Can a Tennessee county tack a $1 surcharge onto every ticket sold at the county fairgrounds to fund a new exposition center?

Subject

Opinion No. 14-43, County's Authority to Impose Ticket Surcharge at County Agricultural Center, April 7, 2014

Plain-English summary

Representative Mark Pody asked whether a Tennessee county could require private event vendors at its agricultural center to collect a $1 surcharge on every admission ticket and remit it to the county, with the money funding a new county exposition center. The AG said no under current law, but yes by private act if the General Assembly could articulate a rational basis for treating that county differently.

The fee-versus-tax line decided the first question. Tennessee distinguishes them by the purpose of the imposition, not its label. A fee defrays the cost of providing a service or benefit to the person paying it and must bear a reasonable relationship to the cost involved (Porter v. City of Paris; S & P Enterprises v. City of Memphis). A tax is a revenue-raising measure for general or designated public purposes (City of Tullahoma v. Bedford County). The proposed surcharge would not pay for any service to ticket buyers; it would fund a separate facility. That makes it a tax. Counties have no inherent taxing power, only what the General Assembly grants (Southern Ry. Co. v. Hamblen County; Kivett v. Runions). And the existing amusement-tax statute, Tenn. Code Ann. § 67-6-212, already occupies this field, so a county cannot pile a $1 surcharge on top of it without legislative authorization.

The private-act question turned on Article XI, § 8 of the Tennessee Constitution, which forbids the legislature from suspending general law for particular individuals or counties unless a rational basis supports the special classification. The AG cited Op. 04-027 (proposed 5% "large event" admissions tax) and Stalcup v. City of Gatlinburg (special tourism business tax upheld because of tourism's overwhelming impact) and Polk County v. Rogers (special rafting-ticket tax upheld because of whitewater traffic). A private act could survive if the requesting county could point to a similar concrete impact justifying differential treatment. A population bracket that effectively names a single county does not, by itself, supply the rational basis (Buntin v. Crowder).

The same rational-basis analysis applies to a parking surcharge, which would conflict with the parking-sales tax in Tenn. Code Ann. § 67-6-205(c)(2).

Currency note

This opinion was issued in 2014. 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.

Common questions

What is the difference between a tax and a fee in Tennessee?

The Tennessee Supreme Court in City of Tullahoma v. Bedford County, 938 S.W.2d 408 (Tenn. 1997) and the Court of Appeals in Saturn Corp. v. Johnson, 236 S.W.3d 156 (Tenn. Ct. App. 2006) draw the line by purpose: a tax raises general or designated revenue; a fee pays for a specific service or regulation directly benefiting the payer. A surcharge that does not match a cost or service is a tax.

Why does the surcharge conflict with state amusement tax law?

Tenn. Code Ann. § 67-6-212 imposes the state amusement (sales) tax on admissions. Counties cannot pile on additional admissions taxes unless the General Assembly authorizes them. The $1 surcharge would have done exactly that, in excess of the state-authorized rate.

What is a "private act" and why does it matter here?

A private act is legislation that applies to only one or a few counties (or other defined classes) rather than statewide. Article XI, § 8 of the Tennessee Constitution requires that any private act be supported by a rational basis: an actual reason to treat that locality differently. Without that, the act is invalid as special legislation.

Can a population bracket be the rational basis?

Not by itself. Buntin v. Crowder, 173 Tenn. 388, 118 S.W.2d 221 (1938) recognized that a population bracket targeted at a single county does not, standing alone, justify departing from general law. The legislature has to show why this county's situation is different from others.

What examples of valid rational bases has Tennessee recognized?

Stalcup v. City of Gatlinburg (tourism's outsized impact on Gatlinburg) and Polk County v. Rogers (massive whitewater rafting volume in Polk County) are the AG's headline examples. Op. 04-027 also offered factors for a county hosting unusually large events. The unifying theme is a unique, concrete, locality-specific condition that justifies the special tax.

