A majority of council members, in a 3-2 vote, decided Wednesday to charge occupational taxes going back seven years on every billboard site in the city. Three national billboard companies disagree with the decision, arguing it’s a violation of both state law and the city’s own ordinance.
Marietta would be the first local government in the state to tax billboards in that way, and it could set a far-reaching legal precedent, according to the billboard officials.
Attorneys for Clear Channel, CBS Outdoor and Lamar Advertising made their case before the council Wednesday during a hearing that lasted until just before midnight. The advertisers appealed the decision of the city’s business license manager but were met with a split 3-2 vote to uphold the decision to levy the taxes prompted largely by the city’s attorney.
They’re still deciding if they’ll challenge the matter in court.
“We would anticipate doing so, but they haven’t made a final decision,” said Scott Peters, attorney with the Atlanta-based Schreeder, Wheeler and Flint LLP representing Clear Channel and CBS Outdoor.
The argument is all about the definition of the word “office.”
The city says that because the billboards are located in its jurisdiction and are a driver of revenues it is owed occupational taxes. The companies think that’s faulty logic and that because they have no physical office building or employees in Marietta, their taxes are owed to another jurisdiction.
Businesses pay an occupational tax each year based on revenue made and can’t be taxed on more than 100 percent of their revenue. The companies say they’ve already paid those taxes — just not to Marietta.
Clear Channel pays occupational taxes to Peachtree Corners. The city of Atlanta gets CBS Outdoor’s taxes. Lamar Advertising’s taxes go to Smyrna.
An unexpected tax
Now, Marietta wants to get seven years of backed taxes.
That’s about $29,000 CBS and Clear Channel each paid under protest for about 30 billboards each company owns in Marietta. Lamar paid the city $350 for its one billboard.
The city realized the companies weren’t paying occupational taxes in Marietta after examining Board of Lights and Water records for electric service used to illuminate the signs at night.
But the city was originally asking for more than $100,000 from both CBS and Clear Channel and another $500 from Lamar. That’s because the city assessed taxes on all billboards serviced by its utility even though the BLW provides electricity to some sites outside of the city limits.
There could also be some billboards that weren’t assessed if they are inside the city limits but are serviced by another utility, like Georgia Power or Cobb EMC.
The companies maintain they were taken aback by the notices they received for taxes owed.
They say it seemed to come out of nowhere. The billboard companies have been in Marietta for years, attorneys said on Thursday, and regularly appear before the City Council requesting variances for their signs.
Billboards just aren’t taxable, said Matt Klase of the Cobb-based firm Webb, Klase, and Lemond LLC representing Lamar.
Klase fears it would set a dangerous precedent if each billboard is allowed to be taxed and create a “logistical nightmare” in knowing what jurisdictions should be paid for what billboards. Costs would also add up more quickly, Klase said, because local governments typically charge service fees.
“This is the first municipality that has ever tried to impose occupation taxes on an individual billboard,” Klase said.
Attorneys also argue the tax could be an infringement on free speech rights under the First Amendment and could be a violation of equal protection clause of the 14th Amendment because other similar commodities, like vending machines, aren’t charged occupational taxes for each location.
The city refuted that argument, saying automated video rental machines, like Redbox, are required to have occupation taxes for each site.
Peters, the attorney for Clear Channel and CBS, says the businesses aren’t trying to get out of paying their taxes.
“We are not seeking to avoid paying an occupation tax for the revenue that these companies make,” Peters said. “The point is that state law requires that the tax be paid out of the office where it is generated and a billboard does not constitute an office.”
A split decision
Councilmen Johnny Sinclair, Andy Morris and Anthony Coleman voted to go with the taxes after emerging from a closed session discussion. Testimony from attorneys representing the city and the companies were heard in open session with members of the public present.
Morris and Coleman said that decision was made at the urging of the city’s attorney, Doug Haynie.
“That’s what we pay them for,” Morris said.
“I didn’t want to go against the person representing the city,” Coleman said.
Councilmen Philip Goldstein and Jim King voted against the decision of the city’s business license manager.
Goldstein doesn’t think the city has the authority to tax individual billboards.
“My conclusion was that the city doesn’t have the right to that,” Goldstein said, adding he didn’t vote in favor of the appeal to avoid a court battle but because of the “facts.”
Mayor Steve Tumlin agrees with the council decision, but said it was a “hard call.”
“The 3-2 vote was indicative of that it was not an easy decision,” Tumlin said.
Councilman Grif Chalfant and Councilwoman Annette Lewis were absent when the vote took place late Thursday night.