Court Opinion

ID: 5163862
Source: CourtListenerOpinion
Date Created: 2022-01-02 03:13:55.391138+00
Date Added: 2024-06-11T08:25:45.314344
License: Public Domain

SUMMERS, Justice,
concurring in part and dissenting in part.
The majority orders a refund of only the state sales taxes and declines to determine whether similar municipal and county taxes are also subject to refund. Because of the inequity of requiring a refund from municipalities and counties as hereinafter developed I would decline to make Branch Trucking Company v. Oklahoma Tax Commission, 801 P.2d 686 (Okla.1990) retroactive as to counties and cities, and thus end this controversy as to those entities.
I. The Tax Commission’s Obligation to Refund.
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 taxpayers1 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 *179Title 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.
II. Misapplication of the Refund Statute.
The Tax Commission argues that the municipal and county sales taxes cannot be refunded without putting some cities into bankruptcy, drastically reducing sales tax allocations to other cities and thereby causing a reduction of services necessary for the health and safety of those residents. This argument is based upon the amount of current sales tax revenues and the following language of § 225 that identifies the source of tax refunds:
“(d) Such refunds and interest thereon shall be paid by the Tax Commission out of monies in the Tax Commission clearing account from subsequent collections *180from the same source as the original tax assessment, provided that in the event there are insufficient funds for refunds from subsequent collections from the same source, the refund shall be paid by the Tax Commission from monies appropriated by the Legislature to the special refund reserve account for such purposes as hereinafter provided. There is hereby created within the official depository of the State Treasury an agency special account for the Tax Commission for the purpose of making such refunds as may be required under this section, not otherwise provided. This account shall consist of monies appropriated by the Legislature for the purpose of making refunds under this section.” 68 O.S.Supp.1989 § 225(d).
This statute requires refunds to be paid from the Tax Commission clearing account. If that account is insufficient to pay the refund then subsequent tax collections from the same source shall pay it. If subsequent collections are insufficient then the refund is paid from an appropriation by the Legislature.
Section 225(d) cannot apply to tax refunds from municipalities and counties for the following reasons: (1.) The statute would unconstitutionally use state revenues on the behalf of counties and municipalities.3 (2.) A “judgment” in a Tax Commission protest is against the Tax Commission and is, according to § 225 of Title 68, paid by the Tax Commission, at least until the majority’s pronouncement today. (3.) Judgments against counties and municipalities are paid from a sinking fund or taxes levied to pay the judgment.4 Section 225 does not give the Tax Commission authority to withhold current sales tax revenues from the counties and municipalities involved.
The majority opinion requires naming counties and municipalities as parties to a Tax Commission protest when revenues from those sources are at issue. The tax statutes do not require naming the political subdivisions as parties and the result of such a requirement conflicts with the principle that tax remedies are liberal in giving the taxpayer an opportunity for a refund when the taxpayer complies with the tax procedure and taxes are paid under protest. Exchange Oil Co. v. State, 193 P. at 1002.
The § 221 protest is a special statutory proceeding, as opposed to a proceeding before a court of record, and as such, does not result in a true “judgment” against the taxpayer, although it may have the effect of a judgment. See, Excise Bd. of Pottawatomie County v. French, 201 Okla. 380, 206 P.2d 203 (1949), (payment of a worker’s compensation claim by county was not an action in a court of record for a money judgment against the county) and 68 O.S.Supp.1989 § 221(h), (properly filed and docketed final assessment has same force as judgment of district court). Because there is no provision in § 225 for creating an administrative award or “judgment” against named political subdivisions, such as counties and cities, I believe that requiring their inclusion in the administrative process without Legislative action violates 62 O.S.1981 § 365.1. This statute prohibits money judgments against counties and municipalities unless such occur in a court of record. See also, Excise Bd. of *181Pottawatomie County v. French, supra, and the explanation that the Legislature may require a county to pay a worker’s compensation “award” arising from an administrative proceeding.
III. Resolution of the Controversy.
Clearly, the county and municipal taxes involved are without legal authority. Rural electric cooperatives are exempt from state, county and municipal sales taxes. See, 18 O.S.1981 § 437.25 and Branch, supra. The refund of all taxes, including county and municipal taxes, is predicated upon a retroactive application of Branch. I agree with the majority opinion and would apply Branch retroactively as to the State sales taxes. Retroactive application provides a remedy for recovery of unauthorized State sales taxes paid under protest, and the State has made no showing that retroactive application would curtail the delivery of governmental services. Retroactive application of Branch to counties and municipalities is a different matter.
Regurgitation of literally millions of dollars by counties and municipalities is no small inconvenience. The Tax Commission’s affidavit identifies approximately one-hundred and seventy-seven cities and twenty-four counties that would be required to contribute to the refund amount. The litigation against the respective cities and counties for the enforcement of the refund would consume additional tax dollars.
The majority’s citation of Chevron Oil Company v. Huson, 404 U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 296 (1971) and Griggs v. State, 702 P.2d 1017 (Okla.1985) shows that a court must weigh the probable inequity of the retroactive application of a principle of law. Those citizens who paid the sales taxes received the benefit of governmental services when their respective counties and municipalities included those taxes in their fiscal budgets. Any refund of those taxes must come from those same governmental entities. Okla. Const. Art. 10 § 20. According to the argument of the Tax Commission these refund amounts would come from the current sales tax revenues of those counties and cities, a potentially disastrous consequence for the fiscal stability of several of the political subdivisions. In my view, the refunds would instead be required to come from the appropriate sinking funds — likely requiring raising the taxes of those very taxpayers receiving a refund. In either scenario the communities would be subject to litigation and fiscal turmoil with little net relief to the individual taxpayer. Thus, I would end this controversy now and hold that Branch will be held retroactive only as to the State, but prospective as to counties and municipalities.
IV. The “Next Case.”
Resolving the present controversy does little for the State unless we can give the Tax Commission some guidance for the real problem herein and its recurrence in the “next case.” The Commission is statutorily required to refund all amounts paid under protest although some of those funds have been already distributed to counties and municipalities. The majority indicates that the Commission acts as agent for counties and municipalities in the collection and administration of the sales tax. I agree, and under the statutory requirement that all of the protested tax be refunded I would give the Tax Commission the duty to segregate and retain all non - State sales tax revenue when such is paid under protest and subject to the possibility of a refund. Such action by the Commission would require notifying all affected political subdivisions, since such revenue could possibly have been included in their budgets. See 11 O.S.1981 §§ 17-204 and 17-206, wherein “estimated revenue” is included in a municipal budget. Such a result would assist in assuring the availability of funds if a protest is successful and thereby maintain the fundamental fairness of our tax collection procedure.
I am authorized to state that Justice ALMA WILSON and Justice KAUGER join in these views.