Could the county impose a litigation tax instead to fund the project?

The AG cited Op. 03-006 for the proposition that counties can use a local litigation tax to fund a public building project, but only up to the state-authorized amount under § 67-4-502. To exceed the state amount, a private act would still be needed.

Does the parking-surcharge analysis differ from the ticket surcharge?

No materially. The sale of parking is itself a taxable privilege under § 67-6-205(c)(2). A county-level surcharge on parking would also require a rational basis under Article XI, § 8 if the private act sought to exceed what the general law allows. (Note: parking lots run unattended by political subdivisions with meter-collected charges are not covered by the privilege tax.)

Background and statutory framework

Tennessee counties operate under a doctrine of limited authority: they have only what the General Assembly has expressly granted or what is necessarily implied (City of Lebanon v. Baird; Bayless v. Knox County). Article II, § 29 of the Tennessee Constitution requires that any tax-imposition authority for counties come "in such manner as shall be prescribed by law." The statutory taxing authority for counties consists primarily of the property tax (§§ 5-5-122 and 5-7-106 authorize special property taxes for building public facilities), local-option additions to state-authorized privilege taxes (§ 67-4-502, capped at the state tax amount), and a handful of other specific authorities.

For activities outside this general framework (such as a ticket surcharge), the only routes are (a) explicit statutory authorization or (b) a private act. The private act must satisfy Article XI, § 8: the legislature may not "suspend any general law for the benefit of any particular individual" without rational basis. Estrin v. Moss, 221 Tenn. 657, 430 S.W.2d 345 (1968) supplied the deferential standard ("any possible reason can be conceived to justify the classification, or if the reasonableness be fairly debatable"). Stalcup v. City of Gatlinburg and Polk County v. Rogers offer concrete examples of locality-specific conditions that satisfy that standard.

The amusement-tax field is mainly occupied by § 67-6-212, which makes admissions to entertainment events a taxable privilege. A county-level ticket surcharge effectively duplicates and exceeds that imposition, putting it squarely in private-act territory.

Citations

• Tenn. Const. art. II, § 29 (county tax authority)
• Tenn. Const. art. XI, § 8 (no suspension of general law for individuals)
• Tenn. Code Ann. § 5-7-116 (county lease of property to private parties)
• Tenn. Code Ann. § 5-5-122 (county tax authority for public buildings)
• Tenn. Code Ann. § 5-7-106 (county building maintenance and special tax)
• Tenn. Code Ann. § 67-4-502 (county privilege taxes, including litigation, capped at state amount)
• Tenn. Code Ann. § 67-6-205(c)(2) (parking privilege tax)
• Tenn. Code Ann. § 67-6-212 (amusement/admissions sales tax)
• City of Lebanon v. Baird, 756 S.W.2d 236 (Tenn. 1988) (Tennessee Supreme Court; municipal power doctrine)
• Bayless v. Knox County, 199 Tenn. 268, 286 S.W.2d 579 (1956) (Tennessee Supreme Court; county power doctrine)
• Freeman Indus., LLC v. Eastman Chemical Co., 172 S.W.3d 512 (Tenn. 2005) (Tennessee Supreme Court; statute construed to avoid constitutional conflict)
• Southern Ry. Co. v. Hamblen County, 115 Tenn. 526, 92 S.W. 238 (1906) (Tennessee Supreme Court; county taxing power requires legislative grant)
• Kivett v. Runions, 191 Tenn. 62, 231 S.W.2d 384 (1950) (Tennessee Supreme Court; counties need legislative authority to tax)
• City of Tullahoma v. Bedford County, 938 S.W.2d 408 (Tenn. 1997) (Tennessee Supreme Court; tax vs. fee distinction)
• Saturn Corp. v. Johnson, 236 S.W.3d 156 (Tenn. Ct. App. 2006) (Tennessee Court of Appeals; tax vs. fee)
• Memphis Retail Liquor Dealers' Ass'n v. City of Memphis, 547 S.W.2d 244 (Tenn. 1977) (Tennessee Supreme Court; tax defined)
• Porter v. City of Paris, 184 Tenn. 555, 201 S.W.2d 688 (1947) (Tennessee Supreme Court; fee must bear reasonable relation to purpose)
• S & P Enterprises, Inc. v. City of Memphis, 672 S.W.2d 213 (Tenn. Ct. App. 1983) (Tennessee Court of Appeals; fee must reflect expenses)
• Estrin v. Moss, 221 Tenn. 657, 430 S.W.2d 345 (1968) (Tennessee Supreme Court; rational-basis standard)
• Stalcup v. City of Gatlinburg, 577 S.W.2d 439 (Tenn. 1978) (Tennessee Supreme Court; tourism rational basis for special tax)
• Buntin v. Crowder, 173 Tenn. 388, 118 S.W.2d 221 (1938) (Tennessee Supreme Court; population bracket insufficient alone)
• Polk County v. Rogers, 85 S.W.3d 781 (Tenn. Ct. App. 2002) (Tennessee Court of Appeals; rafting-ticket special tax)
• Tenn. Att'y Gen. Op. 03-006 (Jan. 22, 2003) (county litigation tax for building)
• Tenn. Att'y Gen. Op. 99-104 (May 10, 1999) (private act required for tax above state amount)
• Tenn. Att'y Gen. Op. 04-027 (Feb. 12, 2004) (5% large-event privilege tax rational-basis analysis)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2014/op14-043.pdf

