COUNTY, CITY JOIN USE-TAX LAWSUIT

Missouri's counties and municipalities may not have to repay use-tax revenues after all.

On Tuesday, 41 cities and counties, including Cape Girardeau County and the city of Cape Girardeau, filed suit against the Missouri Department of Revenue and Janette M. Lohman, director of that department.

Their argument is that local governments should not be required to repay the tax money or the 12 percent interest on those revenues that the state is also demanding.

An injunction, granted the same day the lawsuit was filed, has ordered that the Missouri Department of Revenue be restrained from collecting the money until a hearing can determine whether the money has to be paid back.

Among the plaintiffs are the cities of St. Louis, Springfield, St. Joseph and Kirksville.

In March, the Missouri Supreme Court declared the local portion of the state's use tax unconstitutional. Shortly thereafter, revenue department officials notified local governments that the Department of Revenue would begin withholding disbursements of sales tax revenues until use-tax funds were recouped.

Cape Girardeau County officials, who had set aside the county's use-tax revenues for various projects, were especially incensed by the 12 percent interest tacked onto the total.

"Legally, we don't think it has to be paid back," said Joe Gambill, county commissioner. "We would have paid the money back, but the lawsuit is to stop them from charging interest and to clarify how the money can be paid back."

Gambill said when the Missouri Supreme Court declared the use tax unconstitutional, the court made no reference to refunds or paying the money back.

"I don't think it's a common course of action to collect a refund for taxes that have already been collected," he said.

Larry Bock, another Cape Girardeau county commissioner, calls the demands made by the Department of Revenue "completely unfair."

"I think the Department of Revenue is way off base," he said. "This high rate of interest is crazy. I think they're beyond their jurisdiction."

The Department of Revenue plans to return the collected tax money to those who paid it, mainly out-of-state business people, Bock said.

"The citizens need this money, not some company in Ohio or wherever they may be," he said.

Cape Girardeau County has collected over $800,000 from those purchasing Missouri goods and services from out-of-state, as the use tax required.

The 12 percent interest the revenue department wants would add another $300,000 to Cape Girardeau's bill.

A Department of Revenue spokesman said the department had no comment at this time.

The 30-page lawsuit is based on three issues, said Morley Swingle, Cape Girardeau County prosecuting attorney. Swingle also acts as county counsel.

The lawsuit states that when the Missouri Supreme Court struck down the use tax in March, it fell under the "unexpected decision" statute.

Swingle said that under this law, since city and county governments weren't expecting to pay the money back, they are not responsible for paying back any of the use-tax monies that may have already been budgeted or spent.

The second point of the lawsuit is that it is a general rule when a tax is declared unconstitutional, there is no refund. Specifically, the lawsuit says that the Department of Revenue has no authority to issue refunds for taxes paid.

Finally, the lawsuit maintains that the Department of Revenue's actions are in violation of the Hancock Amendment.

A hearing date is scheduled to be set June 17. Swingle said he expects a decision to be reached by Christmas.