Branch Trucking Co. v. State, ex rel. Oklahoma Tax Com'n

Decision Date17 April 1990
Docket NumberNo. 68620,68620
Citation801 P.2d 686,1990 OK 41
PartiesBRANCH TRUCKING COMPANY, et al., Appellants, v. STATE of Oklahoma, ex rel. OKLAHOMA TAX COMMISSION, Appellee.
CourtOklahoma Supreme Court

Appeal from Order No. 87-03-20-02 of the Oklahoma Tax Commission.

Tax Commission adopted order No. 87-03-20-02 requiring Rural Electric Cooperatives to collect, report and remit state, city and county sales tax. Appellants contend that the order is invalid because of improper notice. Moreover, Appellants urge that prior settled statutory construction exempting them from collecting such sales tax prohibit the Tax Commission from reversing its position absent a cogent reason.

ORDER VACATED.

Larry Derryberry, Patrick D. Shore, Derryberry, Quigley, Parrish & Gooding, Marvin B. York, Oklahoma City, for appellants.

Joe Mark Elkouri, Gen. Counsel, Marjorie Welch, Oklahoma Tax Com'n, Oklahoma City, for appellee.

J.W. Doolin, Barry W. Cousins, Lawton, amicus curiae, for appellants.

Sherry Blankenship, Sherman, Pool, Thompson, Coldiron & Blankenship, Del City, Sue Ann Nicely, Oklahoma City, amicus curiae, for appellee.

LAVENDER, Justice.

The question presented is whether Rural Electric Cooperatives are exempt from collecting sales tax on the sale of electricity. We answer in the affirmative.

FACTS

On March 20, 1987, the Oklahoma Tax Commission adopted Regulation 13-62 (Order No. 87-03-20-02) requiring rural electric cooperatives to collect, report and remit state, city and county taxes on the sale of electricity to Oklahoma consumers. Regulation 13-62 required rural cooperatives to collect the sales taxes beginning in May, 1987. However, an appeal was filed on April 17, 1987, in this court requesting a stay pending appeal. We declined the stay and directed the parties to pursue their request with the Tax Commission under 68 O.S.1981, § 225(f). 1 Then on April 30, 1987 an open meeting was held by the Tax Commission, the result of which was to modify the order and extend the effective date of collection to June 1, 1987.

Finally, on May 29, 1987, the Tax Commission entered its third order, allowing for any party, or any rural electric cooperative, affected by Regulation 13-62 to stay the effect of the order by posting a bond in the amount of one percent (1%) of the gross total sales of electricity for 1986. Thereafter, Appellants filed in this Court a Supplemental Motion to their petition requesting to stay the effect of Regulation 13-62 without posting the aforementioned bond. We denied the motion. 2

To understand the basis for this appeal, a brief review of the history of rural cooperatives is in order. In 1936 Congress adopted the Rural Electrification Act, 7 U.S.C. § 901 et seq. (the "Act"). This Act was established to provide low cost funds to "light up" rural areas not having access to electricity because of the high cost of servicing a sparse population base. In 1939, Oklahoma enacted the Rural Electric Cooperative Act, 18 O.S.1981, § 437. To complement this Act, the Legislature established a separate tax structure acknowledging the differences between rural electric cooperatives that are member owned versus other corporations including investor owned utilities. 3 It is from this tax structure that the present dispute arises.

Significantly, Rural Electric Cooperatives have been exempt over the years from collecting sales tax on the sale of electricity. 4 This practice, or lack thereof, forms the basis for Appellants' present appeal. Because, according to its own administrative interpretation, rural cooperatives have been exempt from collecting sales tax on the sale of electricity, Appellants argue that the Commission may not now reverse its long-standing position without a cogent reason for doing so 5 or legislative action. Additionally, Appellants urge lack of notice as grounds for invalidating the order. 6 However, because we answer affirmatively as to the first issue, we need not address Appellants' second argument.

I. THE TAX COMMISSION'S ADMINISTRATIVE INTERPRETATION EXEMPTING RURAL ELECTRIC COOPERATIVES FROM COLLECTING SALES TAX ON THE SALE OF ELECTRICITY CANNOT BE REVERSED ABSENT LEGISLATIVE ACTION OR A COGENT REASON TO DO SO.

Since at least 1940, the question of whether rural cooperatives were exempt from collecting sales tax has been discussed.

