Competing claims on sales taxes going to court
The Iberville Parish government's bid for dismissal of a City of St. Gabriel's law suit over sales tax collections within its city limits will go to court May 5.
At issue is whether the city or the parish has the right to collect two-thirds in sales tax in St. Gabriel above a five percent state-imposed limit on local sales taxes within a parish.
The City of St. Gabriel claims in its suit that a First Circuit Court of Appeal decision last July gave it the right to collect a full one-cent city sales tax approved in 1996. The parish contends St. Gabriel's protest comes years too late.
Just after the city tax passed, nine St. Gabriel industries who would pay the majority of it sued the city. The case was headed for the Louisiana Supreme Court when, in an unpublished settlement agreement with the industries in October 1999, the city agreed to collect only a one-third cent tax for 10 years. The agreement put the city's sales tax rate at four percent, the legislative limit on local sales taxes at the time.
In the meantime, the Legislature raised the local tax rate to five percent, and Iberville voters in 2006 approved a new one-cent parish wide tax that was phased in over three years and reached the full collection point in January 2009.
In November 2007, St. Gabriel officials passed an ordinance raising its city tax rate to one cent. The parish filed suit to stop the move. The parish won in the 18th Judicial District Court in a decision that the First Circuit Court of Appeal, sitting as a whole, reversed last July. In doing so, the First Circuit also reversed its own previous decision in the case.
St. Gabriel's current suit said the First Circuit cited state law authorizing incorporated municipalities to levy up to two and a half cents in sales taxes without reference to sales tax limits imposed on parishes and school boards.
Last fall, St. Gabriel officials increased the tax to the full one percent city voters approved in 1996. (The tax produced $135,195 for the city in January, including some $31,000 was paid under protest.)
With the parish continuing to collect its full amount and St. Gabriel's increasing the local tax by two-thirds of a cent, the sales tax rate in the city went up to 5.666 percent. With a four percent state sales tax, the rate is 9.666 percent, compared to nine percent elsewhere in the parish.
Last month, six industries located in St. Gabriel filed suit against the parish government for the return of the additional sales taxes they said they paid under protest.
In the parish's bid to have St. Gabriel's suit dismissed, attorney Russell J. Stutes Jr. of Lake Charles, cited a state constitutional provision requiring any action contesting the legality of any tax to be brought within 60 days of the promulgation of the results of a tax election.
He quoted the provision:
“After that time, no one shall have any cause or right of action to contest the regularity, formality or legality of the election, tax provisions or bond authorization, for any cause whatsoever.”
St. Gabriel's suit was more than two years late, the petition said.
The newest one-cent parish tax – along with one and two-thirds cents in parish wide taxes – is shared by the Iberville Parish Council and the six parish municipalities, including St. Gabriel. The Iberville Parish School Board levies another two percent in sales taxes, and the parish collects a one-third cent solid waste tax, putting the parish at the five percent limit. St. Gabriel is the only municipality with a separate local sales tax.
The competing claims to the disputed two-thirds cent in St. Gabriel already have had a spillover effect on the City of Plaquemine. On the advice of the city's bond attorneys, the Board of Selectmen last week agreed to delay advertising $12.34 million in bonds for a citywide road program.
Attorney F. Barry Marionneaux, representing the city in case, is seeking to have 18th Judicial District Judge James Best move the hearing date up from May 5, Mayor Mark A. “Tony” Gulotta said. (Marionneaux is representing Plaquemine because L. Phillip Canova Jr. is city attorney for both Plaquemine and St. Gabriel.)
“The lawsuit is just clouding our ability to borrow money,” he said.
Gulotta said he and the city council had to delay action bond attorney Hugh Martin could write an opinion on the tax dispute. The city has a good enough bond rating, that they probably could sell the road bonds, but probably at a higher interest rate than they had expected.
The city already has let a contract for the repair of utility lines under city streets before they are overlayed. The big worry, he said, is that a delay would leave the roads exposed and in poor repair for an extended period of time.
“I don't want to leave those roads ripped up for five or six months,” the mayor said.
Gulotta went to New Orleans Monday to sign papers on the sale of $275,000 in bonds for the purchase of a new city fire truck. The city sold the bonds at an interest rate of 3.75 percent, the same low rate officials hoped for the road program bonds, he said.
While there, he said he talked with Martin, who was more optimistic that they could go ahead with the road bonds at the next city council meeting.
“The dispute is over the additional two-thirds,” Gulotta said. “The additional two-thirds has nothing to do with us.”