TO BE PUBLISHED

















OAG 93-17


February 23, 1993






Hon. Doris Barnett

County Judge/Executive

Magoffin County

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 subdivisions."



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 county.

Sincerely,

CHRIS GORMAN

ATTORNEY GENERAL





Gerard R. Gerhard

Assistant Attorney General

(502) 564-7600

GRG:par

Enclosures