City of Louisville v. Sebree

Decision Date06 August 1948
Citation308 Ky. 420,214 S.W.2d 248
PartiesCITY OF LOUISVILLE et al. v. SEBREE et al.
CourtKentucky Court of Appeals

As Extended on Denial of Rehearing Oct. 12, 1948.

Appeal from Circuit Court, Jefferson County, Chancery Branch, Second Division; Amos H. Eblen, Special Judge.

Representative class suit by William Sebree, and others, against the City of Louisville, and others, to determine validity of an ordinance imposing an annual tax or license fee for privilege of engaging in any business, occupation or labor within the city. From the judgment, defendants appeal, and plaintiffs cross appeal.

Judgment reversed on direct appeal, and affirmed on cross appeal.

Gilbert Burnett and James W. Stites, both of Louisville, for appellants.

Lawrence S. Grauman, Edwin C. Willis and Luther M. Roberts, all of Louisville, for appellees.

STANLEY Commissioner.

The Board of Aldermen of Louisville has imposed an annual tax or license fee for the privilege of engaging in any business occupation, calling, profession or labor within the city with certain exceptions. The action taken is quite novel and revolutionary.

In this representative class suit, the several judges of the Jefferson Circuit Court disqualified themselves and the Honorable Amos H. Eblen of the Franklin County bar sat as a special judge. He held the ordinance to be valid with the exception of a section which exempted from its terms demestic servants employed in private homes. The case is before us on an appeal and cross-appeal.

The major attack upon the ordinance stems from the fact that the measure of the tax is the earnings from the exercise of the privileges of engaging in the various activities, being one percent thereof. The validity of the ordinance is principally questioned upon the ground that it imposes an income tax in fact although it designates the tax as a license fee. But other important questions of constitutional and statutory validity are also raised.

Two broad classifications made by the ordinance for the measurement of the tax show its complete coverage. The tax is computed upon: '(a) all salaries, wages, commissions and other compensations earned by every person in the city for work done or services performed or rendered in the city; and (b) the net profits of all business, professions or other activities conducted in the city.' 'Business' is defined as an enterprise, activity, profession or undertaking of any nature conducted for gain or profit whether conducted by an individual, co-partnership, association, or any other entity, but does not include boards of trade or other similar organizations operated exclusively for religious, charitable, scientific, literary, educational or civic purposes. The term 'net profits' is declared to mean, 'The net income from the operation of a business, or enterprise, after provision for all costs and expenses incurred in the conduct thereof, shall be the same as reported for federal income tax purposes excluding items exempted under this ordinance but without deduction of taxes based on income.'

Provisions are made for the allocation of compensation and net profits where only a part is for or is the result of activities conducted in the city. Thus, the ordinance gathers within the sweep of its perimeter everybody who earns any money in any occupation, trade or profession or in the conduct of any business within the limits of the city and taxes them for the privilege according to the amount of their earnings or profits. Other provisions of the ordinance are thus summarized in the trial court's opinion: 'The remaining sections of the ordinance provide for withholding of the license fee by employers; the making of returns by those subject to the license fee, the enforcement of the ordinance by the Secretary-Treasurer of the Commissioners of the Sinking Fund, who is given authority to examine books, records and papers of employers; the levying of additional fixed sum license fees on certain activities; the enumeration of ordinances not repealed by this ordinance; and imposing penalties and providing for interest for failure to make a return or pay the fee when due. The usual severable clause is found at Section 17. Section 18 grants an exemption to domestic servants employed in private homes, while Section 19 declares that the ordinance shall remain in force and effect until and including June 30, 1950.'

Since a municipality's power to tax is only that which the legislature has granted it, and the legislature in granting the power must conform to constitutional limitations, we must first look to the authority of the Board of Aldermen for the particular action taken here.

Section 181 of the Constitution provides that the General Assembly may 'delegate the power to * * * cities * * * to impose and collect license fees on * * * franchises, trades, occupations and professions.'

