose of raising revenue for the support of state government and it levied a new tax in the strict sense of the word.2 ¶2 This case involves House Bill 2433,3 which was also enacted during the final five days of the session and did not receive three-fourths support in either legislative chamber.4 Like the first case, this case involves an Article V, Section 33 challenge, but the similarities end there because this case presents the much different question of whether a measure revoking an exemption from an already levied tax is a "revenue bill" subject to Article V, Section 33's requirements. Applying the two-part test we have applied for the last century, we conclude that HB 2433 is not a "revenue bill" because, despite its revenue-raising purpose, it does not levy a tax in the strict sense of the word. ¶3 We are compelled to reach this result for three primary reasons. First, our cases have long held that measures making "certain property . . . theretofore exempt from taxation . . . subject to taxation" are not "revenue bills" because removal of an exemption from an already levied tax is different from levying a tax in the first instance.5 Second, while that rule may seem superficially inconsistent with Article V, Section 33's taxpayer protections, it is actually deeply rooted in our Constitution's related policies that disfavor special exemptions from taxation and promote uniformity of taxation-policies that are also designed to protect the taxpayers. And third, because we have never before in our history held that a measure revoking a tax exemption is a "revenue bill," and because we have explicitly held that such measures are not "revenue bills," to hold otherwise would require us to break new ground and overrule well-established precedents. To do so would be to deprive the Legislature and the people of the legal predictability, uniformity, and clarity that it is our obligation to provide. Accordingly, we must deny Petitioners the relief they seek. I. ¶4 To properly apply our Article V, Section 33 test, we must first determine the operation and effect of HB 2433. ¶5 In 1933, the Legislature levied a sales tax on all tangible personal property-including automobiles-and that sales tax has remained part of our tax code ever since.6 In 1935, however, the Legislature added an exemption for automobile sales in the sales-tax provisions, so that automobiles were subject to only an automobile excise tax from that point forward.7 HB 2433 revokes part of that sales tax exemption so that sales of automobiles are once again subject to the sales tax, but only a 1.25% sales tax.8 Sales of automobiles remain exempt from the remainder of the sales tax levy. HB 2433 does not, however, levy any new sales or excise tax, as the text of the measure and related provisions demonstrate. ¶6 For example, the sales tax levy can be found in 68 O.S. § 1354, imposing a tax upon "the gross receipts or gross proceeds of each sale" of tangible personal property and other specifically enumerated items.9 The last amendment increasing the sales tax levy was in 1989, when the rate was raised to 4.5%.10 Nothing in HB 2433 amends the sales tax levy contained in section 1354;11 the rate remains 4.5%.12 Likewise, the levy of the motor vehicle excise tax is found in 68 O.S. § 2103.13 That levy has not been increased since 1985,14 and nothing in HB 2433 amends the levy contained in section 2103.15 Both before and after the enactment of HB 2433, the levy remains the same: every new vehicle is subject to an excise tax at 3.25% of its value, and every used vehicle is subject to an excise tax of $20.00 on the first $1,500.00 or less of its value plus 3.25% of its remaining value, if any.16 ¶7 HB 2433 instead does its work by amending the sections of law that provide and give effect to the sales tax exemption for motor vehicles: 68 O.S. §§ 1355 and 2106, respectively. Prior to HB 2433's enactment, section 1355 "specifically exempted from the [sales] tax . . . [the s]ale of motor vehicles . . . on which the Oklahoma Motor Vehicle Excise Tax . . . has been, or will be paid."17 Section 2106, meanwhile, made clear that "[t]he excise tax levied by this article [wa]s in lieu of all other taxes on the transfer or the first registration in this state of vehicles,"18 effectively erecting a bar on any other law seeking to impose a sales tax on motor vehicles. After HB 2433, however, section 1355 only exempts motor vehicle sales from "all but a portion of the levy provided under Section 1354 of this title, equal to one and twenty-five-hundredths percent (1.25%) of the gross receipts of such sales."19 Likewise, and to avoid potential conflict, HB 2433 also amended the bar in 2106 to now provide that "[t]he excise tax levied by this article is in lieu of all other taxes on the transfer or the first registration in this state of vehicles, . . . except: . . . [o]ne and twenty-five-hundredths percent (1.25%) of the gross receipts upon which the tax is levied by Section 1354 of this title."20 These amendments do not levy a new tax, as their reference to the sales tax levy in section 1354 makes plain. They merely remove, in part, an exemption from a tax that was levied many years prior. II. ¶8 Our cases have always recognized the important constitutional distinction