City of Lexington v. Motel Developers, Inc.

Department Watson, Highways Ky., 52; Commonwealth, Depart Highways Brent,

ment Ky., 436 S.W. 781; Commonwealth,

2d Department of

Highways Tyree, Ky., 365 S.W.2d 472.

The witnesses for the landowners

referred they “comparable” to sales deemed affecting their estimates of “before”

value, why but did explain same respect

evaluations were inapposite with “after” value. there was Since insuf

ficient probative sup evidence of value to verdict,

port the judgment must be re

versed for a new All other questions trial.

are reserved without decision. judgment is reversed.

All concur. al., Appellants,

CITY OF et LEXINGTON DEVELOPERS, INC., al.,

MOTEL et Appellees. Appeals Kentucky.

April 2, 1971. engaged

sons the business of Motor Motels, Hotels, Courts, Inns and like or pay similar accommodations shall Lexington, Treasurer of the Ken- tucky, collecting city, as officer said imposed.” the tax hereinabove Wilson, Ginocchio, Earl Frank S. Lex- S. The license imposed “Section 7. ordinance, ington, appellants. forth, on the trade set shall be in addition to such other tax or Marks, Miller, Lexington, Griffin & generally taxes levied or on all appellees. occupations, professions.” (Em- trades or phasis added) CLAY, Commissioner. designed produсe This ordinance to controversy involves the constitu- general city pur- additional revenue for tionality of an of the ordinance questioned it poses, and is not that a li- 5, 1970, February Lexington, enacted im- properly revenue cense tax mea- owners, posing upon and motel hotel (rather regulatory one). than a sure similarly engaged, purports to others what it legislature, authorized be a “license” tax fixed at rental 5% Kentucky to do under section of the charged occupancy of rooms. The Constitution, by KRS 92.280 92.281 Chancellor held the unconstitu- ordinance au- granted (including Lexington) cities He grounds. tional on two concluded the thority impose license fees See to or taxes.1 tax was an excise tax which cannot be lev- Devine, Ky., Harrodsburg v. Kеntucky of the ied in view of section 181 recognized, (1967). It has been S.W.2d 426 Constitution, but, if was a license conceded, authority and is here public policy of the would violate levy excise permit such cities against state double taxation. Sebree, City of Louisville v. taxes. See time the has had an or- For some (1948), 214 S.W.2d imposing upon enterprises dinance business Brewing George Co. v. Wiedemann generally an annual license tax Newport, Ky., 321 profits the net amount 1½% purports The tax business. question is first whether Our license tax levy an additional motels, even additional hotels Insofar hotel and motel business. designated es though a “license” here, questioned ordinance pertinent cities sence “excise” provides: controlling. City levy. is not The label Sebree, supra. Section February after 3. On and “Section empowers the Constitution imposed a hereby room there is special “a ex Assembly to General rental for per (5%) cent of five provides tax”, but this same section cise suite, room or every occupancy body may authorize legislative that such companies, by all rooms, persons, charged fees on “impose and collect license cities similar like or and other corporations *** franchises, trades, occupations and doing organizations groups, persons, construed, consistently As professions”. Hotels, Courts, Motels, as Motor encompass “excise” taxes. latter does not accommodation or similar like Inns and association, Every person, of the Consti- Exactly what the framers businessеs. per- they or similar sec- other like drafted corporation or had mind when tution “license, regulate” hotels and tax and 84.190(2) cities second-class also authorizes BUS public houses. difficulty. Downs, tion 181 has caused the Churchill When special words “or a page excise tax” (which we said: Assembly empowered General “ ** * an excise tax proper impose) were added to the section ‘something sense cut price off from the amendment, was no discussion there paid on a goods sale of as a contribution purpose Debates, or their meaning-. Con ” support the government.’ of the 2, 1890, stitutional page Convention Vol. very 2795. The word is a term “excise” concept This was confirmed in Shanks v. general signification. v. Booth’s Ex’r Kentucky Independent Co., Ky. Oil 225 Commonwealth, 88, Ky. 130 113 61 S.W. 303, 8 (1938), S.W.2d 383 and Shannon v. Tax (1908). Hughes State Commission v. Steamers, Ky. 649, Streckfus 279 131 S.W. Co., 432, Drug Ky. 219 293 (1927), S.W. 944 2d 833 (1939). may It be observed here that opinion quotes Ruling the Case Law a sales tax is a example classic an ex following (page 945 : S.W.) Maloney cise Martin, Davidson Co. v. 449, Ky. 274 118 S.W.2d 708 (1938); Com “ ‘Excises, original sense, in their were monwealth ex rel. Luckett v. of Eliza something price cut off from paid on bethtown, Ky., 435 S.W.2d 78. goods, a sale as a contribution to the government. of the support The word taxpayers, is contended and the has, however, come to have a broader found, Chancellor so in ques- meaning every and includes form of tax- truly tion was not a license tax but anwas ation which is not a burden directly laid city may levy. excise tax of the kind a upon persons property; words, in other apparently This conclusion is based on the every excise includes charge form of im- theory charge a upon that the tax is room- posed by public authority purpose transactions, equate rental which raising upon revenue performance sale of commodities. From technical act, enjoyment of an privilege, standpoint section 3 of the ordinance ” engaging or the in an occupation.’ levy upon the appear a tax property. starts renting transaction of recognized We that a have license tax is by imposing “a A rational out room tax”. an excise tax. Kentucky Shanks v. Inde section, however, analysis makes of this Co., pendent Ky. 273, 225 Oil upon hotel clear that the tax rather 383, 385 (1928); Shannon v. Streckfus simply and is measured and motel owner Stеamers, Ky. 649, 279 131 S.W.2d 833 receipts. of room-rental by a percentage observed, (1939) aptly .2 As the Chancellor mea- general license of the permis substance true license tax is a Spe- net income. by percentage sured sible form of excise tax cities be nec- of income does not the source cifying authorized to under section 181 upon en- a tax a business essarily convert apparent Constitution. It is transactions upon the terprise a tax into document, the drafters of when in ef involved. denying right impose fect cities the an Downs, tax, using “excise” were not the term Churchill Louisville v. 339, encompass (1937), a li 10 in dif- broad which would 102 sense S.W.2d 267 tax, narrower tax and using cense but were a license ferentiating between signifi- upon a trans court ‍​‌‌​‌​​‌‌​‌​‌​‌‌​‌​‌‌​​​​​​‌‌‌​​‌‌​‌‌‌​‌‌‌​​‌‌‌‌‍considered sensе to characterize excise sale, transfer was the fact that involving use or of the latter action cant incident upon primarily the tax was property. impact jur States, recognized generally in other v. United Theatre Ticket Office This Mfg. 44; Singer Cir., 2 F.2d Heriot v. Hancock isdictions. 851, Pensacola, 480, 846, 289, L.R.A. 41 A. 108 Fla. 146 So. 62 N.J.L. 285, Gunn, (1933). 84 Fla. Amos (1922) ; Alexander 94 So. patron Early in our or the customer. Therein the case law observation that it was “not the equal gross receipts, policy was made 3% persons operating places property state to tax the same twice as entertainment, against same but stat- owner”. Cumberland Tel- amusement pur- ephone Telegraph Hopkins, ute from the & Co. v. required collection chaser of tickets of admission. Some of distinguished opinions apparently our later held to overlooked the tax here the fact that observation made in from a license tax. While of section question probably passed context 171 of the Constitu- tion, rooms, requires uniformity the tax is not occupants of taxation. Martin, Corporation In Harco the rental transactions. the Act involved was this tioned in Second Street Court Jefferson is may Though quite be similar noted County, Ky., 445 S.W.2d the vigorously Properties v. Fiscal constitutionality of to the one nature of attacked, ques it was stated: lic ation) ^[*] n n “There exists policy and ft to frown to refrain from upholding a judicially page it declared (double pub- tax- it, tax was made contention no Perhaps pre- this court was somewhat a “li rather than an “excise” invalid as sumрtuous attempting ju- in to develop a this avenue attack While cense” tax. public policy respect dicial to the valid- overlooked, inadvertently may measures, ity have particularly of tax when that qustion was not to believe are inclined policy in direct of the contravention merit, in lacking because it presented policy adopted by the framers of our Con- con view. We comports with our may which be, However that not it is stitution. under consideration tax here clude the description a tax measure as “dou- may permissible characterized be properly ble taxation” which it. invalidates Lexington flag term raises simply a red which warns enterprise upon a business impose may could be invalid on a more fun- the kind excise tax of is and ground. Judge damental As observed Kentucky case, section cities under Telephone in the Cumberland O’Rear levy. empowered to are not Kentucky Constitution section 171 of Constitution is barrier to surmount. pre- second us brings provides that be That section taxes “shall of whether ordinance the form sented in ap- County Campbell taxation”. uniform”. “double imposes invalid attempt Newport, some necessary proper pears analyzed impact There problem Judge involved. Carroll clarification against alleged vice prohibition provision upon claim no constitutional is opinion states recognized taxation. and we have double “double taxation” (page S.W.): herein- cases next (See many times. history, sec- As matter cited.) aftеr there is present “In the Constitution Constitution tion uni- taxation must be declaration Constitu- to the 1890 proposed originally form, against prohibition but no direct pro- specific contained Convention tional against prohibition But a double taxation. Debates, taxation. double against hibition hardly necessary, be- taxation was double 1890, Vol. Convention Constitutional thing as be such a cause there lengthy discussion After page 2373. is the taxation taxation where double taxation, double permissible be might what uniform. stricken. on and was voted prohibition “ twice, Convention Debates, taxing means taxation’ Constitutional ‘Double year, in the same purpose, for the same 2794. page Vol. territory in property purpose some “Classification for of mu- taxing laid all of nicipal which the without licensing legislative is a func- territory property If it. all tion, by a municipality and selection avocations, which the tax taxed among occupations ac- purpose twice and the same raising tivities for revenue year the same without discrimination or allowed,*providing the selection involves exemption, this is not double taxation unreasonable no classification.” is prohibited, the sense that such taxation Green, Bowling In Williams v. because, limits, if constitutional within it 967 (1934), uniform, the tax is the amount it is organization, noted that differences authorities, the taxing discretion may management, time, at may he levied sufficiently clas- justify substantial subject of several levies. However, discrimination which sification. Uniformity in taxation double tax- does not have a reasonаble basis obvious- wholly ation are inconsistent. can- One arbitrary principle and violates the ly exist where the other is force. And uniformity set equality and forth section so if our constitutional scheme of uni- observed, form taxation is there can be no double taxation.” of unreasonable classification Examples following cases. Fis are shown exposition princi This is a clear County A. F. and v. cal Owen ple Telephone set forth in Cumberland & 738, Co., Ky. (1888), 296 Cox 132 117 S.W. 850, Telegraph Hopkins, Ky. 121 90 Co. v. using on vehicles streets license tax a Walker, (1906); Hager v. S.W. 594 128 on four- insofar as the tax was held invalid 1, ; Ky. 254 (1908) 107 S.W. Commonwealth as much wagons was three times horse Trustee, Ky. 103, v. 133 Walsh’s S.W. 106 wagons. of Cov upon three-horse 240, (1909). 117 398 S.W. Dalheim, 26, Ky. 126 102 S.W. ington v. grocers only a tax (1907), 829 It thus apparent questions that in im delivery wagons which was using оur problem this kind real is whether lacking grocers was held posed upon other the tax measure violates section 171 of Newport uniformity. City of v. may Constitution. noted that 408, Frankel, Ky. (1921), 884 192 uniformity requirement closely relat theatres was held invalid a license tax on ed prohibition against the exercise ticket twenty-cent seller of a where the arbitrary power found section 2 of day more than pay a required ap $15 that instrument. The former section In Com seller a fifteen-cent ticket. plicable to prop license taxes as well as Co., Ky. Payne 138 Medicine monwealth erty City of taxes. Louisville v. Aetna tax 164, (1910), a license 127 760 Co., S.W. Ky. Ins. Fire 284 143 S.W.2d patent medicines exclusive upon sellers of cases cited therein. (1940), charged other ly, fee was no such when sellers, held invalid. recognized long It has that a legislative body may discriminate between foregoing through the Running imposition