By an Act of 1948 (Senate Bill No. 14) c. 131, now KRS 92.281 the General Assembly provided:

'Cities of all classes are authorized to levy and collect any and all taxes provided for in Section 181 of the Constitution of the Commonwealth of Kentucky, and to use the revenue therefrom for such purposes as may be provided by the legislative body of the city.'

Expressions of legislative intent with respect to the construction to be given the Act include:

'This act shall also be subject to the provisions of Kentucky Revised Statutes section 91.200.'

At the same session, (Senate Bill No. 62), c. 144, the legislature re-enacted that section of the statutes with new and different provisions as to the use of the revenues and with certain limitations not material in this case KRS 91.200. Its purpose, apparently, was to permit the consistent exercise of the broad powers granted in S. B. No. 14. This Act of 1948 authorizes the Board of Aldermen of a city of the first class (Louisville), among other things, to 'provide for licensing any business, trade, occupation or profession * * * and fix in each case the license fee,' excepting companies paying franchise taxes and banking institutions or in any other case where the city is prohibited by statute from imposing a license tax.

KRS 91.260 in part provides: 'Each city of the first class shall raise a revenue from ad valorem taxes and from taxes based on income, licenses and franchises.'

Other provisions relate to an annual tax on property, with which we are not now concerned.

Therefore, with respect to the objects or activities, the range or scope of the power of the City of Louisville to impose a license fee or occupational tax embraces all 'trades, occupations and professions.' In Hager v. Walker, 128 Ky. 1, 107 S.W. 254, 256, 32 Ky.Law Rep. 748, 15 L.R.A.,N.S., 195, 129 Am.St.Rep. 238, it was said with respect to this language: 'The authority to tax under this section is as far-reaching and as sweeping as language could make it. It would be difficult to find three words that cover wider fields of employment.' See also Weyman v. City of Newport, 153 Ky. 487, 156 S.W. 109; R. J. Reynolds Tobacco Co. v. City of Lexington, 181 Ky. 503, 205 S.W. 592; Karnes v. City of Benton, 258 Ky. 425, 80 S.W.2d 558; Mills v. City of Barbourville, 273 Ky. 490, 117 S.W.2d 187.

We adopt the following from the opinion of the learned special judge as a full and complete response to the particular argument:

'The assertion that the Kentucky Constitution never contemplated that the common laborer would be subjected to a license tax must be rejected, as must also the argument that in order to be effectual a license must grant a privilege or give authority to do that which if done without a license would be illegal. The power to impose a license fee on trades, occupations or professions, which is authorized to be delegated, is without any language restricting or qualifying its exercise except that it be by general law. It must be concluded, therefore, that Section 181 of the Kentucky Constitution expressly authorizes the General Assembly to delegate to cities the power to impose license fees on those persons subjected thereto by this ordinance.

'It is further urged that the right to earn a livelihood is an inalienable right guaranteed by the Bill of Rights of the Constitution. Sections 1 and 2, Kentucky Constitution; Rawles v. Jenkins, 212 Ky. 287, 279 S.W. 350. That this is true may be conceded by all. However, the Bill of Rights does not operate to relieve from taxation as against an express grant of power such as is found in Section 181. At most it only affects the amount of the tax by prohibiting an unreasonable or arbitrary exaction. Hager v. Walker, supra; Lone Star Shows v. Commissioners of Sinking Fund of [City of] Louisville, 294 Ky. 114, 171 S.W.2d 28, and cases cited therein.'

Referring again to Section 181 and KRS 91.200 as amended and 91.260, the trial court continues:

'Thus, the power to impose license fees on trades, occupations and professions, which is delegated to cities of the first class by these sections, extends to all but the excepted activities stated in KRS 91.200, and as to all remaining activities is as comprehensive as the power expressly granted by Section 181. In accordance with the conclusion reached as to the scope of Section 181, it necessarily follows that the General Assembly has delegated to cities of the first class the power to require license fees of persons made subject thereto by this ordinance.'

To this we may add the observation that the tax is not on the right to work or do the things but the doing of them in fact (cf. James v. Kentucky Refining Co., 132 Ky. 353, 113 S.W. 468), and that the legislative body of a municipality is free to exercise in its discretion the powers to be found within a grant or delegation of the state legislature when not...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT