|Legal Opinion: |
Text of Document: May 4, 1994
Your question is, can the Town levy an amusement tax? The answer is probably no.
The City of Knoxville levies an amusement tax on a broad variety of amusements, under the authority of Private Acts 1992, Chapter 82 (which also authorizes Knox County to levy an amusement tax). That act is the latest in a series of private acts dating to 1947 authorizing the City of Knoxville to levy such a tax. The City of Memphis was also authorized to levy a one cent tax on cigarettes under Private Acts 1955, Chapter 295, the City of Gatlinburg to levy a one percent gross receipts business tax under Private Acts 1955, Chapter 328. A number of cities levy hotel-motel taxes, many by private acts. Regrettably, the authority supporting those taxes does not constitute authority for the Town to levy an amusement tax.
Tennessee Code Annotated, § 67-6-212 imposes a state "amusement tax" equal to the sales tax on tangible personal property on a comprehensive list of amusements. That statute is a product of Public Acts 1984, E.S., Chapter 13, which brought amusements within the fold of the Retailers' Sales Tax Act. A component of the Retailers' Sales Tax Act is the Local Option Revenue Act. Under the Local Option Revenue Act, the local option sales tax applies to amusements up to the limit authorized by the Act. But the first section of that Act also provides that:
The tax authorized by this part is and shall be in addition to all other taxes which counties, cities and towns are now authorized to levy, whether in the form of excise, license, or privilege taxes, and shall be in addition to all other fees and taxes now authorized to be levied. [Emphasis is mine.] [Tennessee Code Annotated, § 67-6-701(b).]
That language seems to permit the continuation of taxes of various kinds previously authorized by the Tennessee General Assembly, but forecloses the future imposition of sales-type taxes by cities, unless they are imposed in accordance with the Local Option Revenue Act. That logic would explain why the Knoxville amusement tax (dating as it does back to 1947) is legal, but why a similar amusement tax would not be legal.
That logic is lent further weight by another section of the Local Option Revenue Act. The first subsection of Tennessee Code Annotated, § 67-6-705 declares that the sales tax resolution shall be subject to a referendum, then respectively announces in two succeeding subsections that:
(b) Nothing herein contained shall be deemed to permit an increase in the privilege tax rates hereby authorized, without the ratification thereof in the manner provided in § 67-6-706 [provisions for the referendum], regardless of the nature of any previous call and regardless of future action of the general assembly regarding the levy of the tax authorized by this chapter.
(c) Any amendment to any existing tax rate shall be subject to the approval of the voters of the city or county in the same manner as is required for the initial adoption of the tax... [Tennessee Code Annotated, § 67-6-705]
I read those provisions to mean that the sales tax can be increased only by the referendum prescribed by the Local Option Revenue Act, obviously within the other limitations prescribed by that act. The effect of a private act giving the Town the authority to levy an amusement tax would be to give it authority to go around the limitations of the Local Option Revenue Act, a comprehensive general law.
That can be done on rare occasions. It has been held in several cases that a private act giving a particular city authority to levy a certain tax in conflict with a general law is legal where there is a rational basis to treat the city differently. [See Stalcup v. City of Gatlinburg, 577 S.W.2d 439 (Tenn. 1978), and Brentwood Liquors Corp v. Fox, 496 S.W. 2d 454 (Tenn. 1973).] If the Town can figure out a good reason why it should be singled out by a grant of such authority, it might successfully levy the tax. However, I doubt that it can do so.
Sidney D. Hemsley
Senior Law Consultant