Huntsville appeals tax decision
NASHVILLE — The Town of Huntsville has appealed before the Tennessee Supreme Court a lower court’s decision on the town’s sales tax lawsuit against Scott County.
Town of Huntsville attorney Andrew Tillman filed paperwork with the State Supreme Court Wednesday (April 23) to appeal an earlier opinion of an appeals court.
In that opinion, issued in February, the court effectively overturned an earlier court decision that directed sales taxes from several businesses along the U.S. Hwy. 27 corridor to the Town of Huntsville rather than Scott County.
In question are the local option sales taxes from all businesses located along U.S. Hwy. 27 from just north of Helenwood Main Street to just north of the highway’s intersection with Glass House Road at New River. The Town of Huntsville annexed those properties into the town’s municipal limits with ordinances approved in late 1997 and early 1998.
At that time, state law provided that 100% of the sales tax revenue from businesses annexed into a municipality would be directed to the municipal government upon the finalization of the annexation.
Three months after the Huntsville Board of Mayor and Aldermen approved the ordinance, however, the Tennessee General Assembly adopted a revision in state law aimed at halting rapidly expanding municipal annexation of unincorporated business districts. The new law provided for a majority of the sales tax revenue to be directed to the county in which the businesses were located for a period of 15 years after any municipal annexation.
Meanwhile, the Town of Huntsville’s annexation of the U.S. Hwy. 27 corridor had been challenged in court. That challenge was ultimately dismissed, and appeals options were exhausted when the Supreme Court refused to take up arguments in the case in early 2002.
The State Dept. of Revenue ruled that the town’s annexation did not take effect until after the legal challenge was exhausted in court — Jan. 7, 2002, or nearly four years after the state’s new law that directed a large portion of the local option sales taxes be directed to county government.
However, the Town of Huntsville argued that the annexation took effect upon the adoption of the ordinance by the Board of Mayor and Aldermen — Feb. 16, 1998, or nearly 12 weeks before the new state law was passed.
The initial court ruling in the case was in favor of the Town of Huntsville, which would have directed the sum of the local option sales taxes to the town and required Scott County to reimburse the town for taxes collected from 1998 until that particular time.
However, Scott County appealed that decision and argued its case before the appellate court last October.
When the court handed down its decision in February, it cited an opinion in a similar case involving the city of Knoxville and Knox County just a week earlier, in which the court held that “when a quo warranto action is timely filed to challenge an annexation, the effective date of the challenged annexation ordinance is held in abeyance pending the litigation.”
Should the Supreme Court side with the appeals court’s decision, or refuse to hear arguments in the case, Scott County will continue to receive sales taxes from the businesses within the U.S. Hwy. 27 annexation area equal to taxes it received in the 12 months prior to Jan. 7, 2002. After Jan. 7, 2017, the Town of Huntsville would be eligible to receive those taxes.
Scott County has 15 days to file an argument in opposition of the town’s request to appeal the case before the Supreme Court.