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City agrees to settlement in sales tax suit
By Peggy Blackburn
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An agreement approved Monday night by the majority of the Wetumpka City Council was a bitter pill to swallow for District 1 Councilman Ken Hammock, the only member of the panel who voted against the measure. The settlement agreement and release ends a multi-year court battle between the city and Russell Petroleum concerning remittance of sales taxes collected at the company’s Petro Plus gas station located on U.S. Highway 231.
“This sets a bad precedent,” said Hammock. “It sends a message to other businesses that they can come into our city, collect sales taxes from the taxpayers and then not have to turn them all over to the city.
“And it’s not fair to all of our businesses that have always done things correctly -- a lot of them for more than 50 years,” he said. “I don’t like it and I think it’s a disservice to our businesses and citizens.”
District 3 Councilman Kevin Walker, who made the motion to approve the agreement, said he doesn’t like the situation either.
“This is definitely something we don’t like, but it’s been an ongoing thing and it’s time to put it to rest,” said Walker.
The history of disagreement between the city and Russell Petroleum dates back several years. The station, built in 1999, became part of the city’s police jurisdiction in 2000 after an annexation on Wetumpka’s southern -border.
Petro Plus was officially taken into the city limits with a bill passed May 18, 2001 by the Alabama Leg-islature which annexed the property into Wetumpka. Company officials denied that the station was first in the city’s police jurisdiction and later in the corporate limits.
Within the city limits, a three-cent sales tax and a one-cent per gallon gasoline tax is in effect. Taxes that should be collected and remitted within the police jurisdiction are half of that amount “ one-and-a-half cents in sales tax, and a one-half cent per gallon gas tax.
The store collected tax levies despite the company’s assertion that they were not lawfully in either the city limits or police jurisdiction. And although taxes were collected from consumers, the revenues were not voluntarily for-warded to the city.
The city council first took action in 2002 in a suit charging that the business had never purchased a business license, or remitted sales or gasoline taxes. Russell Petro-leum filed a counterclaim.
In September 2003, the local court found for the city, and ordered the two parties to work together to determine fees and taxes owed by the business. Then in late December 2003, the Alabama Department of Revenue enforced a $19,534.89 garnishment on the company.
By March 2004, Russell Petroleum contested the city’s right to collect sales taxes on retail transactions.
In August 2004, the city received a second judgment that ordered the company to remit fees and taxes. But Russell filed an appeal of the trial court’s verdict.
The Supreme Court decision was finally sent down in June 2007. Justice Mike Bolin said the property had been legally annexed into the city, and ordered the business to pay license fees and gasoline taxes. But the judgment ordering Russell to remit sales taxes was reversed, and remanded to a trial court for further action.
In August 2007, after the city council refused to issue a retail beer license to the store in July, a company official attended the meeting and asked the council to reconsider its decision. On the advice of Keith Howard, city attorney, the council voted to approve the license.
At that time, Russell Petroleum attorney Doyle Fuller offered an agreement to settle a portion of the debt. The company agreed to pay business license fees, penalties and interest due, along with back fuel taxes. The total of those items amounted to $99,728.50 that was paid to the city.
The two attorneys were supposed to meet within a week to resolve the sales tax issue, since the settlement did not include remittance of overdue sales tax receipts or interest. But an agreement wasn’t officially presented to council members until recently.
In accordance with the settlement approved by the council, Russell Petroleum will pay the city $25,000 in unremitted sales taxes for the period from 1999 to 2007. Hammock said he doesn’t believe that figure reflects the amount that was collected during that time.
“I think it was more than that -- much, much more,” he said.
According to City Clerk Janice Whorton, the business has paid its business license fees and remitted fuel and sales taxes since summer 2007.
In other council business:
•A decision on whether or not to proceed with a project that would replace some downtown sidewalks was postponed until the next council meeting. The low bid for the project, which includes new walks on one side of Company Street and one side of Hill Street, along with a handicap accessible path from the riverwalk to the park restrooms, totaled $250,775.80.
District 4 Councilman Robert Hankins said he would prefer that the decision be made by the new administration after it takes office.
“There’s $1 million in the reserve fund, and I don’t think it would be right for us to obligate 25 percent of their reserve for this budget year,” he said.
Mayor Jo Glenn said she is concerned about repairing trip hazards and providing better access between the riverwalk and restrooms.
“The basic reason we started this was to fix trip hazards,” she said. “We’ve been working on it for months and I would love to see us go forward.”
District 5 Councilman Chick McConnell suggested that the council determine if the low bidder is willing to extend the effective date of the bid by 15 days.
“That would let the new people coming in make the decision,” he said.
•Three contracts up for renewal were extended on a month-to-month basis until the new council takes action. Those include agreements with the Wetumpka Area Chamber of Commerce, Airport FBO Manager Brett Curenton and Head Start for electric bill payment.
•A special meeting to canvass Tuesday’s election results was set for Oct. 14 at 11:30 a.m.