between measures levying new taxes and measures removing exemptions to already levied taxes. In an unbroken line of decisions dating to near statehood, we have accounted for this distinction through application of a two-part test that limits Article V, Section 33's application to only those measures whose "principal object is the raising of revenue" and which "levy taxes in the strict sense of the word."21 The first prong isn't seriously in doubt here; the passage of HB 2433 was motivated by a desire to capture additional tax revenue to be used to support state government. But because we have always said that bills must have both features, this case turns on the second prong: whether the measure "levies a tax in the strict sense of the word." Both the facts and the law compel the conclusion that it does not. A. ¶9 As explained above, HB 2433 does not, as a matter of fact, levy a sales tax on automobiles. That tax was originally levied in 1933, and the most recent levy increasing that tax was in 1989.22 But for a legislative exemption that was granted to car buyers, sales of automobiles-just like other sales of goods-would be subject to the sales tax.23 HB 2433 merely revokes a portion of that special exemption from sales tax such that car buyers now receive only a partial exemption from sales tax, rather than the complete exemption they have long enjoyed. HB 2433 thus does not levy a tax; it merely makes automobile sales subject to the sales tax that was levied on automobile sales many decades prior. ¶10 Nor does HB 2433 levy a tax in any legal sense. "Strictly speaking, a levy is the legislative act, whether state or local, which determines that a tax shall be laid, and fixes its amount."24 We have never held that a measure removing an exemption from an existing tax "levies a tax in the strict sense." That complete absence of precedent for Petitioners' position is strong evidence that removing an exemption has always been understood as something other than the levy of a tax. But stronger evidence still is found in our cases where we have explicitly held that making "certain property . . . theretofore exempt from taxation . . . subject to taxation" (i.e., removing an exemption from taxation) was not a levy of a tax.25 ¶11 In Leveridge v. Oklahoma Tax Commission,26 for example, this Court was called on to determine whether Article V, Section 33 applied to a measure modifying an exemption from the automobile excise tax. The purpose of the measure at issue was, as its title stated, "to require payment of vehicle excise tax on manufacturer's factory delivered price as to new vehicles of the latest manufactured model owned by used car dealers when same have not theretofore been registered in Oklahoma and an excise tax paid thereon."27 In simpler terms, used cars that had previously been titled in another state and which were owned by used car dealers were exempt from the excise tax.28 Used car dealers discovered that they could take advantage of this exemption by titling new cars in other states, and then selling those cars in Oklahoma as used cars exempt from the tax.29 Because this exemption was causing the State to miss out on revenue, the Legislature enacted House Bill 885. ¶12 HB 885 amended the law in two ways, both of which were designed to aid in the capture of those lost revenues. First, the measure amended the relevant exemption found in 47 O.S.1951 § 52d "so as to specifically provide that a used car dealer was not exempt from motor vehicle excise tax upon registering a motor vehicle of the 'latest manufactured model' for the first time in Oklahoma, even though the vehicle had theretofore been registered in some other state."30 Second, because under the existing definitions of "new" and "used" cars, a car owned by a used car dealer was never considered "new," even if it was of the latest model year, the measure amended the definitions in 47 O.S.1951 § 52c so that "a used car dealer could own a 'new vehicle' for the purposes of the Motor Vehicle Excise Tax Act and could therefore be subjected to motor vehicle excise tax on the basis of 100% of the factory delivered price of the vehicle."31 Neither of these amendments can be fairly construed as having a purpose besides raising revenue. ¶13 Accordingly, we never suggested that the purpose of the measure was anything other than to raise revenue. Had there been a plausible argument that the purpose was something other than raising revenue, one would expect the Tax Commission to make that argument; but it didn't. It instead defended the bill on the basis that it "d[id] not levy a tax in the strict sense of the word."32 Likewise, if it were the case that the measure in Leveridge failed that first prong of our "revenue bill" test, one would expect this Court to have resolved the case on that basis; but we didn't. We instead resolved the case on the basis that-even if revenue raising was its purpose-the measure didn't levy a tax, holding that "[t]he bill under consideration does not within its four corners levy a tax and for said reason is not per se a revenue bill."33 In reaching that holding, we reasoned that "at most . . . H. B. 885 . . . merely declare[s] that certain property (automobiles of the latest manufactured models owned by used car