What happens if a Tennessee hotel collects the Kingsport hotel/motel tax but does not remit it to the city?

Subject

Opinion No. 13-97, Enforcement of Kingsport Hotel/Motel Tax, November 27, 2013

Plain-English summary

District Attorney General Barry Staubus asked whether a Kingsport hotel operator who collects the local hotel/motel tax from guests but then fails to remit it to the city is breaking Tennessee law, and if so, what penalties apply. The AG's answer was yes, with several distinct exposures.

Direct civil liability under Kingsport's 1981 private act. 1981 Tenn. Priv. Acts ch. 46 authorized the City of Kingsport to assess and collect a privilege tax on transient hotel occupancy (now 7% after later amendments). Section 7 of Chapter 46 deems any tax not remitted by the 20th of the following month "delinquent," and adds 12% annual interest plus a 0.5% monthly penalty.

Title 67 enforcement powers borrowed via Section 9. Chapter 46 § 9 gives the Kingsport city treasurer "all the powers and duties provided in Title 67" of the Tennessee Code for enforcing taxes. That sweep includes:

• Levy/distraint and seizure (§ 67-1-1405)
• Padlocking the business premises (§ 67-1-1410)
• Demand for books and records (§ 67-1-1413)
• Notice and sale of property (§ 67-1-1415, § 67-1-1435)
• Jeopardy actions (§ 67-1-1431)
• Compelled testimony and document subpoenas (§ 67-1-1437)
• Search warrant execution by revenue officers (§ 67-1-1441)
• Continuation of business to satisfy delinquent tax liability (§ 67-1-1442)
• Transferee liability (§ 67-1-1444)
• Distress warrants executable by sheriff/constable (§§ 67-1-1201 to -1206)

Per-transaction civil fine. Section 7 also says "[e]ach occurrence of willful refusal of an operator to collect . . . or remit the tax . . . is declared to be unlawful and shall be punishable upon conviction by a fine not in excess of fifty dollars ($50.00). Such fine shall be levied for each transaction involving the payment of consideration for occupancy of a space in a hotel." The AG treated this fine as civil (not criminal), partly because reading it as a criminal sanction would conflict with the constitutional rule that the General Assembly cannot make conduct a crime in only one county (Tenn. Const. art. I, § 8; State v. Toole, 224 Tenn. 491 (1970)), and partly because the rule of lenity counsels against reading ambiguous statutes to create criminal punishment.

Perjury exposure for false returns. Section 5 of Chapter 46 required each operator to file a monthly return "under oath." Under Tenn. Code Ann. § 39-16-702, a person who, with intent to deceive, makes a false statement under oath or on an official perjury-warned document commits a Class A misdemeanor, punishable by up to 11 months 29 days incarceration, a fine up to $2,500, or both (Tenn. Code Ann. § 40-35-111(e)(1)). The AG noted that Kingsport's tax-return form treats the operator's signature as a certification under penalty of perjury.

Currency note

This opinion was issued in 2013. 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.

Kingsport's private act and the cited Title 67 collection statutes have been amended since 2013. The 7% rate, the interest and penalty rates, and the available enforcement tools should be confirmed against current text before action.

Background and statutory framework

Hotel/motel taxes in Tennessee, three sources. (1) Private acts for individual counties and municipalities (Kingsport's source). (2) Metropolitan and consolidated governments under Tenn. Code Ann. §§ 7-4-101 to -112. (3) "Home rule" municipalities under §§ 67-4-1401 to -1425. Each track has its own enforcement story; Kingsport's is private-act + Title 67.

Chapter 46's structure. Sections 3, 4, 5, and 7 establish the tax, the monthly remittance deadline, the sworn monthly return, and the interest/penalty. Section 9 imports Title 67's enforcement powers.

Title 67's enforcement toolbox. The Tax Enforcement Procedures Act (§§ 67-1-1401 to -1425) applies to "every public tax" and any related penalty or interest. § 67-1-1402. Through Section 9 of Chapter 46, the Kingsport city treasurer effectively stands in the shoes of the Commissioner of Revenue for this tax.

The single-county criminal-law problem. State v. Toole and Jones v. Haynes hold that the General Assembly cannot enact a criminal law applicable only in one county; such a law would violate Tenn. Const. art. I, § 8's law-of-the-land requirement and the non-delegation principle. The AG used those cases to resolve the ambiguity in Section 7 of Chapter 46 in favor of a civil reading.

