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Chuck's Package Store v. City of Morristown

Supreme Court of Tennessee, Knoxville

February 6, 2018

CHUCK'S PACKAGE STORE ET AL.
v.
CITY OF MORRISTOWN

          Session May 9, 2017

         Appeal by Permission from the Court of Appeals Chancery Court for Hamblen County No. 2014-CV-458 Thomas J. Wright, Judge

         From 2011-2014, a municipality charged alcoholic beverage retailers higher inspection fees than was authorized by the municipality's ordinance. A group of alcoholic beverage retailers paid the excess fees, but not under protest. After the municipality denied the retailers' requests for refunds, they sued the municipality for recovery of the excess collections and other damages. The municipality moved to dismiss, arguing that Tennessee Code Annotated sections 67-1-901, et seq., required the retailers to have paid under protest any disputed taxes before filing suit to recover the overpayments. The trial court disagreed and awarded the retailers a judgment for the overpayments, ruling that Tennessee Code Annotated sections 67-1-1801, et seq., applied and payment under protest was not required. The Court of Appeals affirmed. We hold that Tennessee Code Annotated sections 67-1-901, et seq., rather than sections 67-1-1801, et seq., apply to a suit to recover municipal taxes. Under section 67-1-901(a), the retailers were required to have paid under protest the disputed taxes before filing suit. Because the retailers did not pay the taxes under protest, they are not entitled to refunds.

         Tenn. R. App. P. 11 Appeal by Permission; Judgments of the Trial Court and the Court of Appeals Reversed

          Daniel R. Pilkington and Brian R. Bibb, Knoxville, Tennessee, for the appellant, City of Morristown.

          F. Braxton Terry, Morristown, Tennessee, and W. Lewis Jenkins, Jr., Dyersburg, Tennessee, for the appellees, Chuck's Package Store; The Cellar, Inc.; T & T Package Store, LLC; Morristown Beverage Associates, Inc., d/b/a Cork & Keg Package Store; The Package Store; and C & C Package, Inc.

          Herbert H. Slatery III, Attorney General and Reporter; Andrée Sophia Blumstein, Solicitor General; Charles L. Lewis, Deputy Attorney General; and Mary Ellen Knack, Senior Counsel, for the Amicus Curiae, State of Tennessee.

          Douglas Gordon, Knoxville, Tennessee, for the Amicus Curiae, Tennessee Municipal Attorneys Association.

          Sharon G. Lee, J., delivered the opinion of the Court, in which Jeffrey S. Bivins, C.J., and Cornelia A. Clark, Holly Kirby, and Roger A. Page, JJ., joined.

          OPINION

          SHARON G. LEE, JUSTICE

         I.

         A municipality may impose by ordinance an inspection fee on licensed alcoholic beverage retailers located within the municipality. Tenn. Code Ann. § 57-3-501(a)(1) (Supp. 2017). The maximum amount of the fee is determined by the population of the county, according to the latest federal census, where the municipality is located. Counties with a population under 60, 000 may not charge over eight percent of the wholesale price of the alcoholic beverages supplied by a wholesaler in the municipality. Id. § 57-3-501(b). Counties with a population over 60, 000 may not charge more than five percent of the wholesale price. Id. § 57-3-501(c). Alcoholic beverage wholesalers are required to collect the fees from retailers and pay the fees each month to the municipality. Id. §§ 57-3-502, -503(a) (2013).

         The city of Morristown in Hamblen County adopted an ordinance, under the authority of Tennessee Code Annotated section 57-3-501(a)(1), imposing an inspection fee on licensed alcoholic beverage retailers within its municipal boundaries. The city set the fee at eight percent of the wholesale price based on the county's population of less than 60, 000. By January 2011, the county's population, according to the 2010 federal census, increased to over 60, 000. Under the city's ordinance, the inspection fee should have decreased to a maximum fee of five percent of the wholesale price. However, from 2011-2014, the city of Morristown charged the retailers an eight percent inspection fee, which the wholesalers collected and remitted to the city.

         In June 2014, one of the alcoholic beverage retailers, Chuck's Package Store, forwarded to the city a law firm advertisement letter advising that the city was overcharging inspection fees based on the population increase. The city's administrative services director acknowledged the error and pledged to refund the overpayments. However, in July 2014, after a meeting with other city officials, the administrative services director notified Chuck's Package Store that the city would not issue a refund.

          On October 14, 2014, a group of alcoholic beverage retailers, Chuck's Package Store; The Cellar, Inc.; T & T Package Store, LLC; Morristown Beverage Associates, Inc., d/b/a Cork & Keg Package Store; The Package Store; and C & C Package, Inc., sued the city of Morristown in the Hamblen County Chancery Court to recover the overpaid taxes, damages, and other relief.

         The city moved to dismiss, arguing in part that the retailers were not entitled to relief because they had failed to pay the disputed taxes under protest as required by Tennessee Code Annotated sections 67-1-901(a) and -911 (2013). The trial court denied the city's motion to dismiss, holding that Tennessee Code Annotated sections 67-1-1801, et seq. (2013 & 2017 Supp.), applied and the retailers were not required to have paid under protest the municipal taxes before seeking refunds. Following a bench trial in April 2015, the trial court awarded the retailers a ...


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