Local Sales, Use and Transaction Taxes
Will Yancey, PhD, CPA
Office phone 734.744.4400
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an endorsement or assertion about the usefulness of the information
provided. These local taxes include sales, use, transaction
privilege, municipal utility, local gross receipts, business privilege
tax, and business license taxes based on revenue.
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General Directories on Local Taxes
Court Cases on Local Taxing Jurisdictions' Authority to Tax
Following are citations to a few cases that have implications for local
governments' authority to assess local taxes based on sales, use,
gross receipts, or business occupation. Some of these cases are also
cited in the page on Tax Class Action Litigation .
- AB Cellular-LA, LLC doing business as AT & T Wireless and
Los Angeles SMSA Limited Partnership doing business as Verizon Wireless v. City of Los Angeles,
No. B185373, California Appeals, Second Appellate District, May 9, 2007).
Appealed from Superior Court of Los Angeles County.
The carriers sued the City of Los Angeles for imposing a city tax on wireless service without obtaining voter approval as required by
California's Proposition 218. The appellate court ruled in favor of the carriers and held that the city's tax is unconstitutional.
- AB Cellular-LA, LLC v. City of Los Angeles, 2003 Cal. App. Unpub. LEXIS 5502, 2003 WL 21290906,
CCH-STATE-CASE-APP-CT, CA-TAXRPTR, ¶403-470, (Cal. Appeals -
2nd District, unpublished, June 5, 2003). AB Cellular,
doing business as AT&T Wireless, asserted it could not
accurately collect a City tax on cellular telephone customers because
the City did not provide an adequate address database of customers
residing in the City. Cellular provided specific evidence of how
it repeatedly attempted to get an accurate database from the
City. City auditor determined assessment by sampling 6,500 bills
from one billing cycle within one month of audit period. Trial
court ruled in favor of the city. Appellate court overturned and
ruled in favor of the taxpayer because of the City's failure to provide
an adequate address database. [Note: Subsequently the City
of Los Angeles did publish an address database.]
- Associated Industries of
Missouri and Alumax Foils, Inc. v. Lohman, Director of Revenue of
Missouri, 114 S. Ct. 1815, No. 93-397,
(US Supreme Court, 1994). Court held that Missouri local use tax
violated Commerce Clause of the US Constitution because interstate
purchases were taxed more heavily than intrastate purchases.
- Cable & Wireless
Communications, Inc. v. D.C.; American Telephone & Telegraph
Company, AT&T Communications of D.C., Inc. v. D.C.; U.S. Sprint
Communications Company Limited Partnership v. D.C.; ITT Communications
Services, Inc. v. D.C.; Contel Office Communications, Inc. v. D.C.;
Cable & Wireless Communications, Inc. v. D.C.; Allnet
Communications Service, Inc. v. D.C.; Long Distance Service of
Washington, Inc. v. D.C, Nos. 4091-88, 4092-88, 4348-89,
4349-89, 4363-90, 4650-90, 4693-91, 5000-91, CCH-STATE-CASE-TRL-CT,
DC-TAXRPTR, ¶200-494, (Superior Court of the District of Columbia,
Tax Division, February 18, 1992). Gross receipts tax imposed on
telecommunications companies was constitutional and valid. This tax did not violate
the Commerce Clause of the United States Constitution based on the
four-prong test established in Complete Auto Transit, Inc. v. Brady,
430 U.S. 274 (1977).
- City of Findlay (Ohio) v. Hotels.com, LP, US District Court for the Northern District of Ohio,
Western Division, No. 3:05 CV 7443 (2006). Class action by Ohio cities against several online travel companies for
allegedly underpaying local sales taxes.
- City of Homewood v. Bharat, LLC, d/b/a Howard Johnson's Express Inn, No. 1040712,
(Alabama Supreme Court, September 30, 2005). Held that a local law (Act 2001-546, Sec. 7) capping the total
lodgings tax rate in Jefferson County at 14% violated the Alabama Constitution. Therefore, the trial court erred in invalidating the
city of Homewood general ordinance increasing the City's lodgings tax rate from 3% to 6% (for a total rate of 17%),
on the ground that it violated the local law cap.
- City of Jefferson et al. v. Cingular Wireless et al., No. 04-4099-CV-C-MKL (W.D. Mo. October 17, 2006).
Wireless telecommunications providers refused to collect the sales tax imposed by Missouri cities. The federal district court dismissed the case.
