Request By:
Lewis B. Kerberg
General Manager
Louisville Area Chamber of Commerce, Inc.
300 West Liberty Street
Louisville, Kentucky 40202
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: David K. Martin, Assistant Attorney General
You desire our opinion as to whether or not a 4% disposal fee on hazardous waste storage units may be accomplished through a tax imposed by the affected counties. This tax is to provide incentive for the affected counties to allow hazardous waste units to be constructed in Kentucky. In addition, you desire our opinion as to whether or not revenues derived from this tax must be restricted to any specific purpose.
The legal analysis of your proposals centers on Section 181 of the Kentucky Constitution, which provides, in pertinent part, the following:
The General Assembly shall not impose taxes for the purposes of any county, city, town or other municipal corporation, but may, by general laws, confer on the proper authorities thereof, respectively, the power to assess and collect such taxes. The General Assembly may, by general laws only, provide for the payment of license fees on franchises, stock used for breeding purposes, the various trades, occupations and professions, or a special or excise tax: and may, by general laws, delegate the power to counties, towns, cities and other municipal corporations, to impose and collect license fees on stock used for breeding purposes, on franchises, trades, occupations and professions. . . .
Section 181 has been construed to allow the General Assembly to delegate by general laws to counties, cities and other municipal corporations, the power to impose and collect license fees on stock used for breeding purposes, on franchises, trades, occupations and professions. However, other forms of excise taxes may not be levied by counties under this section. So the first question to be answered is whether your proposal would constitute a license tax or an invalid excise tax. We are reminded of the words of Judge Osborne, concurring with the result in
City of Lexington v. Motel Developers, Inc., Ky., 465 S.W.2d 253 (1971), where he stated at page 262:
Perhaps it is clear to those more adept in legal gymnastics than I why in one instance a tax on volume or gross receipts is a license tax, and in the next is purely an excise.
However, the weight of authority, as expressed by the majority opinion in the above-cited case, seems to indicate that a license tax may be measured by the amount of net profits of a business, or gross income, or other measure of the amount of business conducted. Even when a tax is measured by the wages, salaries and commissions earned by persons, or the net profits of a business, it is possible that the tax will be viewed as a license tax.
City of Louisville v. Sebree, 308 Ky. 420, 214 S.W.2d 248 (1948). To be a license tax, the tax must be viewed as being levied on the privilege of engaging in a particular business or occupation. If the tax is viewed as being on the sale or use of a commodity, it is clearly an excise tax, and could not be imposed or collected by a county.
C.C.C. Coal Company, Inc. v. Pike County, Ky., 536 S.W.2d 467 (1976). The tax you have proposed in your letter appears to be within the definition of a license tax rather than an excise tax.
This determination, however, does not end the inquiry. KRS Chapter 68 contains the present authority for counties to levy license taxes. KRS 68.197 and 68.180 provides that license fees on any business, trade, occupation or profession for revenue purposes must not exceed one percent (1%) in counties with a population of 30,000 or more, and must not exceed one and one-fourth percent (1 1/4%) in counties with a population of 300,000 or more (Jefferson County) of the subject being taxed. The one percent may be figured as one percent of compensation earned by persons, or one percent of the profits of a partnership, corporation, etc. The license fees authorized by KRS Chapter 68 and the one you propose are in essence revenue measures. Section 180 of the Kentucky Constitution requires that any act or ordinance levying a tax shall specify the purpose for which the tax is levied, and the revenue may not be used for any other purpose. Although the constitutional provision appears to be very restrictive, the purpose for which the revenue is collected may be broad. If the purpose of the tax, under the appropriate resolution, is to defray the general expenses of the county government, the tax is technically in compliance with KRS 68.100 and Section 180 of the Kentucky Constitution. Under KRS 68.210 and 68.240(a) the levying of a tax for general fund purposes or a budget unit for the general expenses of the county government is valid. Thus, the resolution providing for any license tax, including one for the disposal of hazardous waste, must specifically describe the general fund for which it is to be levied.
Planters Bank and Trust Co. of Hopkinsville v. City of Hopkinsville, 289 Ky. 451, 159 S.W.2d 25 (1942).
Since both the license taxes authorized by KRS Chapter 68 and the one you propose are for the purpose of raising revenue to meet general revenue requirements, some reasonable basis for the different level of taxation placed on the hazardous waste disposal business must be found. Otherwise, the tax may run afoul of Section 171 of the Kentucky Constitution, which requires that taxes "shall be uniform". It is possible to discriminate among different classes in the imposition of license taxes, so long as the classification is reasonable. In
City of Lexington v. Motel Developers, Inc., supra, the City of Lexington had enacted a special license tax applicable to hotels and motels of 5% of the rental charged for the occupancy of rooms. This tax was in addition to Lexington's general licensing ordinance on all businesses at the rate of 1 1/2% of net income. The Court struck down the ordinance applying to motels and hotels as violative of Section 171 of the Kentucky Constitution, as there was no reasonable basis for singling out the particular business for a heavier tax load. See also,
Jahr v. City of Radcliffe, Ky., 503 S.W.2d 743 (1973).
Since the facts and even the tax rates in the City of Lexington case are quite similar to those you outline in your proposal, only a substantial jusitification for a heavier tax burden would legitimize the hazardous waste tax you propose. The nature of the hazardous waste business may provide such a justification in that a disposal business is in some respects a liability to the county it is located in. Those liabilities include the likelihood of increased truck traffic carrying hazardous materials in the area, with the possibility of transportation accidents, a land use that may be incompatible with many other uses on adjacent parcels of land, possible leakage of hazardous material from land burial sites or storage areas, possible air pollution from equipment breakdowns, and the commitment of an amount of land to the disposal business for a long time into the future. The rest of the state would benefit greatly from a hazardous waste disposal facility, as it is a necessary concomitant to many beneficial industrial processes. It may be reasonable to compensate a county monetarily for an activity that presents real or imagined problems for the area the activity is conducted in. 1 However, we can think of no other business for which a special tax was enacted based on the potential of the business to become a nuisance. In conclusion, the tax you propose would more likely than not be constitutional. However, the matter is not free from doubt due to the requirement of uniform taxation found in Section 171 of the Kentucky Constitution.
Footnotes
Footnotes
1 If this justification is legally sufficient, it would seem to apply with equal force to disposal of hazardous wastes on the property of the waste generator.