Cox Cable New Orleans, Inc. v. City of New Orleans

• Decision Date: 03 September 1993
• Docket Number: No. 92-WA-2311,92-WA-2311
• Citation: 624 So.2d 890
• Parties: COX CABLE NEW ORLEANS, INC. v. The CITY OF NEW ORLEANS, et al. COX CABLE NEW ORLEANS, INC. v. Paul MITCHELL, etc.
• Court: Louisiana Supreme Court

Page 890

624 So.2d 890

COX CABLE NEW ORLEANS, INC. v. The CITY OF NEW ORLEANS, et al.

COX CABLE NEW ORLEANS, INC. v. Paul MITCHELL, etc.

No. 92-WA-2311.

Supreme Court of Louisiana.

Sept. 3, 1993.

Rehearing Denied Oct. 7, 1993.

Dan B. Zimmerman, Brett J. Prendergast, William D. Aaron, Jr., Kathy L. Torregano, New Orleans, for applicant.

Marcel Garsaud, Jr., Martin E. Landrieu, Gordon, Arata, McCollam & Duplantis, New Orleans, for respondent.

LEMMON, Justice ^*.

This is a direct appeal from a judgment declaring unconstitutional an ordinance enacted by the City of New Orleans which purported to "clarify the application" of the preexisting amusement tax on the gross receipts of "admission charges" to certain amusements so as to impose the tax on the subscribers of cable television service. Also raised is the issue of whether Cox Cable New Orleans, Inc., a cable television franchisee, has the right to bring an action for refund of the tax paid by its subscribers and collected by Cox for payment to the City.

Facts

In 1990, the City adopted Ordinance No. 14300 M.C.S., which amended and reordained sections of Chapter 6 of the City Code pertaining to the "Amusement Tax." Chapter 6, as originally enacted in 1940, imposed a five percent tax on the gross receipts representing admission charges to a number of "described amusements," including a "production." The 1990 ordinance sought to clarify the applicability of the tax to cable television subscriptions by defining "production" to include "any audiovisual production, wherever shown, which is obtained by payment of a rental fee, subscription, or similar charge, including but not limited to cable or satellite TV subscriptions...."

As required by the ordinance, Cox collected the tax from its subscribers and remitted the funds to the Department of Finance, but notified the City that it was doing so under protest. Cox, in its own name, immediately filed two separate actions: (1) a declaratory judgment action seeking a declaration that the ordinance is null and void, and (2) an action to obtain a refund of the taxes paid by Cox under protest. After the actions were consolidated, both Cox and the City filed motions for summary judgment addressing the validity of the ordinance. The City also filed an exception of no right of action asserting that Cox had no right to seek a refund of taxes paid by its subscribers.

The district court denied Cox's motion for summary judgment and overruled the City's exception of no right of action. The district court, however, granted the City's motion for summary judgment, ruling that the tax was a valid amusement tax on production, and dismissed Cox's declaratory judgment action.

The court of appeal, in an unpublished opinion, reversed the summary judgment granted by the trial court in favor of the City and rendered judgment in favor of Cox, declaring the ordinance unconstitutional, 601 So.2d 393, 601 So.2d 392. The court reasoned that the ordinance purporting to levy an amusement tax violated La. Const. art. VI, Sec. 29 by levying what was in reality a municipal sales tax in excess of three percent that had not been authorized by the Legislature and approved by the voters. ¹ The court further held that Cox had a right of action to seek refund of the taxes paid under protest and ordered a refund to Cox, to be distributed to the cable subscribers.

The City then applied to this court for certiorari. Because the judgment declaring an ordinance unconstitutional was reviewable under our appellate jurisdiction, this court granted the application and ordered the matter lodged as an appeal. 602 So.2d 12. See La. Const. art. V, Sec. 5(D)(1).

Constitutionality of Ordinance

The City of New Orleans is entitled to levy, impose and collect any and all kinds of taxes which are not prohibited by or inconsistent with the Constitution. La.Rev.Stat. 33:361; Home Rule Charter, City of New Orleans, Sec. 7-101(2); Radiofone, Inc. v. City of New Orleans, 616 So.2d 1243 (La.1993); Hildebrand v. City of New Orleans, 549 So.2d 1218 (La.1989), cert. denied, 494 U.S. 1028, 110 S.Ct. 1476, 108 L.Ed.2d 613 (1990); Acorn v. City of New Orleans, 377 So.2d 1206 (La.1979); See also Mouledoux v. Maestri, 197 La. 525, 2 So.2d 11 (1941).

