City of Claremore v. Okla. Tax Comm'n

• Decision Date: 16 April 1946
• Docket Number: Case Number: 32035
• Parties: CITY OF CLAREMORE v. OKLAHOMA TAX COMMISSION
• Court: Oklahoma Supreme Court

1946 OK 122

169 P.2d 299

197 Okla. 223

CITY OF CLAREMORE v. OKLAHOMA TAX COMMISSION

Case Number: 32035

Supreme Court of Oklahoma

Decided: April 16, 1946

Syllabus

¶0 1. LICENSES--Sales taxes on electric energy sold by municipality held "excises" and not violative of constitutional provision exempting municipal property from taxation.

Taxes upon gross proceeds or receipts from sale of electric energy from municipal light plant, levied pursuant to provisions of Oklahoma Consumer's Tax Law of 1935, art. 7, c. 66, Sess. Laws 1935; the Consumers and Users Tax Act 1937, art. 10, c. 66, Sess. Laws 1937; and the Consumers and Users Tax Act 1939, art. 11, c. 66, Sess. Laws 1939, are "excess" and the assessment and collection of such taxes does not constitute an attempt to tax property of a city or town in violation of section 6, art. 10, of the Constitution.

2. MUNICIPAL CORPORATIONS - Powers subject to legislative control--Obligations imposed where municipality engages in activity commonly engaged in by individuals.

Municipal corporations exercise their powers subject to legislative control and may be required to perform certain duties of public concern; and where a municipality engages in activity commonly engaged in by individuals, it acts in its private capacity and is subject to the same obligations imposed by legislative enactment as any private corporation.

3. SAME-LICENSES-Obligation of municipality to pay sales tax on electricity sold by it to resident consumers not subject to debt limiting provision of Constitution.

An obligation imposed upon municipal corporation to pay sales tax on sales of electric energy sold to consumers residing within the corporate limits of the city, being a liability imposed by statute, does not come within the limitations provided by section 26, art. 10, of the Constitution.

4. SAME--Three-year statute of limitation for assessment of sales tax held binding on state.

The provisions of 68 O.S. 1941 § 1472, enacting a special limitation period of three (3) years within which assessments of sales tax due under the Consumers and Users Tax Act, supra, must be made, is such a limitation as is within the power of the Legislature to provide; and is not violative of the right reserved to the state to be free from operation of the statutes of limitation, inasmuch as such provision only affixes a restriction upon the period of time within which the state must assert its power where there is a failure on the part of the taxpayer to comply with the requirements of the act.

Appeal by the City of Claremore from order of Oklahoma Tax Commission assessing tax liability. Reversed in part, with directions.

Frances Holtzendorff, City Atty., of Claremore (Holtzendorff & Holtzendorff, of Claremore, of counsel), for plaintiff in error.

E. L. Mitchell and C. W. King, Attorneys for Oklahoma Tax Commission, for defendant in error.

CORN, J.

¶1 This is an appeal by the city of Claremore from an order of the Tax Commission assessing sales tax liability against the city under the Sales Tax Act (68 O. S. 1941 § 1251 et seq.)

¶2 For many years the city of Claremore, hereafter called the city, has owned and operated an electric light and water system, furnishing services to residents and also to persons living outside the corporate limits of the city. As to the consumers residing outside the corporate limits, the city has collected and remitted the sales tax, but no taxes have been collected from the users residing within the corporate limits.

¶3 June 19, 1939, the Oklahoma Tax Commission, hereafter called the commission, made an assessment against the city for delinquent sales taxes for the period April 23, 1935, to April 30, 1939, including penalties and interest to May 20, 1939. Upon notice of such proposed assessment the city filed the required protest and the matter was set down for hearing. The protest was overruled and an order entered finding the city liable for the entire amount of the assessment, with penalties.

¶4 The city neither made payment on such assessment nor thereafter made any effort to collect the tax from the consumers within the corporate limits. The commission made no effort to enforce the assessment until June 22, 1944, when the city was notified of the commission's intention to levy an additional assessment for sales tax due on electricity sold up to and including May 30, 1944, with interest and penalties.

¶5 The city filed protest against such assessment. Hearing was had, evidence introduced, and a stipulation of facts entered into. At the conclusion of the hearing the commission overruled the protest and entered the order herein appealed from, based upon the original assessment, together with the further assessment, penalties and interest.

