Can Moore County, Tennessee spend its hotel occupancy tax revenue on public restrooms for tourists?

Plain-English summary

Senator Jim Tracy asked the AG whether Moore County could use its hotel occupancy tax (formally, a "tourist accommodation tax") to build public restrooms for tourists. The answer turned on two questions: are there statutory limits on what Moore County could spend the money on, and what does the Tennessee Constitution require?

The AG's office walked through the relevant statutes and found that Title 7, Chapter 4 of the Tennessee Code does limit the use of tourist accommodation tax revenue, but those limits kick in only when a county exceeds certain population thresholds or has been designated a "secondary tourism development zone." Moore County's 2010 census population was 6,362, well below any of those thresholds, and Moore County had no secondary tourism development zone. So the statutory limits did not apply.

That left Article II, Section 29 of the Tennessee Constitution, which requires that county taxes be used for "county purposes." Building public restrooms for tourists who visit the county was a county purpose under longstanding Tennessee precedent, including the 1854 Tennessee Supreme Court decision in Louisville & Nashville R.R. v. County Court of Davidson (railroad construction as county purpose) and the more recent Ragsdale v. City of Memphis (sports arena construction as public purpose). The conclusion: Moore County could spend its tourist accommodation tax revenue on public restrooms, subject only to the broad "county purpose" requirement.

Currency note

This opinion was issued in 2016. 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

Article II, Section 29 of the Tennessee Constitution is the gating provision for all county taxation. It grants the General Assembly the power to "authorize the several counties and incorporated towns in this State, to impose taxes for County and Corporation purposes." That language has two effects: it requires legislative authorization for any county-level tax, and it constrains the use of revenue to county purposes.

The General Assembly's authorization for county tourist-accommodation taxes lives at Tennessee Code Annotated §§ 7-4-101 through 7-4-112. Section 7-4-102(a)(1) authorizes counties with a metropolitan form of government to levy a privilege tax up to 3% on hotel occupancy by transients. Moore County was a metropolitan-form county, so the basic 3% tax was available to it.

The chapter's use-restrictions are population-graduated:

• Sections 7-4-102(a)(2), 102(b)(1)-(3), and 7-4-110(a)-(e) impose use limits only when county population crosses statutory thresholds (the lowest is 100,000).
• Sections 7-4-110(f) and (g) impose additional limits only on counties with a designated "secondary tourism development zone."

Moore County had a 2010 census population of 6,362 and no secondary tourism development zone, so none of the chapter's statutory use limits constrained its choices in 2016.

That left the broader constitutional "county purposes" standard. Tennessee courts have read "county purpose" generously over more than a century. Louisville & Nashville R.R. v. County Court of Davidson, 33 Tenn. 637 (1854) upheld county funding for railroad construction; Ragsdale v. City of Memphis, 70 S.W.3d 56 (Tenn. Ct. App. 2001) upheld a sports arena. Public restrooms for tourists fit comfortably inside that tradition.

The opinion's footnote made the boundary clear: if Moore County crossed 100,000 in population or designated a secondary tourism development zone, the statutory use-restrictions would kick in and constrain the spending. The opinion's conclusion was specific to Moore County's then-current configuration.

Common questions

Q: At the time of this opinion, was every Tennessee county free to spend hotel tax revenue on anything?
A: No. The chapter's use-restrictions applied to counties above various population thresholds (the lowest is 100,000) and to counties with a designated "secondary tourism development zone." Smaller, undesignated counties like Moore had only the broad "county purposes" requirement.

Q: What is a "metropolitan form of government" in Tennessee?
A: A consolidated city-county government created under Tennessee's metropolitan-government enabling statutes. Davidson County (Nashville) is the best-known example; Moore County was also organized this way. Only metropolitan-form counties could levy the chapter-7 tourist accommodation tax under § 7-4-102(a)(1).

Q: What does "county purpose" actually mean?
A: Tennessee courts have read it broadly. Anything reasonably tied to county-level public benefit qualifies. The 1854 Louisville & Nashville R.R. case upheld railroad funding; Ragsdale (2001) upheld a sports arena. Public restrooms for tourists are well within that range.

Q: What was Moore County actually trying to do?
A: Build public restrooms for tourists. The opinion did not get into the specific funding source or scale; it answered the general question of whether such a use was constitutionally permitted.

Q: Would the answer change if Moore County crossed 100,000 in population?
A: Yes. At that point, the statutory use-restrictions in sections 7-4-102 and -110 would attach, and would constrain spending choices regardless of the broader "county purposes" standard.

Citations and references

Constitutional provisions:

• Tenn. Const. art. II, § 29 (Taxes for county and corporation purposes)

Statutes:

• Tenn. Code Ann. §§ 7-4-101 to -112 (Tourist accommodation tax)
• Tenn. Code Ann. § 7-4-102(a)(1) (Metropolitan-county 3% privilege tax)
• Tenn. Code Ann. § 7-4-110 (Population-graduated use restrictions; secondary tourism development zones)

Cases:

• Louisville & Nashville R.R. v. County Court of Davidson, 33 Tenn. 637 (1854) (Tennessee Supreme Court)
• Ragsdale v. City of Memphis, 70 S.W.3d 56 (Tenn. Ct. App. 2001) (Tennessee Court of Appeals)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2016/op16-002.pdf

Original opinion text

STATE OF TENNESSEE
OFFICE OF THE ATTORNEY GENERAL
January 12, 2016
Opinion No. 16-02
Purposes for Which Proceeds of Tourist Accommodation Tax May Be Used

Question 1
Is the use of proceeds of the tourist accommodation tax imposed by Moore County under Tenn. Code Ann. § 7-4-102(a)(1) limited to particular purposes?

Opinion 1
Use of proceeds of Moore County's tourist accommodation tax is limited only by Article II, Section 29, of the Tennessee Constitution, which requires that the proceeds be used for purposes of the county.

Question 2
May Moore County use proceeds of its tourist accommodation tax imposed under Tenn. Code Ann. § 7-4-102(a)(1) to build public restrooms for tourists?

Opinion 2
Yes. Providing public restrooms for tourists visiting the county would be a purpose of the county within the meaning of the Tennessee Constitution.

ANALYSIS

Article II, Section 29, of the Tennessee Constitution gives the legislature the "power to authorize the several counties and incorporated towns in this State, to impose taxes for County and Corporation purposes respectively." When the legislature authorizes such a tax, it may, consistent with Article II, Section 29, restrict the use of the tax to specifically delimited county or corporation purposes. Absent an express legislative limit on the use, the use is limited by Article II, Section 29, to "county purposes."

The legislature has authorized counties with a metropolitan form of government to impose privilege taxes on certain tourist accommodations. Tenn. Code Ann. §§ 7-4-101 to -112. Specifically, the legislature has authorized a privilege tax upon the privilege of occupancy in any hotel of each transient in an amount not to exceed three percent (3%) of the consideration charged by the operator, except as provided in subsection (b). The tax so imposed is a privilege tax upon the transient occupying the room and is to be collected and distributed as provided in this chapter [4 of Title 7], and the tax shall be approved by ordinance of the metropolitan council. Tenn. Code Ann. § 7-4-102(a)(1).

Moore County has a metropolitan form of government. Thus, the plain language of Tenn. Code Ann. § 7-4-102(a)(1) permits Moore County to levy a three percent (3%) tax on the privilege of occupying a hotel room (the "tourist accommodation tax").

Title 7, Chapter 4, does provide some limits on the use of revenue derived from the tourist accommodation tax, but none of those statutory limits applies to Moore County. Most of the use limits in Tenn. Code Ann. §§ 7-4-101 to -112 apply only to counties that exceed certain population thresholds specified in sections 7-4-102 and -110 and pegged to federal census data. Moore County's highest federal census population to date was 6,362. U.S. Census Bureau, 2010 Census. This figure is substantially below any of the statutory population thresholds or brackets; no population-dependent limits on the use of proceeds of tourist accommodation taxes apply to counties with fewer than 100,000 people. See Tenn. Code Ann. §§ 7-4-102(a)(2), 102(b)(1)-(3), and 7-4-110(a)-(e). Tennessee Code Annotated § 7-4-110(f) and (g) also limit the use of proceeds of tourist accommodation taxes, but those subsections apply only to counties in which there has been designated a "secondary tourism development zone." It is our understanding that Moore County does not have a "secondary tourism development zone." Thus, neither the use limitations in subsection 110(f) nor the use limitations in subsection 110(g) currently apply to limit the use of Moore County's tourist accommodation tax revenues.

Although there are no statutory limitations that currently apply to the use of Moore County's tourist accommodation tax revenues, the Tennessee Constitution does require that those revenues be used for "county purposes." Constructing public restrooms for the many tourists who visit and contribute to the economy of Moore County is such a "county purpose." See Louisville & Nashville R.R. v. Cnty. Court of Davidson, 33 Tenn. 637, 666 (1854) (holding that the construction of a railroad through a county is a valid county purpose); see also Ragsdale v. City of Memphis, 70 S.W.3d 56, 72 (Tenn. Ct. App. 2001) (holding that the construction of a sports arena is a valid public purpose). Therefore, Moore County may, consistent with the limitation in Article II, Section 29, use proceeds of its tourist accommodation tax to fund the construction of public restrooms.

In sum, no statutory provision that specifies or limits the purposes for which proceeds of a tourist accommodation tax imposed under Tenn. Code Ann. § 7-4-102(a)(1) may be spent currently applies to Moore County, and Moore County may, consistent with Article II, Section 29, of the Tennessee Constitution, use proceeds of its tourist accommodation tax to fund the construction of public restrooms.

HERBERT H. SLATERY III
Attorney General and Reporter

ANDRÉE SOPHIA BLUMSTEIN
Solicitor General

JAMES P. URBAN
Assistant Attorney General

Requested by:
The Honorable Jim Tracy
State Senator
2 Legislative Plaza
Nashville, TN 37243

Footnote 1: This opinion assumes that Moore County's population is below 100,000 and that no "secondary tourism development zone" within the meaning of Tenn. Code Ann. § 7-4-110 has been designated within Moore County. If either assumption is incorrect or becomes incorrect in the future then Moore County would be limited in the use of its tourist accommodation tax revenues according to the statutory provisions that would then apply to it.