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Bristol, Kingsport reclaim liquor-by-the-drink tax revenues

Gary B. Gray • Feb 9, 2016 at 7:08 PM

A suit by Sullivan County and the Sullivan County Board of Education seeking about $2 million in liquor-by-the-drink tax revenues from Bristol and Kingsport has been dismissed.

A final order filed Feb. 2 in Second Judicial District Chancery Court in Bristol by First Judicial District Chancellor John Rambo nullifies Sullivan County’s claim. The order awards Bristol roughly $1.3 million and Kingsport nearly $760,000 collected from 1980 through 2013.

Rambo said in the order he found no ambiguity in state law T.C.A. 57-4-306, which was amended in 1982 following the Tennessee Attorney General’s opinion. Rambo cited two main points of clarity.

First, he found the intent of the law to mean municipalities without school systems should contribute a percentage of tax proceeds to county schools. However, Bristol, Kingsport — and Johnson City, which also is involved in a similar suit with Washington County — have their own school systems.

“What is significant is the (state) Senate and the House understanding and adoption of part of the Attorney General’s reasoning related to remittance to the county when a municipality did not operate a school system,” Rambo wrote in his opinion.

Second, he found the law to be clear that funds from liquor-by-the-drink taxes should go to “political subdivisions” that have passed referendums. The aforementioned municipalities have held and passed referendums: Bristol and Kingsport in 1984; Johnson City in 1980.

Neither Sullivan nor Washington Counties have passed referendums.

Rambo explained that the statute “made no provision to reserve or disturb the understanding of the law as written and interpreted by the Attorney General as not requiring the municipality to share its share of liquor-by-the-drink tax proceeds with the local County.” 

He also states that based on either the “plain language” or “legislative history” of the statute, the county school fund is not entitled to any portion of tax proceeds collected by the cities.

Sullivan County and the Sullivan County Board of Education brought suit in May 2014. Both the Bristol and Kingsport cases were consolidated in September. James F. Goodwin, the presiding Second Judicial District Chancery Court judge, deferred the case to Rambo.

“The court order reflects the complexity of the issues in this liquor-by-the-drink litigation,” said attorney Erick Herrin, who is defending Johnson City in its case. “Chancellor Rambo has issued an extraordinarily detailed and thorough opinion in the Sullivan County case.

“I’m sure that Chancellor Moody (Sullivan County Chancellor E.G. Moody), who has the Johnson City-Washington County case, will be interested in the analysis applied both in the Sullivan County case and the Blount County case, where the cities prevailed.”

Washington County and the Washington County Board of Education are seeking $3.4 million for its schools from prior municipal liquor sales tax revenues.

Moody ruled in March that Washington County could join the Board of Education’s suit filed in early 2014. However, no ruling has yet come down the line from Sullivan County Chancery Court about whether the Board of Education has the right to litigate for its share of revenues through the 2013 fiscal year.

A 2014 amendment to state law restricts retroactive claims to liquor-by-the-drink tax revenues prior to 1999 and prohibits the filing of suits before June 1, 2014. The Washington County Board of Education filed one month before this date.

Cleveland attorney James Logan is representing Washington County. He was not immediately available for comment.

Email Gary Gray at [email protected]. Like Gary B. Gray on Facebook at www.facebook.com/garybgrayjcp. Follow him on Twitter @ggrayjcpress.

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