Constitutional canon: avoid surplusage and constitutional doubt. Bozeman v. Barker, West v. Tenn. Hous. Dev. Agency, Waters v. Farr, McCarver, Gallaher, and Riggs all stand for indulging every presumption in favor of constitutionality. State v. Lakatos: when statutory language permits, the court should adopt the constitutional construction.

Rule of lenity. State v. Marshall and State v. Collins direct that criminal statutes are read narrowly; ambiguous criminal language should not "reach" to punish conduct not plainly proscribed. Applied here, it reinforces reading Section 7's $50 fine as civil.

Perjury. Tenn. Code Ann. § 39-16-702 covers both statements under oath and false statements on an official document required or authorized by law to be made under oath that warns of perjury penalties. Tax returns hit both prongs. A Class A misdemeanor is up to 11 months 29 days, or up to $2,500, or both. § 40-35-111(e)(1).

Common questions

Is non-remittance a state crime in Tennessee generally?

For the Kingsport tax: the AG concluded the $50 civil fine is the direct sanction, not jail. Perjury is the criminal exposure, and only if the operator files a false sworn return. Other hotel/motel taxes (metro, home-rule) may have different sanctions written into their authorizing statutes.

Could the city padlock a hotel for unpaid tax?

Tenn. Code Ann. § 67-1-1410 authorizes the Commissioner of Revenue to padlock business premises to enforce tax compliance, and Section 9 of Chapter 46 imports that power for the Kingsport treasurer. So yes, in principle.

How does the $50 fine work in volume?

It's per transaction. A hotel that willfully refuses to collect or remit on 1,000 occupancies faces up to $50,000 in civil fines, on top of interest, penalty, and the unpaid tax itself.

What if the operator collected the tax but is in financial distress?

The Title 67 collection tools (levy, distraint, transferee liability under § 67-1-1444, jeopardy actions under § 67-1-1431) are designed for exactly this scenario. The city treasurer is not limited to ordinary collection litigation.

Could the DA prosecute the unpaid tax itself as theft?

The opinion didn't analyze general theft or fraud charges. Money collected from guests as a tax and not remitted may be exposed to theft, embezzlement, or conversion analyses under separate statutes; the AG opinion focused on the tax statutes themselves.

Citations

1981 Tenn. Priv. Acts ch. 46 (as amended by 1989 ch. 10, 1996 ch. 132, 2007 ch. 52). Tenn. Code Ann. §§ 67-1-1201, 67-1-1201 to -1206, 67-1-1401 to -1425 (specifically 67-1-1402, -1404, -1405, -1410, -1413, -1415, -1431, -1435, -1437, -1441, -1442, -1444), 7-4-101 to -112, 67-4-1401 to -1425, 39-16-702, 40-35-111(e)(1). Tenn. Const. art. I, § 8. Cases: State v. Toole, 224 Tenn. 491, 457 S.W.2d 269 (1970); Jones v. Haynes, 221 Tenn. 50, 424 S.W.2d 197 (1968); Bozeman v. Barker, 571 S.W.2d 279 (Tenn. 1978); West v. Tenn. Hous. Dev. Agency, 512 S.W.2d 275 (Tenn. 1974); Waters v. Farr, 291 S.W.3d 873 (Tenn. 2009); McCarver v. Ins. Co. of State of Penn., 208 S.W.3d 380 (Tenn. 2006); Gallaher v. Elam, 104 S.W.3d 455 (Tenn. 2003); Riggs v. Burson, 941 S.W.2d 44 (Tenn. 1997); State v. Lakatos, 900 S.W.2d 699 (Tenn. Crim. App. 1994); State v. Marshall, 319 S.W.3d 558 (Tenn. 2010); State v. Collins, 166 S.W.3d 721 (Tenn. 2005). Prior AG opinions: Op. 01-166 (Nov. 15, 2001); Op. 90-05 (Jan. 11, 1990).

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2013/op13-097.pdf

Original opinion text

S T A T E O F T E N N E S S E E
OFFICE OF THE ATTORNEY GENERAL
PO BOX 20207
NASHVILLE, TENNESSEE 37202

November 27, 2013

Opinion No. 13-97

Enforcement of Kingsport Hotel/Motel Tax

QUESTIONS

1. Under the City of Kingsport's privilege tax on hotel transient occupants (also known as the "hotel/motel tax"), does an operator who collects taxes but then willfully fails or refuses to remit those taxes to the city treasurer violate Tennessee law?

