Corbin to ask that occupational tax collected by Knox Co. be escrowed if appeal filed

While Knox County officials have vowed to fight a recent court ruling that would essentially gut a good portion of the county’s one percent payroll tax on workers and companies, Corbin city leaders say no one should get to spend the revenue in question until the issue is settled.

Corbin City Manger Bill Ed Cannon said Tuesday the city has asked its attorney’s to request that revenue from the tax collected by Knox County from any individuals or businesses within the city limits be held in a special account until the issue is ultimately resolved.

"I think our attorney will ask them to escrow the funds that come out of Corbin," Cannon said. "With that ruling in our favor, they can collect it, there is not a problem with that, but until this is decided I think that money belongs to the city of Corbin."

On June 4, Special Circuit Judge Roderick Messer sided with Corbin in the long-simmering tax fight that finally spilled into the courts last year when the city filed a lawsuit against Knox County. Corbin officials claim its citizens are entitled to the right to credit the amount of the occupational license fee paid to the city against the occupational license fee owed to the county. The city of Corbin passed a one percent occupational license tax in Aug. of 2005. The Knox County Fiscal Court approved a one percent tax in 1999. Absent the ruling, Corbin citizens that live in the Knox County side of the city would have been forced to pay two percent of their wages and net profits – one percent to the city, another to the county.

Knox County Judge-Executive J.M. Hall said an appeal is planned of the ruling, but that the county will continue to collect the tax in the interim. He said talk of funds being escrowed aren’t true.

"We will challenge it in the Court of Appeals. While the appeal is in process, the county will continue to collect tax as usual. "Nothing will change. We will collect our tax as always."

But Cannon said not escrowing the money, even in the absence of a judge telling the county to do so, is a mistake.
"I believe if I were them I would be finding out," Cannon said. "I think that ruling is pretty easy to understand and it says right there who the money belongs to."

Cannon said city leaders had briefly discussed beginning the process of immediately collecting occupational taxes from the Knox County side of the city when the ruling was issued, but decided against it at the advice of their attorneys.

Patrick Hughes, the attorney representing Corbin in the case, said the city has chosen in the past not to collect the tax to avoid legal confusion. He said the city could do so, though, at any time, a move that may mean Corbin would be due taxes from the day of the initial ruling when the case is decided on appeal. A private citizen, local tax profession Joe White, is also a plaintiff in the lawsuit.

Hughes said he has contacted Don McSwain, the Lexington attorney representing Knox County, to try to work out a deal to escrow the money prior to any appeal.

"I would think we would probably collect our own … we certainly are capable of collecting it right here in Corbin," Cannon said. "Right now we are just following the advice of our attorney."

As of press time, no appeal had been filed in the case.