classes license taxes. legislative principle Payne cases is Commonwealth Medicine basis, not, rational body without some Metropoli 127 S.W. 760 enterprise Paris, tan Co. select certain business Life Ins. ; substantially upon it a heavier impose (1910) Harrods Devine, business Ky., imposed upon other burg than that McQuillin, general clas Municipal Corpora As the same said which fall within es tions, Edition, page Atlantic & Third case Great section sification. The 26.- Com’n, Kentucky Tax 60: Tea Co. v. Pacific of hotels and motels. under the

quite presented, princi- significant. graduated circumstances involved same ple applicable. The upon Lexington chain stores and differеnce solely general number ordinance has ‍​‌‌​‌​​‌‌​‌​‌​‌‌​‌​‌‌​​​​​​‌‌‌​​‌‌​‌‌‌​‌‌‌​​‌‌‌‌‍licensing rates was based placed enterprises declaring city the Act all business opinion, stores. The invalid, attempted first that a valid classifica- one and has not to fix city sewage disposal, garbage services of peculiar ments are not ownership to the collection, protection police pro- fire and multiple units.” greater degree tection than cit- other izens, businesses, The fur- etc.” Preamble Another significance case is Commis- city ther recites that the “is need Weis, sioners of Sinking Fund v. funds”, sympathetically under- and we can 554, 108 Therein the S.W.2d reason, although stand this it of course city of Louisville a license tax unreasonably justify discrimina- upon selling those a certain of mer- tory tax. chandise on plan. the installment It was held invalid. The court observed (page proof has been taken in this case No 516 S.W.): respect city services with extra hotels and might required by be “This license tax must regarded businesses, and motels and not other

a revenue measure. It seems to us that say appellees that issue is not before us. singling out of the selling business of However, question pre- we believe special for necessities licensing savors city has determining sented in whether inequity rather than of reason. But placed and motels unreasonably hotels controlling judicial factor in the de- imposing special purpose class for termination of validity is logical that of on them an additional tax burden. We considerations of uniformity equal- properly judicial takе no- may believe we ity.” require more that a motel not tice It may argued than, foregoing city apartment say, services house cases involve unreasonable discrimination with the same number rooms. particular within class, event, whereas here city basing we if the this additional do not services, have discrimination within upon city the class the rendition of violating principles it is we have tivities of tourists commis- then and0convention imposing discussed oth- sions. The issue of unreasonable classifi- above not cation principal ground er additional taxes commensu- The businesses was raised. such furnishing services. which we sustained the classification rate with impressed city’s purpose are not was the limited fine we particular special of this a rea- accоrded justification taxpayer tax constitutes this acceptable spe- this benefit from the utilization of basis the revenue sonable realized. distinguishing such feature cial classification. No distinction, appears making here. this city heavily upon relies 508 Chest- The we do not mean to the rec- intimate Louis, Mo., nut, of St. Inc. ognition particular flowing benefits In that case the 823. expenditure neces- revenue had a ordinance Louis license-tax St. sarily justifies a classification. separately dealt with various kinds busi- others, consideration, along city. inon ness carried Some tip the scales in the reasonable- determining were fixed amounts others fees ness the classification. gross receipts. Hotels based were were pay a required to fee 50 cents only justification can find The annually sleeping for each room. The singling and for the tax in controversy was levied on hotels particular taxpayers out of class of daily at the rate of and motels 2% hotels that the in need of funds receipts guests. rental from transient The group comprise motels convenient principle contention of uni- This is assume burdens. additional formity was violated because hotels recognizable not a legally basis clas doing a transient business would have arbitrary sification. It is in violation to pay the tax. issue was discrimina- The section 2 Constitution tion within the class of hotels and motels. uniformity violates section principle of Supreme Court of Missouri held there a reasonable making basis for the dis- tinction between transient and nontransient judgment is affirmed. hotels. No contention was made representing particular hotels that this busi- All concur. enterprise being ness differently taxed or greater than comparable other

enterprises. (concurring). OSBORNE, Judge out, pointed As have above the by opinion presented The sole issue had, Lexington prior tax interpretation proper revolves around question, placed all businesses one clas- Kentucky Constitu- 181 of the of Section reclassifying sification. Without other aof the imposition tion as to it relates businesses, placed it has now hotels and ease municipalities. For by license tax single a special motels in classification. di- should interpretation, the section by city upheld have urged that we Kentucky Constitu- parts. vided into four special of hotels and classification tion, 181, provides: Section Fis- Properties Street motels Second Assembly shall County, Ky., “(1) The General cal Jefferson any discussed). purpose impose for taxes (1969) (hereinabove S.W.2d 709 municipal city, or other constitutionality county, town

