JACKSON - Several cities have failed to convince the Mississippi Supreme Court that they had been wronged by the state involving the diversion of sales taxes.
The municipalities sued the Tax Commission in 1999, claiming the commission had been holding back some of the tax money and putting it in the state treasury. In 2000, they amended the complaint to challenge a new state law that appeared to the cities to legalize the practice.
A Hinds County judge threw out the lawsuit in 2001. The Supreme Court on Thursday upheld the trial judge's decision.
Under a 1968 state law, municipalities collect sales taxes for the state and for that service are allowed to keep 18.5 percent of what they take in. The law also repealed a local sales tax levy.
Twenty cities had sued the Tax Commission. Those listed as appellants were Jackson, Greenville, Grenada, Indianola, Belmont, Calhoun City, Canton, Corinth, Houston, Kosciusko, Newton, Ocean Springs, Pearl and Waynesboro.
For many municipalities, the sales tax they get back from the state provides funds for budgets.
The 2000 Legislature passed a law that locked into the statutes the diversion procedure used by the Tax Commission and barred cities from attacking the diversion formula.
Lawmakers said that if the cities won the lawsuit, the state might have ben forced to pay $200 million.
On appeal, the cities argued the law was unenforceable because lawmakers tried to make it retroactive in such a way to derail the suit.
Justice George Carlson, writing Thursday for the Supreme Court, said the cities' claims were unfounded. He said both the diversion formula and the 2000 law were legal.
Carlson said there are many other cases in which the retroactive application of laws has been upheld, even when the legislation would obstruct pending lawsuits.
Copyright 2003, Associated Press. This material may not be published, broadcast, rewritten, or redistributed.
