Paradise Tomato Kitchens, Inc. v. Louisville-Jefferson County Metro Revenue Commission, No. 2007-CA-000965-MR (Ky. App. 5/9/2008)
| Decision Date | 09 May 2008 |
| Docket Number | No. 2007-CA-000965-MR.,2007-CA-000965-MR. |
| Parties | PARADISE TOMATO KITCHENS, INC. Appellant v. LOUISVILLE-JEFFERSON COUNTY METRO REVENUE COMMISSION; Louisville/Jefferson Metro Government; Transit Authority of River City; and Board of Education of Jefferson County, Kentucky Appellees. |
| Court | Kentucky Court of Appeals |
Timothy J. Eifler, Walter L. Sales, Kathryn V. Eberle, Louisville, Kentucky, Brief for Appellant.
Walter L. Sales, Louisville, Kentucky, Oral Argument for Appellant.
Francis J. Mellen, Jr., Jennifer B. Starr, Louisville, Kentucky, Brief for Appellee Board of Education of Jefferson County.
Terri A. Geraghty, Louisville, Kentucky, Brief and Oral Argument for Appellees Louisville-Jefferson County Revenue Commission, Louisville-Jefferson County Metro Government, and the Transit Authority of River City.
Before: KELLER and TAYLOR, Judges; GRAVES,1 Senior Judge.
Paradise Tomato Kitchens, Inc. (Paradise), substantially overpaid the occupational tax assessed by the Louisville/Metro Government2 (the Metro Government) on behalf of itself, the Transit Authority of River City (TARC), and the Board of Education of Jefferson County (the Board). Paradise sought a refund of the entire overpayment from the Louisville-Jefferson County Metro Revenue Commission (the Commission), which administers the tax. However, the Commission refunded only a portion of the overpayment. Therefore, Paradise filed suit seeking a refund of the remainder of the overpayment. The Jefferson Circuit Court entered an opinion and order granting the Appellees' motion for summary judgment and it is from this order and opinion that Paradise appeals. In its appeal, Paradise raises several constitutional, statutory, and common law issues, which we will discuss in detail below. Having reviewed the record and, for the reasons set forth below, we affirm.
The facts are not in dispute. As noted above, the City levies an occupational tax on behalf of itself, TARC, and the Board. Basically, the occupational tax is calculated by determining the portion of the net profits and wages attributable to activities within the City. That portion of net profits and wages attributable to activities outside the City are not to be included for tax purposes.
From 1993 through 2001, Paradise's accounting firm calculated the amount owed for the occupational tax based on 100% of Paradise's net profits, not on the portion of those profits attributable to activities within the City. Paradise filed tax returns based on these incorrect calculations. We note that the portion of the taxes attributable to wages is not at issue. Therefore, when we refer to the occupational tax, we are only referring to the tax attributable to profits.
In early 2003, the accounting firm discovered its mistake and Paradise filed an amended return for the 2001 calendar year, seeking a refund. The Commission approved Paradise's claim and issued a refund in the amount of $76,113. Paradise also filed amended returns for 1993 through 2000, seeking an additional refund of $202,434. The Commission did not approve those claims by Paradise based on City of Louisville, Kentucky, General Codified Ordinances § 112.20 (Ordinance § 112.20) and KRS 160.487. Ordinance § 112.10 was amended during the time period in question; however, the versions state that the Commission cannot authorize any refund unless application is made within either one year of the date payment was due or the date the return was filed. KRS 160.487 is part of a statutory plan to provide funding for school systems in counties with populations of 300,000 or more. That plan provides that counties that meet the population threshold may impose an occupational license fee for the benefit of the counties' school districts. Any license fees imposed under the plan are to be collected and distributed by the county fiscal court or its agent. KRS 160.482 through 160.486. KRS 160.487 provides that a person who has paid such a license fee may seek a refund but must do so within one year after the fee became due.
Following denial of its request for a refund, Paradise filed complaints for declaratory judgment in Jefferson Circuit Court requesting a refund of the amounts it overpaid between 1993 and 2000.3 After initiating the lawsuit, and because it was raising constitutional challenges to Ordinance § 112.20 and KRS 160.487, Paradise served the Attorney General with notice of the proceedings. In response, the Attorney General filed notice that he "decline[d] to participate in the defense of the City Ordinance and Statute."