La. Const. art. VI, Sec. 29 prohibits the imposition of any sales or use taxes by a municipality with a combined rate greater than three percent unless the tax is authorized by the Legislature and approved by a majority of the voters in an election held for that purpose. However, La. Const. art. VI, Sec. 31, further provides that "any tax validly being levied by a political subdivision under prior legislative or constitutional authority on the effective date of this constitution is ratified."

The initial inquiry is whether the tax is a sales tax subject to the limitation of La. Const. art. VI, Sec. 29(B). The nature of a tax is determined not by its title, but by its incidents, attributes and operational effect. The realities and substance of the tax must be examined, not its form. Reed v. City of New Orleans, 593 So.2d 368 (La.1992); City of New Orleans v. Scramuzza, 507 So.2d 215 (La.1987); City of New Orleans v. Christian, 229 La. 855, 87 So.2d 6 (1956).

In Reed v. City of New Orleans, 593 So.2d 368, 371 (La.1992), this court described the incidents and attributes of a sales tax:

A sales and use tax is a tax on the privilege of selling or purchasing and using or consuming tangible personal property. It is a form of excise tax. Sales and use taxes may be general, applying to tangible personal property generally, or selective, applying to one specific commodity or group of commodities.... A sales and use tax is a consumption tax, applying to commodities intended for consumption and the burden of which falls on the consumer. (citations omitted).

Accordingly, this court held that the tobacco consumption privilege tax was not a valid special excise tax upon the privilege of consuming tobacco products, but was actually an unconstitutional sales tax. The tax had the incidents and attributes of a sales, use or consumption tax: the tax was due and payable at the time of the sale and purchase; the tax was levied on the purchaser and collected by the seller; the seller could not assume the tax and was required to collect it from the purchaser; and the tax was calculated as a percentage of the retail sales price. See also Circle Food Stores, Inc. v. City of New Orleans, 620 So.2d 281 (La.1993). ²

The tax in the present case also has the essential characteristics of a sales, use or consumption tax. The tax is paid by the purchaser at the time cable service is purchased for the pertinent period, it is collected by the seller of the service, it cannot be assumed by the seller, and it is calculated by a percentage of the purchase price of cable service. ³

Because the tax at issue is a sales tax which increased the combined sales tax above three percent and which was not authorized by the Legislature or approved by the electors, the levying of this sales tax violates the Constitution unless the tax can be sustained as a continuation of the amusement tax which was being levied validly under prior legislative authority on the effective date of the 1974 Constitution and which was therefore ratified by the Constitution.

The City contends that the 1990 tax was a modification of the amusement tax which was originally enacted in 1940 under the authority of La.Rev.Stat. 4:41 and was being validly levied on the effective date of the 1974 Constitution. In this respect the City argues that cable television was not enumerated in the 1940 ordinance because it did not then exist, but that the 1940 enactment intended to tax amusement productions such as cable television. Accordingly, the City argues, the 1990 ordinance did not enact a new tax, but rather modified the amusement tax chapter to reflect advances in technology and clarified the applicability to cable television operations of the 1940 tax that was ratified by the 1974 Constitution.

In 1940 La.Rev.Stat. 4:41 authorized municipalities of a certain size to levy an amusement tax to fund public charitable institutions, with the tax to be levied on "any theater, motion picture house, athletic contest, exhibition, pageant, production, demonstration, flower show, concert, musicale, recital, circus, freak show, minstrel show, lecture, address, night club, cabaret, dance, dance-hall, restaurant which provides either floor show, singing, dancing, or dancing facilities to patrons, excursion and sightseeing steamers which receive and discharge passengers in the same parish or municipality, aviation pleasure rides that take on and discharge passengers in the same parish or municipality, scenic railways, flying horses or merry-go-rounds, shooting galleries, and all games of skill and chance, as well as all mechanical devices operated for pleasure or skill where a fee is charged for admission or entrance or for the purpose of playing them, or where there is any charge whatever for them or in connection with them either directly or indirectly, or where admission is had by a season ticket." (emphasis added). Under this authority the City in 1940 enacted an amusement tax which to a large extent tracked the language of La.Rev.Stat. 4:41. After several amendments not here pertinent, the 1990 ordinance added a definition of the word "production" in part as follows:

"Production" shall include, but not be limited to, in addition to those amusements specifically listed in Section 6.1, any entertainment provided on the premises by a disc jockey or similar entertainer and any audiovisual production, wherever shown, which is obtained by payment of a rental fee, subscription, or similar charge, including but not limited to cable or satellite TV subscriptions and rental of video tapes, video games, and computer games.

Because the word "production" had not been defined by the original ordinance or by any amendments...