Okla. Auto. Dealers Ass'n, an Okla. Corp. v. State, Case Number: 116143.

• Decision Date: 31 August 2017
• Docket Number: Case Number: 116143.
• Citation: 401 P.3d 1152
• Parties: OKLAHOMA AUTOMOBILE DEALERS ASSOCIATION, an Oklahoma Corporation, L and J Acquisitions, LLC d/b/a Battison Honda, and Caitlin Cannon, an Individual, Petitioners, v. STATE of Oklahoma, EX REL. OKLAHOMA TAX COMMISSION, Respondent.
• Court: Oklahoma Supreme Court

401 P.3d 1152

OKLAHOMA AUTOMOBILE DEALERS ASSOCIATION, an Oklahoma Corporation, L and J Acquisitions, LLC d/b/a Battison Honda, and Caitlin Cannon, an Individual, Petitioners,

v.STATE of Oklahoma, EX REL. OKLAHOMA TAX COMMISSION, Respondent.

Case Number: 116143.

Supreme Court of Oklahoma.

FILED August 31, 2017

Clyde A. Muchmore, Melanie Wilson Rughani, and Paige A. Masters, Crowe & Dunlevy, P.C., Oklahoma City, Oklahoma, for Petitioners.

Mithun S. Mansinghani, Abby Dillsaver, and Ethan Shaner, Office of the Attorney General, State of Oklahoma, Oklahoma City, Oklahoma, for Respondent.

Wyrick, J.:

¶ 1 This is the second of several cases challenging various measures enacted by the Legislature this past session in response to the State's budget crisis. In the first of those cases we unanimously held that a measure imposing a new $1.50-per-pack assessment on cigarettes was a "revenue bill" subject to Article V, Section 33's requirements that revenue bills (1) originate in the House of Representatives, (2) be enacted prior to the final five days of the legislative session, and (3) be approved by either the people or by a three-fourths majority of each legislative chamber.¹ This was so because the cigarette measure fit squarely within our century-old test for "revenue bills," in that it both had the primary purpose of raising revenue for the support of state government andit levied a new tax in the strict sense of the word.²

¶ 2 This case involves House Bill 2433,³ which was also enacted during the final five days of the session and did not receive three-fourths support in either legislative chamber.⁴ Like the first case, this case involves an Article V, Section 33 challenge, but the similarities end there because this case presents the much different question of whether a measure revoking an exemption from an already leviedtax is a "revenue bill" subject to Article V, Section 33's requirements. Applying the two-part test we have applied for the last century, we conclude that HB 2433 is not a "revenue bill" because, despite its revenue- raising purpose, it does not levy a tax in the strict sense of the word.

¶ 3 We are compelled to reach this result for three primary reasons. First, our cases have long held that measures making "certain property ... theretofore exempt from taxation ... subject to taxation" are not "revenue bills" because removal of an exemption from an already leviedtax is different from levying a tax in the first instance.⁵ Second, while that rule may seem superficially inconsistent with Article V, Section 33's taxpayer protections, it is actually deeply rooted in our Constitution's related policies that disfavor special exemptions from taxation and promote uniformity of taxation—policies that are alsodesigned to protect the taxpayers. And third, because we have never before in our history held that a measure revoking a tax exemption is a "revenue bill," and because we have explicitly held that such measures are not "revenue bills," to hold otherwise would require us to break new ground and overrule well-established precedents. To do so would be to deprive the Legislature and the people of the legal predictability, uniformity, and clarity that it is our obligation to provide. Accordingly, we must deny Petitioners the relief they seek.

I.

¶ 4 To properly apply our Article V, Section 33 test, we must first determine the operation and effect of HB 2433.

¶ 5 In 1933, the Legislature levied a sales tax on all tangible personal property—including automobiles—and that sales tax has remained part of our tax code ever since.⁶ In 1935, however, the Legislature added an exemption for automobile sales in the sales-tax provisions, so that automobiles were subject to only an automobile excise tax from that point forward.⁷ HB 2433 revokes part of that sales tax exemption so that sales of automobiles are once again subject to the sales tax, but only a 1.25% sales tax.⁸ Sales of automobiles remain exempt from the remainder of the sales tax levy. HB 2433 does not, however, levy any newsales or excise tax, as the text of the measure and related provisions demonstrate.