. The electric cooperatives collected and remitted the taxes due. Every person required to collect a sales tax is personally liable for the tax. 68 O.S.1981 § 1361(A). The term "person” includes "corporations,” 68 O.S.Supp.1985 § 202(e), and a rural electric cooperative is a corporation, 18 O.S.1981 § 437.1. Any person liable to pay a state tax is a "taxpayer.” 68 O.S.Supp.1985 § 202(d)(1). A taxpayer may protest the assessment of a tax collected by the Tax Commission. 68 O.S.Supp.1981 § 221. The electric cooperatives have standing to seek a refund of the taxes they paid under protest.

. The statutory expectation arises only if a taxpayer is successful with a tax protest. In the controversy before us the taxpayer is successful with a protest only if this court applies Branch retroactively. We ruled in Branch that the tax was contra to State law. Generally, a State court has the authority to determine the retroac-tivity of its own decisions involving State law. See, American Trucking Associations, Inc. v. Smith, — U.S. -, 110 S.Ct. 2323, 2330, 110 L.Ed.2d 148 (1990), (plurality opinion by Justice O’Connor joined by Rehnquist, C.J., White and Kennedy, JJ.). A refund is required under the Federal Constitution only when a state requires payment of the tax as a condition precedent for judicial review and the tax is contrary to the Federal Constitution. McKesson v. Div. of Alcoholic Beverages & Tobacco, - U.S. -, 110 S.Ct. 2238, 2247, 110 L.Ed.2d 17 (1990). No arguments or claims are made herein that the Federal Constitution requires a refund.

. See, Okla. Const. Art. 10 § 20:
"The Legislature shall not impose taxes for the purpose of any county, city, town, or other municipal corporation, but may, by general laws, confer on the proper authorities thereof, respectively, the power to assess and collect such taxes.”
See also, Okla. Const. Art. 10 § 15 and the restriction that the credit of the State shall not be given to political subdivisions of the State except as provided for therein.

. See, Okla. Const. Art. 10 § 28:
"Counties, townships, school districts, cities, and towns shall levy sufficient additional revenue to create a sinking fund to be used, first, for the payment of interest coupons as they fall due; second, for the payment of bonds as they fall due; third, for the payments of such parts of judgments as such municipality may, by law, be required to pay.”
See also, 62 O.S.1981 §§ 431 and 435, (providing for the payment of judgments from a municipality's sinking fund) and 11 O.S.1981 § 17-209(D) (providing that the county excise board shall levy taxes necessary for the municipality's sinking fund for the budget year pursuant to § 431 of Title 62); 19 O.S.1981 § 6, (payment of judgment against county by taxes levied by county).