Anthony, Inc. v. City of Omaha
| Decision Date | 18 May 2012 |
| Docket Number | No. S–11–421.,S–11–421. |
| Citation | 813 N.W.2d 467,283 Neb. 868 |
| Parties | ANTHONY, INC., a Nebraska corporation, et al., appellants, v. CITY OF OMAHA, a Nebraska municipal corporation, appellee. |
| Court | Nebraska Supreme Court |
OPINION TEXT STARTS HERE
Syllabus by the Court
[283 Neb. 868]1. Constitutional Law: Ordinances: Appeal and Error. The constitutionality of an ordinance presents a question of law, in which an appellate court is obligated to reach a conclusion independent of the decision reached by the trial court.
2. Administrative Law: Statutes: Appeal and Error. The interpretation of statutes and regulations presents questions of law, in connection with which an appellate court has an obligation to reach an independent conclusion irrespective of the decision made by the court below.
3. Municipal Corporations: Taxation: Statutes. Municipal corporations have no power to impose taxes except such as is expressly conferred by or necessarily implied from statute.
4. Taxation: Words and Phrases. An occupation tax is a tax upon the privilege of doing business in a particular jurisdiction or upon the act of exercising, undertaking, or operating a given occupation, trade, or profession.
5. Taxation: Words and Phrases. A sales tax is a tax upon the sale, lease, rental, use, storage, distribution, or other consumption of all tangible personal property in the chain of commerce.
6. Taxation: Proof. The legal incidence test requires a determination of who the law declares has the ultimate burden of the tax.
7. Taxation. The legal incidence of a sales tax falls upon the purchaser, because it is a tax upon the privilege of buying tangible personal property.
8. Taxation. The legal incidence of an occupation tax falls upon the retailer, because it is a tax upon the act or privilege of engaging in business activities.
[283 Neb. 869]9. Taxation. Both occupation taxes and sales taxes can be calculated upon gross receipts.
10. Taxation. It is not objectionable for there to be two or more occupation taxes imposed upon the same retailer.
11. Taxation. The same person or entity may engage in several different businesses or activities and be taxed on each.
12. Statutes: Legislature: Intent. In the exposition of statutes, the reason and intention of the lawgiver will control the strict letter of the law when the latter would lead to palpable injustice or absurdity.
13. Statutes: Legislature: Intent. When words of a particular clause, taken literally, would plainly contradict other clauses of the same statute, or lead to some manifest absurdity or to some consequences which a court sees plainly could not have been intended, or to result manifestly against the general term, scope, and purpose of the law, then the court may apply the rules of construction to ascertain the meaning and intent of the lawgiver, and bring the whole statute into harmony if possible.
14. Taxation: Liquor Licenses. The monetary limit for an occupation tax on the business of any person, firm, or corporation licensed under the Nebraska Liquor Control Act is a specific limitation on an occupation tax on the type of business or activity licensed under the act.
15. Administrative Law: Taxation: Legislature. A state legislature, in fixing a license tax on a certain subject, may limit taxes against the same subject by other branches of government.
16. Constitutional Law: Ordinances: Presumptions: Proof: Appeal and Error. When passing on the constitutionality of an ordinance, an appellate court begins with a presumption of validity. Therefore, the burden of demonstrating the constitutional defect rests with the challenger.
17. Constitutional Law: Statutes: Special Legislation. When a law confers privileges on a class arbitrarily selected from a large number of persons standing in the same relation to the privileges, then the law in question has resulted in the kind of improper “special favors” prohibited by the special legislation clause.
18. Special Legislation. A legislative act constitutes special legislation if (1) it creates an arbitrary and unreasonable method of classification or (2) it creates a permanently closed class.
19. Municipal Corporations: Taxation: Ordinances. To be valid, a municipal ordinance classifying an occupation for the purpose of levying a tax thereon must not be arbitrary in its classification.
20. Taxation: Public Policy. A classification for tax purposes must rest on some reason of public policy or some substantial difference of situation or circumstances that would naturally suggest the justice or expediency of diverse legislation with respect to the objects or individuals classified.