dealers) theretofore exempt from taxation (the motor vehicle excise tax) shall thereafter be subject to taxation. Such amendments do not constitute a revenue bill."34 ¶14 The takeaway from Leveridge is thus straightforward: measures removing exemptions from already levied taxes are not revenue bills. This conclusion was entirely consistent with our constitutional policy disfavoring exemptions, and also with our longstanding Article V, Section 33 test, which requires that a measure "levy a tax in the strict sense" if it is to be considered a revenue bill. Because the measure at issue in Leveridge levied no new tax, but merely removed an exemption from an already levied tax, it didn't meet the test. B. ¶15 As was the case in Leveridge, HB 2433 doesn't levy a tax in the strict sense because it merely removes a previously granted exemption from an already levied tax, making "certain [transactions] . . . theretofore exempt from taxation . . . subject to taxation." Leveridge should thus be dispositive of this case. Recognizing as much, the Petitioners attempt to distinguish the case, but do so unpersuasively.35 ¶16 First, Petitioners insist that the measure at issue in Leveridge lacked a revenue-raising purpose. As explained above, however, nothing in Leveridge supports the notion that the measure at issue there had a principal object other than raising revenue. That is not how the bill was defended, it did not serve as any part of our holding in the case, and the title and text of the measure expressed a revenue-raising purpose and nothing else.36 And while Petitioners are correct in a certain sense when they say that the measure was designed to "close a loophole" that allowed used car dealers to avoid certain taxation, this merely begs the obvious question: Why does government seek to close loopholes in its tax code? To collect more tax revenue, of course. ¶17 At bottom, Petitioners' argument is that HB 2433 must be a revenue bill because it causes people to have to pay more taxes. But to say that removal of an exemption from taxation causes those previously exempt from the tax to pay more taxes is merely to state the effect of removing an exemption. It does not, however, transform the removal of the exemption into the levy of a tax, and it begs the dispositive question of whether removal of an exemption is the "levy of a tax in the strict sense." Indeed, the measure at issue in Leveridge could just as easily have been characterized as "imposing a tax disguised as an exemption removal" on new cars that were previously either taxed not at all or at a lower rate. Yet, despite their common effect (causing someone to have to pay a tax they previously didn't have to pay), removing an exemption and levying a new tax are distinct as a matter of fact and law. Our Constitution's restrictions on the enactment of revenue bills are aimed only at those bills that actually levy a tax. The policy underlying those restrictions is not undercut in an instance such as this, because the original levies of the sales tax on automobile sales were subject to Article V, Section 33's restrictions. ¶18 It has also been suggested that the 1992 passage of State Question 640 modified our definition of "revenue bill" such that we no longer need inquire as to whether the measure levies a tax in the strict sense-in other words, that revenue-raising intent alone should decide the case. We have rejected this notion on three occasions now, including in our recent unanimous decision in Naifeh v. State ex rel. Oklahoma Tax Commission,37 and were correct to do so each time. ¶19 Article V, Section 33 can best be thought of as having two parts. The first describes the object to which it applies ("revenue bills"), and the second describes the requirements it imposes on those revenue bills. SQ 640 only amended the second part by adding the requirement that revenue bills be approved by either the people or by a super-majority of the Legislature. It did not amend the first part defining the provision's coverage.38 Our many cases defining "revenue bill"-including Leveridge, which excluded exemption-removing measures from the definition of "revenue bill"-existed at the time SQ 640 was drafted, but the drafters of the amendment chose to leave that portion of Article V, Section 33 unchanged.39 Thus, both before and after SQ 640, Article V, Section 33 only applies to "revenue bills," and "revenue bills" are only those bills that (1) have the primary purpose of raising revenue for the support of state government and (2) levy a tax in the strict sense of the word.40 Even putting the plain text aside, no party has provided any evidence that SQ 640 was intended to overrule our prior cases that say the term "revenue bill" does not include measures making "property . . . theretofore exempt from taxation . . . subject to taxation."41 ¶20 In sum, artificially distinguishing our prior holdings in order to allow some exemption removals but not others would deny the Legislature and the people the legal predictability, regularity, and clarity that it is our obligation to provide. The Legislature would be left guessing as to whether its next attempt to remove an exemption will be treated like the measure in Leveridge, or like the measure at issue here. We instead