Request By:
Ms. Patsy Judd, Executive Director
Kentucky CATV Association
Box 414
Burkesville, Kentucky 42717
Opinion
Opinion By: Robert F. Stephens, Attorney General; By William S. Riley, Assistant Attorney General
In your recent letter to the Attorney General it is stated that a community antenna television system (CATV), pays annual franchise fees to a city and pays city ad valorem property taxes on the television system's property. They are also liable for occupational license tax enacted by the city under KRS 92.281 and Section 181 of the Kentucky Constitution. Approximately 34 cities in the Commonwealth levy occupational license taxes on the net profits of the television antenna system who also pay franchise fees to the cities for the privilege of operating within their boundaries.
Section 181 of the Kentucky Constitution provides that the General Assembly may by general laws, authorize cities and towns to provide for taxes for municipal purposes on personal property, tangible and intangible, based on income, licenses or franchises.
KRS 92.281 permits cities of all classes to levy and collect any and all taxes within Section 181 of the Kentucky Constitution. Subsection (3) of that statute states that a city cannot authorize any company paying an ad valorem and a franchise tax to pay a license tax.
The question is whether a community antenna television system which pays a franchise fee for the privilege of operating in a city and also pays ad valorem property taxes to the city is required to pay occupational license taxes on such system's net profits.
The television antenna systems in question are not assessed at the state level.
The cases of
City of Pikeville v. United Parcel Service, Inc., Ky. 417 S.W.2d 140 (1967) and
City of Covington v. Cincinnati, Newport and Covington Transportation Company, Ky., 515 S.W.2d 617 (1974) stand for the proposition that a city cannot levy license fees against companies which are paying ad valorem and franchise taxes assessed pursuant to Chapter 136. That chapter makes provisions for allocating and apportioning among local taxing units all assessments made by the Department of Revenue upon property including franchises subject to taxation by such local units.
It is pointed out in
Dickson v. Jefferson County Board of Education, 311 Ky. 781, 225 S.W.2d 672 (1949) that although the distinction between a fee and a tax is one that is not always observed with nicety in judicial decisions, any payment exacted by the state or its municipal subdivisions as a contribution toward the cost of maintaining governmental functions, where the special benefits derived from their performance is merged in the general benefit, is a tax. On the other hand, a fee is generally regarded as a charge for some particular service.
The community television systems are paying a fee for the privilege of performing a service within the cities in which they operate. The basis for the fee is a matter of local determination. It is not a tax. This franchise fee is not the type of charge contemplated under KRS 92.281(3) and there is, therefore, no bar to a city levying a license tax on the net profits of a local community antenna television system operating within the city.