NO. 83-250
IN THE SUPREME COURT OF THE STATE OF MONTANA
1983
MONTANA INNKEEPERS ASSOCIATION,
Plaintiff and Appellant,
VS .
CITY OF BILLINGS,
Defendant and Respondent.
Appeal from: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone
Honorable Charles Luedke, Judge presiding
Counsel of Record:
For Appellant:
Philip W. Strope argued, Helena, Montana
Hjort, Lopach & Tippy, Helena, Montana
Roger Tippy argued, Helena, Montana
For Respondent:
K. D. Peterson argued, Billings, Montana
For Amicus Curiae:
Larry Huss, Helena, Montana
Larry Mansch aruued Helena Montana
Landoe, Brown Law Firm, Bozeman, Montana
Submitted. September 13, 1983
Decided October 27, 1983
Filed. QCT 2 ? 1983
Clerk
Honorable John M. McCarvel, District Judge, delivered the
Opinion of the Court.
This is an appeal from the District Court of the
Thirteenth Judicial District of the State of Montana, in and
for the County of Yellowstone, the Honorable Charles Luedke
presiding.
The appellant-plaintiff, Montana Innkeepers Association,
hereinafter referred to as "Innkeepers," instituted a
declaratory judgment proceeding pursuant to the provisions of
the Uniform Declaratory Judges Act, Title 27, Chapter 8,
Montana Code Annotated, against the City of Billings,
Montana, respondent-defendant, hereinafter referred to as
"City," to declare Ordinance No. 83-4461 enacted by the City
Council of Billings, Montana, to be illegal and void. Amicus
curiae briefs were permitted to be filed by the Montana Legal
Defense Fund, Inc., a division of the Montana Taxpayers
Association, and by the City of West Yellowstone, Montana,
which has enacted a similar ordinance.
Prior to the 1972 Constitution of the State of Montana,
local governments could exercise only such powers as were
expressly granted to them by the State together with such
implied powers as were necessary for the execution of the
powers expressly granted.
The 1972 Montana Constitution, in addition to providing
for the continuance of the county, municipal and town
governmental forms already existing, opened to local
governmental units new vistas of shared sovereignty with the
state through the adoption of the self-government charters.
Whereas the 1972 Montana Constitution continues to provide
that existing local governmental forms have such powers as
are expressly provided or implied by law (to be liberally
construed), Art. XI, Sec. 4, 1972 Mont. Const., a local-
government unit may now also act under a self-government
charter with its powers uninhibited except by express
prohibitions of the constitution, law or charter, Art. XI,
Sec. 6, 1972 Mont. Const.:
"Self-government powers. A local
government unit adopting a self-
government charter may exercise any power
not prohibited bv this constitution, law
or charter . . ."
The broad expanse of shared sovereignty given to
self-governing local units is illustrated by section 7-1-103,
MCA, which provides:
"A local government unit with self-
government powers which elects to provide
a service or perform a function that may
also be provided or performed by a
general power government unit is not
subject to any limitation in the
provision of that service or performance
of that function except such limitations
as are contained in its charter or in
state law specifically applicable to
self-government units."
And again in section 7-1-106, MCA:
"The powers and authority of a local
government unit with self-government
powers shall be liberally construed.
Every reasonable doubt as to the
existence of a local government power or
authority shall be resolved in favor of
the existence of that power or
authority."
State ex rel. Swart v.Molitor (Mont. 1981), 621 P.2d 1100,
Pursuant to such authorization, according to the
Secretary of the Montana League of Cities and Towns, Inc.,
the following nineteen local governments have elected to be
self-governing:
Anaconda-Deer Lodge County Glasgow
Billings Helena
Bridger Hingham
Broadview Neihart
Browning Poplar
Butte-Silver Bow County Sunburst
Circle Virginia City
Clyde Park West Yellowstone
Ennis Whitefish
Fromberg
The City of Billings is a municipality in the State of
Montana, which has adopted a charter form of government with
self-governing powers. On August 23, 1982, the City of
Billings adopted Ordinance No. 82-4461, which provides for a
"fee" of $1.00 per adult transient occupant for each day of
occupancy of a room in a hotel, motel, or other place of
lodging within the City when the occupancy is for a period of
one day or more, but not exceeding fourteen consecutive days.