21. Municipal Corporations: Taxation: Ordinances. Municipal authorities may by ordinance classify the different occupations for taxation, and impose different taxation in different amounts upon the different classes; and a classification made by such authorities will not be interfered with by the courts, unless it manifestly appears that it is unreasonable and arbitrary.
D.C. Bradford, Ryan J. Dougherty, and Justin D. Eichmann, of Bradford & Coenen, L.L.C., Omaha, for appellants.
Thomas Mumgaard, Deputy Omaha City Attorney, for appellee City of Omaha.
Rodney M. Confer, Lincoln City Attorney, and Jocelyn W. Golden, Lincoln, for amicus curiae City of Lincoln.
Anthony, Inc.; Anthony J. Fucinaro, Jr.; La Casa Pizzaria Inc.; and members of the Omaha Restaurant Association (collectively the Restaurants) operate restaurants in the City of Omaha (the City) subject to a municipal ordinance which became effective on October 1, 2010. The ordinance declares itself to be an “occupation tax” on restaurants and drinking places in the City in the amount of 2 1/2 percent of gross receipts. The Restaurants argue that the tax is actually a “sales tax” which exceeds the sales tax limits authorized by law. Alternatively, the Restaurants argue that if the ordinance imposes an occupation tax, it violates limitations in the Nebraska Liquor Control Act (Liquor Control Act) 1 on the amount of occupation tax for liquor licensees. Finally, the Restaurants argue that the ordinance is unconstitutional special legislation. We find no merit to the Restaurants' challenges to the ordinance.
In response to budget shortfalls, the Omaha City Council passed ordinance No. 38791 (the Restaurant Ordinance),2which imposes “an occupation tax on persons operating restaurants and drinking places within the City” (the Restaurant Tax). A restaurant is defined by the ordinance as “any place that is kept, used, maintained, advertised, or held out to the public as a place where food is prepared and sold for immediate consumption either on the premises or elsewhere.” 3 A “drinking place” is defined as “any establishment or business offering the public on-premises consumption of alcoholic and/or nonalcoholic beverages.” 4
The amount of the Restaurant Ordinance is 2 1/2 percent “of all gross receipts for each calendar month derived from the sale of food or beverages subject to this tax.” 5 The Restaurant Ordinance provides that a taxable restaurant or drinking place “may itemize the tax levied on a bill, receipt, or other invoice provided to the purchaser but each person engaged in the restaurant or drinking place business shall remain liable for the tax imposed by this section.” 6 The tax “is for revenue purposes to support the government of the city” and is “in addition to all other fees, taxes, excises, and licenses levied and imposed under any contract or any other provisions of this code or ordinances of the city and in addition to any fee, tax, excise, or license imposed by the state.” 7
The stated intent and purposes of the Restaurant Ordinance are as follows:
(a) The city council determines that persons engaging in restaurant and drinking place businesses are benefited from tourism and recreational activity that places unique demands on the city's resources but which is activity that should be promoted and encouraged. Further, residents and non-residents who patronize these businesses are enjoying a discretionary activity that is dependent upon, and generating revenue from, the business's location within the city and the business's access to the services provided by the city. Subjecting the business's revenue to taxation for general city purposes is fair, reasonable, and just.
(b) Pursuant to the authority of Neb.Rev.Stat. § 14–109, the city council finds, determines, and declares that restaurant and drinking place businesses form a discrete class of occupation engaged in within the city and it is appropriate that a tax be imposed on this class of businesses for the purpose of raising revenue to support and further general city activities and services. This determination is made with due recognition of the inherent value of business conducted within the city and the relation business has to the municipal welfare and the expenditures required of the city, and with consideration of the just, proper and equitable distribution of tax burdens within the city.8
The Restaurant Ordinance contains a severability clause stating that if any provision “or the application thereof to any person or circumstances” is held invalid, then “that invalidity shall not affect the other provisions of this article which can be given effect without the invalid provision or application.” 9
The City's finance department sent letters to restaurants, drinking places, and caterers identified as subject to the Restaurant Ordinance. Those letters informed the businesses as to various matters concerning the Restaurant Tax, including how it related to the calculation of state and city sales and use taxes.
The letter stated that the state and local sales and use taxes are “ calculated on the gross receipts plus the restaurant tax.” In the event restaurants chose to itemize the Restaurant Tax on their...
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