¶ 6 For example, the sales tax levy can be found in 68 O.S. § 1354, imposing a tax upon "the gross receipts or gross proceeds of each sale" of tangible personal property and other specifically enumerated items.⁹ The last amendment increasing the sales tax levy was in 1989, when the rate was raised to 4.5%.¹⁰ Nothing in HB 2433 amends the sales tax levy contained in section 1354 ;¹¹ the rate remains 4.5%.¹² Likewise, the levy of the motor vehicle excise tax is found in 68 O.S. § 2103.¹³ That levy has not been increased since 1985,¹⁴ and nothing in HB 2433 amends the levy contained in section 2103.¹⁵ Both before and after the enactment of HB 2433, the levy remains the same: every new vehicle is subject to an excise tax at 3.25% of its value, and every used vehicle is subject to an excise tax of $20.00 on the first $1,500.00 or less of its value plus 3.25% of its remaining value, if any.¹⁶

¶ 7 HB 2433 instead does its work by amending the sections of law that provide and give effect to the sales tax exemption for motor vehicles: 68 O.S. §§ 1355 and 2106, respectively. Prior to HB 2433's enactment, section 1355"specifically exempted from the [sales] tax ... [the s]ale of motor vehicles ... on which the Oklahoma Motor Vehicle Excise Tax ... has been, or will be paid."¹⁷ Section 2106, meanwhile, made clear that "[t]he excise tax levied by this article [wa]s in lieu of all other taxes on the transfer or the first registration in this state of vehicles,"¹⁸ effectively erecting a bar on any other law seeking to impose a sales tax on motor vehicles. After HB 2433, however, section 1355 only exempts motor vehicle sales from "all but a portion of the levy provided under Section 1354 of this title, equal to one and twenty-five-hundredths percent (1.25%) of the gross receipts of such sales."¹⁹ Likewise, and to avoid potential conflict, HB 2433 also amended the bar in 2106 to now provide that "[t]he excise tax levied by this article is in lieu of all other taxes on the transfer or the first registration in this state of vehicles, ... except: ... [o]ne and twenty-five-hundredths percent (1.25%) of the gross receipts upon which the tax is levied by Section 1354 of this title."²⁰ These amendments do not levy a new tax, as their reference to the sales tax levy in section 1354 makes plain. They merely remove, in part, an exemption from a tax that was levied many years prior.

II.

¶ 8 Our cases have always recognized the important constitutional distinction between measures levying new taxes and measures removing exemptions to already levied taxes. In an unbroken line of decisions dating to near statehood, we have accounted for this distinction through application of a two-part test that limits Article V, Section 33's application to only those measures whose "principal object is the raising of revenue" andwhich "levy taxes in the strict sense of the word."²¹ The first prong isn't seriously in doubt here; the passage of HB 2433 was motivated by a desire to capture additional tax revenue to be used to support state government. But because we have always said that bills must have both features, this case turns on the second prong: whether the measure "levies a tax in the strict sense of the word." Both the facts and the law compel the conclusion that it does not.

A.

¶ 9 As explained above, HB 2433 does not, as a matter of fact, levy a sales tax on automobiles. That tax was originally levied in 1933, and the most recent levy increasing that tax was in 1989.²² But for a legislative exemption that was granted to car buyers, sales of automobiles—just like other sales of goods—would be subject to the sales tax.²³ HB 2433 merely revokes a portion of that special exemption from sales tax such that car buyers now receive only a partial exemption from sales tax, rather than the complete exemption they have long enjoyed. HB 2433 thus does not levy a tax; it merely makes automobile sales subject to the sales tax that was levied on automobile sales many decades prior.

¶ 10 Nor does HB 2433 levy a tax in any legal sense. "Strictly speaking, a levy is the legislative act, whether state or local, which determines that a tax shall be laid, and fixes its amount."²⁴ We have never held that a measure removing an exemption from an existing tax "levies a tax in the strict sense." That complete absence of precedent for Petitioners' position is strong evidence that removing an exemption has always been understood as something other than the levy of a tax. But stronger evidence still is found in our cases where we have explicitly held that making "certain property ... theretofore exempt from taxation ... subject to taxation" (i.e., removing an exemption from taxation) was nota levy of a tax.²⁵

¶ 11 In Leveridge v. Oklahoma Tax Commission,²⁶ for example, this Court was called on to determine whether Article V, Section 33 applied to a measure modifying an exemption from the automobile excise tax. The purpose of the measure at issue was, as its title stated, "to require payment of vehicle excise tax on manufacturer's factory delivered price as to new vehicles of the latest manufactured model owned by used car dealers when same have not theretofore been registered in Oklahoma and an excise tax paid thereon."²⁷ In simpler terms, used cars that had previously been titled in another state and which were owned by used car dealers were exempt from the excise tax.²⁸ Used car dealers discovered that they could take advantage of this exemption by titling new cars in other states, and then selling those cars in Oklahoma as used cars exempt from the tax.²⁹ Because this exemption was causing the State to miss out on revenue, the Legislature enacted House Bill 885.

¶ 12 HB 885 amended the law in two ways, both of which were designed to aid in the capture of those lost revenues. First, the measure amended the relevant exemption...