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Show PAGE WEDNESDAY, JULY THE DAILY RECORD FOUR 14, 1971 Attorney General Opinion OPINION NO. Question makes a concession to county and fact is a privilege designed for 1 For many years the problem of local government financing for counties, cities and towns within the State of Utah has been at a critical stage. The problem is even more acute in the larger metropolitan areas of the state, and, allegedly, the situation continues to deteriorate each fiscal year. The problem continues to get worse because of factors such as decreasing populations within decreasing property valuations as properties get while at the same time the demands are older steadily growing for increased and improved municipal services for the business communities. city limits and and more run-do- wn, help alleviate this problem, in 1959, the Legislature passed the Uniform Local Sales and Use Tax Law of Utah, which permits counties, cities and towns to levy local sales and use taxes of one percent (12), even though the sales and use of one-hTo alf tax had, up to that time, been traditionally reserved solely as a state source of revenue. The local portion of the sales and use tax is collected by the Uah State Tax Commission, along with the state's portion of those taxes, and the Tax Commission must transmit the local portion to the county or municipality in which the sale occurred. sale was consummated (Section The a presumption that the at the place of business of the retailer et seq., 11-9- -1 act also creates Utah Code Annotated 1953). Although the enactment of the Uniform Local Sales and Use Tax Law of Utah afforded some temporary relief to the municipalities and counties, their financial situation is apparently again at a critical point, and the Utah Legislature is being urged to authorize counties and municipalities to levy an additional one-h- alf of one percent local sales and use tax. (12) The letter to this office from the Utah Legislative Council, requesting this opinion, stated that "the Ad Hoc Legislative Committee on Local Government Finance passed the following motion: That the Committee favors a county option cent with a referendum sales tax of one-hbe based on point of sale tax the that clause; and within a county distribution that by county; be on a population basis to cities, towns and county (unincorporated area) ; and that a direcalf tive be included to require counties to distribute the tax." This office understands that if such a bill were passed, the sales and use tax would be collected by the State Tax Commission and distributed to the county in which the sale occurred, and the county would then distribute a portion of the local sales and use tax to the incorporated areas within the county based on their proportion of the county population, rather than based on the point of consummation of the sale. That method of distribution is the only portion of the Committee's resolution which is in question in this opinion, and whether or not the increase was approved by a referendum would not have any effect on this opinion, because if the method of distribution is constitutional, a referendum would not be needed, and if it is unconstitutional, then a referendum would not save it. primary constitutional provision in determining the answer to this question is Article XIII, Section 5, of the ConstThe itution of the State of Utah, which provides as follows: The Legislature shall, not impose taxes for the purpose of any county, city, town or other municipal corporation, but may, by law, vest in the corporate authorities thereof, respectively, the power to assess and collect taxes for all purposes of such corporation. It is this provision which gives the legislature the enabling power to give counties, cities and towns the right to impose taxes, including local sales and use taxes, and any authorization from the legislature for the imposition of additional local sales and use taxes must comply with that constitutional provision. In the case of Merkley v. State Tax Commission. 11 U.2d 336, 358 P.2d 991 (1961) , the Utah Supreme Court, in a decision written by Justice Henriod, held that the Uniform Local Sales and Use Tax Law did not violate Article XIII, Section 5, of the Utah Constitution. In upholding the law, the court placed strong on the provisions of the act which granted to the local emphasis of the privileges; permitted the local governlegislature to impose the taxes; placed the responsibility on the state for only the collection of the taxes; but did not give the state any right to interfere with the prerogatives of the local authorities. The wording of the court was as municipalities all ment and not the follows: Rather than being an interference with local government, or an imposition of any tax for the purposes of such local government, it actually extends a privilege to and allows the local government, not the legislature, to impose the tax. The court continued: ... it is legislative authority obvious from the act that no over cities is granted to nor such is any counties, authority delegated to the tax