Request By:
Mr. Thomas M. Weddle, Jr.
Casey County Attorney
Courthouse - Box 634
Liberty, Kentucky 42539
Opinion
Opinion By: David L. Armstrong, Attorney General; Nathan Goldman, Assistant Attorney General
In your letter of February 24, 1987 you ask the following questions pertaining to county taxes:
"What kinds of taxes may a fiscal court in a county with a population of less than 30,000 levy? "
This office has opined in the past that Section 181 of the Kentucky Constitution limits counties to two types of taxes - ad valorem property taxes and occupational license taxes. OAG 73-246, 74-348, 74-427, 76-623, 79-385, 84-116 and 85-84. In Driver v. Sawyer, Ky., 392 S.W.2d 52 (1965) the court stated that the two above-mentioned taxes were the only kinds of taxes that a county may levy. As we said in OAG 72-318, ". . . a county may tax only what the General Assembly permits it to tax as an implementation of the Constitution." Thus, a county may levy only ad valorem and occupational license taxes.
"Is a motor vehicle license tax for general revenue purposes constitutionally permissible, and, if not, for what purposes may a motor vehicle license tax be levied?"
We assume you are referring to a tax on the vehicle itself, as opposed to the occupation of operating a vehicle.
The courts have previously addressed this and related issues. A review of those cases would be appropriate.
In Bowser v. Thompson, 103 Ky. 331, 45 S.W. 73 (1898) the court held that a license fee on vehicles may be imposed under the police power, which, in this case, was understood to be the regulation of the use of the streets.
In City of Henderson v. Lockett, 157 Ky. 366, 163 S.W. 199 (1914) the city had a motor vehicle sticker ordinance. The court held that if the ordinance could be construed as a revenue measure (that is, a tax), it would be unconstitutional since it was not provided for in Section 181 of the Kentucky Constitution or elsewhere. However, the court construed it as a fee levied under the police power (that is, a regulatory measure) . As to the amount of the fee the court stated:
"But, where a license fee is imposed under the police power, the fee exacted must not be so large as to charge the ordinance with the imputation of a revenue-producing purpose. The fee that may be imposed under the police power is one that is sufficient only to compensate the municipality for issuing the license and for exercising a supervision regulation over the subjects thereof. Anything in addition to this amounts to a tax for revenue, and cannot be upheld as a valid exercise of the police power. What is a reasonable fee is a question of fact, depending upon the particular circumstances, the cost of issuing the license certificate, together with the cost of registering, supervising, and keeping in control the subjects of the license, taking into consideration the area of the city, population, conditions of public travel, etc." 163 S.W. at 201.
In Daily v. City of Owensboro, 257 Ky. 281, 77 S.W.2d 939 (1934) the city had a sticker fee that was paid into the general fund of the city. The court held that it did not matter where the proceeds of the fee went so long as the fee was reasonable. The fee was imposed under the city's police power. Therefore, the only limit on the fee was that it be reasonable. Reasonableness was a question of fact but could include classifying, licensing, tagging and supervising the vehicles and their drivers. Similarly, in Johnson v. City of Paducah, 285 Ky. 294, 147 S.W.2d 721 (1941) the court held that the reasonableness of such a fee is presumed until evidence to the contrary is shown.
In Hertz Drivurself Stations v. City of Louisville, 294 Ky. 568, 172 S.W.2d 207 (1943) the court held that a sticker fee could produce funds in excess of those required to regulate traffic so long as the fees collected bore some reasonable relation to such expense.
In Roe v. Commonwealth, Ky., 405 S.W.2d 25 (1966) the court held that a fee imposed under the police power must not be so large as to create a revenue measure. It must be sufficient only to meet the expense of issuing the license and supervising any necessary regulatory measure.
Along those lines, the court in Blue Coach Lines v. Lewis, 220 Ky. 116, 294 S.W. 1080, 1082 (1927) stated:
". . . the authority to regulate . . . under the police power carries with it the additional right to assess and collect fees, which, in the aggregate, are sufficient to defray the necessary administrative expenses in enforcing the statute, and also a sum sufficient to repair any special injuries attributable to and produced by the activities of the thing regulated . . ."
And finally, in City of Mayfield v. Carter Hardware Co., 192 Ky. 381, 233 S.W. 789, 790 (1921) the court stated:
". . . if, in fixing the fee, a slight mistake is made in calculating the cost of administration, and the fee fixed too high, this alone will not invalidate the ordinance, if the surplus fund after the payment of all reasonable charges is not so great as to manifest a purpose on the part of the legislative body levying the same to make the ordinance a revenue-producing measure. The modern trend of judicial opinion in this country is to uphold license ordinances, even though they produce revenues in excess of the amount required for a judicious administration of the act, if such excess if small and plainly results from a miscalculation of the amount necessary to be raised or the amount that will result from such license. "
It appears from the above cases that a local government may impose a motor vehicle license fee (or sticker fee) pursuant to its police power. The fee charged must bear a reasonable relationship to the administrative cost of the regulatory power. Whether a fee is reasonable or not is a question of fact. Any excess over the administrative cost will not invalidate the fee provided that the excess is not so great as to make the fee into a revenue measure.
This has been the opinion of this office in the past. See, OAG 72-318, 73-526, 73-827, 74-340, 74-346, 76-597 and 83-25. In OAG 72-318 we opined, inter alia, that the sticker fee proceeds could not be used to fund a mass transit authority. In OAG 83-25 we opined, inter alia, that the sticker fee "must only be sufficient for classifying, licensing, tagging and supervising vehicles and their drivers in connection with the sticker tax ordinance. That would involve the use of a county police force. However, the tax cannot be created merely to fund a county police force."
In OAG 82-601 we reached the same conclusion as we had in our previous opinions except for one statement. After stating that the proceeds from a sticker tax could not exceed the amount of revenue reasonably necessary to fund the administrative cost of the regulatory power, we stated: "There is nothing to prohibit the use of the revenue for ambulance service purposes." This statement appears to be inconsistent with our previous opinions and the court cases. OAG 83-25 was an attempt to explain OAG 82-601 and did specifically state that the proceeds from a sticker tax could not be used to fund an ambulance service. To the extent OAG 83-25 has not already done so, we hereby modify OAG 82-601 to delete the above-quoted sentence. The excess proceeds from a vehicle license fee can be used for any county purpose. However, if the excess proceeds are too great, the entire sticker fee may be invalid.
In conclusion, we believe that a county may impose a motor vehicle license fee pursuant to its police power. The fee charged must bear a reasonable relationship to the administrative costs of the regulatory power. Reasonableness is a question of fact. However, excess proceeds will not necessarily invalidate the sticker fee provided the excess is not so great as to make the fee into a revenue-producing measure.