Opinion ID: 2329371
Heading Depth: 1
Heading Rank: 1

Heading: oklahoma's effort to streamline local sales and use tax collection, procedural history, and undisputed facts.

Text: ¶ 3 Prior to July 1, 2010, the Oklahoma Tax Code, 68 O.S. Supp.2002 § 2702(A) [3] authorized municipalities such as Tulsa to contract with the Tax Commission to collect and enforce Tulsa's municipal taxes. The Commission was also authorized to collect up to 1 and 3/4% of the funds it collected as a service fee. ¶ 4 Tulsa admits that, historically, it has voluntarily chosen to contract with the Commission for such services and that such contracts were terminable by either party upon proper notice as specified in the contract. In fact, it contracted with the Commission for a service fee of 1% of the municipal sales and use taxes, interest, and penalties it collected for Tulsa until May of 2010. [4] ¶ 5 The backdrop to this dispute is found throughout the Oklahoma Tax Code. [5] The Commission has long been authorized to enter into agreements with cities, town, and municipalities (collectively municipalities) to collect and administer local sales and use taxes for a fee on behalf of the municipalities. [6] However, it was not until the 2000 legislative session, that the Oklahoma Legislature, along with other states, began actively modernizing and streamlining municipal tax collections. ¶ 6 In 2000, the Oklahoma Legislature adopted the Streamlined Sales Tax System Act (the 2000 Act) [7] in response to Legislative findings that: 1) state and local tax transactions should be treated competitively and neutral; 2) sales and use tax systems should be simplified; 3) revenue sources and fiscal sovereignty should be preserved; and 4) the administrative burden of collection should be reduced. [8] The purpose of the Act was to direct the Commission to work with other states in developing and participating in a streamlined system for sales tax and use tax collection and administration. [9] ¶ 7 The next year, in 2001, the Legislature, in an apparent response to the Commission's work, adopted the Streamlined Sales and Use Tax Administration Act, which applied to state, county or municipality sales and use tax collection. [10] The purpose of the 2001 Act was to simplify and streamline sales and use tax collections and reduce and eliminate the burden and costs of collecting taxes for both the state and its political subdivisions. [11] ¶ 8 As part of the simplification process, the Legislature authorized the State to work with other states and enter into agreements simplifying and modernizing sales and use tax administration to substantially reduce a taxpayer's burden of tax compliance. [12] The agreements reduced the burdens of complying with local sales and use taxes by requiring states to administer sales and use taxes levied by local jurisdictions. [13] ¶ 9 Some nine years later, the legislature expanded its streamlining efforts during the 2010 Legislative session, [14] when it passed House Bill 2359 which amended § 2702(A) to require municipalities to contract with the Commission for collection of municipal taxes and set the required collection fee at 1 and 3/4% of what was collected. [15] On June 1, 2010, Tulsa entered into an agreement with RDS, a private company who specializes in the collection and recovery of taxes for cities in various states. On June 9, 2010, the 2010 legislative amendment to § 2702 was signed by the Governor to become effective July 1, 2010. ¶ 10 On June 30, 2010, Tulsa amended its contract with RDS, making some minor adjustments to their arrangement. The next day, the statutory mandates of § 2702 became effective. On August 19, 2010, Tulsa filed a petition for declaratory judgment in Oklahoma County District Court, seeking to have § 2702 declared unconstitutional. [16] It objected to two sections of the statute, § A, which required municipalities to contract with the commission, [17] and, § D, which concerned auditing efforts of municipalities, based upon the premise that they were required to contract with the Commission. [18] ¶ 11 Tulsa argued that the statute was unconstitutional because it: 1) impaired its obligation of contracts; 2) limited its power to assess and collect its own taxes; 3) limited its ability to maximize its tax revenue; and 4) abrogated or limited City powers which were reserved in its city charter. Both the State and the City filed Motions for Summary Judgment. The trial court, on May 9, 2011, in a twenty-two page order determined the statute to be unconstitutional and it granted Tulsa's motion for summary judgment and denied the State's motion. [19] ¶ 12 The Commission appealed to this Court on June 9, 2011, and requested that we retain the cause rather than assign it to the Court of Civil Appeals. The motion to retain was granted on July 22, 2011, and additional brief's were ordered. The briefing cycle was completed on August 29, 2011.