commission. The legislation grants to counties the right to levy taxes for their purposes, with a correlative power in the cities to do likewise. In both cases the act own 1-- 016 city that in. the benefit (Emphasis added) of each. Court, in that case, clearly implies that the legislature should not interfere with the taxing powers of counties, cities or towns, nor should they attempt to "keep strings attached" once they have granted a taxing power to municipal governments. The court also implied that counties should not be given taxing powers of cities and towns, legislative authority over the nor should counties be able to "keep strings attached" to the taxing powers of cities and towns. In view of the decision of the Utah once the legislaSupreme Court, interpreting the Utah Constitution, ture has given municipalities the right to impose taxes, all powers vested in the corporate authorities of relating to those taxes are and any attempt at controlling or attachthe municipal governments, of ing strings to those taxes would cause the act to be in violation Article XIII, Section 5, of the Constitution of the State of Utah. The Utah Supreme This opinion is consistent with previous opinions issued this office under previous Attorneys General. In 1959, former the Utah Attorney General E. R. Callister, now the Chief Justice of held that if No. That issued opinion 5021. Opinion Supreme Court, from sales tax rethen on sales which occur within its geographical limits, but quired the county to allocate or appropriate a portion ofon the sales propotax revenues to municipalities within the county, based a with rtionate shares of the county population, proportionate share being retained by the county, such an act would be in violation of Article XIII, Section 5, of the Constitution of the State of Utah. Some of the language of that opinion, after citing the constitutional provision, is as follows: a bill was enacted, which empowered a county to impose a interpret the foregoing authorization to that a county may be empowered to assess and collect taxes for all purposes of the county, a city may be empowered to assess and iollect taxes We mean all a town may be purposes of the city, empowered to assess and collect taxes for all purposes of the town. The implied restriction is that a county may not be empowered to assess and collect taxes for the purposes of a city or town, nor the city or town for county purposes. Therefore, an enactment, which in effect would grant a county power to assess and collect 'taxes, and subsequently allocate a portion thereof for municipal purposes, would contravene the provisions of Article XIII, Section 5. for That opinion concluded: In any event, the Legislature has power to vest in the authorities of the county the power to assess and collect taxes for the purposes of such county only, which, by implication, ibits the Legislature from vesting in the prohcorporate authorities of a county the power to assess and collect taxes for the purposes of a city, town or other municipal corporation. In 1961, former Utah General Walter L. Budge Attorney issued Opinion No. which responded to a question almost identical with the question presented for this opinion. That opinion held that the present Uniform Local Sales and Use Tax Law could not constitutionally be amended to have the State Tax Commission transmit the collected revenues to the county in which the taxes were collected and then require the county to distribute those funds to the municipalities in the proportion in which the popula-io- n of the municipality and the county bore to collected in the county. The reasoning of that opinion wastheas taxes follows: 61-0- 17, to take the taxes high revenue r - MiuwiiuiiiGiii. imposed on areas where is obtained WUUW JJC relatively and distribute same to areas where relatively low revenue is the obtained, in other words, the areas which are bearing the heavies burdens of the tax would not be receiving the relative benefits. have the upon one The proposed amendment would effect of the Legislature imposing a tax area for the benefit of another area. This is obviously contrary to the letter and of the first part of Article XIII, Section spirit 5, of the Constitution quoted above. The first part of this Constitution is sn injunction agsinst legislative interference in the affairs of counties, cities and towns by the means of taxation. Fur as stated in Arnold v. Hopkins, et al., 203 Cal. 503, 265 P. 223; ther-mor- ifc 18 a sound principle of taxation, and one wholly in accord with the fundamental maxims of popular government, which prescribes that, in so far as the practicable, benefits of taxation should be directly received by thoso who are most concerned in bearing the directly burdens of taxation." In Prescott, et v. tion of Hardee County,al., et al So. 2d 731, it is said: Board of Public Fla. Instruc-15- 9 663, 32 It is a general rule of law that state taxes must be expended for state purposes; that county taxes must bo expended for purposes of the county; that district taxes must bo J.or purposes of the district; and that ex-pci.- JoJ ContinuH |