Oklahoma Tax Com'n v. City Vending of Muskogee, Inc.

• Decision Date: 14 July 1992
• Docket Number: No. 65602,65602
• Parties: OKLAHOMA TAX COMMISSION, Appellee, v. CITY VENDING OF MUSKOGEE, INC., Appellant.
• Court: Oklahoma Supreme Court

Page 97

835 P.2d 97

1992 OK 110

OKLAHOMA TAX COMMISSION, Appellee, v. CITY VENDING OF MUSKOGEE, INC., Appellant.

No. 65602.

Supreme Court of Oklahoma.

July 14, 1992.

Certiorari to the Court of Appeals, Division 1 Appeal from the District Court of Muskogee County; William Bliss, Trial Judge.

Oklahoma Tax Commission (OTC) sought to enjoin taxpayer from selling cigarettes without a license after OTC revoked taxpayer's license as a cigarette wholesaler for failure to affix excise tax stamps to cigarettes sold to Indians and/or Indian Tribes for resale within Oklahoma. The trial judge issued a permanent injunction. Taxpayer appealed contending the earlier revocation order of OTC was void for lack of jurisdiction. The Court of Appeals affirmed. Held: The earlier order of OTC was not void for lack of jurisdiction. We can find no error in the trial court's grant of a permanent injunction on this record and, accordingly, the trial court is affirmed. CERTIORARI PREVIOUSLY GRANTED; COURT OF APPEALS OPINION VACATED; TRIAL COURT AFFIRMED.

J. Lawrence Blankenship, Robert C. Jenkins, David Hudson, Stanley Johnston, Office of General Counsel, Oklahoma Tax Com'n, Oklahoma City, for appellee.

Jon Tom Staton, Muskogee, for appellant.

PER CURIAM:

Appellant, City Vending of Muskogee, Inc. (City Vending), was an Oklahoma based wholesaler of cigarettes licensed by appellee, the Oklahoma Tax Commission (OTC). ¹ Wholesalers are required to purchase and affix tax stamps to cigarettes ² with certain exceptions. ³ On May 31, 1985, after auditing City Vending, OTC mailed a proposed tax assessment to it for distribution and sale of unstamped cigarettes. OTC also sought to cancel and/or revoke City Vending's wholesale license for its failure to affix cigarette tax stamps. ⁴ City Vending protested the assessment and defended against revocation of its license on two grounds. It argued the sales at issue were made to Indian Tribes and the transactions were therefore exempt by virtue of the Indian Commerce Clause of the United States Constitution. U.S. CONST. art. 1, § 8, cl. 3. ⁵ City Vending also asserted OTC discriminatorily applied the cigarette tax laws against in-state wholesalers, while not seeking any assessment against out-of-state wholesalers who also sold cigarettes to Indian Tribes. Presently, only the first defense is involved. ⁶ The assessment and revocation matters were eventually combined, apparently by agreement of the parties, and were presented to an administrative law judge. After hearing(s) the judge issued Findings, Conclusions and Recommendations which recommended the protest be denied and the license canceled. OTC adopted the Findings, etc. of the administrative law judge as the Order of the Commission. No appeal by City Vending was perfected to this Court as allowed by 68 O.S.1981, § 225 and the order was allowed to become final. ⁷

Shortly after the order was issued OTC filed a proceeding in Muskogee County District Court to enjoin City Vending from continuing to sell cigarettes without a license. The instant appeal is from the trial judge's granting of the requested injunction. ⁸ City Vending claims the OTC City Vending asserts the facial invalidity of the OTC order is contained in the following quotation from the administrative law judge's Findings, Conclusions and Recommendations: "[t]hat [OTC] is without jurisdiction to determine the constitutional questions presented and asserted by [City Vending]". It argues that because OTC was without authority to determine the constitutional defense(s) presented OTC was without jurisdiction to enter any order revoking its license with the constitutional defense left unresolved. We do not agree.

order revoking its license was void ab initio, or facially void, for lack of jurisdiction. ⁹ The Court of Appeals found the order was not void, that it could and should have been the subject of appeal to this Court under § 225 and because it was not it became final and impervious to collateral attack. Accordingly, the Court of Appeals affirmed the trial court's granting of a permanent injunction.