- City of Macon v. Alltel Communications, Inc., Case No. S04Q0128,
(Georgia Supreme Court, May 3, 2004). Court held the city could
not charge a telecommunications fee higher than the Georgia Department
of Transportation right-of-way fee rate. The city had enacted an
ordinance on increasing the $-per-foot fee for using the city's
- City of Modesto v. National Med, Inc., Case No.
292944, (Stanislaus Superior Court, October 21, 2002). Held that
Modesto’s business license tax was unconstitutional because it did not
apportion for receipts generated outside the city. Specifically,
it held that Modesto’s tax was not externally consistent because it
purports to tax all of a taxpayer’s gross receipts. Held that
Modesto’s August 2002 amendments did not cure the tax’s constitutional
infirmities because they were nothing more than a promise to adopt
specific apportionment language at some unknown future date.
- City of Springfield v. Sprint Spectrum, No. SC87238;
City of St. Louis v. Sprint Spectrum, No. SC87400,
(Supreme Court of Missouri en banc, August 8, 2006).
Court held the cities' gross receipts business license tax on wireless service did not meet the statutory requirements.
- City of University City et al v. AT&T Wireless et al., Case No. 01CC-004454, (St Louis
County (Missouri) Circuit Court Division 10, original petition filed
January 8, 2002). Plaintiff class action by 22 Missouri cities against
18 wireless companies doing business in Missouri. Plaintiffs are
seeking to collect local business or occupation license taxes based on gross receipts for wireless
services. Plaintiffs sought declaratory and injunctive relief and an accounting.
- In 2005, Missouri enacted HB 209 to limit class actions by cities regarding business taxes against telecommunications companies.
- City of Webster and the Webster Economic Development Corporation v. Strayhorn,
Cause Number: D-1-GV-06-001823, (261st Judicial District Court of Travis County, Texas, filed September 15, 2006).
The RoomStore operates retail stores in several cities in Texas. The orders are accepted at the
company's warehouse in Grand Prairie. The Comptroller determined that local sales tax should be reallocated from
the cities with the retail stores to Grand Prairie. The City of Webster, several other cities, and transit authorities sued the
- Dean Taylor Cadillac-Olds, Inc., et al. v. Mary Thompson, Collector, et al, 871 SW2d
5, CCH-STATE-CASE-APP-CT, MO-TAXRPTR, ¶201-696, (Missouri Court of
Appeals, Eastern District, No. 62493, December 7, 1993). A
municipal ordinance that taxed various businesses,
including automobile dealers, a percentage of their annual gross
receipts for the privilege of conducting business within the city's
limits while charging others a flat rate was held to be constitutional.
- Ford Motor Company v. City of Seattle and City of Tacoma,
Docket No. 77167-7,
(Washington State Supreme Court, April 12, 2007).
Ford Motor Company challenges the validity of Business & Occupation (B & O) taxes it
paid to the Cities of Seattle and Tacoma. The court ruled 5 to 4 against Ford. Ford intends to appeal.
See dissenting opinion.
- General Motors Corporation
v. City of Seattle, Finance Department and City of Seattle, Office of
the Examiner; Chrysler Corporation v. City of Seattle, Finance
Department and City of Seattle, Office of the Examiner, 105
Wa. App. 1011 , 2001 Wash. App. LEXIS 1687 Nos. 46152-4-I, 47562-2-I,
and 47561-4-I, CCH-STATE-CASE-APP-CT, WA-TAXRPTR, ¶202-322
(Washington Court of Appeals, Division I, May 7, 2001). Two automakers were
subject to a Washington city's business and occupation tax on the gross
receipts of their wholesale auto sales to city dealers because their
in-city marketing and other business activities
were sufficient to create substantial nexus. The Washington court
reviewed various US Supreme Court cases and held the automakers had
not proved the tax violated the federal constitution, not
proved they were subject to multiple taxation, and not shown that
the tax failed the external consistency test.
- Kirkwood Glass Co. Inc. v.
Director of Revenue, No. 03-1359 RS, (Missouri Administrative
Hearing Commission, September 24, 2004), on appeal to Missouri Supreme
Court. Taxpayer requested a local use tax refund on the basis
that Missouri cities could impose more use tax on interstate than
intrastate purchases. Commission held against the taxpayer.
This case is an extension of the issues in Associated Industries of Missouri v.
Lohman, cited above.
