OKLAHOMA CITY – Although the McGirt decision rendered last year by the Supreme Court of the United States focused solely on criminal jurisprudence, the extent of state taxing authority in “Indian Country” has been challenged in court cases whose outcomes could affect school operations, municipal budgets, and public capital improvements financed via government bond issues.
Both cases contest taxes collected inside the boundaries of the Muscogee (Creek) Nation.
Oneta Power, LLC, which owns an electricity generation plant in Broken Arrow, filed suit in Wagoner County District Court against County Assessor Sandy Hodges over the company’s property tax assessment.
Oneta Power has raised the question of whether the Wagoner County assessor “has lawful jurisdiction to levy and assess ad valorem tax on personal property within the territorial boundaries of the Creek Reservation” in light of the SCOTUS decision in McGirt.
The power company also appealed the substantial increase in the plant’s property tax valuation Hodges assessed the property at a fair cash value of $282,021,000 for tax year 2019, but raised the valuation for tax year 2020 to $399,245,277. That was an increase of more than $117 million, or 41.5%.
The power company contends the “actual fair cash value” of their property is $218 million “or less.” The assessor said her office contracted with an outside company to calculate the value of the power plant.
Oneta’s formal tax protest was scheduled for a hearing before the Wagoner County Equalization Board on July 28, 2020. However, Hodges, her attorney and tax consultant asked the board to “stop the hearing due to Oneta’s alleged non-compliance with the subpoena,” and the board voted 3-0 to halt the hearing.
The electric company has requested a trial “to correct and lower” the fair cash value of their property. No trial date has been set, the Oklahoma State Courts Network indicates.
Oneta has paid the share of property taxes that were not in dispute, and has deposited into an escrow account the portion that has been protested, Hodges said.
In another civil tax case, a grocery chain and the Oklahoma Tax Commission have been locked in a dispute for two years over collection of state sales taxes on a store operating in Indian Country.
GROCER PROTESTS STATE SALES TAXES IN INDIAN COUNTRY
Warehouse Market Inc., based in Tulsa, believes it has no obligation to pay state sales taxes on a Cox Cash Saver Cost Plus store it operates in a shopping center in Okmulgee that is located on restricted Indian land within the jurisdiction of the Muscogee (Creek) Nation. Warehouse Market rents the building in Okmulgee from a company that leases the property through a master lease with the U.S. Bureau of Indian Affairs (BIA).
The feud started 21 months before the U.S. Supreme Court ruled in the McGirt case from Oklahoma’s Eastern District federal court in Muskogee that the Creek Nation Reservation was never dissolved by Congress.
Warehouse Market has paid to the Oklahoma Tax Commission (OTC) city, county and state sales taxes, at a combined rate of 10.083%, collected on purchases of items at its Okmulgee store.
The Tulsa grocer received a letter from the Creek Nation in September 2018 which stated that under the BIA master lease, any retail sales on the property it rents in Okmulgee are subject to a 6% tribal sales tax.
In October 2018 Warehouse Market paid the Creek Nation its 6% in tribal sales tax receipts and paid the OTC 10.083%, but notified the Tax Commission that pursuant to the tribal notice the company would stop remitting state and local taxes to the OTC.
The Tax Commission responded with a letter informing Warehouse Market that sales on restricted Indian land are subject to state and local taxes; that Warehouse Market was not relieved from requirements of the Oklahoma Tax Code; and that failure to remit state and local sales taxes to the state would result in closure of the business and/or revocation of the business’s sales tax permit.
Warehouse Market filed suit in Okmulgee County District Court in December 2018, naming the Tax Commission and the Muscogee (Creek) Nation as defendants. Subsequently the Creek Nation was dismissed as a party because of tribal sovereign immunity.
Okmulgee County District Judge Ken Adair issued a summary judgment in favor of Warehouse Market in November 2019. The OTC “is not currently entitled to retail tax proceeds” at the Okmulgee grocery “unless and until the legitimate dispute” between the Creek Nation and the Tax Commission “is resolved in another forum or tribunal,” Judge Adair ruled.
The Tax Commission appealed Adair’s decision to the Oklahoma Supreme Court and continued to insist it is entitled to tax sales at the Okmulgee store. Warehouse Market said it still collected the 10.083% sales tax from its customers “pending a final decision” on whether the State of Oklahoma is entitled to tax sales on restricted Indian land.
Warehouse Market filed suit in Tulsa’s Northern District federal court in November 2020, seeking a judgment that the Tax Commission “is not entitled to tax retail sales at Warehouse Market’s grocery store, which is located on restricted Indian land” in Okmulgee.
The Oklahoma Supreme Court reversed Judge Adair’s ruling on Feb. 2, 2021, declaring that because Warehouse Market’s request for relief is a tax protest, the grocer must exhaust “administrative remedies” before it can seek relief in the trial court.”
The federal lawsuit was dismissed on Feb. 4 because the federal court, too, “lacks jurisdiction” to consider Warehouse Market’s claim, U.S. District Judge Claire Eagan ruled.