By Diane Krizek
Cass County received over $966K in sales tax revenue that should have benefited the City of Lees Summit. Over a three year period prior to 2012, KCPL submitted 36 monthly sales tax returns erroneously attributing the tax collected came from Cass County. The error was caught by a Director of Revenue internal audit in 2012. KCPL paid the correct amount to the Director but the error cost the City $966,692.25. The County has used that overpayment of tax revenue interest-free for over seven years.
After six years of litigation, the Director issued a final decision in March 2016 to redistribute the overpayment. It would withhold sales tax revenue monthly from the County over a three year period that it would redistribute it to the City starting July 1 that year. The Director believed this remedy is fair and reasonable by allowing the County to pay back within the same time frame that the overpayments were distributed.
The County rejected the decision and appealed to the Missouri Administrative Hearing Commission on the basis that the Director had no statutory authority to withhold tax from the County. It also asserted the overpayment should be treated as a refund not a redistribution.
The County argued that because the Director is holding part of the local sales taxes in a trust for the County with the state treasurer then KCPL must apply for a refund before the Director can redistribute money from the trust to the City. KCPL would have to resubmit the tax after receiving the refund. The Director says such a trust does not exist and the revenue is a local sales tax on domestic utilities not a county sales tax.
The AHC held a hearing on Sept. 2016 and a year later issued its decision that the Director has the legal authority to withhold and redistribute $966,692.25 in local sales taxes affirming the final decision. The commission asserted that the statute is plain that this is not a refund case because there is no balance to be refunded. KCPL amended its sales tax returns soon after being notified of the error thereby reconciling its tax collections, submissions and returns.
The County appealed AHCs decision further questioning that the commission had jurisdiction to review the Directors automatic processing of the amended sales tax returns.
The case is now before the Missouri Supreme Court which was heard on April 3. Michael G. Berry of Berry Wilson LLC in Jefferson City represented Cass County; the Director was represented by Deputy Solicitor Julie Blake of the attorney generals office in Jefferson City; and Lees Summit was represented by the City’s chief of litigation, Zachary Cartwright.