Jefferson County Cigarette tax update
Jeffco cities' tobacco tax ruled illegal
State Supreme Court reverses its earlier ruling on 10-cent levy
July 29, 2006
ROBERT K. GORDON, News staff writer
The Alabama Supreme Court reversed itself Friday and ruled illegal a 10-cent tax on tobacco products levied by some Jefferson County cities.
"I think the Supreme Court got it right on the legality of the tax," said lawyer Pete Short, who filed a lawsuit seeking to get the tax overturned. "The law was clear that cities in Jefferson County could not tax tobacco products."
The high court ruled that money collected under the tax by Bessemer, Hoover and Hueytown - about $1.8 million - go to Cooper Green Hospital after a third of the sum is awarded in attorney fees.
With regard to money collected by Trussville, Mountain Brook and Homewood, the court ordered Bessemer Circuit Judge Dan King to either dismiss the case against them, or transfer the case to the Birmingham division for a judge there to make a ruling. The court ruled that King - who presides in the Bessemer Cutoff - had no jurisdiction over the cities in the Birmingham division.
Efforts to reach King on Friday were unsuccessful.
King's dismissing the case would mean those cities would get the money they've collected. Transferring the case to Birmingham would mean the money would remain in escrow until a Birmingham judge, in essence, concurs in the Supreme Court's ruling. If a Birmingham judge rules that those cities illegally collected the tax, it's unclear what happens to the money the cities have collected.
Since January 2004, a 10-cent tax on cigarettes and other tobacco products has been collected in those Jefferson County cities. State Sen. E.B. McClain filed a lawsuit, claiming the tax was illegal. His lawsuit asked that the money collected go to Cooper Green Hospital for the treatment of tobacco-related illnesses.
A total of about $2.1 million has been collected in tobacco taxes. The money has been held by the circuit court clerk in Bessemer.
King ruled the tobacco tax illegal in August 2004. The cities appealed the ruling and the Supreme Court reversed King's ruling. Short, McClain's lawyer, filed a motion asking the court to review its decision. Short argued that a 1947 law repealed all tobacco taxes and barred cities in Jefferson County from taxing tobacco. The cities countered that the law barred taxation by requiring the affixation of a stamp. The cities said the tax is valid if it did not require a tax stamp.
Civil appeals Judge Tommy Bryan participated in reviewing the case after Justice Tom Parker recused himself. Parker, one of the justices who originally ruled the tax was legal, stepped down from the case in February because he was related to one of the lawyers representing Hueytown.
Hoover collected a little over $800,000, the most of any of the cities, according to court records. Bessemer collected $591,800, the second highest amount. Read
Lawyer faults high court on ruling cities' tobacco tax legal
Wednesday, February 15, 2006
ROBERT K. GORDON
News staff writer
The Alabama Supreme Court erred when it ruled that a tax levied on tobacco was legal because it did not require the affixation of a tax stamp, said a lawyer seeking to strike down the tax.
The court missed the intent of the Legislature when it passed a 1947 law repealing municipal tobacco taxes in Jefferson County and barring cities from collecting a tobacco tax by affixing tax stamps, lawyer Pete Short said.
The intent was to create a uniform system for taxing tobacco products, he said.
Short has filed an application for the Supreme Court to revisit the 5-4 decision it handed down last month. In January 2004, Hueytown, Bessemer, Hoover, Homewood, Mountain Brook, Trussville and Vestavia Hills enacted a 10 cents-a-pack tax on cigarettes and cans of snuff.
That tax did not require a tax stamp. Bessemer Circuit Judge Dan King ruled the tax illegal in August 2004. The high court overturned King's ruling.
"They were wrong," Short said of the high court's ruling.
The ruling, Short said, allows the cities "to do something that they don't have the authority to do as long as they didn't use that method."
Tax stamps were simply the common method used to collect taxes when the law passed 59 years ago. Technology has changed that. Stamps are no longer required to collect a tax, Short said in court papers.
Allowing the January 2004 ruling to stand is tantamount to a double tax, Short contends, because those cities still receive their share of tobacco tax money created by the 1947 law.
"This court has completely destroyed the single tax system of tobacco taxation created for Jefferson County and created an unjust and absurd result," Short wrote.
In its decision, the court ruled that because the tax enacted by the cities did not require a tax stamp, the tax did not run afoul of the 1947 law.
The ruling did not say whether the cities may continue to collect the tax since the Legislature amended the law to say that cities cannot collect a tax on tobacco unless it affixes a stamp.
The seven cities have collected at least $2 million since January 2004. The money is being held in escrow until the case is finalized.
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