Cullman County officials said Tuesday they are confident their ability to levy a 1-cent sales and use tax they claim is authorized under legislation approved in 1993, will be upheld on appeal.

The 1-percent use tax currently generates roughly $300,000 annually, 40 percent of which is distributed equally to the county general fund and city of Cullman. The remaining 20 percent is distributed on a monthly basis to the other municipalities in the county based on population.

To improve chances that the tax will remain on the books, the Cullman County Commission is currently publishing a legal notice of pending legislation that seeks to clarify the act.

The original legislation (Act 93-705), which was passed by the Alabama Legislature in 1993 as a local act, came under question in November 2003 when attorneys representing Cooper Industries (Nicholson File) contested the statute and filed a petition of review.

As part of its petition, Cooper Industries requested a refund of $34,161.07 plus interest. Attorneys for the company contend the amount represents that portion of a 4 percent use tax that was collected by the county without legal authority to do so.

"There is no provision in Act 1993-705 similar to Section 3 of Act 1981-599 which levies a use tax, nor is there language similar to the levies of an excise or use tax in Act 1975-30 and Act 1963-66," Whitney Compton, an attorney representing Cooper Industries, wrote in a legal brief. "Because there is no provision in Act 1993-705 imposing a tax on the storage, use or other consumption of tangible personal property, the one percent tax paid by Cooper Industries based upon 'storage, use or other consumption,' namely $34,161.07 plus interest, must be refunded."

Hearing Officer Mark O. South reviewed Cooper Industries' petition on Jan. 5 and ruled in favor of the county.

South ruled that materials acquired by Nicholson File as part of its operation are subject to the tax authorized by Act 93-705. Consequently, the refund request was denied.

Compton earlier this month, filed notice of appeal of South's ruling with Cullman County attorney Dan Willingham, Cullman County Sales Tax Director Chris King, South and Cullman County's administrative law judge Douglas C. Martinson II.

"That (South's) decision is incorrect in that it finds that Act 93-702 imposed an additional 1 percent use tax when there is no imposition authorized in the statute," Compton stated in his notice of appeal. "Cooper Industries hereby appeals this matter to Cullman County's Administrative Law Judge Douglas C. Martinson II."

No date or time has been scheduled to hear the appeal, Willingham said.

Both Willingham and Cullman County Commission Chairman Wiley Kitchens said Tuesday they are hopeful the company's questions regarding the 1993 act can be resolved with new legislation designed to clarify the intent of Act 93-705.

"The preamble to the act called it a sales and use tax, but there was a question raised by Cooper Industries in regard to whether the body of the act itself spells out that it allows for the collection of a use tax," Willingham said. "It has been and remains the contention of the commission that the answer to this question is 'Yes.'"

Asked what the financial impact would be on the county if the hearing officer's ruling was to be overturned on appeal and the 13-year-old use tax declared null and void, neither Kitchens nor Willingham had an answer.

"I honestly have no idea how much money we would be talking about. If every industry sought reimbursement it would be a substantial amount, but I'm not sure it would be in the millions of dollars," Willingham said. "Again, we feel the statute is clear enough and it won't come to that."

Admitting that he is not as well versed in these types of petitions and appeals as he would like to be, Willingham said there is a statutory formula for proceeding with the appeal process.

"Cooper Industries has filed notice of appeal and has requested a hearing before the county's administrative law judge," Willingham said. "I'll need to do a little research before I comment on where the process would go from there."

Both Willingham and Kitchens said they were confident the county's authority to levy a 1 percent use tax will be upheld.

"Prior to 1993 the state of Alabama was collecting the sales and use tax on behalf of the county, and what we and a number of other counties in the state did was ask our legislative delegation to pass local legislation granting the county the authority to levy and collect its own sales and use taxes," Willingham said. "We simply started collecting the same taxes the state had collected."

Because other counties in the state adopted similar if not identical legislation in and around 1993 it's not just a Cullman County question.

"We feel confident about the county's position. We feel the statute is clear enough, but because this question did arise we've begun publishing a legal notice of an act which will be introduced during this legislative session which will clarify the intent of the 1993 act," Willingham said. "Our view is if somebody can read it and have a question in their mind, why not go ahead and pass something that will clarify it for everyone. The lawyers who filed this petition aren't crack pots. They read the act and if they have a question in their minds then someone else might read it and have a question as well. This new legislation will clear it up for everyone."

Emphasizing that the proposed legislation is "not a new tax" but rather is a clarification of Act 93-705, the new act seeks to amend Act 93-750 and add a new Section 10 which reads as follows:

"The clear intent of the Legislature in the passage of House Bill 848 during the 1993 regular session, which became Act 93-705, was and continues to be to authorize the County Commission of Cullman County to levy both a sales and use tax pursuant to the provision of the act."

Kitchens said he expects the amendment to be presented to the Legislature in March.

Asked if he is concerned that Cooper Industries petition could strain relations between the industry and county, Kitchens said there is no reason to suspect that would be the case.

"Nicholson File is a good company, they employ a lot of people and they have been a good corporate neighbor to Cullman County for many years," Kitchens said. "The intent of the 1993 act was and still is to provide the county with the ability to collect a sales and use tax and hopefully this new legislation will explain exactly what 'is' means."

Willingham said in the end, it is probably a good thing that this happened.

"This clarification will guarantee that anyone in the future who looks at it won't get confused as to what it says and what it means," Willingham said. "I don't blame Cooper Industries for challenging the language in the act. We just think they are not correct."

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