Assuming, without deciding, OTC was without authority to determine the constitutional defense(s) because it has no power to either rule a legislative enactment unconstitutional or because it likewise lacks authority to grant an exemption from an unambiguous legislative taxing scheme that does not provide for the claimed exemption, ¹⁰ this does not mean a decision either to uphold a proposed tax assessment or to revoke a license like that at issue here is facially void. In a related case, the United States Court of Appeals for the Tenth Circuit stated:

On appeal, [City Vending] asserts the OTC determination upholding the first tax assessment was void because the OTC did not have jurisdiction to consider the constitutional claims. This argument is unpersuasive because the OTC did not address the constitutional claims contrary to its authority, but rather held it lacked authority to consider those claims. ¹¹

Although we are not bound by the Tenth Circuit's determination and we realize the situation before it was presented in the context of a bankruptcy proceeding where only the tax assessment part of the order was in issue, we find its determination on the voidness issue to be persuasive. The simple fact is that although OTC may not have been able to determine the constitutional defenses raised by City Vending before it we had the authority to consider those defenses on appeal and City Vending cannot now claim the order of OTC was void because it did not have authority to definitively determine the constitutional defenses. ¹² Normally our inquiry would end here. However, because City Vending claims all the sales it made were wholly exempt from state taxation by virtue of the Indian Commerce Clause and presumably that such fact ousted State authorities of all jurisdiction to tax any such sales, we feel compelled to answer the Commerce Clause question.

Although City Vending appears to admit in its submissions to this Court cigarettes it sold in this case to Indians and/or Indian Tribes for resale at the retail level by the tribes or tribally related smoke shops would only be tax exempt from the excise tax if made to members of the involved tribe it asserts its dealings are nonetheless completely tax exempt under the Indian Commerce Clause and State authorities must seek a remedy directly against a Tribe or the smoke shop retailer. We do not agree.

In Oklahoma Tax Commission v. Citizen Band Potawatomi Indian Tribe of Oklahoma, 498 U.S. 505, 111 S.Ct. 905, 112 L.Ed.2d 1112 (1991), the United States Supreme Court held that retail sales of cigarettes by tribal sellers to nontribal members were subject to Oklahoma tax. 498 U.S. at ----, 111 S.Ct. at 911. However, in the same opinion the Supreme Court held a Tribe could not be sued by State tax authorities because Indian Tribes retain sovereign immunity from nonconsensual suit by the State. Id., 498 U.S. at ----, 111 S.Ct. at 909-910. The Supreme Court realized this latter ruling barred the State from pursuing the most efficient remedy to collect taxes on nonexempt sales, i.e. sales to nontribal members. It accordingly stated the following, "[a]nd under today's decision, States may of course collect the sales tax from cigarette wholesalers, either by seizing unstamped cigarettes off the reservation ... or by assessing wholesalers who supplied unstamped cigarettes to the tribal stores...." (citations omitted) Id., 498 U.S. at ----, 111 S.Ct. at 912. Accordingly, City Vending is wrong that the Indian Commerce Clause exempts all sales by a wholesaler to an Indian Tribe.

One may, however, argue that because the State only has authority to tax final retail sales to nontribal members and OTC made no distinction in this case between sales at the retail level ultimately made to tribal members and those made to nontribal members it had no authority to revoke the license. We do not believe any such argument assists City Vending in the present case. No record has been presented to us which would show to whom the ultimate retail sales were made by the involved Tribes or smoke shops City Vending wholesaled cigarettes. This record only shows City Vending sold to Indians and/or Indian Tribes at the wholesale level for resale within Oklahoma. Once this fact is established, which without some exemption would be a violation of our cigarette tax laws, it was City Vending's burden to show some valid exemption existed which would make its sales tax exempt. The instant Accordingly, the opinion of the Court of Appeals is Vacated and the trial court is Affirmed.

record does not show any such exemption. ¹³ Furthermore, in that only sales to tribal members would be exempt from the reach of Oklahoma's tax laws and the face of the record we have been provided does not explicitly show any retail sales to tribal members which would be exempt we cannot conclude OTC lacked jurisdiction to revoke City Vending's license nor that the trial court erred in permanently enjoining City Vending from continuing to wholesale cigarettes after its license was revoked. ¹⁴

HODGES, V.C.J., and LAVENDER, SIMMS, HARGRAVE and WATT, JJ., concur.

WILSON, J., concurs specially.

OPALA, C.J., concurs in judgment.

KAUGER and SUMMERS, JJ., dissent.

ORDER

The petition for rehearing of Appellee, the Oklahoma Tax Commission is granted and this Court's opinion promulgated on April 23, 1991 and reported at 62 O.B.J. 1377 is withdrawn and replaced by the opinion filed this date.

DONE BY ORDER.

OPALA, Chief Justice, concurring in judgment.

The court affirms today the trial court's judgment which permanently enjoins the wholesaler, City Vending, from selling cigarettes within the State without a license. While I do not accede to the court's pronouncement, I concur insofar as the court declares that the Oklahoma Tax Commission's [Commission] order, which assessed a cigarette excise tax...