2. If so, what civil and criminal liabilities would arise from non-remittance of such taxes?

OPINIONS

1. Yes.

2. Based on the language of the City of Kingsport's enabling private act, which itself incorporates generally the enforcement powers granted to the Commissioner of Revenue in Title 67 of the Tennessee Code Annotated, a hotel/motel operator who fails to remit taxes that the operator collected may incur civil liability, as well as liability for perjury under general criminal statutes if he makes a false tax return under oath. The potential civil liabilities include interest, penalties, seizure of property for forced sale and other forms of levy, and a fine not exceeding $50 per occupant transaction. Perjury is criminally punishable by imprisonment for not greater than 11 months and 29 days, or a fine not to exceed $2,500, or both.

ANALYSIS

Over the last several decades, private acts have authorized hotel/motel taxes in numerous Tennessee counties and municipalities. Generally, these private acts authorize a county or city to levy a privilege tax upon each transient who exercises the privilege of temporary occupancy in any hotel, motel, or other non-residential place of habitation. Since 1981, the City of Kingsport has by virtue of enabling legislation assessed and collected such taxes. 1981 Tenn. Priv. Acts, ch. 46 (hereinafter "Chapter 46").

Whether a hotel/motel operator in Kingsport who fails properly to remit the tax would violate Tennessee law and thus face civil or criminal liability depends first and primarily on the language of Chapter 46. Chapter 46 provides that such taxes must be remitted to the Kingsport city treasurer no later than the 20th day of each month next following the collection of such taxes; otherwise the taxes are considered delinquent. See 1981 Tenn. Priv. Acts, ch. 46, §§ 3, 4, 5, 7. Each hotel/motel operator in Kingsport subject to the tax must also file a monthly tax return under oath with the city treasurer. See id. § 5. Such taxes become delinquent, and thereby accrue interest and penalty, as follows:

Taxes collected by an operator which are not remitted to the city treasurer on or before the due date are considered delinquent. Any operator delinquent in the payment of such taxes shall be obligated to pay interest from the due date at the rate of twelve percent (12%) per annum, plus a penalty of one-half percent (1/2%) for each month or fraction thereof that such taxes are delinquent. Such interest and penalty shall become a part of the tax . . . .

Id. § 7. Thus, the most basic civil liability for a Kingsport hotel/motel operator who willfully fails or refuses to remit duly collected taxes is the imposition by the city treasurer of additional interest and penalties.

Section 9 of Chapter 46 provides that the "city treasurer in administering and enforcing the provisions of this act shall have all the powers and duties provided in Title 67 [of the Tennessee Code]." Included among the powers in Title 67 are those found at Tenn. Code Ann. §§ 67-1-1401 to -1425. This part of Title 67 (Chapter 1, Part 14), titled "Tax Enforcement Procedures Act," sets forth various civil procedures and remedies by which the Commissioner of Revenue may enforce and collect taxes due. By extension then, the city treasurer of Kingsport has available those procedures and remedies to enforce that city's hotel/motel taxes. Specific provisions of Part 14, Title 67 that are accordingly granted to the city treasurer are the following:

• § 67-1-1405. Collection by levy authorized.
• § 67-1-1410. Levy – Padlocking [business] premises.
• § 67-1-1413. Levy – Production of books [or records upon demand].
• § 67-1-1415. Notice of sale [of property].
• § 67-1-1431. Action where tax in jeopardy.
• § 67-1-1435. Sale of personal property. . . .
• § 67-1-1437. Obtaining evidence [examination of books and witnesses, summons].
• § 67-1-1441. Revenue officers . . . Execution of search warrants.
• § 67-1-1442. Continuation of business to satisfy delinquent tax liability.
• § 67-1-1444. Collection of tax debt from transferees – Liability of transferee.

Chapter 46 also provides a separate fine at Section 7:

Each occurrence of willful refusal of an operator to collect . . . or remit the tax . . . is declared to be unlawful and shall be punishable upon conviction by a fine not in excess of fifty dollars ($50.00). Such fine shall be levied for each transaction involving the payment of consideration for occupancy of a space in a hotel.

1981 Tenn. Priv. Acts, ch. 46, § 7. An apparent ambiguity exists in the language of the two quoted sentences of Section 7. The words "unlawful," "conviction," "fine," and "levied" create uncertainty whether a civil or criminal fine is intended, although Section 7 does not use words such as "misdemeanor," "felony," or "imprisonment."

