TO BE PUBLISHED
Hon. Doris Barnett
P. O. Box 430
Salyersville, Kentucky 41465
Re: Whether County is Obligated to Pay Cost of Taxes
Imposed Upon Utilities That are Passed Through to
County as a Consumer. AGO Corr. No. 93-(O)-132.
Dear Judge Barnett:
By letter of January 25, 1993, you explain that the Magoffin County government
(fiscal court) is being charged a 3% school utility tax on all utilities (telephone, gas,
water and electric) and a 4% City of Salyersville utility tax (which is shown on the
electric bill as a "franchise fee").
You ask whether local units of government are obligated to pay local utility
taxes, and whether Magoffin County is entitled to a refund for school and/or utility
taxes paid over the past few years. We take it that by "local units of government" you
mean a county (or fiscal court).
In our view, in the absence of a constitutional or statutory exemption, Magoffin
County is obligated to pay the cost of taxes imposed on utilities that are passed
through to the county as a consumer. The county is not entitled to a refund of such
taxes that have been previously paid. Discussion follows.
First, while counties are exempt from payment of some types of taxes, there is
no general exemption of counties from the payment of all types of taxes. Section 170 of
the Constitution of Kentucky exempts from property taxes "public property used for
public purposes." Some specific statutes regarding specific taxes provide for an
exemption for counties, or encompassing counties, e.g., KRS 139.470(7), related to sales
tax, and 138.470(1), regarding exemption from motor vehicle usage tax (KRS 138.460)
for motor vehicles sold to the Commonwealth of Kentucky "or any of its political
What you refer to as a "school utility tax" is, from a legal perspective,
presumably a "utility gross receipts license tax" (KRS 160.613). Boards of education of
school districts are authorized to impose such a tax by KRS 160.593 and 160.613.
KRS 160.613, which specifically provides for the utility gross receipts tax,
does not list any exemption which would relieve Magoffin County from the payment
of such tax. We are not aware of any other provision of the statutes, or of a
constitutional provision, which would exempt Magoffin County from payment of the
tax here involved. A similar conclusion is reached in OAG 72-460, and in OAG 76-269
(copies enclosed), both of which we follow here. In those opinions it was noted that
the taxes in question (like those here involved) are upon the utility, the utility merely
passes the cost through to the consumer, and there is no exemption for counties.
You also ask whether Magoffin County is liable for a 4% City of
Salyersville utility tax. You indicate the tax is listed on the county's bill for electric
service as a "franchise fee."
License fees on franchises may be imposed by cities of the second through
sixth classes pursuant to KRS 92.280(2). In the circumstance you cite, the City of
Salyersville has apparently imposed a franchise tax upon utilities, the cost of which is
passed through by the utility to consumers such as Magoffin County. As with the
utility gross receipts tax imposed by the schools, we are not aware of any provision
exempting Magoffin County from paying the cost of the tax as a pass through item on
the county's electric bill. The tax in question is upon the utility, not Magoffin County,
and in any event, no constitutional or statutory provision exempts a county from
payment of such tax. Again, see OAG's 72-460 and 76-269 (copies enclosed).
For the same reasons expressed above, Magoffin County would be liable
for the cost of a tax imposed upon a telephone company as a utility that the telephone
company passes on to the county.
Given the views expressed above, we believe Magoffin County is not
entitled to a refund of amounts paid to utility companies in recent years, for accurately
computed costs of taxes imposed upon the utility, which were passed on to the
Gerard R. Gerhard
Assistant Attorney General