¶6 The stipulation of facts entered into between the parties to this appeal is as follows:

"It is hereby agreed and stipulated, by and between the protestant, City of Claremore, that the only controversy to be determined by the Oklahoma Tax Commission in this case is the legality of the Sales Tax Act as applied to the City of Claremore, and the validity of the tax assessment based thereon, in the light of the contention of the City of Claremore, represented by its protest, that the Act of the Legislature attempting to provide for the levy and assessment of the sales tax against municipalities is in violation of section 6, article 10, of the Oklahoma Constitution, which exempts property of municipalities from taxation as therein set out and expressed; that the question of the statute of limitations from the 19th day of June, 1939, to and including a period beginning three years thereafter, and running to the date of the present assessment, is also to be determined by the Oklahoma Tax Commission in this controversy; that there is no dispute as to the amount of the tax, interest or penalty involved, necessary to be determined by the Oklahoma Tax Commission, but the only question to be determined is one of the legal right of the Oklahoma Tax Commission to levy and enforce the tax."

¶7 For the purpose of this appeal particular attention will be directed to three propositions, which we deem decisive of the issues herein involved. The first contention is the proposition that the statutes, 68 O.S. 1941 § 1251 et seq. (commonly denominated the Consumers or Sales Tax Act) insofar as it attempts to clothe the commission with authority to make such assessments against municipalities (i.e., for sales tax on electric energy sold to the citizenry) is unconstitutional and void, being an indirect levy of taxes upon municipal property in violation of section 6, art. 10, of the Constitution of this state.

¶8 Particularly in view of recent decisions of this court, we are of the opinion the argument offered by the city is without merit, and the authorities cited are not applicable. We have considered related phases of this question in the past. City of Ardmore v. State ex rel. Oklahoma Tax Commission, 168 Okla. 316, 32 P.2d 728, holding that the exemption granted by section 6, art. 10, applies to a property tax, and not to an excise tax. In Oklahoma Tax Comm. v. Sisters of the Sorrowful Mother, 186 Okla. 339, 97 P.2d 888; Baptist General Convention v. Oklahoma Tax Comm., 196 Okla. 96, 162 P.2d 1012, wherein we recently held that the sales tax is an excise tax, and that the provisions of section 6, art. 10, do not exempt religious organizations from payment of such tax.

¶9 More recently this question has been before the court in Re City of Enid, 195 Okla. 365, 158 P.2d 348, 159 A. L. R. 358, a case very similar to the matter now before the court. Therein the city had appealed from an adverse order of the commission in a proceeding upon its protest against the assessment of sales tax upon admission tickets to a municipal swimming pool. After conclusively demonstrating that the tax in question is an excise tax and not a property tax, we said, in paragraph 2 of the syllabus:

"Taxes upon the gross proceeds or receipts from the sale of admissions to a swimming pool owned and operated by a municipal corporation levied pursuant to the provisions of the Oklahoma Consumer's Tax Law of 1935, art. 7, ch. 66, S. L. 1935; The Consumers and Users Tax Act 1937, art. 10, ch. 66, S. L. 1937; and The Consumers and Users Tax Act 1939, art. 11, ch. 66, S. L. 1939, are 'excises' and the assessment and collection of such taxes does not constitute an attempt to tax the property of a city or town in violation of sec. 6, art. 10, of the Constitution."

¶10 In view of our decisions in Baptist General Convention v. Oklahoma Tax Comm., supra, and in Re City of Enid, supra, we are of the opinion, and hold, that provisions of the (Consumers Sales Tax) act are not in contravention of sec. 6, art. 10, of the Constitution, as urged by the city.

¶11 In the second contention it is urged that the proposed assessment is one which the commission is without authority to make, since it (a) purports to create a debt against the city, based neither upon contract or tort, and not authorized by the citizens of the municipality, thus violating section 26, art. 10, of the Constitution; (b) undertakes to establish the city's liability for nonfeasance of officers in a matter wherein they were acting, not on behalf of the city, but as agents of the state.

¶12 In considering this second contention it is necessary to consider factors determinative of the questions raised by this proposition. The first inquiry concerns the authority of the Legislature to impose duties or obligations upon municipalities.

¶13 It is generally recognized that municipal corporations hold and exercise their powers subject to legislative control. State v. Tibbetts, 21 Okla. Cr. 168, 205 P. 776. The state has the power to require municipal subdivisions to perform certain duties of state concern. Where such obligation is incurred in the discharge of a duty which is of state or public interest, the city cannot object thereto upon the ground that such duty...