R.R. Tway, Inc. v. Oklahoma Tax Com'n

• Decision Date: 21 November 1995
• Docket Number: No. 82725,82725
• Citation: 1995 OK 129,910 P.2d 972
• Parties: R.R. TWAY, INC., Appellant, v. OKLAHOMA TAX COMMISSION, Appellee.
• Court: Oklahoma Supreme Court

Page 972

910 P.2d 972

1995 OK 129

R.R. TWAY, INC., Appellant, v. OKLAHOMA TAX COMMISSION, Appellee.

No. 82725.

Supreme Court of Oklahoma.

Nov. 21, 1995.

Rehearing Denied Feb. 6, 1996.

Appeal from the Oklahoma Tax Commission.

John B. Hayes, Looney, Nichols, Johnson & Hayes, Oklahoma City, for Appellant.

David Hudson, General Counsel and Marjorie L. Welch, Deputy General Counsel, Oklahoma Tax Commission, Oklahoma City, for Appellee.

Lou Keel, Assistant District Attorney, Oklahoma City, for Oklahoma County.

SUMMERS, Justice:

This is an appeal from an action in the Oklahoma Tax Commission by a construction contractor seeking a refund of both state and county sales tax. The Tax Commission granted the requested refund for the state sales tax, but declined to refund any Oklahoma County sales tax, and also refused to allow Oklahoma County to be joined as a party in the refund proceeding. We affirm the Tax Commission's order.

R.R. Tway, Inc. is the contractor. It paid sales tax on materials used to fulfill construction contracts with the Oklahoma Department of Transportation. In August of 1992 Tway sought a refund in the amounts of $19,154.57 for State sales taxes and $5,913.96 for Oklahoma County sales taxes. The application requested refunds for state sales taxes paid between July 21, 1986 and July 20, 1988, and a refund of Oklahoma County sales taxes paid between November 1, 1987 and July 20, 1988.

The statute under which the refunds were sought is 68 O.S.Supp.1992 § 1354(1)(T). ¹ This section allows a contractor to apply for a refund of sales taxes when specified circumstances occur. The refund is based upon the difference between the sales tax rate at the time the contract was entered into and the higher rate paid when the materials were purchased to fulfill the contract.

In Order 93-11-04-24 the Tax Commission determined "that the sales tax claims for refund of Protestant, R.R. Tway, Inc. be sustained." The Commission also determined that it had no jurisdiction to require Oklahoma County to be named as a party. The result of the Commission Order is that Tway is refunded state sales tax but not the county sales tax. Tway appealed, arguing that the Commission should have exercised jurisdiction over Oklahoma County and determined the County's liability to Tway for a sales tax refund.

When the application for refund was filed in August of 1992 the Oklahoma County sales taxes collected in 1987 and 1988 by the Commission had already been remitted to Oklahoma County. Those funds were thus no longer in the custody of the Tax Commission. Additionally, at the time of the refund proceeding the Commission was not collecting any Oklahoma County sales taxes. Thus, there were no Oklahoma County sales taxes in the custody of the Commission available to satisfy Tway's claim for an Oklahoma County sales tax refund.

The statute granting the right to a refund also states that: "... the Oklahoma Tax Commission shall prescribe rules and regulations and shall provide procedures for the refund to a contractor of sales taxes collected on purchases eligible for the lower sales tax rate authorized by this subsection;...." The Commission issued Rule 710:65-13-70 to provide a procedure for refunds. This rule states that the contractor may seek refunds on an annual basis for purchases made the preceding year, or may seek a refund upon completion of the contract. By Tax Commission interpretation a refund may also be requested at any time prior to contract completion.

The Tax Commission collects and enforces county sales taxes pursuant to a contract with a county as authorized by statute. 68 O.S.1991 § 1371. In its agreements with Oklahoma County the Tax Commission provided a procedure for refunds to taxpayers of taxes collected for the benefit of the county. The agreements were in force between November 1, 1987 and June 30, 1989, and included provisions stating that:

The County agrees that refunds of county sales tax previously paid over to the Treasurer of the County shall be paid from subsequent collections of the county sales tax. The Commission's determination of claims for refund shall be binding on the County.

In the event of termination of this agreement, the Commission will cause to be paid over to the County all county sales tax funds in its possession then due and payable under this Agreement, and the County shall thereafter be liable for and shall pay any refunds of county sales tax, penalty and interest paid under protest that must be refunded and any interest required thereon. After such termination, the Commission's liability shall extend only to the amount of such funds being held by it. The County agrees to pay any interest required by law to be paid on such refunds.

