Request By:
Mr. Nelson T. Sparks
Assistant County Attorney
P.O. Box 231
Pikeville, Kentucky 41501
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
As Assistant County Attorney you have been asked to advise the Pike Fiscal Court as to the validity of a payroll tax or occupational tax on all persons working within the county.
Question No. 1:
"Can a county utilize an occupational or payroll tax? "
A county, under § 181 of the Kentucky Constitution, and through the fiscal court, is authorized to levy only two kinds of taxes: (1) ad valorem taxes; and (2) occupational or license taxes.
Driver v. Sawyer, Ky., 392 S.W.2d 52 (1965) 53; and
Wiedmann Brewing Co. v. City of Newport, Ky., 321 S.W.2d 404 (1959).
The Supreme Court of Kentucky, in Fiscal Court, Etc. v. City of Louisville, Ky., 559 S.W.2d 478 (1977), in striking down the Home Rule statute KRS 67.083 generally for vagueness in the delegation of legislative authority to fiscal courts, did uphold KRS 67.083(2) 1, which provides that "The fiscal court of any county is hereby authorized to levy all taxes not in conflict with the constitution and statutes of this state now or hereinafter enacted." (Emphasis added). Justice Jones, in Fiscal Court v. City of Louisville, above, wrote this at page 482:
"Sec. 181 of our Constitution provides that the General Assembly may delegate to counties the power to impose and collect license, franchise and occupational taxes. At the time the General Assembly passed this statute it had to know that by the terms of Sec. 181 these powers effectively passed to the counties. To that extent and no further, its action was thoughtful, purposeful and deliberate. As to those powers not so enumerated, the grant is legislation in a vacuum and a nullity."
The court, in the Home Rule case, had just said that "The thoughtful, purposeful and deliberate delegation of a known power is required of the General Assembly." The tax portion of KRS 67.083 passed the test.
In
City of Louisville v. Sebree, 308 Ky. 420, 214 S.W.2d 248 (1948), the occupational or license tax of the city in question laid the tax upon the privilege of working and conducting a business within the city, and only measured the value of the privilege by the amount of earnings or net profit. The tax was computed upon (a) all salaries and wages earned in the city; and (b) the net profits of all business, etc., conducted in the city. The court said that the Louisville tax was an occupational tax upon the right or privilege of carrying on a business, vocation, trade or calling, and was not a property tax but a tax on the exercise of the right or privilege in the nature of a license or excise tax. Further, the court held that such tax was not an income tax, although measured by gross receipts or gross income.
The answer to question no. 1 is that a county, through its fiscal court, has the authority under § 181, Constitution, and KRS 67.083, to levy an occupational or license tax, of the kind dealt with in City of Louisville v. Sebree, above. Even if the occupational tax covered all persons working or carrying on a business in the county [including those in cities in the county], double taxation would not be involved. To constitute double taxation the two taxes must be imposed on the same property by the same governing body during the same taxing period for the same taxing purpose.
Second Street Prop. v. Fiscal Court of Jefferson Co., Ky., 445 S.W.2d 709 (1969) 715.
Question No. 2:
"Could such a tax be implemented by the Fiscal Court or must it be approved by public referendum? "
Such a tax can be imposed under an appropriate ordinance without approval by public referendum. Of course no question can be legally put on the ballot in the absence of an express provision for referendum by the Constitution or statute. We are not aware of any such referendum provisions in this matter.
Question No. 3:
"Can funds generated by the tax be placed in a special budget or used for a specific purpose, such as road repair? "
It is our opinion that such a tax may be considered as general revenue for the county, and may be expended for any statutorily authorized county purpose, including county road repair. The expenditure must, however, follow through proper budgeting procedure as outlined in KRS Chapter 68. See
Howard v. Lebby, 197 Ky. 324, 246 S.W. 828 (1923). The constitution and statutes place no limitation as to a particular governmental use of such a tax. However, such a tax must not be discriminatory, must be based upon reasonable classifications, and must not be confiscatory.
Jellico Grocery Co. v. City of Whitesburg, 286 Ky. 470, 151 S.W.2d 35 (1941) 36.
Footnotes
Footnotes
1 As amended by H.B. 152, Ch. 118, § 3, 1978 Acts.