Liberty Steel Co. v. Oklahoma Tax Commission

• Decision Date: 15 June 1976
• Docket Number: No. 48519,48519
• Citation: 554 P.2d 8
• Court: Oklahoma Supreme Court
• Parties: LIBERTY STEEL COMPANY, Appellant, v. The OKLAHOMA TAX COMMISSION, an Agency of the State of Oklahoma, Appellee.

Page 8

554 P.2d 8

LIBERTY STEEL COMPANY, Appellant, v. The OKLAHOMA TAX COMMISSION, an Agency of the State of Oklahoma, Appellee.

No. 48519.

Supreme Court of Oklahoma.

June 15, 1976.

Weil Craig & Fischman, P.C., Lawrence Fischman, Dallas, Tex., Robert G. Grove, Oklahoma City, for appellant.

Lester D. Hoyt, Gen. Counsel, Stanley J. Alexander, Clyde E. Fosdyke, F. Karen Grethen, Oklahoma City, for appellee.

DOOLIN, Justice.

Do the sales tax provisions of 68 O.S.1971 § 1407 impose such a burden on interstate commerce by regulation through taxation thereof as to violate article I § 8 cl. 3 and the 14th amendment to the Constitution of the United States?

The first part of this statute, which is a provision of the Use Tax Code, provides the Oklahoma Tax Commission may authorize an out of state Seller to collect the use tax imposed by the act on the Buyer. Its validity is not challenged. The portion of the statute which is in jeopardy reads as follows:

'* * * Provided, however, that in all instances where such sales are made or completed by delivery to the purchaser within this State by the retailer or vendor in such retailer's or vendor's vehicle, whether owned or leased (not by common carrier), such sales or transactions shall continue to be subject to applicable State and any local sales tax at the point of delivery and the tax shall be collected and reported under taxpayer's sales tax permit number accordingly.'

Appellant Liberty Steel (Liberty) is a corporation organized under the laws of the State of Texas, with its principal place of business in Dallas. Liberty purchases and resells metal beams, angles and strips etc. to users, contractors and manufacturers for use in construction projects, but not to retailers for resale. It has never maintained an office in Oklahoma, advertised in Oklahoma or had any employees who reside in Oklahoma. It accepts orders in its Dallas office by phone or mail and through outside salesmen who call on customers in Oklahoma. Deliveries are made by trucks owned by Liberty and are F.O.B. origin. During the year of 1974, 25% Of Liberty's total sales volume was to residents of Oklahoma.

A Commission sales tax auditor made a request of Liberty to audit its books and records with a view toward determining its sales tax liability, if any, to the State of Oklahoma for the years 1972, 1973 and 1974. Liberty denied the request and filed a protest with the Commission. This appeal by Liberty is taken from an order of the Commission denying the protest.

Liberty concedes its transactions are within the scope of 68 O.S.1971 § 1407, acknowledging if the statute is constitutional and the sales tax is held to be a valid assessment, then Commission has the right to audit its books.

A sales tax, as opposed to a use tax, is imposed on the sale itself and is collectible from the seller. To be taxable in Oklahoma the sale must be made in Oklahoma. Liberty contends because the sales are made to residents of Oklahoma does not necessarily mean the sales are made In Oklahoma. It asserts that such a tax is a tax on interstate commerce in violation of the commerce clause and the due process provisions of the United States Constitution, relying materially on McLeod v. J. E. Dilworth Co., 322 U.S. 327, 64 S.Ct. 1023, 88 L.Ed. 1304 (1944).

Commission does not dispute the transactions are interstate in nature, but counters by denying that all interstate commerce is constitutionally non-taxable by the states. It submits the statute covers the situation where the seller by using his own trucks on Oklahoma Highways to deliver merchandise to Oklahoma residents subjects himself to the taxing and police power of this state. Whereas the first part of the statute authorizes seller to Collect use tax levied on Buyer, when sale is not made in Oklahoma, the portion we deal with today imposes a sales tax on the Seller when the sale is made in Oklahoma. It argues the statute is not unconstitutional in that the sale of goods by Liberty takes place in Oklahoma because Liberty solicits sales in Oklahoma, makes deliveries in Oklahoma, and possession is transferred to buyer in Oklahoma.

A tax imposed by a state affecting interstate commerce in order to be valid must pass two constitutional hurdles: the commerce clause and the due process clause of the fourteenth amendment. The due process problem is concerned with 'minimum contacts' or 'nexus' between the subject matter and the taxing state. In order that a state may be entitled to levy a tax, there must be some minimum connection between the state and the person, property...