Original opinion text

STATE OF TENNESSEE
OFFICE OF THE ATTORNEY GENERAL
April 7, 2014
Opinion No. 14-43
County's Authority to Impose Ticket Surcharge at County Agricultural Center

QUESTIONS

1. Under current law, may a county commission, through its contracts with private vendors for the rental of available facilities at the county agricultural center, require such vendors to collect, and remit to the county trustee, a $1.00 surcharge on every admission ticket sold for each private event, where the funds collected would be used to pay for the construction and operation of a new county exposition center?

2. If the answer to Question 1 is no, may the General Assembly, by private act, authorize a county commission to levy such a ticket surcharge for this purpose?

3. May the General Assembly, by private act, authorize a county commission to levy a surcharge on parking at the county agricultural center for this purpose?

OPINIONS

1. No. A ticket surcharge used to generate funds for the construction and operation of a new county exposition center is actually a tax that would conflict with the general amusement-tax statute, Tenn. Code Ann. § 67-6-212.

2. and 3. There must be a rational basis for suspending the general law in a particular county in order to impose a tax in excess of that allowed by State law. If such a rational basis were demonstrated, a private act authorizing imposition of such a tax would not violate Article XI, § 8, of the Tennessee Constitution.

ANALYSIS

Cities and counties have only those powers expressly granted by, or necessarily implied from, statutes. City of Lebanon v. Baird, 756 S.W.2d 236 (Tenn. 1988); Bayless v. Knox County, 199 Tenn. 268, 286 S.W.2d 579 (1956). Tenn. Code Ann. § 5-7-116 provides that "each county may lease land or existing buildings owned by the county to any person, corporation, partnership or association for such consideration and upon such terms in the judgment of the governing body are in the interest of the county." While this provision gives a county commission latitude in the execution of its rental contracts, it cannot be construed to allow an imposition that would be constitutionally impermissible. See Freeman Indus., LLC v. Eastman Chemical Co., 172 S.W.3d 512, 521-22 (Tenn. 2005) (statutes construed to avoid constitutional conflict).

Whether a county may constitutionally impose a ticket surcharge through its rental contracts with private vendors under current law turns on whether the surcharge is a fee or a tax. Counties have no inherent powers of taxation but possess only those taxing powers granted to them by the General Assembly.[1] Southern Ry. Co. v. Hamblen County, 115 Tenn. 526, 92 S.W. 238, 239 (1906). Therefore, a county can impose a surcharge only if it is clearly a fee or, in the alternative, a tax that the General Assembly has authorized. See Kivett v. Runions, 191 Tenn. 62, 231 S.W.2d 384, 386 (1950).

