Request By:
William C. Wessell, Esquire
OAKLEY & ANDERSON
111 Church Street
Lexington, KY 40507
Opinion
Opinion By: Steven L. Beshear, Attorney General; Reid C. James, Assistant Attorney General
This is in response to your recent request for an opinion of this office on behalf of your client, the Morgan County Fiscal Court. Your questions relate to Kentucky's Alcoholic Beverage Control laws, and are:
1) May the fiscal court levy an inventory tax on alcoholic beverage inventories under the authority it is granted by KRS 68.246, AND
2) May the fiscal court adopt ordinances which are stricter than the Alcoholic Beverage Control Board regulations to regulate the nature of the premises from which alcoholic beverages are to be sold?
In response to your first inquiry it is our opinion that the fiscal court may levy a tax on alcoholic beverage inventories. The 1980 General Assembly enacted KRS 68.246 which grants county fiscal courts the authority to levy a tax on business inventories. Such a tax is limited to a rate equal to or less than the prevailing rate of taxation on other tangible personal property in the respective counties. A new provision added to KRS Chapter 132 grants the same authority to cities and urban county governments.
It is understood that the tax proposed by the Morgan County Fiscal Court would be levied only on alcoholic beverage inventories thereby giving rise to possible equal protection arguments. The statute itself does not prohibit the fiscal court from levying a tax on specific types of business inventories as opposed to others. Such a differentiation does not generally fail constitutionally if there exists a rational basis for the difference, and the tax is not excessive, arbitrary, or prohibitive.
Baker v. City of Corbin, Ky.App., 556 S.W.2d 449 (1977);
Hartman v. City of Louisville, 282 Ky. 487, 138 S.W.2d 948 (1940).
A tax on a particular type of activity is justified if it bears a fair and substantial relationship to the object of the tax.
Second Street Properties v. Fiscal Court of Jefferson County, Ky., 445 S.W.2d 709 (1969). Should prohibition be defeated in Morgan County's local option election the proposed tax would be levied upon a new activity. The alcoholic beverage business by its nature adds to a county's expenses for regulation and increased law enforcement. It is a closely regulated activity, and because of its special character has been treated specially by courts in the past. See
George Wiedemann Brewing Company v. City of Newport, Ky., 321 S.W.2d 404 (1959). We therefore feel such a tax could be levied.
In your second inquiry you ask whether the fiscal court may adopt ordinances which are stricter than the regulations of the state Alcoholic Beverage Control Board to regulate the nature of the premises from which alcoholic beverages are sold. Generally we would respond affirmatively. Specifically you refer to an ordinance which would prohibit taverns, roadhouses, or any other licensed business establishments in Morgan County from permitting both the sale and consumption of alcoholic beverages on licensed premises. We are of the opinion that the fiscal court may enact and enforce such an ordinance in Morgan County.
KRS 243.020(3) provides that no person shall permit another to drink distilled spirits or wine on his business premises unless he has a license to sell such beverages by the drink. A license to sell distilled spirits and wine by the drink may only be issued for businesses located within counties containing cities of the first three classes having an adequate police force, or in a city of the fourth class which conducts a special local option election on this question and also possess an adequate police force. KRS 243.230(1) and (2). Morgan County contains no cities of the first four classes. KRS 81.010.
While the drinking of distilled spirits and wine on licensed business premises is therefore a moot question in Morgan County, a malt beverage retailer's license does not prohibit consumption of beer on premises licensed to sell malt beverages, nor does any other state statute. Typically the decision as to whether malt beverages may be consumed on such premises is left to the licensee. However in