Warehouse Mkt. Inc. v. State ex rel. Okla. Tax Comm'n

• Decision Date: 02 February 2021
• Docket Number: No. 118,504,118,504
• Citation: 481 P.3d 250
• Parties: WAREHOUSE MARKET INC., Plaintiff/Appellee, v. STATE of Oklahoma, EX REL. OKLAHOMA TAX COMMISSION, Defendant/Appellant, and Muscogee (Creek) Nation, ex rel. Office of the Tax Commission, and Pinnacle Management & Consulting, LLC., Defendants.
• Court: Oklahoma Supreme Court

481 P.3d 250

WAREHOUSE MARKET INC., Plaintiff/Appellee,

v. STATE of Oklahoma, EX REL. OKLAHOMA TAX COMMISSION, Defendant/Appellant,andMuscogee (Creek) Nation, ex rel. Office of the Tax Commission, and Pinnacle Management & Consulting, LLC., Defendants.

No. 118,504

Supreme Court of Oklahoma.

FILED FEBRUARY 2, 2021

James H. Ferris, Randy J. Lewin, Scott V. Morgan, Tulsa, Oklahoma. for Plaintiff/Appellee, Warehouse Market, Inc.

Randall J. Yates, Assistant Solicitor General, Oklahoma Attorney General, Oklahoma City, Oklahoma, for Defendant/Appellant, Oklahoma Tax Commission.

KAUGER, J.:

¶1 The dispositive question presented is whether the trial court can address plaintiff's action/request for relief from OTC taxation? We hold that because the substance of the plaintiff's action/request for relief is a tax protest, exhaustion of administrative remedies is a jurisdictional prerequisite to seeking relief in the trial court.

FACTS AND PROCEDURAL HISTORY

¶2 Two tribal members of the federally recognized tribe, the Muscogee (Creek) Nation (the Tribe), own real property within the jurisdiction of the tribe, within the town of Okmulgee, Oklahoma. A shopping center is located on the property. The property is "restricted Indian land," which Federal regulations define as land in which the title "is held by an individual Indian, subject to Federal restrictions against alienation or encumbrance."¹

¶3 The landowners leased the property on February 5, 2018, to Pinnacle Management & Consulting, Inc. (Pinnacle) for a period of twenty-five years with an option to renew one (1) twenty-five year period. The lease is titled as the "United States Department of the Interior Bureau of Indian Affairs Business Lease" (BIA Lease) and the purpose of the lease is for Pinnacle to manage the shopping center. The Superintendent of the Okmulgee Agency of the Bureau of Indian Affairs (BIA) approved the lease on February 13, 2018.² The lease requires new businesses to obtain licensing and pay appropriate sales tax to the Tribe.³

¶4 On October 1, 2018, Pinnacle entered into a Sublease with Warehouse Market, Inc., D/B/A Cox Cash Saver Cost Plus 10% (Warehouse Market). The initial term of the Sublease was for sixteen months, with four additional, optional sixty month terms. The tax provision of the Sublease required the sublessor to pay all attributable real property and assessments to the property.⁴ The Sublease also required it to be governed by tribal law.⁵ The Sublease was not approved by the BIA.⁶

¶5 The record is silent as to whether or how long Warehouse Market may have occupied the premises before it entered into this particular Sublease with Pinnacle. Nevertheless, the Tribe sent a letter to Pinnacle dated September 6, 2018, which stated that effective October 1, 2018, pursuant to the BIA Lease, any retail sales located on the property would be required to pay 6% sales tax to the Tribe. The letter also states that "[t]here is no obligation to pay taxes to any city, county, or state agencies as the Muscogee (Creek) Nation Tax Commission is the only authorized taxation agency allowed to assess or collect taxes on restricted land." Subsequently, Pinnacle passed the information on to Warehouse Market.

¶6 Warehouse Market "had been collecting and remitting" 10.083% sales tax levied by the State of Oklahoma on taxable items at the store. However, for the month of October 2018, as requested by the Tribe, Warehouse Market sent the 6% which the Tribe assessed as sales tax to the Tribe. Warehouse Market also advised the Oklahoma Tax Commission (OTC) that the October 2018 payment would be the last sales tax payment to the State of Oklahoma.⁷ The OTC responded with a letter dated November 21, 2018, which stated that the full amount of the October taxes were due to the OTC and that future taxes would also be due.

¶7 With the prospect of losing its licensing and permits if it did not remit sales tax to both State and Tribal taxing entities, Warehouse Market filed an action in the District Court of Okmulgee County on December 21, 2018. The filing is labeled as a "Petition for Interpleader and Application for Temporary Restraining Order, Temporary Injunction, and Permanent Injunction." The action named the OTC, the Tribal Office of Tax Commission, and Pinnacle as defendants.

