Opinion ID: 1280823
Heading Depth: 1
Heading Rank: 1

Heading: The Tax Commission's Obligation to Refund.

Text: Effective November 1, 1989, collected sales taxes are deposited into the sales tax remitting account and remitted to the counties and municipalities on a monthly basis. 68 O.S.Supp. 1989 §§ 1373 and 1374. These statutes clearly require remitting the collected tax to the appropriate counties and municipalities, but contain no provision for preserving sales taxes paid under protest for eventual refunds to taxpayers. The State Treasurer has apparently distributed the revenues from the unauthorized sales tax to the respective counties and municipalities notwithstanding the protests. According to the Tax Commission these funds were appropriated and spent by the entities involved. The taxpayers [1] paid money to the Tax Commission under protest. A taxpayer may protest an assessment. 68 O.S.Supp. 1987 § 221. The Tax Commission issues an order adjudicating the protest. Id. at § 221(g). That order is appealable to this court. 68 O.S.Supp. 1987 § 221(g) and 68 O.S. 1981 § 225. When in the course of an appeal of a protest this court determines that the taxes paid under protest were erroneously or illegally assessed  then  said amounts so paid by the taxpayer, together with the interest thereon at the rate of three percent (3%) per annum, shall be refunded to the taxpayer by the Tax Commission. 68 O.S. 1981 § 225(c). (Emphasis Added). Additionally, Article 2 of Title 68 provides the Uniform Tax Procedure for the Tax Commission, and therein is found the requirement that the Tax Commission return to the taxpayer deposited money or securities in excess of the taxpayer's liability when such was paid by the taxpayer to secure compliance with any State tax law. 68 O.S. 1981 § 211. Section 225 imposes a duty on the Tax Commission to repay all of the money paid under protest  and in this controversy that amount includes amounts collected for counties and municipalities. Sections 211, 221, and 225 show that taxpayers of this State have a statutory expectation for the return of all money paid under protest. [2] This State has long required prompt payment of a tax as a condition precedent for testing the validity of the tax, and the fundamental fairness of such a requirement rests on the taxpayer's ability to eventually receive a refund of invalid taxes. See, Exchange Oil Co. v. State, 80 Okla. 52, 193 P. 999, 1001-1002 (1920). More recently we have said: The State's integrity requires that when a statutory tax refund is due, it must be paid, and procedures must be found to accomplish that purpose. Art. 2, § 6, Oklahoma Constitution. Continental Oil Co. v. Oklahoma Tax Commission, 494 P.2d 650, 653 (Okla. 1972). In Continental Oil Co. v. State Bd. of Equalization, 494 P.2d 645 (Okla. 1972), we observed that The authorization to pay under protest would have no meaning unless it is possible for the taxpayer to derive a benefit therefrom. Id. at 647. The statutorily required benefit is a refund when a taxpayer is successful with a protest. Clearly, the state sales taxes paid under protest must be returned to the taxpayers. The Tax Commission collects sales taxes on behalf of counties and municipalities pursuant to contractual agreements authorized by state law. 68 O.S.Supp. 1983 § 1371 (counties) and 68 O.S.Supp. 1986 § 2702 (municipalities). Contracts with counties must provide for the assessment, collection, and enforcement of the sales tax, ... in the same manner as the administration, collection, and enforcement of the state sales tax by the Oklahoma Tax Commission.  68 O.S.Supp. 1983 § 1371. (Emphasis added). Similar language is found in § 2702. These statutes require administering county and municipal sales taxes in the same manner as state taxes. Thus, under the combined statutory authority of §§ 211, 221, 225, 1371, and 2702, city and municipal sales taxes paid under protest and collected by the Tax Commission are to be refunded by the Tax Commission to the taxpayer upon completion of a successful protest. However, the refund of the municipal and county sales taxes, as explained in part III herein, would be inequitable.