Therein was involved the laws, may, by general corporation, empow- but which (KRS 83.350) of a statute there- proper authorities levy and a transient confer on counties cities to ered and power to assess of, motels, hotels, respectively, tax” and “room collect such taxes. financing ac- like, purpose Assembly by problem now faces us (2) may, The arises General is, according to general only, provide pay- laws for because a license tax most franchises, Thus, authorities, ment of license fees on stock a form of an excise always purposes, municipality used for faced with the breeding various trades, occupations professions, problem tax that enacting and or when a license special form might enacting or excise some other tax excise which in fact is unconstitution- by laws, (3) may, general delegate in determining al. The courts or whether counties, towns, power to cities and not a has acted within its constitu- municipal corporations, impose other to tional boundaries must first determine what fees on stock used collect license distinguishes a tax from ex- other franchises, breeding purposes, on cise taxes. An excise has been defined as trades, occupations professions, species consisting generally of tax manufacture, duties laid sale ' may, (4) Assembly the General consumption or within commodities general only, laws authorize cities or state, occupa- or upon callings certain or provide for towns of to taxa- class taking exactions tions, often the form of personal municipal purposes on tion pursue for licenses In more them. tangible intangible, property, based any tax which modern sense excise is franchises, lieu income, licenses not fall the classification within valorem tax thereon.” ad embraces poll property tax directly every burden not laid form of 181 the General As- Pursuant Section upon persons property. Pollock sembly and 92.281 enacted KRS 92.280 429, Co., U.S. & Trust Farmers’ Loan authority granted municipalities 759; Booth Ex’r v. 15 S.Ct. 39 L.Ed. permis- levy all taxes which were Commonwealth, sible under Section 181. Taxation, (1908); see also Am.Jur. 36, p. 65. § arises as to what taxes now permissible 181. There are under Section As for a license what municipality can be no doubt that a can an excise portion it is that seem levy a under Section since tax which designated. specifically right (3) professions, or exercising callings, certain levy authority of cities Kentucky Indepen- vocations. Shanks v. nearly tax is not the much broader dent Oil spec it is 181(2) Section so clear. Under City of Levi v. Assembly can, by ified the General gen- S.W. 973 But, general power, excise taxes. erally a flat rate or such measured authority the designating what General surplus, capital stock, capital bases as num- municipalities, Assembly delegаte could Usually capacity. exclud- ber units or levy an excise is omitted. power to by directly trans- ed are taxes measured intended, or omission Whether income, gross net or value of actions, or In oversight, is not merely clear. only to property except to those event, long has been settled apply. nominal rates consistently by It has held this court. authority attempted delegated This has to municipalities with court on occasion Assembly levy taxes. cannot make a distinction the two between from General Oil George Independent Brew Shanks an excise tax. Wiedemann v. corporate City Newport, Ky., supra, 321 v. S.W. the state enacted a ing Co. (1959); City paid. see tax appellant also license which the 2d 404 Sebree, Ky. 420, Subsequent passеd 214 248 thereto the v. 308 state gasoline three-cent under which the (1948). tax It this case that Appellant required pay appear three cents would thus from appel- for an a license tax gallon gasoline. on each enactment to be merely privilege sec- must en- upon lant that this was be levied contended gaging specific occupation, double or ond license tax and amounted to trade This court affirmed on the the- in such a taxation. business. cannot be levied ory gasoline tax not a license manner that it in effect is a tax on con- by sumption, but its nature excise tax. was an use or sale. making the court stated distinction municipality has court said that a as follows: license tax the au- unless thority specifically has delegated “A tаx privilege or tax for the legislature. City Harrodsburg v. doing business is referred sometimes Devine, Ky., City (1967); 418 S.W.2d 426 excise, to as an as are all forms of taxa- Sebree, supra; Louisville v. West directly

tion which are not burdens laid Sterling, Ky., of Mount 65 S.W. upon persons property. or The three- Lexington, Ky., Baker (1901); gasoline cent tax on imposed by the municipality If the (1899). S.W. act, however, is an classify authority, has that then it can original sense, being and limited some- them, occupations certain order thing paid cut off from price aon but that classification must be reasonable sale goods, as a contribution to the arbitrary. Great Atlantic support government. A careful Kentucky Commission, Pacific Tea Co. v. reading of the act convinces us that the al., Ky. 367, et 128 S.W.2d 581 tax imposed was not intended a li- as Benton, Karnes v. cense or a tax privilege for the addition, any S.W.2d 558 li- engaging in the selling gaso- business of cense tax that must be uniform levied line the state. What is taxed the- ‍​‌‌​‌​​‌‌​‌​‌​‌‌​‌​‌‌​​​​​​‌‌‌​​‌‌​‌‌‌​‌‌‌​​‌‌‌‌‍occupation and if there a clas- thing itself as an consumption article of sification then uniform as to the class. and the consumption tax is an excise on Hager, Walker, Auditor v. or use and not selling. on the act of George 254 (1908); & Co. Schuston n n n n n n 689 (1905).

