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Purdy addresses issues relating to sales tax lawsuit

Wednesday, July 1, 2009

Purdy officials took steps this week to protect the city from future litigation over its sales taxandto strengthen the city's position in dealing with a pending lawsuit.

Action resulted from the lawsuit filed last year by Farmington attorney Tom Burcham. According to Purdy City Attorney Don Trotter, Burcham has made "a crusade" of sending out associates around the state, making purchases, then filing lawsuits against towns that have multiple voter-approved sales taxes for the same purpose. Purdy has two one-cent sales taxes, both supporting the general fund.

Burcham sued the city claiming that having the second tax was illegal. After hearing the case in Barry County Circuit Court, Judge Robert Wiley issued an injunction against the city, siding with Burcham.

According to Trotter, there is no maximum sales tax cap declared in state law. However, the legislature placed a cap of one-and-a-third percent for the city of St. Louis. Judge Wiley pondered the intent of the legislature in setting a cap for St. Louis, Trotter said, and concluded the legislature probably intended fourth class cities like Purdy should not go above the one-and-a-third percent limit.

Judge Wiley issued an interim summary judgment against the city on this issue only.

"There is no final judgment against the city. Right now we're still fighting," Trotter said.

This week aldermen hired the St. Louis law firm of Cunningham, Vogel and Rost as special legal counsel in the city's case. Trotter explained the St. Louis firm has engaged in defending cities against such lawsuits for some time. The firm has already prepared legal arguments and paperwork that Purdy can use, Trotter said.

Aldermen also adopted an ordinance establishing a procedure for paying taxes under protest. Without such a procedure, Burcham had been able to take his grievance directly to circuit court. Under guidelines developed by the Missouri Department of Revenue, taxes paid under protest will be kept in a separate fund and the issue would be addressed in a special hearing.

For Burcham to win a settlement against the city, Trotter said there has to be proof that the tax is incorrect. Burcham will also have to prove the tax was passed with the city knowing the tax was illegal, and that it was done "with reckless disregard" to collect additional revenue.

There has been no determination of a settlement against the city, Trotter said, and a decision about appealing the judge's injunction is premature.

"This case is far from over," Trotter said.

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