Litigation Taxes

State law mandates that courts collect a “litigation tax” on all cases that are litigated. The state has determined, for the purposes of imposing a litigation tax, that a case is litigated when the defendant is found guilty, either by a guilty plea or after a hearing. See T.C.A. 67-4-602(e) and T.C.A. 67-4-603(a)(4).

The state-mandated litigation tax currently is $13.75 in all cases in municipal court. T.C.A. § 16-18-305(a). The litigation tax must be submitted to the Tennessee Department of Revenue on Form PRV 401, Line #1.

Litigation tax is not an item of court cost. These litigation taxes should be added on top of any fines and court costs when a conviction occurs.

The litigation tax should be collected when:

• The defendant pleads not guilty but subsequently is found guilty; or
• The defendant comes to court and pleads guilty
• In other words, when the defendant pays the entire ticket on the court date or later.

The litigation tax should not be collected when:

• The defendant is found not guilty after a hearing and the judge dismisses the entire case (resulting in zero money being paid);
• The case is dismissed with court costs to be paid. Note: A defendant may be offered an opportunity to have the charge dismissed after successful completion of a driver improvement course. If the case ultimately is dismissed, no litigation tax is to be collected, even if the dismissal is contingent on paying court costs;
• The defendant submits a “cash bond,” which means the person pays the entire ticket amount before the court date and does not show up to court. This can be by mail, online payment, over the phone payment, or by payment in person. Note: When a person pays the entire ticket prior to court and does not show up for court, the case is considered "satisfied" and the defendant would not be considered "failure to appear."

Cash Bond Forfeiture Fee

A defendant may pay the entire ticket amount prior to court with the intention of never showing up to court. This dollar amount would be the regular ticket costs which would include the fine, court costs, and the $13.75. However, this $13.75 would be considered a "Cash Bond" instead of litigation taxes. If the defendant does not appear in court, the cash bond is forfeited. Generally, paying a fine and posting a cash bond accomplish the same thing, but the litigation tax must be collected when someone pays a fine.

Effective July 1, 2010, the Tennessee General Assembly mandated a "Cash Bond Forfeiture Fee," to be collected when a defendant pays before court, and the city treats the payment as a cash bond. The fee is $13.75, the same as the litigation tax, but is it reported to the department of revenue on a different form. The city is entitled to keep a five percent commission. T.C.A. §38-6-103(d)(1)(A)-(C).

When a city reports this Cash Bond Forfeiture fee to the Department of Revenue, it will be on the Department of Revenue's Form PRV 414, Line #14. If you read T.C.A. §38-6-103(d)(1)(A)-(C), you will see that this $13.75 is initially sent to the Department of Revenue and then forwarded to the Tennessee Bureau of Investigation to help fund its Forensic Services Laboratory. This Cash Bond Forfeiture fee is often nicknamed "TBI Crime Lab Fee."

A city should never collect the litigation tax and the cash bond forfeiture fee for the same charge. That would result in overcharging the defendant by $13.75. Likewise, I city should not forward both a litigation tax and a cash bond forfeiture fee to the Department of Revenue. That would result in the city paying the Department of Revenue twice and the city losing $13.75 per case.

Municipalities are authorized to impose local litigation taxes that do not exceed the state amount of $13.75. See, T.C.A. §16-18-305(c), T.C.A. §67-4-602, and T.C.A. § 67-4-604.The purpose of a local litigation tax is revenue enhancement. As stated above, litigation tax may be collected only if the charge is litigated and the defendant is found guilty. Court costs, however, may be collected without litigation. As a practical matter, it is recommended that if a municipal court wishes to increase revenues, such efforts be focused on imposing a local litigation tax as opposed to increasing court costs.

Litigation Tax on Parking Violations
The Municipal Court Reform Act of 2004 created a litigation tax on parking violations, but the application of the tax is somewhat different from other violations. The court must collect a $1 litigation tax for every violation of any municipal law or ordinance governing the use of public parking space even if the offender does not appear in court. This $1 litigation tax is the only litigation tax to be collected on parking violations. T.C.A § 16-18-305(b).