The ordinance was referred to the electors of the City of
Billings at the election held in November 1982, the voters
approved it, and the ordinance became effective January 1,
The owner or operator of a lodging establishment is
obligated to collect the fee and remit the same to the City
monthly, less 2 percent administrative costs, and is subject
to penalty for noncollection, audit and inspection.
Section 5.10.010 of the ordinance states specifically
its purpose:
"Purpose of the occupancy fee imposed by
this ordinance is to provide a portion of
the revenue necessary to construct and
reconstruct the arterial and collector
streets of the City in a good substantial
condition and a portion of the necessary
expense of police and fire and allocable
incidental administration costs. The
fees imposed hereby will enable those
persons non-resident of the City to pay a
portion of the services of the city that
extant within the City for their benefit
and protection during their sojurn within
the City. "
In addition the city council could allocate up to 20 percent
of revenue to promote tourism, conventions and other similar
activities within the City.
Innkeepers is a nonprofit corporation organized under
the laws of the State of Montana. It is a voluntary trade
a.ssociation organized and existing for the benefit of the
lodging industry of the State of Montana. Members thereof
are the owners and operators of lodging establishments within
the City of Billings wherein they pro.trid.e, among other
things, overnight lodging services for the genera1 public.
The District Court held that the express purpose of the
ordinance was to generate revenue; that the ordinance does
not indicate any activity that is being regulated; and
concluded, as a matter of law, that the "fee" imposed by the
0rdin.a-nceis a tax, and not a "fee." Innkeepers do not
appeal that portion of the District Court order.
The sole issue on a-ppeal is whether the tax imposed by
the ordinance is a tax prohibited by statute, and
specifically section 7-1-112(1, MCA, which provides as
follows:
"A local government with self-government
powers is prohibited the exercise of the
following powers unless the power is
specifically delegated by law:
" (1) the power to authorize a tax on
income or the sale of goods or services,
except that this section shall not be
construed to limit the authority of a
local government to levy any other tax or
establish the rate of any other tax."
The power to tax the sale of goods or services has not
been delegated to local governments.
The District Court held that the renting of a hotel or
motel room is the sale of a service, but since the ordinance
imposed the tax on the person occupying the room and not on
the transfer of that room, it is not a tax on the sale of
goods or services. Counsel for the City a.rgued that the
renting of the room has nothing to do with the tax imposed.
Therefore, every nonresident of the City upon entering the
City is subject to the tax. However, hotel and motel
operators are the only busi-nesses permitted to levy the tax.
Restaurants, bars and other businesses may not collect the
tax from a transient nonresident. This reasoning of course
is fallacious. The renting of the room cannot be divorced
from the collection of the tax. Therefore, the tax is a tax
on the sale of a service and prohibited by section
7-1-112(1), MCA. J. A. Tobin Const. Co. v. Weed (1965), 158
Colo. 430, 407 P.2d 350. 68 Am.Jur.2d Sales - - Taxes,
and Use §
Hotels and motels sell a product or service which is
temporary lodging. The occupant is the consumer since he
purchases the service. No title changes hands, but the
consumer comes into temporary possession of the room. A tax
placed on that transaction is a sales tax.
The District Court relied as sole support for its
decision on the case Teachers Retirement System of Georgia v.
City of Atlanta (1982), 249 Ga. 196, 288 S.E.2d 200. That
case held a public entity cannot claim its tax-exempt status
on properties it has acquired through foreclosure, for that
would result in significant loss of revenue to the taxing
authorities. The entity acquires title to those properties
subject to existing taxes. The Georgia court merely decided
- must pay the tax.
who
A crucial distinction must be made between Teachers
Retirement System and the case at hand. In the Georgia case,
the validity of constitutionality of the taxes was not at
issue. The question of whether the Atlanta hotel--motel
excise tax wa.s or was not a sales tax was not before the
court. Teachers Retirement System based its entire case on
the sole argument that it enjoyed tax-exempt status. Whether
a tax is actually imposed on the vendor, or upon the
occupant, may be important for deciding whether the taxing
authorities can collect the tax. It is of no importance in
determining the nature of the tax--whether it is or is not a
sales tax. Therefore, Teachers Retirement System is of
minimal significance to the issue of whether the City of
Billings has imposed an invalid sales tax.
Ordinance No. 82-4461 enacted by the City is illegal and
void. The judgment. of the District Court is reversed.
~Ystrict Judge, sitting in
place of Mr. Justice Frank B.
Morrison, Jr.
We concur:
La..$&JwoaQ
& Chief Justice