choose to provide the Legislature with a workable bright line rule: measures whose primary purpose is to raise revenue for the support of state government and which levy a tax in the strict sense are "revenue bills"; measures merely eliminating special exemptions to already levied taxes are not.42 III. ¶21 It's understandable that some might at first blush think that our prior cases elevate form over function. After all, as a result of HB 2433, those buying a car will pay more taxes to the State than they did before, even if no new tax was actually levied. But on closer examination it is apparent that the distinction between (1) elimination of a special exemption from an existing tax and (2) a levy of a new tax, is one deeply rooted in our Constitution and in our founders' notions of fair play when it came to bearing the burdens of taxation. ¶22 Oklahoma's preference for the uniform administration of taxes is expressed in our Constitution in a variety of ways. First are the complementary commands of Article X, Section 5, and Article V, Section 50. Together, those provisions demand that "[t]axes shall be uniform upon the same class of subjects,"43 and that "[t]he Legislature shall pass no law exempting any property within this State from taxation, except as otherwise provided in this Constitution."44 Likewise, Article V, Section 46, prohibits the Legislature from passing any local or special law that, among other things, "exempt[s] property from taxation,"45 while Sections 51 and 59, more generally require the uniform application of laws and prohibit the extension of special treatment to favored groups or persons.46 Read together, these provisions express an unmistakable constitutional policy disfavoring special exemptions from taxation and favoring uniformity of taxation, such that all citizens help shoulder the financial burden of supporting our state government. ¶23 The people articulated in our Constitution only a few limited exceptions to this rule. Article X, Section 6 delineates specifically the people's desire that certain things like libraries, museums, cemeteries, orphanages, churches, etc., be exempt from taxation.47 The people then sharply limited the Legislature's ability to enlarge those constitutional exemptions or grant new statutory exemptions, while giving the Legislature the authority to revoke any exemptions that existed outside the Constitution. We described this constitutional framework as follows: "the Legislature is vested with power, Sec. 6, Art. 10, Const., to qualify, curtail or annul any exemption from taxation but it is without power to grant exemptions other than those recognized by the Constitution or to enlarge the exemptions so recognized."48 ¶24 Given all this, it is impossible to conceive that the people-the same people who placed in the Constitution these strong limitations on exemptions and gave the Legislature the power "to qualify, curtail or annul any exemption from taxation"-intended that measures revoking special exemptions would be subject to the strict requirements of Article V, Section 33-requirements whose sole purpose is to hamstring the Legislature's ability to act. Indeed, Petitioners ask us to enshrine in our Constitution a policy in favor of such exemptions by making measures eliminating exemptions subject to Article V, Section 33. Were we to do so, the Legislature would be able to hand out special exemptions with only 51% support, but would not be able to take them back without at least 75% support. The practical effect of such a one-way-ratchet rule is that the many special exemptions from taxation currently existing in our tax code-billions worth, according to the Tax Commission49-would be exceedingly difficult to eliminate. That is a result we think wholly inconsistent with the uniformity of taxation policy the people enshrined in our Constitution, a policy designed to ensure that the burdens of supporting our state government were not disproportionately placed on those lacking the political clout to secure special dispensations from taxation.50 ¶25 Petitioners account for none of this. Accordingly, we reject their request that we replace our Constitution's preference for uniformity with a new policy favoring special exemptions from taxation by making them easy to enact, but all-but-impossible to revoke. Our policy disfavoring new tax levies can-and should-coexist with our policy disfavoring disparity in taxation. Indeed, our obligation as a court is to give vitality to all provisions in the Constitution, and where one constitutional provisions butts up against another, we must harmonize the two rather than allow one to run roughshod over the other.51 * * * ¶26 HB 2433 was not enacted in violation of Article V, Section 33. Accordingly, we assume original jurisdiction and deny Petitioners' request for a Writ of Prohibition. ¶27 Any petition for rehearing shall be filed no later than 5 p.m. on the 6th day of September, 2017. If no petition for rehearing is filed by that deadline, this opinion shall be final. ORIGINAL JURISDICTION ASSUMED. PETITION FOR WRIT OF PROHIITION DENIED. Gurich, V.C.J., Kauger, Winchester, Reif, and Wyrick, JJ., concur. Combs, C.J. (by separate writing), Watt (by separate writing), Edmondson, and Colbert, JJ., dissent. FOOT