These provisions show that county refunds are to be paid from the Commission's collection of sales tax for the county at the time of the refund. This procedure is inadequate for Tway because the Commission was not collecting sales tax for Oklahoma County at the time Tway filed its application for a refund. The Commission relies upon Okla. Const. Art. 10 § 20, ² and argues that State funds in its custody cannot be used to satisfy the liability of Oklahoma County, and that the county sales tax refund must come from Oklahoma County.

I.

Tway argues that a taxpayer seeking a refund from a county is authorized to bring the county in as a party to the refund proceeding before the Commission. Tway cites to the Commission's statutory obligation to provide a refund procedure and the Court's opinion in Kay Electric Cooperative v. State ex rel. Oklahoma Tax Commission, 815 P.2d 175 (Okla.1991). In Kay the Court stated that "This Court's opinion in the present case is only binding as the law of the case on the entities which are parties to the actions." Id. 815 P.2d at 178. The refund of city sales taxes was not reached in Kay because the cities were not parties to the refund proceeding, and Tway argues that this must mean that cities (and counties) may be made parties to refund proceedings. Tway also relies upon the separate opinion in Kay for the proposition that joining Oklahoma County would be the proper procedure. Id. 815 P.2d at 178-181 (Summers, J., concurring in part and dissenting in part, and joined by Wilson and Kauger, JJ.).

In Kay Electric Cooperative this Court noted the problem of administering, within the statutory procedure of a Tax Commission protest proceeding, a sales tax refund when it was from the sales taxes of counties and municipalities, and when the counties and municipalities were not parties thereto. Id. 815 P.2d at 178. That opinion was published in July of 1991. In the intervening four years since Kay no express statutory authorization for joining counties and municipalities in either refund or protest proceedings before the Commission has been enacted by the Legislature.

The Court's language in Kay does not state that counties and cities may be made parties for a refund proceeding. For example, the language does not rule out the possibility that liability of a county or municipality for sales tax refunds could be addressed in a proceeding other than one before the Commission. Indeed, Oklahoma County's brief in this case argues that the proper remedy was suit in the District Court. Further, in Kay the tax was paid under protest, and that is not the case before us.

Tway argues that the Commission was required to "provide procedures for the refund to a contractor of sales taxes collected on purchases eligible for the lower sales tax rate authorized by this subsection [§ 1354(1)(T) ]...." Does this language authorize the Commission to compel Oklahoma County to appear as a party to the proceeding on the refund application?

The Tax Commission is of the opinion that § 1354 does not give it the authority to compel an appearance of Oklahoma County or issue orders requiring Oklahoma County to make payments on tax refunds. ³ We believe the Commission's stance is reasonable.

First, in the intervening four years since Kay the Legislature has enacted no statute for joining counties and municipalities in either protest or refund proceedings before the Commission. Failure to amend a statute after judicial construction of that statute is legislative acquiescence to that construction. McDonald v. Time-DC, Inc., 773 P.2d 1252, 1257 n. 20 (Okla.1989). In Kay the court judicially construed a Tax Commission protest procedure to the extent that the Court's holding therein requiring a refund was not applied to the counties and municipalities, they being non-parties. Kay Electric Cooperative, 815 P.2d at 178. The Legislature has been active in amending certain tax statutes. For example, both 68 O.S. § 1354(1)(T) creating the exemption at issue, and 68 O.S. § 225 providing for payment of refunds in appeals, were amended in 1994, and neither provided for including counties or municipalities as parties for the purpose of funding local tax refunds. Thus, post-Kay Legislatures have appeared to have concluded that counties and municipalities should not be included as parties.

Tway argues that the Commission should have set aside Oklahoma County sales tax funds for anticipated refund claims such as Tway's. But Tway does not offer any argument on how the Commission could anticipate the amount of potential refund claims occurring years after the sales tax was paid. One problem in Tway's argument is the statutory scheme for collecting and remitting county and municipal sales tax revenue collected by the Tax Commission.

In City of Oklahoma City v. Oklahoma Tax Commission, 789 P.2d 1287 (Okla.1990) we explained the legislatively-required accounts for deposit of sales tax revenue collected by the Commission for a municipality. We noted that sales tax revenue was deposited into a revolving fund, and that on the tenth of each month the Commission remitted to a municipality those municipal sales taxes collected the previous month. Id. 789 P.2d at 1289-1290...