Can Arkansas county sales tax dollars dedicated to detention facilities pay for a district court, and can the county treasurer take a commission on economic-development pass-through funds?

Plain-English summary

A state representative asked two unrelated questions stitched together by a single county's experience. The county had passed a 0.25% sales tax for "operating and maintaining detention facilities and facilities related to or in support of a detention facility," then later built a new district court building that included holding cells. Could it use the detention sales tax to fund the district court? The county had also adopted an economic development sales tax whose proceeds passed through the county treasurer to an economic development corporation. Could the treasurer take a 2% commission on those pass-through funds?

Question 1 (detention sales tax for district court). The AG declined to answer. The question turned on interpreting a local ordinance with reference to all the relevant facts about the ordinance, the building, and the uses of the holding cells. The AG does not act as a fact-finder in written opinions and has long declined to interpret local ordinances under those circumstances. The opinion did flag the controlling legal standard: it is generally the local governing body's responsibility to determine legislatively whether a particular expenditure is within the ballot-designated purpose of a local sales tax, and courts will not disturb that finding unless it is "demonstrably arbitrary and unwarranted" (McAdams v. Henley).

Question 2 (treasurer commission on economic development funds). The AG concluded the treasurer may not collect a commission. Two statutes were in conflict.

Ark. Code Ann. § 21-6-302(a) is the general treasurer-commission statute: county treasurers "shall be required to collect, as a treasurer's commission, two percent (2%) on all funds coming into their hands as treasurers and to be paid out of the respective funds." That statute was enacted in 1941.

Ark. Code Ann. § 14-174-109 deals specifically with economic development sales taxes. It says such taxes "may be used for the sole use and benefit" of an economic development corporation and that on receipt from DFA, the local government "shall deliver all of the proceeds to the corporation to use in carrying out its functions." That statute was enacted in 2005.

When statutes conflict, the more specific and later-enacted statute controls. Section 14-174-109 is both more specific to the context (economic development sales tax pass-throughs) and later (2005 versus 1941). So the treasurer may not collect a commission on those funds.

Currency note

This opinion was issued in 2015. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Background and statutory framework

Local sales taxes in Arkansas are subject to ballot-designated purposes; the ballot defines the proper uses, and ordinances can elaborate. The general McAdams v. Henley standard gives local governing bodies discretion to apply the ballot-designated purpose to specific expenditures, with judicial review limited to whether the finding was "demonstrably arbitrary and unwarranted."

The AG's general reluctance to interpret local ordinances and underlying facts is grounded in the statutory limits of the AG opinion role. The AG does not have fact-finding authority and has long declined to interpret local instruments in this format (Op. Att'y Gen. 2015-005, 94-260).

On the second question, the AG applied two standard tools of statutory construction: where statutes conflict, the more specific governs the general, and the later-enacted governs the earlier. Section 14-174-109 was enacted by Act 1372 of 2005, while § 21-6-302(a) was enacted by Act 78 of 1941. Both factors point the same direction. The economic development statute's "shall deliver all of the proceeds" language is also categorical: the local government must deliver "all" the proceeds to the corporation, leaving no room for an intermediate commission on those pass-through funds.

The opinion does not analyze whether the treasurer's office has any internal cost-recovery mechanism for the administrative work of processing the pass-through. Section 14-174-109(b)'s "all of the proceeds" language leaves that question open if the issue arises in practice.

Common questions

Can the county use its detention-facility sales tax for a district court with holding cells?

The AG declined to answer. That is a question for the local governing body in the first instance, with appellate-style judicial review on a "demonstrably arbitrary and unwarranted" standard.

Can the county treasurer take a 2% commission on economic development sales tax proceeds?

No. Section 14-174-109 requires the local government to deliver "all of the proceeds" to the economic development corporation. The general 2% treasurer-commission statute is overridden by this specific, later-enacted provision.

What about pass-throughs for other dedicated taxes?

The opinion does not address other tax pass-throughs. The analysis is statute-specific: § 14-174-109 was the operative provision. Other dedicated taxes may have different governing statutes, and the same analysis (specific over general; later over earlier) would apply.

Where does the county fit in this process?

DFA collects the economic development sales tax, then remits to the county. The county then must deliver "all of the proceeds" to the economic development corporation. The county is a passthrough rather than a long-term holder.