In Tennessee, taxes are distinguishable from fees by the objectives for which they are imposed. The distinction between fees and taxes lies not in the name given in the relevant legislation, but rather in the purpose of the monetary imposition. City of Tullahoma v. Bedford County, 938 S.W.2d 408, 412 (Tenn. 1997); Saturn Corp. v. Johnson, 236 S.W.3d 156, 160 (Tenn. Ct. App. 2006). A tax is a revenue-raising measure levied for the purpose of paying the government's general debts and liabilities. City of Tullahoma, 938 S.W. 2d at 412 (citing Memphis Retail Liquor Dealers' Ass'n v. City of Memphis, 547 S.W.2d 244, 245-46 (Tenn. 1977)). A fee, on the other hand, is imposed for the purpose of regulating a specific activity or defraying the cost of providing a service or benefit to the party paying the fee. City of Tullahoma, 938 S.W. 2d at 412; Saturn Corp., 236 S.W.3d at 160. Moreover, a fee must bear a reasonable relation to the objective to be accomplished, see Porter v. City of Paris, 184 Tenn. 555, 201 S.W.2d 688, 691 (1947), or to the expenses involved, see S & P Enterprises, Inc. v. City of Memphis, 672 S.W.2d 213, 216 (Tenn. Ct. App. 1983).

Under these principles, a surcharge imposed on admission tickets for events at a county agricultural center, where the funds would be used for the construction and operation of a new county exposition center, cannot be characterized as a fee because it does not bear any relation to the cost of providing a service or benefit to the person buying the ticket. The ticket purchaser would receive no direct service or benefit from the surcharge. Moreover, the surcharge would bear no relationship to the regulation of events held at the agricultural center. While the monies generated from the surcharge would be designated for a particular purpose, as opposed to the county's general debts and liabilities, the surcharge would unquestionably be a revenue-raising measure. Thus, such a surcharge must be characterized as a tax. Accordingly, it can be imposed under current law only if the General Assembly has authorized it. See Kivett, 231 S.W.2d at 386.

Counties are authorized by the General Assembly to levy taxes for county purposes, usually by special provisions in the general revenue laws for general county purposes and by special statutes for certain special purposes. Southern Ry., 92 S.W. at 239. In addition to general revenue law that authorizes counties to levy an annual tax on real property, the General Assembly has authorized counties to levy special taxes for building and repairing county buildings. Id. at 240. Under Tenn. Code Ann. § 5-5-122, "county legislative bodies have full power to lay any tax, from time to time that they may think proper, to build, extend or repair, any courthouse, jail or public office for county purposes." Similarly, Tenn. Code Ann. § 5-7-106 provides that "county buildings are to be erected and kept in order and repair at the expense of the county, under the direction of the county legislative body, and it may levy a special tax for this purpose."

This authority is not limited to the imposition of additional taxes on real property. In Tenn. Att'y Gen. Op. 03-006 (Jan. 22, 2003), this Office opined that a county could impose a litigation tax to fund a public building project but that it could not designate and tax a privilege unless it had been authorized to do so under some other provision of State law. Under Tenn. Code Ann. § 67-4-502, counties must levy privilege taxes, including litigation taxes, "in the same manner and not to exceed in amount the tax levied by the state, except as otherwise stated in the code." Accordingly, a county can pass a resolution levying a local litigation tax and specifying that the revenues generated by the tax would be used to fund a public building project, but the county cannot exceed the amount of the State litigation tax. Op. 03-006, at 3.

