Kay Electric Cooperative v. State ex rel. Oklahoma Tax Commission

HODGES, Vice Chief Justice. On March 20, 1987, the Oklahoma Tax Commission (Commission) adopted Regulation 13-62 requiring rural electric cooperatives to collect, report and remit state, city and county taxes on the sale of electricity. As a result, the appellants, Kay Electric Cooperative and Cotton Electric Cooperative (collectively, coops), collected and remitted sales tax to the Commission. The tax was paid under protest. The coops then separately filed for refunds. The Commission denied both requests for refunds based on the Administrative Law Judge’s Findings, Conclusions and Recommendations. Both coops appealed from — 177 — those denials. The cases were consolidated on appeal. In Branch Trucking Co. v. Oklahoma Tax Comm’n, 801 P.2d 686 (Okla.1990), this Court addressed the question of whether rural electric cooperatives were exempt from collecting, reporting, and remitting sales tax. Branch was a challenge to the validity of the Commission’s order under Okla.Stat. tit. 68, § 225(f) (1981). Therefore, the issue of whether the tax should be refunded was not addressed. The only difference in the present cases and Branch is that the present appeal is from the denials of requests for refunds. The Commission, after this Court requested additional briefs, argues that Branch should only be given prospective effect. We disagree. The general rule is that a decision of a court will be given retrospective application. An exception to that rule was set out in Chevron Oil Company v. Huson, 404 U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 296 (1971), and adopted by this Court. See Griggs v. State, 702 P.2d 1017, 1020-21 (Okla.1985). The three factors for determining if a decision should be given only prospective application are: First, the decision to be applied nonretro-actively must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied or by deciding an issue of first impression whose resolution was not clearly foreshadowed. Second, it has been stressed that “we must ... weigh the merits and demerits in each case by looking to the prior history of the rule in question, its purpose and effect, and whether retrospective operation will further or retard its operation.” Finally we have weighed the inequity imposed by retroactive application, for “[w]here a decision of this Court could produce substantial inequitable results if applied retroactively.” Chevron, 404 U.S. at 106-07, 92 S.Ct. at 355-56 (citations omitted); Griggs 702 P.2d at 1020. In Branch, there was no new pronouncement overruling clear past precedent on which the litigants relied. In fact, the Commission was bound by two early 1900 district court cases. See Alfalfa Elec. Coop. v. Oklahoma Tax Comm’n, No. 105,766, slip op. (D.Ct.Okla. Jan. 29, 1943); Cotton Elec. Coop. v. Oklahoma Tax Comm’n, No. 105,778, slip op. (D.Ct.Okla. Aug. 11, 1942). Further, Branch was not a case of first impression. It has long been the rule that a party to an action is bound by stare decisis and that the Attorney General cannot overrule a court of competent jurisdiction. The history and purpose of the rule favor retroactive application. As just stated, the Commission was bound by two district court cases from which it did not appeal. It could not collaterally attack those decisions by relying on the Attorney General’s opinion. Likewise, there is little inequity in imposing the Branch decision retroactively. The coops paid the taxes under protest. The Commission was fully aware of the possibility that the taxes would have to be refunded. While the state argues that it will endure hardship if Branch is applied retrospectively, it does not argue that it would be unfair. Balancing these three factors, the scales tilt on the side of the general rule. The Branch decision should be applied retroactively to requests for refunds of state sales taxes paid under protest. Even if the balance was shifted, this Court still must order the refunds. The Legislature has provided that taxes which were erroneously or illegally assessed by the Commission must be refunded. Okla.Stat. tit. 68, § 225(c) (1981). Section 225(c) states: “If upon final determination of the appeal the order assessing such tax, penalties, and interest is reversed or modified and it is determined that said tax or part thereof was erroneously or illegally assessed, said amounts so paid by the taxpayer, together with the interest thereon at the rate of three percent (3%) per annum, shall be refunded to the taxpayer by the Tax Commission.” Having — 178 — found that the taxes were illegally collected, the Commission must refund the taxes. The Commission relies on First of McAlester Corp. v. Oklahoma Tax Comm’n, 709 P.2d 1026 (Okla.1985), and Sun Oil Co. v. Oklahoma Tax Comm’n, 620 P.2d 896 (Okla.1981), for the proposition that the refunds should be denied. Those two cases are distinguishable from the present case because the taxes in those cases were not paid under protest. Section 206 applies only to taxes paid under protest. We express no opinion on whether Branch applies to requests for refunds of taxes which were not paid under protest because that issue is not before us. Some municipalities have filed an amicus curiae brief arguing, among other things, that Branch should not be applied to them because they were not parties to that case. Likewise, they are not parties in the present appeal or in the hearings below. This Court’s opinion in the present appeal is only binding as the law of the case on the entities which are parties to the actions. See Fry v. Pennsylvania Mut. Life Ins. Co., 195 Okl. 507, 159 P.2d 550 (1945). ORDER OF TAX COMMISSION REVERSED. CAUSE REMANDED WITH INSTRUCTIONS TO REFUND PROTESTED STATE SALES TAXES. LAVENDER, SIMMS and HARGRAVE, JJ., and BACON, S.J., concur. OPALA, C.J., and ALMA WILSON, KAUGER and SUMMERS, JJ., concur in part and dissent in part. BACON, S.J., sitting in place of DOOLIN, J., who disqualified.