Citations

• Ark. Code Ann. § 14-174-109(a), (b) (Supp. 2013) (economic development sales taxes paid through to corporation)
• Ark. Code Ann. § 21-6-302(a) (Supp. 2013) (general 2% treasurer commission)
• Act 78 of 1941 (origin of treasurer commission)
• Act 1372 of 2005 (economic development sales tax framework)
• McAdams v. Henley, 169 Ark. 97, 273 S.W. 355 (1925) ("demonstrably arbitrary and unwarranted" standard)
• Op. Att'y Gen. 2015-005, 94-260 (declining to interpret local ordinances)

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

Opinion No. 2015-078
September 10, 2015
STATE OF ARKANSAS
ATTORNEY GENERAL
LESLIE RUTLEDGE
The Honorable Mike Holcomb
State Representative
9108 Sulphur Springs Road
Pine Bluff, AR 71603-0904
Dear Representative Holcomb:
This is in response to your request for an opinion on the use of county sales tax revenues, and on the county treasurer's commission on an economic development sales tax.

Your request states: A county passed a .25% sales tax for the purpose of operating and maintaining detention facilities and facilities related to or in support of a detention facility. That county subsequently enacted an ordinance which states "Detention Facilities" shall include any and all types of facilities, both real and person[al], for the detention and confinement of any criminal, accused defendants, suspected, juvenile detainees or other persons held in lawful custody, and facilities related thereto or in support thereof. Later the county built a new district court, which included holding cells. Since that time, the county has used funds from the aforementioned sales tax to fund district court.

You pose this question relating to the foregoing:

1. Where a county has passed a .25% sales tax for the purpose of operating and maintaining detention facilities and facilities related to or in support of a detention facility, may monies raised from that sales tax be used for district court, where that building includes holding cells?

With your request, you included a letter from the county treasurer stating that the county adopted an economic development sales tax, and that the Department of Finance and Administration remits proceeds of the tax to the county, rather than directly to the economic development corporation that ultimately receives the tax proceeds. The letter describes a disagreement with respect to whether the treasurer may or must collect a commission on the tax proceeds.

You pose this question relating to such tax proceeds:

2. Concerning pass-through money received from the Department of Finance and Administration, may this money be charged a percentage for treasurer's commission? If so, may the county decide whether to charge a percentage for treasurer's commission?

RESPONSE

For the reasons given below, I must decline to give an opinion on the first question. With respect to the second question, it is my opinion that a county treasurer may not collect a commission on proceeds of a sales tax dedicated to economic development that are to be paid over to an economic development corporation.

DISCUSSION

Question 1: Answering this question would require me to interpret a local ordinance with reference to all the relevant facts and circumstances relating to the ordinance, its adoption, the characteristics and uses of the facility at issue, and perhaps other matters. Because I am not equipped or authorized to act as a finder of fact in connection with giving written opinions, I must respectfully decline, as has been the Attorney General's longstanding practice, to state an opinion on this question because it involves fact-intensive interpretation of a local ordinance. I will, however, briefly state the applicable law. Generally speaking, it is the responsibility of the local governing body to determine legislatively whether a particular expenditure is within the ballot-designated purpose(s) of a local sales tax, and a court will not disturb its finding unless it is found to be "demonstrably arbitrary and unwarranted."

Question 2: In my opinion, a county treasurer may not collect a commission on proceeds of a sales tax dedicated to economic development that are to be paid over to an economic development corporation. Arkansas Code § 21-6-302(a) provides, with exceptions not relevant here, that county treasurers "shall be required to collect, as a treasurer's commission, two percent (2%) on all funds coming into their hands as treasurers and to be paid out of the respective funds."

Arkansas Code § 14-174-109 provides, however, that economic development sales taxes "may be used for the sole use and benefit" of an economic development corporation and that "[o]n receipt from the Director of the Department of Finance and Administration of the net proceeds of [an economic development] sales and use tax ..., the local government shall deliver all of the proceeds to the corporation to use in carrying out its functions."

When statutes conflict, effect is given to the more specific statute rather than the more general one, and to the one enacted later in time. Here, the statute providing for the treasurer's commission was enacted in 1941 (Act 78 of 1941) and the one addressing economic development corporations' use of economic development sales tax proceeds was enacted in 2005 (Act 1372 of 2005). The latter is also clearly the more specific of the two in this context.

Accordingly, in my opinion, § 14-174-109 controls, and a county treasurer may not collect a commission on proceeds of a sales tax dedicated to economic development that are to be paid over to an economic development corporation.

Sincerely,
Attorney General