Following discovery, Paradise filed a partial motion for summary judgment, which the circuit court denied. The Appellees then filed a joint motion for summary judgment, which the circuit court granted. It is from the circuit court's opinions and orders denying Paradise's motion and granting the Appellees' motion that Paradise appeals. In its appeal, Paradise raises numerous issues, which distill to the following: (1) that it is entitled to a refund under common law; (2) that the "overcollection" of the occupational tax violated the Commerce Clause of the United States Constitution and, therefore, the Commission's refusal to make a refund was unlawful; (3) that the limitations on obtaining refunds in City Ordinance § 112.10 and KRS 160.487 do not apply to Paradise's common law claims because they interfere with Paradise's jural rights; (4) that KRS 160.487 and Ordinance § 112.10 amount to special local legislation, and are unconstitutional; and (5) that Ordinance § 112.10 applies only to the Commission and does not prevent the City, TARC, or the Board from issuing refunds.
Although the appeal is from the circuit court's rulings on the parties' motions for summary judgment, the issues presented are not of fact but of law. Therefore, the standard of review is de novo. Carroll v. Meredith, 59 S.W.3d 484, 489 (Ky. App. 2001); see also A & A Mechanical, Inc. v. Thermal Equipment Sales, Inc., 998 S.W.2d 505, 509 (Ky. App. 1999); Aubrey v. Office of Attorney General, 994 S.W.2d 516, 518-19 (Ky. App. 1998) (citing American Beauty Homes Corp. v. Louisville and Jefferson County Planning and Zoning Commission, 379 S.W.2d 450, 458 (Ky. 1964)). With this standard in mind, we will address the issues raised by Paradise below.
At the outset, we note that Paradise argues that the classifications and time limitations created in KRS 160.487 and Ordinance § 112.10 violate the Kentucky Constitution. In order to challenge the constitutionality of a statute or ordinance on appeal, an appellant is required to serve the attorney general with a copy of the prehearing statement. CR 76.03(5) and KRS 418.075(2). If an appellant fails to make the required service on the attorney general, any issues regarding the constitutionality of a statute or ordinance are not properly before this Court and therefore not subject to our review. Popplewell's Alligator Dock No. 1, Inc. v. Revenue Cabinet, 133 S.W.3d 456, 466 (Ky. 2004). Paradise did not serve the Attorney General with a copy of the prehearing statement; therefore, its constitutional arguments are not properly before us. However, since Paradise did serve the Attorney General with notice of the underlying action and since the constitutional issues are of significant concern, we will address them.
The Commerce Clause of the United States Constitution (Article I § 8) provides that Congress shall have the power "[t]o regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes[.]" While the Commerce Clause limits a state's ability to tax activities that touch on interstate commerce
"[A] state tax is not per se invalid because it burdens interstate commerce since interstate commerce may constitutionally be made to pay its way." Maryland v. Louisiana, 451 U.S. 725, 754, 101 S.Ct. 2114, 2133, 68 L.Ed.2d 576 (1981). The test for whether a state revenue measure offends the Commerce Clause is set forth in Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 97 S.Ct. 1076, 51 L.Ed.2d 326 (1977). A tax withstands Commerce Clause scrutiny if it "is applied to an activity with a substantial nexus with the taxing State, is fairly apportioned does not discriminate against interstate commerce, and is fairly related to the services provided by the State." Id., 430 U.S. at 279, 97 S.Ct. at 1079.
Carpenter v. Commonwealth, 831 S.W.2d 188, 191 (Ky. App. 1992).
Paradise argues that However, Paradise mischaracterizes what occurred. The Commission did not "collect" and did not fail to apportion what was appropriately due. Paradise failed to apportion and "paid" more than was due. While this may appear to be a pedantic distinction, it is, nonetheless, significant. The Commerce Clause only requires states to apportion taxes so as not to interfere with interstate commerce. It does not require states to protect those engaged in interstate commerce from paying more than they are required to pay. The fact that Paradise misconstrued its obligations under the ordinance and statute does not cause either to be in contravention of the dictates of the Commerce Clause. Therefore, we hold that there is nothing inherent in either the ordinance or the statute that violates the Commerce Clause.
However, Paradise's real issue is not with the "collection" of the occupational tax but with the retention of the overpayment of that tax. In that regard, Paradise argues that the Commission's failure to refund the overpayment violates its right to due process. In support of its argument, Paradise cites to Commonwealth, Revenue Cabinet v. Gossum, 887 S.W.2d 329 (Ky. 1994). In Gossum, the Supreme Court of Kentucky cited...
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