Mom-and-Pop C-stores Sue Oklahoma Tax Commission

OKLAHOMA CITY -- Several convenience store operators have joined forces in taking legal action against the Oklahoma Tax Commission, claiming there were the target of sales tax audits because they are minorities.

The lawsuit comes on the heels of the Commission's crackdown on mom-and-pop locations, according to NewsOK.com. Owners of 37 stores allege the Tax Commission singled them out for an audit because of their race or religion. The Commission has denied these allegations and said the majority of the stores came under scrutiny because a computer program identified them as reporting far less merchandise sales than expected based on the value of beer they purchased for sale to the public, the news outlet reported.

In addition, other stores were subject to sales tax audits because of concerns over the sale of unstamped cigarettes; the failure to withhold income tax from employees' salaries; and abuse of the food stamp program, according to the NewsOK.com report, which cited a court document filed in connection with the Feb. 13 Oklahoma County lawsuit.

Oklahoma City attorney Natalie Nhu Mai, who's representing the c-store owners, said her clients are Muslim or Vietnamese. Further, she told the news outlet that through litigations, she has learned of about 150 open Tax Commission convenience store audits and, so far, she has not heard of any that were not minority-owned businesses.

Mai said the amount of contested sales tax payments the Tax Commission is seeking from each of her 37 clients ranges from the low $100,000s to more than $1 million. The Commission claims most owe at least $300,000 or $400,000, she said.

Oklahoma Tax Commission Attorney Marjorie Welch said the race or religion of convenience store owners had nothing to do with why they were selected to be audited, NewsOK.com reported. The computer program that targeted the bulk of the owners for audits doesn't even contain data about the race or religion of the convenience store owners, Welch noted.

The computer picked them out because their reported sales of beer and other merchandise subject to sales tax appeared extraordinarily low when compared to the beer they purchased from distributors for sale at their stores, she explained. Many of the owners actually reported net sales subject to sales tax that were substantially less than the amount the stores had spent on wholesale beer purchases, according to documents filed by Tax Commission attorneys.

Mai said her clients are concerned not only because they are being audited, but also because in recent years, the Tax Commission has been using a different method of calculating taxes owed that her clients believe overstates the amount of sales tax owed by about seven times. Rather than relying on traditional records maintained by the convenience stores and the wholesalers who sell them merchandise, the Commission has been using sales data compiled by NACS, the Association for Convenience & Fuel Retailing, to project what it believes sales should have been, Mai told NewsOk.com.

The Tax Commission is asking District Judge Barbara Swinton to dismiss the lawsuit. A hearing is scheduled for April 20.