Coffee County Board of Education v. City of Tullahoma
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In this case regarding the proper distribution of liquor-by-the-drink (LBD) tax proceeds between a county and a municipality within the county, the Supreme Court reversed the decision of the court of appeals reversing the judgment of the trial court granting summary judgment against the county on its claim that the liquor-by-the-drink (LBD) tax distribution statute, Tenn. Code Ann. 57-4-306, required cities to distribute the tax proceeds as the counties distribute the county property tax schools, holding that that the city was not required to share those proceeds with the county.
The county in this case had not approved the LBD sales, but the city had. The Commissioner of the Tennessee Department of Revenue distributed the tax proceeds to the city. The city distributed half its tax proceeds to its own city school system. The court of appeals concluded that section 57-4-306 required the city to distribute half of its LBD tax proceeds pro rata among all schools in the county. The Supreme Court reversed, holding (1) the distribution statute directed cities to distribute half of their LBD tax proceeds for the benefit of the city's own school system; and (2) the city in this case was not required to share its LBD tax proceeds with the county or the county schools.
Court Description:
Authoring Judge: Justice Holly Kirby
Trial Court Judge: Judge Vanessa A. Jackson
This is one of five cases on appeal to this Court regarding the proper distribution of liquor-by-the-drink tax proceeds between a county and a municipality within the county. In each case, the county had not approved the liquor-by-the-drink sales, but the city had approved such sales. The Commissioner of the Tennessee Department of Revenue, who collects taxes on all liquor-by-the-drink sales, distributed tax proceeds to the defendant cities in accordance with the liquor-by-the-drink tax distribution statute, Tennessee Code Annotated section 57-4-306. The statute required the recipient cities to then distribute half of their proceeds in the same manner as the county property tax for schools is expended and distributed. Tenn. Code. Ann. 57-4-306(a)(2)(A) (2013). In each case, the recipient city distributed half of its tax proceeds to its own city school system and did not share the proceeds with the county. The counties sued the cities, claiming that the statute required the cities to distribute the tax proceeds as the counties distribute the county property tax for schools, which is pro rata among all schools in the county based on average daily attendance. In the instant case, the trial court granted summary judgment against the county and in favor of the city. The Court of Appeals reversed, concluding that the tax distribution statute plainly required the city to distribute half of its liquor-by-the-drink tax proceeds pro rata among all schools in the county. The city appeals. We agree with the city and hold that the distribution statute directed cities to expend and distribute half of their liquor-by-the-drink tax proceeds for the benefit of the city s own school system, if any. In this case, because the city has its own school system, it was permitted to use half of its liquor-by-the-drink tax proceeds for its own school system, and it was not required to share those proceeds with the county or the county schools. Therefore, we reverse the Court of Appeals and affirm the trial court s grant of summary judgment in favor of the city.
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