“The distinction between an excise tax on the thing use and a direct appears reported from our cases that upon is, thing course, itself recognize imposition as valid the fundamental, a license tax upon (1) three tax based theories: privilege engaging particular in a persons engaged upon A uniform tax essentially business different same without reference * * * each of these forms of taxation. done; (2) the amount of business One Legislature, Under section the a uniform tax the volume levies provided addition to the valorem tax ad changing of business done without provide section that a li- increases, proportion the business paid by any shall be person, cense tax same; percent being the a di- (3) firm, corporation according general vision of a class engaging specified occupation, in a done, imposi- and the volume of business consumption also an excise on the tion of a different each division use of person, articles such firm sold the class into which is divided. Gordon corporation. The fact that the seller Louisville, 442, Ky. City of 138 required to collect and accоunt (1910). 327 the last-named not alter character or convert into a license municipal incep- license tax in its tax.” regulatory tion was a tax which was levied

262 Ky. 739,

across the at a flat or hoard even rate 212 S.W. 925 This line regardless of the amount of business done. of distinguish cases hard to from other Thus, engaged advertising all who in were cases where this court has said that such Louisville, posting, Loges City or bill v. of taxation gross receipts on volume or Ky. 367, 141 (1910); 132 S.W. 565 con excise. Inde- Shanks v. limits, doing city pendent tractors work within the Co., supra, passed Oil state City Ky., of King, gasoline requiring Winchester v. S.W. 266 act a three-cent tax on (1954); engaged 2d 343 who in the gallon gasoline. those each of There the court law, practice City v. of said Woodruff Louis that such a tax on volume was ville, Ky., Ky.Opin. 6 230 Baker (1872); оriginal excise in its A or limited sense. City Lexington, Ky., v. 53 16 City S.W. similar decision was in handed down (1899); exchange, loan, Downs, all Ky. and broker’s of Louisville Churchill v. 267 offices, City 339, v. Covington, Simrall 90 102 In that case was S.W.2d 10. 444, Ky. (1890); imposition S.W. 369 all hawkers contended of a tax peddlers, City opera- Heching gross Carlisle on from the receipts derived er, 381, place tion of amuse- S.W. a race track as doing duplication compan business as insurance ment or entertainment was ies, privilege of Washington daily German Mut. Fire Ins. license tax for Louisville, Co. in case engaging 78 S.W. 472 that business. (1904), subject municipal original are all li was court noted that However, cense directly taxes. it declared levied a license tax. receipts purely privilege doing gross business within a city, rate, based pure on a flat is the li an excise tax. easily distinguished cense tax and is adept Perhaps to those more it is clear remaining excise taxes. why gymnastics than I legal imposition soon the a li- receipts gross a tax on volume or instance important cense tax became one of the purely next is in the a license municipalities sought

