Lawsuit seeks back liquor-tax revenues

Published 9:14 am Tuesday, June 3, 2014

Alcohol sales have caused an uproar in the county, though not in the usual way.
On Thursday, the Carter County Board of Education filed suit against the City of Elizabethton, saying the city has withheld tax revenues from the sale of alcoholic beverages which are due to the county school system under state law. The suit was filed in Carter County Chancery Court.
In the complaint for declaratory judgment, the school system alleges the city has failed to turn over the portion of collected liquor-by-the-drink tax revenues which is due to the county school system.
“The Tennessee Department of Revenue collects a 15 percent state-imposed tax on the sale of alcoholic beverages consumed on premises,” states the complaint. “(State law) provides a statutory formula by which the Tennessee Department of Revenue distributes a portion of the liquor-by-the-drink tax revenues to local municipalities which have authorized liquor-by-the-drink sales within their corporation limits. Each such municipality is then required to remit a portion of their liquor-by-the-drink tax revenue to the County school fund of the county in which the municipality is located.”
The Board of Education further alleges in its complaint that the City of Elizabethton has received the redistribution of tax revenue from the state. “The Defendant, City of Elizabethton, has not paid over to the Carter County Board of Education the funds required by statute, but has spent these funds without regard to its statutory duty to distribute same to the Carter County Board of Education.”
According to the complaint, the BOE has requested that the city release the funds to the county school system, but no funds have been received. The complaint states that the Board of Education has information that the city school system, which is also entitled to a portion of the liquor-by-the-drink tax revenue, has received distributions of those revenues from the City.
As part of the lawsuit, the BOE is asking for declaratory judgment as to its rights and the City of Elizabethton’s obligations and responsibilities under state law as to the tax revenues not turned over by the city to the county. The BOE is also asking for a court order compelling the city to pay the BOE the full amount due to the school system of the unremitted tax revenues as well as an order directing the city to pay the BOE future liquor-by-the-drink tax revenues which are due the school system.
The lawsuit was filed on behalf of the Board of Education by the board’s attorney John Banks.
The suit does not ask for a specified amount. “We are waiting for that to be determined,” Banks said, adding that the number should be calculated before any court appearance if the case proceeds to that point.
Legal action by the county was initiated following a special called meeting of the Board of Education, which was held on May 28. During the special meeting, the Board met with Banks and authorized him to proceed with the suit.

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