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Thursday, May 09, 2019

Cities can keep liquor tax
Tennessee cities who have their own school system, like Newport, are not required to share the tax proceeds they receive from “liquor-by-the-drink,” with the county. That was the ruling Wednesday by the Tennessee Supreme Court. Tennessee imposes a 15% tax on liquor-by-the-drink sales allowed in cities or counties that have approved it by referendum, except for private clubs. Cocke County has not approved liquor by the drink. Under Tennessee law, the Commissioner of Revenue keeps half the tax proceeds for general education purposes, and the other half goes back to the city or county in which the sales were made. The ruling resolved five lawsuits centered on what happens to tax proceeds sent back to a city, with its own school system, that has approved the sale of liquor-by-the-drink when the county in which the city is located has not approved such sales. For over thirty years, cities that have approved the sale of liquor-by-the-drink have kept their portion of the liquor-by-the-drink tax proceeds and used them for their own independent school systems. None of the five counties in the lawsuits, just as Cocke County, have approved the sale of liquor-by-the-drink. And all five lawsuits claimed that Tennessee statutes required the cities to share a portion of those tax proceeds with the county schools. Now the Supreme Court has held in favor of the cities. The Court noted that, for over thirty years, cities and counties across Tennessee had been handling liquor-by-the-drink tax proceeds in the same way: cities kept their portion of the tax proceeds for their own schools and did not share the proceeds with the counties. The Tennessee General Assembly was aware of this longstanding practice, and amended the liquor tax laws several times, but it chose not to amend the laws on the cities’ responsibilities as to the distribution of the liquor tax proceeds. This indicated that the legislature agreed with how the cities and counties were applying the liquor tax statutes, the high court held.

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