¶8 Warehouse Market sought to interplead the sales tax it had collected to the Court, and let the Court determine who was entitled to the funds.⁸ It also sought a determination from the Court as to whether the OTC could tax Warehouse Market at all. Warehouse Market requested restraining orders against both tax entities from pulling its license and/or shutting its store down. The trial court initially granted the interpleader, and granted a temporary restraining order. However, through the course of the proceedings, the trial court ultimately dismissed the Tribal Tax Commission due to sovereign immunity, and the court's lack of subject matter jurisdiction over it. Pinnacle also sought to be dismissed because it had no interest in the funds whatsoever.

¶9 On March 19, 2019, the trial court issued a judgment and order determining that the OTC was entitled to the funds, and dismissing Warehouse Market and Pinnacle from the proceedings. Also on March 19, 2019, Warehouse Market filed a Motion for Summary Judgment, requesting that the Court determine whether the OTC could collect any sales tax whatsoever from Warehouse Market because the business is on Federal restricted land. On March 29, 2019, Warehouse Market filed a Motion to Reconsider the March 19, 2019 order. It asked for an opportunity to respond to the OTC's arguments of entitlement to the funds and authority to tax it.

¶10 On April 15, 2019, the OTC responded to the Motion to Reconsider, arguing that what might have initially been guised as an interpleader for collected sales tax fund, is substantively a tax protest. As a tax protest, Warehouse Market has not exhausted administrative remedies as a jurisdictional requirement before the Court can determine the OTC's taxing authority over Warehouse Market. The OTC cross-motioned for dismissal/summary judgment. After a November 14, 2019 oral argument, the trial court issued a somewhat confusing order on Summary Judgment on November 21, 2019. In it, the trial court appears to have granted Warehouse Market's Motion for Summary Judgment, at least in part, and denied the OTC Request for Dismissal/Motion for Summary Judgment.

¶11 The order states:

... Plaintiff's Motion for Summary Judgment is GRANTED only to the extent Defendant Oklahoma Tax Commission is not currently entitled to retail tax proceeds at Plaintiff's subject matter retail establishment unless and until the legitimate dispute between the Muscogee (Creek) Nation and the Oklahoma Tax Commission as to taxation authority is resolved in another forum or tribunal. To allow the Oklahoma Tax Commission to obtain funds or to have exclusive administrative authority over sales tax proceeds would result in catastrophic, permanent and irreparable harm to the innocent party Plaintiff who merely wants to pay its taxes.

Defendant's Cross-Motion for Dismissal or Summary Judgment is DENIED. The OTC filed an appeal on December 20, 2019. We retained the cause on February 18, 2020, and then we ordered additional briefing which was completed on July 28, 2020. The cause was assigned to this chamber on August 6, 2020.

BECAUSE THE SUBSTANCE OF THE PLAINTIFF'S ACTION/REQUEST FOR RELIEF IS A TAX PROTEST, EXHAUSTION OF ADMINISTRATIVE REMEDIES IS A JURISDICTIONAL PREREQUISITE TO SEEKING RELIEF IN THE TRIAL COURT.

¶12 Because the trial court had no subject matter jurisdiction over the Tribal Tax Commission due to sovereign immunity, the Tribal Tax Commission was dismissed and is no longer a party to this cause. Nor is Pinnacle a party because it only served as the sublessor to Warehouse Market. Since the OTC filed this appeal, Warehouse Market has filed a similar action in federal court against the OTC, also seeking relief from that court.⁹ Nothing in the record indicates that Warehouse Market has pursued any administrative remedies in either the OTC, or the Muscogee (Creek) Nation Tax Commission, to protest either entity's respective tax imposition on Warehouse Market.

A. The Substance of The Plaintiff's Action/Request For Relief is a Tax Protest.

¶13 Warehouse Market asks the trial court to determine whom to pay the taxes to and to stop either the OTC or the Tribe from interfering in its business. The OTC argues that this matter is not merely an interpleader, but really a tax protest. An interpleader is viewed with favor by this Court as a means of avoiding multiple and vexatious litigation. It is an appropriate proceeding whenever (1) two or more claims arise out of the same or related subject matter and (2) the stakeholder is exposed to double or multiple litigation as a result of these claims.¹⁰ Without doubt, Market Warehouse's initial petition was in the nature of an interpleader. It specifically requested that it be allowed to deposit the sales tax it had collected, and would continue to collect, which both the OTC and the Tribe asserted claim to, and that the trial court then determine who was entitled to the taxes.

¶14 However, once the trial court dismissed the Tribe because of its sovereign immunity, and the trial court was without any authority to take any further decisive action towards the Tribe, the cause no longer met the basic definition of interpleader and, instead, quickly became nothing more than a tax protest. A tax protest is generally defined as a tax assessment complained to have been illegally levied, alleging that such taxes were illegal because they had been levied without authority.¹¹ Market Warehouse protests the OTC tax assessment and complains that it was illegally levied. It alleges that such taxes were illegal because they had been levied without authority. Consequently, this cause fits squarely within the definition of a tax...