Title 18 1981 § 437.25 states:

Each cooperative ... shall pay annually, on or before the thirty-first day of August, to the Oklahoma Tax Commission, a fee of One Dollar ($1.00) for each one hundred persons or fraction thereof to whom electricity is supplied within the state by it, as of June thirtieth preceding, but shall be exempt from all other excise and income taxes whatsoever. (emphasis added)

Clearly, this statute exempts rural cooperatives from paying "all other excise and income taxes whatsoever." The question remains however, did the Legislature intend for a rural cooperative to be exempt from collecting sales tax on the sale of electricity as well. 7 Rather this would be the question had the Tax Commission not already answered the question by maintaining a policy over the years of not requiring rural cooperatives to collect sales tax on the sale of electricity. Once a policy has been imposed over a long number of years, "[w]e as a Court are not required to perceive at this late date the intent of that legislature" 8 and the Commission must maintain its position absent a cogent reason for changing it.

This rule of law of holding the Commission to its consistent administrative interpretation of a tax structure is well documented in a long line of Oklahoma caselaw. McCain v. State Election Board, held that a long-standing interpretation must be given great weight by the courts and should be disturbed for only cogent reasons, unless the construction is clearly erroneous. 9 Moreover, even if legislative intent is unclear, the Tax Commission's interpretation of a statute "is substantiated by the legislative acquiesence in the Commission's construction...." 10 Even legislative silence may be construed to approve administrative construction. 11 In Oral Roberts University v. Oklahoma Tax Commission, this court held that "[t]he Tax Commission's own undeviating position ... plus the legislature's disinclination to modify the substance of the statute during that period has now caused the original construction to be so firmly entrenched that the Commission may not with the stroke of a pen undo it. That would be a power reserved only to the legislature." 12 Finally, the Legislature "adopts an administrative construction of a statute when, subsequent to such construction, it amends the statute or re-enacts it without overriding such construction." 13

Those decisions are controlling as to the present set of facts. The Tax Commission has exempted rural electric cooperatives from collecting sales tax on the sale of electricity. Regardless of whether this is viewed as an interpretation of the Act, in that rural cooperative consumers were exempt from paying such a tax, or an interpretation by default, because the cooperatives were not required to collect the tax, the end result is a settled policy that cannot now be reversed absent legislative action or a cogent reason by the Tax Commission justifying its actions. 14

Since there has been no legislative action to reverse the Tax Commission's interpretation, the regulation has the force of law. 15 In order to now exclude the exemption, either the Legislature would have to enact a change or this Court would have to recognize a cogent reason for the Tax Commission having done so.

The Tax Commission has put forth what it considers a "cogent reason" for its reversal. The Commission argues that a recent Attorney General's opinion 85-155, May 27, 1986, declaring that member-consumers were not exempt from paying sales tax is binding on a state official until a judgment of a court of competent jurisdiction relieves the public official of the burden of compliance.

The Attorney General is the 'chief law officer' of Oklahoma. Okla.Stat. tit. 74, § 18 (1981). Since 1919, the Attorney General's opinions have been binding on state officials unless the opinion is inconsistent with a final determination of a court of competent jurisdiction. See Rasure v. Sparks, 75 Okla. 181, 183 P. 495 (1919). In York v. Turpen, 681 P.2d 763 (Okla.1984), this Court created an exception to this general rule.

In York, the Attorney General effectively declared a statute unconstitutional. Id. at 765. This Court found that 'the issuance of an opinion finding an act of the legislature unconstitutional is ... an unwarranted encroachment upon the power of the legislature and the unique duty of the courts.' The opinion underlying the present issue does not declare a statute unconstitutional and, therefore, does not fall within the York exception.

An Attorney General's opinion is binding on state officials until a court of competent jurisdiction renders an inconsistent decision. In this case, the District Court for Oklahoma County twice has rendered judgments inconsistent with the Attorney General's opinion No. 85-155. See Alfalfa Electric Coop., Inc. v. Oklahoma Tax Comm'n, No. 105766, slip op. (D.Ct.Okla. Jan. 29, 1943); Cotton Electric Coop., v. Oklahoma Tax Comm'n, No. 105778, slip op. (D.Ct.Okla. Aug. 11, 1942). Because the tax commission did not appeal from those judgments, they became final. In both Alfalfa Electric Coop. and Cotton Elect. Corp., the district court ordered the tax commission to refund sales tax on electricity sold to the cooperatives' customers and remitted to the tax commission by the cooperatives. Thereafter, the Attorney General rendered an opinion which was inconsistent with the court's decision. See 85 Op.Att'y Gen. 155 (1986). The Oklahoma Tax Commission was a party in both of the district court cases. It is bound by the law of those cases. Therefore, those decisions,...

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