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Spotlight on Alabama: Supreme Court Permits Jefferson County to Continue Collecting Occupational Tax


The Alabama Supreme Court issued a ruling yesterday, December 14, 2010, permitting Jefferson County (in which the city of Birmingham is situated) to continue to collect its occupational tax. The decision gives some certainty to employers located in Jefferson County who had been faced with the dilemma of whether to continue to collect and remit the tax, which had been declared unconstitutional by the Montgomery County Circuit Court on December 1, 2010.

Employers located in Jefferson County now can confidently continue to withhold the occupational tax from employees and remit the taxes to Jefferson County as usual.

By way of background, on December 1, 2010, the Montgomery County Circuit Court issued an order declaring the Jefferson County Occupational Tax and Gross Business License Tax unconstitutional based on procedural flaws in the passing of that tax law. In the same order, the Circuit Court enjoined Jefferson County from collecting any further taxes but ruled that Jefferson County did not have to refund the taxes it had previously collected. Jefferson County filed a motion requesting the Circuit Court to modify the injunction to allow it to continue collecting the taxes until its appeal to the Supreme Court of Alabama has been resolved. On December 10, 2010, the Montgomery County Circuit Court denied Jefferson County’s motion. However, on December 14, 2010, the Supreme Court of Alabama issued an order modifying the Circuit Court’s injunction to allow Jefferson County to continue collecting the taxes during its appeal.

Under the Supreme Court's order, Jefferson County must segregate the occupational taxes it collects in an interest-bearing escrow account and keep detailed accounting records as to the collected funds. Employers located in Jefferson County should continue to withhold Occupational Tax from their employees' wages and remit the same until a final order is issued from the Alabama Supreme Court.

If you have any questions relating to your obligations to withhold the Jefferson County Occupational Tax, please feel free to contact one of the following attorneys in the Firm's Tax Department:

Birmingham, Alabama
Thomas J. Mahoney Jr. 205.250.8346 tmahoney@bakerdonelson.com
William R. Sylvester 205.250.8372 bsylvester@bakerdonelson.com
Vincent J. Schilleci 205.244.3827 vschilleci@bakerdonelson.com
Adam S. Winger 205.250.8381 awinger@bakerdonelson.com

Jackson, Mississippi
Stacy E. Thomas 601.351.2484 sthomas@bakerdonelson.com
Jon D. Seawright 601.351.8921 jseawright@bakerdonelson.com
David P. Webb 601.969.4678 dwebb@bakerdonelson.com

Atlanta, Georgia
Nedom A. Haley 404.221.6505 nhaley@bakerdonelson.com
Michael M. Smith 404.589.3419 mmsmith@bakerdonelson.com
Michael S. Evans 404.221.6517 mevans@bakerdonelson.com

New Orleans, Louisiana
Robert W. Nuzum 504.566.5209 rnuzum@bakerdonelson.com

Baton Rouge, Louisiana
Alton E. "Biff" Bayard III 225.381.7019 abayard@bakerdonelson.com

Washington, D.C.
Scott D. Smith 202.508.3430 sdsmith@bakerdonelson.com
James W. McBride 202.508.3467 jmcbride@bakerdonelson.com

Memphis, Tennessee
William H.D. Fones Jr. 901.577.2247 wfones@bakerdonelson.com
Adam C. Flock 901.577.8167 aflock@bakerdonelson.com

East Memphis, Tennessee
James R. "Josh" Hall Jr. 901.579.3126 joshhall@bakerdonelson.com
Christopher J. Coats 901.579.3127 ccoats@bakerdonelson.com

Nashville, Tennessee
Carolyn W. Schott 615.726.7312 cschott@bakerdonelson.com
John B. Burns 615.726.5599 jburns@bakerdonelson.com

Chattanooga, Tennessee
Carl E. Hartley 423.756.2010 chartley@bakerdonelson.com
Virginia C. Love 423.209.4118 vlove@bakerdonelson.com

Knoxville, Tennessee
Angelia M. Nystrom 865.971.5170 anystrom@bakerdonelson.com

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