A grocery store chain has filed a federal lawsuit that asks a judge to determine whether one of its stores should be required to collect sales tax for the Oklahoma Tax Commission, while it also collects sales tax for the Muscogee (Creek) Nation.
This is the second lawsuit to be filed by Warehouse Market Inc., regarding the Cox Cash Saver Cost Plus store that it operates in Okmulgee.
A lawsuit on similar issues is pending before the state Supreme Court.
In its case filed Tuesday in Tulsa federal court, Warehouse Market asks a judge to determine that the Oklahoma Tax Commission can’t require the business to impose state and local sales taxes at its Okmulgee store because the land is on restricted Indian land within the jurisdiction of the Muscogee (Creek) Nation.
The grocery store claims it has been threatened with fines, interest, revocation of business licenses and even closure if it did not remit sales taxes to both entities.
“The federal question presented is whether the State of Oklahoma can collect sales tax on retail sales at Warehouse Market’s Okmulgee store, which is located on restricted Indian land,” according to the lawsuit.
The sales tax dispute dates to September 2018, when the grocery store said it received a letter from the Muscogee (Creek) Nation stating that under a Bureau of Indian Affairs master lease on the property, any retail sales on the property were subject to a 6% tribal sales tax.
The grocery store said it paid the 6% tax on sales for October to the tribe as well as an additional 10.083% sales tax to the Oklahoma Tax Commission.
The grocery store also notified the OTC that it would stop remitting state and local taxes to the state agency due to the tribal tax, according to the lawsuit.
The Tax Commission responded on Nov. 21, 2018, when it sent a letter to Warehouse Market stating that sales on restricted Indian land were subject to state and local taxes, too, and that failure to do so could result in closure of the business and/or revocation of its sales tax permit.
Warehouse Market filed a lawsuit in December 2018 in Okmulgee District Court.
After issuing a temporary restraining order one day after the lawsuit was filed, District Judge Kenneth Adair ruled Nov. 21, 2019, that the grocery store was entitled to summary judgment “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 a 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,” Adair wrote in his order.
The grocery store said it has continued to collect the 10.083% sales tax for the state while the state case has progressed to the state Supreme Court.
The Oklahoma Tax Commission, in its state appeal, attacks the grocery store’s case on procedural grounds and on its merits.
The OTC cited U.S. Supreme Court rulings, in which it claims the court has acknowledged that certain economic activity may be taxed by both a state and a tribe.
The Muscogee (Creek) Nation, for its part, stated in a state court filing that the grocery store may be subject to both tribal, state and local sales taxes so long as tribal members are exempt from non-tribal sales taxes when the purchase occurs on land held in trust for a federally recognized Indian tribe.
The land where the grocery store is located is owned by individual tribal members rather than the tribe, according to court documents.
The grocery store, in a state Supreme Court filing, claims it will be left with one choice if it is required to collect sales tax for the state and tribe simultaneously.
“It cannot stay in business if it has to collect double sales taxes of 16.083%,” according to a July filing with the state Supreme Court.
A spokesperson for the OTC, declined to comment on the federal lawsuit, saying it has yet to be served.
An attorney for the grocery store declined to comment on the case.
A spokesperson for the Muscogee (Creek) Nation issued the following comment:
“Muscogee (Creek) Nation has been made aware that Warehouse Market in Okmulgee has filed a federal lawsuit against the Oklahoma Tax Commission regarding the payment of State retail sales taxes for sales at the grocery store located on restricted land within the Mvskoke Reservation. Since Creek Nation is not a party to this lawsuit, the Nation has no comment on the merits of the action at this time, but will closely monitor the developments in the case.”