Request By:
Hon. Benjamin J. Lookofsky
Attorney at Law
East Side Court Square
P.O. Box 696
Mayfield, Kentucky 42066
Opinion
Opinion By: David L. Armstrong, Attorney General; Walter C. Herdman, Asst. Deputy Attorney General
This is in response to your letter of March 31 in which you request an opinion regarding the payment of payroll taxes by employees of the postal department to the City of Mayfield. You relate that the postal employees are now being required to pay a payroll tax to the city even though their checks are issued by the United States Government in Washington and sent to them through the mail. Also, most of these employees live in Graves County which has no payroll tax. Your specific question is as follows:
"My question is - under these circumstances, are they required to pay payroll tax to the city of Mayfield or to put it another way, can the city of Mayfield tax a federal employee payroll tax when the payment of wages to these federal employees comes from Washington, D.C.?"
Our response to your question would be in the affirmative. Every city outside a city of a sixth class is authorized to levy a so-called payroll tax on all individuals who earn a living within the city limits irrespective of the fact that they may reside outside the city. The initial case on the subject of payroll taxes is City of Louisville v. Sebree, 308 Ky. 420, 214 S.W.2d 248 (1948). In the case of Cook v. Commissioners of Sinking Fund of Louisville, 312 Ky. 1, 226 S.W.2d 328 (1956), the court dealt with your question and held that the immunity of the federal government from taxation does not extend to such government's officers or employees and that federal employees working in the City of Louisville were legally subject to the payroll tax. More specifically in this respect, we quote the following excerpt from the Cook case:
"In the instant case, the tax is not discriminatory, but is imposed on federal employees in common with persons employed by the state, county, city, and privately owned businesses. The payment of the fee is not a prerequisite to the right of the taxpayer to perform his duties: the fee is not collectible until the fifteenth day of the fourth month after the duties shall have been performed. The City does not require the taxpayer to possess qualifications in addition to those that the government has pronounced to be sufficient; and, if it affects at all the capacity of the instrumentality of the government employing the taxpayer, its effect on the instrumentality is so remote, in the light of realities, as to be deemed to be negligible. If it could be determined with any reasonable degree of certainty that any portion of the burden of the tax levied against its employee and measured by his income could reach the Federal Government, such would be a mere incident arising out of the coexistence of more than one taxing authority, and which was known and recognized at the time of the adoption of the Federal Constitution. The tax is imposed to defray the costs incurred by a local government in providing public facilities which the taxpayers, in common with other gainfully employed persons in the City of Louisville, are permitted to enjoy."
The holding in the Cook case has been cited with approval in the following subsequent decisions: Marcum v. City of Louisville Municipal Housing Com'n., 374 S.W.2d 865 (1964); Patrick v. City of Frankfort, 539 S.W.2d 275 (1976); Commissioners of the Sinking Fund v. Hopson, Ky. App., 613 S.W.2d 621 (1980).
Under the circumstances, we are of the opinion that federal postal employees working in the City of Mayfield are subject to the city's payroll tax irrespective of the fact that they may reside outside the city and receive their checks from the government by mail.