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Judge rules against Sullivan County in liquor by the drink tax lawsuit; county to appeal to higher court

J. H. Osborne • Sep 29, 2016 at 10:15 PM

BLOUNTVILLE — A judge has ordered Sullivan County to pay the cities of Kingsport and Bristol, Tenn. $107,286 and $75,802, respectively, for past liquor-by-the-drink revenue collected over a 30-year period.

The order, issued by Chancellor John C. Rambo, was filed Thursday in chancery court in Bristol.

Sullivan County Attorney Dan Street said he will appeal the decision to the Tennessee Court of Appeals, a move the Sullivan County Commission authorized him to make earlier this year after Rambo dismissed Sullivan County’s lawsuit against the two cities seeking a share of the cities’ liquor-by-the-drink taxes for the 30-year period.

Rambo’s order Thursday was in answer to a “motion to alter or amend” Street filed after that dismissal.

After the county sued the cities, the cities had counter-sued, claiming the county, too, had collected but not shared liquor-by-the-drink tax revenues.

Kingsport originally sought $245,000 plus “equitable prejudgment interest,” while Bristol, Tenn., originally sought $88,000 plus “any equitable prejudgment interest the court may consider appropriate to award.”

The cities, their counter-suits combined by the court, lowered their amounts to the $107,286 and $75,802 in their motion for a summary judgment.

A month after the judge dismissed the county’s lawsuit in February, the Sullivan County Commission voted to fight on with an appeal.

And Street told county commissioners the cities wanted back payment for what the county had not been sharing.

The county commission and the Sullivan County Board of Education filed a lawsuit against Bristol and Kingsport in May of 2014, as similar suits were filed statewide.

Counties across Tennessee began to question and challenge the long-held practice of cities not sharing liquor-by-the-drink tax revenues after Hamilton County complained about the city of Chattanooga not sharing — even though the city had ceased operation of a separate school system years ago.

The tax in question is a state tax of 15 percent charged on every on-premise mixed drink sold in localities with liquor by the drink. The money is sent to Nashville, and the state sends half of it back to the locality where it was generated. The state spends the other half on education statewide, and localities are required to spend their half on schools.

Kingsport and Bristol each approved liquor-by-the-drink referendums in the 1980s. That’s what permits mixed drinks to be sold in licensed businesses inside the cities and the tax revenue in question to be generated.

Sullivan County has not broached the issue of a liquor-by-the-drink referendum to permit such sales and revenues outside the cities.

Street has said the liquor-by-the-drink revenues the county has received and not shared were generated by private clubs in non-city portions of the county, including one at Tri-Cities Regional Airport.

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