A Tulsa-based grocery store chain is asking a federal judge to declare that the state cannot collect sales tax from its Okmulgee grocery store because it is situated on restricted Indian land.

Warehouse Market filed a lawsuit on Tuesday in federal court for Northern District of Oklahoma seeking a ruling that the Oklahoma Tax Commission cannot collect sales tax from its Cox Cash Saver Cost Plus store in Okmulgee since the shopping center is located on restricted Indian land under the jurisdiction of the Muscogee (Creek) Nation.

The lawsuit is the latest legal maneuver in a legal dispute between the tribe, the store and the Oklahoma Tax Commission that has been ongoing since late 2018, and did not arise because of the U.S. Supreme Court’s recent McGirt decision. That decision held that Congress never dis-established many of the tribal reservations in eastern Oklahoma.

Attorneys for Warehouse Market declined to comment on the case beyond the court filings. Paula Ross, spokeswoman for the Oklahoma Tax Commission said Wednesday that the commission had yet to receive the lawsuit and declined comment.

Jason Salsman, spokesman for the Muscogee (Creek) Nation, said the tribe was aware of the lawsuit and would be closely monitoring it, but since the tribe is not a party to the suit, declined further comment.

According to the lawsuit, Warehouse Market pays monthly rent for the store to Pinnacle Management & Consulting LLC, which leases the property through a U.S. Bureau of Indian Affairs lease.

The store was collecting and paying a 10 percent sales tax to the Oklahoma Tax Commission until October 2018. A month earlier, according to the lawsuit, Warehouse Market had received a letter from the Creek Nation’s tax commission stating that, under the lease, any retail sales on the property were subject to a 6 percent tribal sales tax.

The letter also stated that it was the position of the tribe that Warehouse Market had no obligation to pay taxes to any city, county or state agencies because the tribal tax commission was the only agency authorized to tax on restricted Indian land, the suit states.

In October, Warehouse Market began paying the tribe sales tax and in November, ceased paying the state, according to the suit.

The land the shopping center is located on is allotment land to an individual that has been passed down for several generations and was being leased through the Bureau of Indian Affairs, said Sonya McIntosh, real estate director for the Muscogee (Creek) Nation.

When the land was first leased many years ago, the tribe did not have its own tax commission, she said. However, when the lease was renewed in 2018, the tribe did have a tax commission, which required that businesses on the land pay the tribal sales tax, McIntosh said.

However, the Oklahoma Tax Commission then sent Warehouse Market a letter stating that “sales on restricted Indian land were subject to state and local taxes; that Warehouse Market was not relieved from the requirements of the Oklahoma Tax Code and that failure to remit state and local sales to the State would result in closure of the business and/or revocation of the business’s sales tax permit.”

A few days later, Warehouse Market received a letter from the tribe stating it was in violation of tribal sales tax rules and would be subject to interest, fines or a revocation of its license if remedial action wasn’t taken.

Warehouse Market filed a interpleader suit against both the tribe and the state in Okmulgee County to resolve the matter of who it owes taxes to. An interpleader action allows one party to deposit funds with the court, which determines who the funds are owed to.

The tribe was subsequently dismissed from the suit, while the state argued that, while the store is on Indian land, it is entitled to sales taxes from the sales of goods to non-Indian customers. Eventually, the judge in the case ruled that the state was not entitled to collect sales tax from the store.

That decision was appealed by the Oklahoma Tax Commission and the case is currently before the Oklahoma Supreme Court.

However, the federal suit states, the Oklahoma Tax Commission is continuing to insist it is entitled to tax all sales at the store, and the store has continued to collect the 10 percent state sales tax from customers.

The suit argues that the store should pay the tribal sales tax, but not the state sales tax, and that the state’s action work to frustrate tribal self-sufficiency and economic development  “because no business would agree to open a retail store on restricted Indian land that was required to collect double taxes from its customers…”

The suit asks that the court declare the state is not entitled to tax retail sales at the Okmulgee grocery store and other relief the court finds appropriate.

Note: This story was updated Nov. 12, 2020 at 11:40 a.m. to include a comment from the Muscogee (Creek) Nation’s spokesman.