A county resolution thus is not sufficient if the county wishes to exceed the amount of a State tax. See Tenn. Att'y Gen. Op. 99-104 (May 10, 1999). While a county may have authority to levy a certain tax, a county may not collect a tax for any county purpose in excess of that authorized by the General Assembly. Southern Ry., 92 S.W. at 240. To exceed the amount of tax levied by the State, a private act would be necessary. See Op. 99-104, at 2. But because such a private act would suspend the general law of the State with respect to a particular county, it must comport with Article XI, § 8, of the Tennessee Constitution.

The Legislature shall have no power to suspend any general law for the benefit of any particular individual, nor to pass any law for the benefit of individuals inconsistent with the general laws of the land; nor to pass any law granting to any individual or individuals, rights, privileges, immunitie[s], or exemptions other than such as may be, by the same law extended to any member of the community, who may be able to bring himself within the provisions of such law.

Tenn. Const. art. XI, § 8. Legislation containing particular classifications does not violate this provision of the Tennessee Constitution if "any possible reason can be conceived to justify the classification, or if the reasonableness be fairly debatable." Estrin v. Moss, 221 Tenn. 657, 430 S.W.2d 345, 349 (1968). A statute that contravenes or is inconsistent with the general law is invalid only if "no reasonable basis for the special classification can be found." See Stalcup v. City of Gatlinburg, 577 S.W.2d 439, 441 (Tenn. 1978).

In Tenn. Att'y Gen. Op. 04-027 (Feb. 12, 2004), this Office considered a proposed private act that would have authorized a county commission to levy a 5% privilege tax on the price of admission for persons who attend a "large event." Because the tax would operate much like the sales tax on amusements under Tenn. Code Ann. § 67-6-212 and was different from and higher than the tax authorized by that statute, the tax was subject to Article XI, § 8's rational-basis test. Op. 04-027, at 2. See id. at 3-4 (discussing factors showing a rational basis for the special tax); see also Stalcup, 577 S.W.2d 439 (upholding special business tax because of overwhelming impact of tourism on the city); Polk County v. Rogers, 85 S.W.3d 781 (Tenn. Ct. App. 2002) (upholding special tax on sale of rafting tickets because of tremendous influx of whitewater enthusiasts in the county).

As was the case in Op. 04-027, the imposition of a $1.00 surcharge on event-admission tickets at a county agricultural center to generate funds for a new exposition center would result in a tax on amusements that exceeds what is authorized by Tenn. Code Ann. § 67-6-212. Thus, there must be a rational basis for suspending the law in a particular county. If such a rational basis were demonstrated, a private act authorizing imposition of such a tax would not violate Article XI, § 8, of the Tennessee Constitution.[2]

The sale of parking is also a taxable privilege under the sales tax law. See Tenn. Code Ann. § 67-6-205(c)(2).[3] Thus, a rational basis must likewise be demonstrated for imposing a surcharge on parking at a county agricultural center in order to raise funds to construct and operate a new county exposition center.

ROBERT E. COOPER, JR.
Attorney General and Reporter

JOSEPH F. WHALEN
Acting Solicitor General

LAURA T. KIDWELL
Senior Counsel

Requested by:
The Honorable Mark Pody
State Representative
203 War Memorial Building
Nashville, Tennessee 37243

[1] Article II, § 29, of the Tennessee Constitution provides: "The General Assembly shall have power to authorize the several counties and incorporated towns in this State, to impose taxes for County and Corporation purposes, in such manner as shall be prescribed by law . . . ."

[2] Inclusion in the private act of a population bracket encompassing only a single county would not, in itself, provide a rational basis. See Buntin v. Crowder, 173 Tenn. 388, 118 S.W.2d 221 (1938); see also Op. 99-104, at 2 ("It is difficult to argue that there is a rational basis for the application of a statute to a single county based on a two-hundred-person population bracket.").

[3] This part of the opinion assumes that persons would manage the parking at agricultural-center events. The tax does not apply to political subdivisions when they are operating a parking lot that is unattended and the charges are collected by parking meters. Tenn. Code Ann. § 67-6-205(c)(2).