means an excise. raise revenue. to this thesis the Pursuant began cities a uniform tax based thinks the point up to this If the reader done. confusion, volume behold of utter law is a state municipalities is in link this area where City series of encounters. next the so-called license tax to volume of busi- Series Ordinance of Louisville enacted ness done that the distinction between 1950, providing: nebu- license and an tax becomes every per- July early uр- after lous at best. This tax was “On association, or other corporation son, Ass’n Building and Loan held Southern trade, occupation, entity engaged Norman, Ky. 294, 32 Knoxville v. activity in the gross or other profession, Here S.W. 952. a tax 2% Sinking Fund of into the foreign corporations pay receipts of all shall under set forth purposes imposed by upheld as a valid state Kentucky Revised Likewise, Fidelity & Casu- 91.200 license Section tax. Act by an as amended alty Statutes Co. v. 1950, an annual Assembly imposed on General S.W. 2% engaging fee for the every paid in the license premium insurance activities, fee shall valid license tax. in said upheld as a (a)- Commonwealth, per centum Ky., by one measured Brown-Forman Co. oth- wages, commissions salaries, one- (1907), a tax of one every pеrson earned spirits compensations per gallon distilled er fourth cents services done for work upheld a valid manufactured was City; and Taylor, Jr., 184 or rendered performed also Greene See businesses, pro- by pofits recognition be eased the net of of certain (b) the fessions, occupations legitimacy.” (Emphasis from activities added). or City.” conducted the the held substance court that a provisions might council this in anoth- further made have levied tax The Ordinance way valid, by employers the er and withholding of it would have been there- pro- it employees fore, going tax tax salaries of to hold the valid from op- notwithstanding invalidity. net from the term income obvious vided that enterprise my opinion shall be reasoning or is this thor- eration of business is, оughly really used itself the same method for what it determined brands There can tax. reporting federal income without comment me. But the his- tory stop this Or- longer be doubt but what not here. tax no practically tax employees an income was attacked dinance Nav- Louisville, imposed by the federal to that al Plant identical Ordinance located in the It was attacked government. Kentucky, they contending that were not utterly lengthy, this in a court courts it subject to the tax since in fact a li- tax to be a confusing, opinion held the license tax as this had held and court City of Louisville v. Se- See cense tax. employees subject to li- federal were bree, court’s The substance supra. tax. This court in the most cense one of para- following opinion contained pieces legal gymnastics beautiful ever graph. wrong employees exhibited held the subject they in their contention that were lays the “This Louisville ordinance tax an income tax. as tax was working tax the privilege of Sinking See Fund of Commissioners city, conducting within privi- Howard, Ky., only value measures lege earnings net by the amount or ruling up- the court’s S.W.2d wherein profits. this is contended point this reads follows: as subterfuge but a to avoid the absence point the Con- appellees “The out that that,

power looking beyond the mat- only substance, Act of authorizes gressional ter of form to the matter of tax,’ or ‘income an income tax. The but definition Sebree, of Louisville v. ap- may be a matter of classification spe- court proach pоint view. Sometimes cifically occupational the Louisville nearby held see the woods It is true an income impact loses was not psychological trees. case that emphasis on what we held in the Sebree placed force when an„income mean- subject rather than was not tax within is made to taxation Constitution, but ing the basis on the measure of tax and is an in- word ‘re- ‍​‌‌​‌​​‌‌​‌​‌​‌‌​‌​‌‌​​​​​​‌‌‌​​‌‌​‌‌‌​‌‌‌​​‌‌‌‌‍computation. if the here is whether Or truth, ap- which, the more ceipts,’ come tax as term defined term, pointed ‘in- Congress. previously be used instead of Act As propriate Congress sums graduated opinion, If stated the Act of come.’ out percentum any tax to include provided been instead defines ‘income tax’ income, gross such income by’ the source of net reсeipts profits, or net ‘measured receipts. have been in the Sebree probability gross in all said sums would We way fixing is a license And case that the Louisville same. il- scarcely regarded ‘measures value could tax which earnings & George privilege by Co. the amount of legal. Cf. Schuster clearly falls with- profits.’ The tax net un- feeling that an Act of sting in the definition made then imposed Congress.” lawful tax has holding appealed to question the Su- lieve that the presented was not

preme lacking That Court the United States. because it in I merit. will not Howard, presume in court et al. v. Commissioners to ascribe parties motives to the al., Sinking litigant Fund of et in that case. it say Suffice to presented that and, U.S. 73 S.Ct. L.Ed. it was therefore, agreed Kentucky Ap- Court was not considered. Had it prеsented peals my position in fact tax was an income in that case would be the same tax. Mr. in Black Mr. as this. Justice Justice dissented, Douglas saying: Admittedly fuzzy there are areas exist- ing between what is a license and what “I have not been able to follow the a purely would be im- argument is an ‘income that this tax possible up to clear these areas meaning tax’ within the of the Buck therefore, opinion, I task leave that to by Act. its terms ‘license fee’ days other and other There are a cases. privilege’ engaging levied on ‘the things few are that definite and certain. narrowly certain The tax is activities. First, Kentucky Section 181 Consti- salaries, wages, commissions confined only permits tution cities businesses, profits net franchises, trades, occupations tax upon Many professions, occupations. professions. any person may Before excluded, g., kinds of divi- income are e. be taxed his fit one must endeavors dends, interest, capital gains. ex- these tax is qualifications, otherwise the emphasize is on clusions that clearly void. privilege working doing busi- That is kind of ness Louisville. Second, sales taxes income taxes Kentucky Appeals a tax the Court admittedly authority are all excise taxes Sebree, held it to be. Louisville be levied cities. Congress 248. S.W.2d Third, where a tax has all of at- yet granted local authorities