If the quoted language of Section 7 were read to impose a criminal sanction it would come into conflict with the often repeated principle that the General Assembly cannot enact a law making certain acts a crime in only one county since such a law would "circumvent not only the rule against delegation of powers peculiarly the province of the legislature (that of creating crimes)" but also "the requirements of Article 1, § 8 [of the Tennessee Constitution] that the law of the land be general." State v. Toole, 224 Tenn. 491, 493, 457 S.W.2d 269, 270 (1970). See also Jones v. Haynes, 221 Tenn. 50, 55, 424 S.W.2d 197, 198 (1968); Tenn. Att'y Gen. Op. 01-166, at 6 (Nov. 15, 2001); Tenn. Att'y Gen. Op. 90-05, at 3 (Jan. 11, 1990). While it is uncertain whether and how this principle would be applied with respect to a valid private act that imposes a tax in only one county and is useful in the administration of that tax, that principle remains a factor to be considered in interpreting the scope and intent of this provision of Chapter 46.

On the other hand, if the language of the last two sentences of Section 7 is read to impose only a civil fine, there is no possible constitutional defect. The language is certainly susceptible to this interpretation. Initially, general principles of statutory interpretation recognize a strong presumption in favor of the constitutionality of acts passed by the General Assembly. See, e.g., Bozeman v. Barker, 571 S.W.2d 279, 282 (Tenn. 1978); West v. Tenn. Hous. Dev. Agency, 512 S.W.2d 275, 279 (Tenn. 1974). If a constitutional attack is levied on a statute, courts will indulge every presumption in favor of the statute's validity, resolving any doubt in favor of, not against, its constitutionality. Waters v. Farr, 291 S.W.3d 873, 917 (Tenn. 2009); McCarver v. Ins. Co. of State of Penn., 208 S.W.3d 380, 384 (Tenn. 2006); Gallaher v. Elam, 104 S.W.3d 455, 459 (Tenn. 2003); Riggs v. Burson, 941 S.W.2d 44, 51 (Tenn. 1997). Thus, when the language of a statute permits, the court must adopt a construction that will not run afoul of constitutional limitations. State v. Lakatos, 900 S.W.2d 699, 701 (Tenn. Crim. App. 1994).

Second, the rule of lenity from criminal jurisprudence provides additional support for this interpretation. Under that rule, the court will limit a statute's potential criminal application to those persons or circumstances that are clearly described in the statute and will decline to impose punishment for conduct that is not "plainly and unmistakably proscribed." State v. Marshall, 319 S.W.3d 558, 563 (Tenn. 2010) (citations omitted). Although, strictly speaking, the rule of lenity applies only to the interpretation of a criminal statute, see, e.g., State v. Collins, 166 S.W.3d 721, 727 (Tenn. 2005), by analogy, one may conclude that a court interpreting Section 7 of Chapter 46 would not "reach" to define the conduct at issue, willful refusal to collect or remit the tax, as criminal. A more lenient interpretation would view the $50 fine as a civil sanction, quasi-criminal at most. As stated by the Tennessee Supreme Court, due process mandates that no person be "forced to speculate, at peril of indictment, whether his conduct is prohibited." State v. Marshall, 319 S.W.3d at 563 (citations omitted). In light of these authorities, the $50 fine imposed by the last two sentences of Section 7 of Kingsport's private act should be interpreted as a civil and not criminal fine.

Finally, turning to the existence of any criminal penalty, noncompliant Kingsport hotel/motel operators might be prosecuted for perjury if their monthly tax returns underreported or otherwise misrepresented the amount of taxes collected or due. As stated, Section 5 of Chapter 46 requires a monthly tax return under oath to be filed with the city treasurer. 1981 Tenn. Acts, ch. 46, § 5. Tennessee law provides that perjury is a crime, stating:

(a) A person commits an offense who, with intent to deceive:

(1) Makes a false statement under oath . . .

(3) Makes a false statement, not under oath, but on an official document required or authorized by law to be made under oath and stating on its face that a false statement is subject to the penalties of perjury . . .

(b)(1) Perjury is a Class A misdemeanor . . . .

Tenn. Code Ann. § 39-16-702(a), (b). A Class A misdemeanor is punishable by a term of imprisonment for not greater than 11 months and 29 days, or a fine not to exceed $2,500, or both. Tenn. Code Ann. § 40-35-111(e)(1).

In summary, under Chapter 46, a Kingsport hotel/motel operator who fails to remit collected taxes may incur civil liability in the form of interest, penalties, levies, and possibly fines not exceeding $50 per transaction. Further, if the operator makes a false return, the operator may incur criminal punishment for perjury.

ROBERT E. COOPER, JR.
Attorney General and Reporter

WILLIAM E. YOUNG
Solicitor General

CHARLES L. LEWIS
Deputy Attorney General

Requested by:

General Barry P. Staubus
District Attorney General
Second Judicial District (Sullivan County)
P.O. Box 526
Blountville, TN 37617