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Sullivan may go after back payment of liquor-by-the-drink tax revenues

May 16th, 2014 7:00 am by J. H. Osborne

Sullivan may go after back payment of liquor-by-the-drink tax revenues

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BLOUNTVILLE — Sullivan County might soon be asking Kingsport and Bristol to come up with some back payments for what could — or could not — be liquor-by-the-drink tax revenues owed to the county's school system for the past 30 years or so.

County Attorney Dan Street suggested county commissioners make themselves familiar with the topic over the next few days.

Street, speaking Thursday at the Sullivan County Commission's work session, told commissioners he will likely address the issue in more detail Monday at the commission's monthly meeting.

Street said Washington County is seeking back payment of such revenue from Johnson City and Jonesborough, and the issue of whether cities have been properly sharing the drink-generated revenue with county school systems has been spreading like wildfire across the state recently.

According to the Johnson City Press, the Washington County Board of Education voted earlier this month to hire Cleveland-based lawyer Jim Logan to negotiate with or take legal action against Jonesborough and Johnson City for $3.4 million the BOE said the county school system should have been paid since the 1980s.

Street said decades-old state law stipulates a 15 percent tax on liquor drinks in restaurants is to be split 50-50 between the state and the city where the tax is collected.

The law further states the 50 percent that comes back to the city is to be split by the city and distributed to school systems based on average daily attendance, Street said.

But several opinions issued by the Tennessee Attorney General over the years have taken the position that cities do not always have to split the money, Street said.

For example, at least one AG's opinion says that if the county in question does not itself have liquor-by-the-drink availability, it is not entitled to share in the revenue.

Sullivan County does not have liquor by the drink outside the cities. And the county has never received any revenue from the tax in question from Kingsport, Bristol or Johnson City, Street said.

Street said he is not necessarily advocating taking the cities to court — and noted that any action might ultimately need to come from the Sullivan County Board of Education — but wants to make the commission aware of the situation, especially after recent action in Nashville.

Street said state lawmakers recently voted to impose a June 1 deadline for any county to mount local challenges regarding nonpayment of the revenues. Afterward all complaints must be filed in Davidson County.

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