has tributes of either a tax or an income sales working right to tax the the ancient and no real earmarks of doing business with United reasonably called it cannot be States.” only do confuses license tax. To so wholeheartedly agree I with these two operate must law and confounds who Honorable I am also unable under it. Justices. argument. follow the I cannot see how retrospect appears it that there now tax can on one hand be a license tax and occupational but what the little doubt income other be an City of Louis- enacted as absolutely under "the forbidden Constitu- 1950, was in ville in Series Ordinance party Nowhere else in the law tion. ais However, this violation of Section litigant permitted ways it to have both upon that Based court found otherwise. did this instance. adopted decision, many other cities have recently taxes. Proper- Most similar identical highly Second Street either County, declare ties v. Fiscal For at timе and us to recant Jefferson be to Ky., a tax that ordinance invalid would li- occupational very practically similar to the one here before us and invalidate I do approved it. contention was in this no cense taxes Commonwealth. prac- parties by the a course made violated Sec- not believe this is degree Constitution, tion tical demonstrate nor right therefore, people have was not consid- of wisdom that officials. their discussing judicial majority opinion expect ered. The not disturb I to be- The cast and will is inclined die now states the court token, However, by the same taxes. these permit we cannot

I am convinced that outright sales by the cities of an

adoption license tax. guise of a under the my tax here under opinion that the

It is clearly sales

consideration rooms, therefore, an excise

rental of motel Con- 181 of the of Sеction in violation I of this

stitution Commonwealth. in this court trial

affirm action

case. NEIKIRK, join JJ.,

REED and

concurring opinion. Harlan, Rice, Huff,

William A. Rice & Emerson, Glazer, Dept, Martin Thomas R. Inc., COMPANY, CARCO MINING Labor, Frankfort, appellants. for al., etc., Appellants, et Greene, Jr., R. Forest- S. William James er, Forester, Harlan, Keller Greene & ELY, Fayette J. Westmoreland Coal Bd., Whitaker, Compensation Appellees. Workmen’s Frankfort, appellees. for Appeals Kentucky. April 2, 1971. OSBORNE, Judge. 21, 1968, Ely Fayette July

On filed Compensation for application Workmen’s benefits. The claim heard Ely occu- Board and an award made pational in the amount (silicosis) disease per peri- week the maximum $44.00 making the award od 425 weeks. occupational Ely Board found his career and that he had divided disease Kentucky, Virginia and between except exclusively Kentucky, years last Virginia. for months in six Ely Board further found thаt Virgin- qualified to receive benefits migrant ia; worker he was not a seeking advantage to take and, Compensation Act there- Workmen’s it. under fore, benefits should awarded notes class specific specific tion and reasonable dif- fees for requires natural businesses. These upon ferences and must be substantial. license taxes are based the volume of reflected in S.W.): court said business done as the net in- (page 588 Accepting city’s argument come. own before us the tax im- “In case is simply the “room tax” an additional posed upon privilege upon ‍​‌‌​‌​​‌‌​‌​‌​‌‌​‌​‌‌​​​​​​‌‌‌​​‌‌​‌‌‌​‌‌‌​​‌‌‌‌‍motels, hotels and situation store, operating particular kind of any provided is the as if the same op- but is a tax profits, pay businesses of the net 1½% than erating more one store under exсept pay and motels shall hotels t/i% management. taxes bear no rela- singling thereof. Here we have the out business, tion to the nor do volume of particular carry pro- business advantages, alleged mul- attach to portionately heavier tax load than all other tiple operation, store such as abundant businesses. find no can reasonable We capital, quantity buying, buying for cash basis for imposing this additional tax buying, any' and skill in relation bear particular business. operated the number of units attempted An particular group. justification for such dis- appears in crimination the Preamble to the analysis advantages “In final ordinance, which recites hotels and depend upon claimed volume (and motels “use similarly situated) management, and skill in and these ele-

Case Details

Case Name: City of Lexington v. Motel Developers, Inc.

Court Name: Court of Appeals of Kentucky (pre-1976)

Date Published: Apr 2, 1971

Citation: 465 S.W.2d 253

Court Abbreviation: Ky. Ct. App.