Request By:
Ms. Donna H. Terry
City Attorney
209 West Main Street
P.O. Box 644
Princeton, Kentucky 42445
Opinion
Opinion By: Robert F. Stephens, Attorney General; By William S. Riley, Assistant Attorney General
In your recent letter to Mr. Walter Herdman of the Attorney General's office, it is stated that the City of Princeton imposes an occupational tax of 1% of gross wages and for services performed within the city limits. This fee is to be deducted by the employer from wages due its employees and paid to the city in quarterly installments.
Section 13-17 of the Princeton Code of Ordinances applies the tax to employees of governmental agencies. The tax applies to salaries, bonuses or incentive payments received by an individual directly, through an agent, in cash or in property, for services rendered as an officer agent or employee (whether elected or appointed, enlisted or commissioner) of a governmental administration agency, arm, authority, board, body, branch, bureau, department, division, section or unit of this state, or any of the political subdivisions thereof, or those of any other state.
The Administrative Office of the Courts employs several persons as assistant clerks of the Circuit and District Courts and one person as District Court Trial Commissioner. It withholds 1% of their salaries pursuant to the ordinance.
The Administrative Office of the Courts does not withhold 1% of the salary paid to the Circuit Court Clerk (who also serves as District Clerk) and cites as its reason the case of The City of Frankfort v. Hon. Edward P. Hill. That case would only have application to the Franklin Circuit Court district. The case was dismissed without prejudice. The question raised in the case is, therefore, moot.
One of the leading cases on this problem is the
City of Louisville v. Sebree, 214 S.W.2d 248 (1948). There the ordinance within the City of Louisville laid a tax upon the privilege of working and conducting a business within the city and measured the value of the privilege by the amount of the earnings or net profit. The Court said this:
". . . . Section 181 of the Constitution, whose authority has been specifically delegated by the General Assembly to the city of Louisville (subject to other consistent statutes) prescribes no particular standard for measuring any tax. As stated in
Moore v. State Board of Charities & Corrections, 239 Ky. 729, 40 S.W. 2d 349, 352; "The power of classifying taxes upon business according to the volume of business done has always been upheld by this Court." And that an occupation tax is measured by the volume of the thing produced does not render it invalid.
Cumberland Pipe Line Co. v. Commonwealth, 228 Ky. 453, 15 S.W.2d 280. The point is that by analogy the basis is substantially the same. As to business, the basis is not the gross volume in dollars but the net profits, and for those who work for wages, salaries, fees and the like, the amount thereof is the basis for measuring the value of the privilege."
A person's residence or source of payment of a person's income has no bearing on the application of the tax due. The question is, where is the individual's compensation earned. If it is earned within the City of Princeton, it is subject to the Princeton occupational tax. If the employees of the Administrative Office of the Courts and the Circuit Court Clerk can establish that they perform services outside of the city, they should be able to secure a deduction from the city occupational tax for so much of the services as are performed without the city limits.