Opinion ID: 4910633
Heading Depth: 2
Heading Rank: 2

Heading: As a Tax Protest, Administrative Remedies Must Be Exhausted Before a Protestant May Resort to Relief in the Courts.

Text: ¶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 Tribe 12 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