- Larrieu et al v. Wal-mart
Stores et al, No. 2003 CA 0600, 2004 WL 324962,
Larrieu et al v. Terrebone
Parish et al, No. 2003 CA 0943,
(Louisiana Appeals Court, First Circuit, February 23,
2004). Plaintiff class action suit alleged that Wal-mart
and other retailers collected too much state and local sales tax on
pre-paid telephone calling cards. Court dismissed the case
and held the plaintiffs failed to exhaust their administrative
remedies before filing this suit.
- Northwood Construction Co. v. Township of Upper Moreland, J-121-2003, No. 12 M. D. Appeal
Docket 2003, 2004 Pa. LEXIS 2055,
(Pa. Supreme Court, Middle District, September 2, 2004). Held
that a municipal business privilege tax ("BPT") was unconstitutional
because it failed to apportion the taxpayer's interstate revenues.
- Portland v. Qwest,
Docket 02-35473, (US Court of Appeals for the Ninth Circuit, October 12, 2004).
Cert. denied by US Supreme Court, May 23, 2005.
Held the federal Telecommunications Act, 47 USC 253(a), may overrride local utility taxes and regulations on providing telecommunications service.
- The Lamar Co., LLC v. the
Unified Government of Wyandotte County/Kansas City, Kansas, No.
03-2213-JWL, (US District Court, D. Kansas, March 4, 2004).
County government enacted an occupation tax on advertising
billboards. Plaintiffs sued in federal court alleging the tax was
unconstitutional. US District Court ruled federal courts did not
have subject matter jurisdiction because of the federal Tax Injunction
Act, 28 USC section 1341.
Publishers of Local Tax Software and Print Products
Links on geocoding and postal maps are at willyancey.com/finding.htm#maps-geocoding
Links on sales and use tax software are at willyancey.com/tax_sales.htm#publishers
Tax Audit Contractors
These contractors work for federal, state, and local government tax authorities on tax audits, enforcement, or collections.
- Affiliated Computer Services, Inc. (ACS)
- Azavar Audit Solutions, Inc. - Municipal Utility Tax Audit Program ...managed by Jason Perry, affiliated with Azavar Technologies
- Broussard Partners & Associates ...subsidiary of Portfolio Recovery Associates
- CBE Group
- Chainbridge, Inc.
- HdL Companies ...formerly known as Hinderliter, de Llamas and Associates
- Linebarger Goggan Blair & Sampson, LLP
- MuniServices, LLC ...subsidiary of Portfolio Recovery Associates
- Municipal Resource Consultants (MRC) ...California firm acquired by MuniServices
- Municipal Tax Bureau ...Pennsylvania firm acquired by MuniServices
- Paces Associates ...Georgia firm acquired by MuniServices
- Multistate Tax Commission
- Municipal Auditing Services, LLC (MAS)
- Municipal Revenue Advisors (MRA)
- Municipal Revenue Counselors (MRC)
- Municipal Revenue Services (MRS)
- Municipal Services Bureau (MSB)
- Outsourcing Solutions Inc. (OSI)
- Pioneer Credit Recovery, Inc. ...affiliated with SLM Corporation
- Public Consulting Group
- Revenue Discovery Systems (RDS) ...fomerly known as Alatax, Inc.,
acquired by Portfolio Recovery Associates
- Revenue Recovery Group, Inc. ...founded by King Woolf
- Revenue Solutions, Inc. (RSI)
- RiverTree Systems ...founded by Joe Trobaugh
- Tax Management Associates, Inc.
Specific State and City Links
Following are links to some web sites selected from the thousands of
web sites that have something to do with local transaction taxes.
- City of Boulder Revenue / Sales Tax Division
- City of Brighton sales tax information
- City of Colorado Springs Sales Tax Division
- City of Denver Department of Revenue
- City of Englewood Finance and Administrative Services, Revenue and Budget Division
- City of Fort Collins, Sales Tax
- City of Pueblo sales tax information
- Colorado Association of Commerce & Industry (CASI) ...state chamber of commerce
- Colorado Association of Municipal Tax Auditors (CAMTA)
- Colorado Counties, Inc. (CCI)
- Colorado Municipal League
- Oreck, Crighton, Adams & Chase LLC ...a law firm representing taxpayers in Louisiana and Colorado
- Oreck, Bruce J., and Chase, Adam W., Colorado Sales & Use Taxation: The Complete State and Local Reference, (State Tax Press 2003).
- New York
- North Carolina
- North Dakota
- South Dakota
- Washington State