This appeal represents the ice. illegal-exaction challenge against the imposition of a local one-percent compensating-use tax within Pulaski County. Based on Daniel v. Jones, 332 Ark. 489, 966 S.W.2d 226 (1998), which the trial court claimed overruled City of Little Rock v. Waters, 303 Ark. 363, 797 S.W.2d 426 (1990) (Waters I), the trial court ruled that the imposition of a one-percent compensating use tax pursuant to Act 31 of 1987, First Extraordinary Session, was invalid because the affected taxpayers were not allowed to vote for or against the tax, but that its ruling should be prospectively applied. On appeal, the appellants argue the following points: (1) the trial court erred by refusing to dismiss the suit under the doctrines of res judicata and collateral estoppel in light of this court’s decision in Waters I, and (2) the trial court erred in finding that Act 31 is invalid. Appellees bring a cross-appeal arguing that the trial court erred by only ordering prospective injunctive relief to the affected taxpayers rather than ordering refunds retroactively. Because we hold that the trial court clearly erred as a matter of law, we reverse. In so holding, the cross-appellants’ argument is rendered moot, thus we dismiss their cross-appeal.
Facts
In 1982, voters in Pulaski County approved a local one-percent sales tax. That ballot title referred only to the sales tax, but pursuant to the provisions of Act 991 of 1981, as amended by the provisions of Act 26 of 1981, the county imposed, by ordinance, collection of a one-percent compensating use tax. That tax was collected from September of 1982, through June of 1986. In Regan v. Venhaus, 289 Ark. 266, 711 S.W.2d 467 (1986), the court declared the imposition of the compensating use tax an illegal exaction because the tax was imposed by county ordinance without a vote of the taxpayers.
Subsequently, the General Assembly enacted Act 31 of 1987, which imposed the one-percent compensating use tax that is presently at issue. That act provides:
SECTION I. In all counties which adopt a local sales tax under the provisions of Act 991 of 1981 or Act 26 of the First Extraordinary Session of 1981 or which have, prior to the effective date of this act (September 4, 1987), adopted a local sales tax under the provisions of Act 991 of 1981, or Act 26 of the First Extraordinary Session of 1981, there is also hereby levied a local compensating use tax. The rate of use tax levied by this Act shall be the same as that of the sales tax in the county. No additional tax shall be levied by this Act where a use tax is otherwise levied under the provisions of Act 26 of the First Extraordinary Session of 1981. Any tax levied under the provisions of this Act shall be levied, collected and administered in accordance with the provisions of Act 26 of the First Extraordinary Session of 1981.
After the effective date of Act 31, September 11, 1987, the use tax was collected for Pulaski County based on the one-percent sales tax approved in 1982. In Waters I, the court held that the use tax so collected pursuant to Act 31 did not violate the equal protection clauses of the United States and Arkansas constitutions. In finding Act 31 to be valid, the court held:
The tax structure in this state is based upon many different types of taxes, some of which are imposed by direct vote of the citizens and some of which are imposed by the citizens’ duly elected representatives. Where those representatives fail to carry out the desire of the people, citizens are afforded the opportunity to voice their concern either direcdy to those legislators or at the polls when those officials face reelection. Whether a tax is fair should be decided by the legislators of this state who are elected by the people for that purpose. Here, the members of the General Assembly voted unanimously to impose a use tax, and the governor subsequently signed Act 31. This court’s function, as one of the three branches of government, is confined to the question of the validity and interpretation of the actions taken by the other two branches. We find that the use tax imposed by Act 31 was a valid exercise of authority by the Arkansas Legislature.
Waters I, 303 Ark. at 370 (emphasis added). Further, the Waters I court held that Act 31 is not local or special legislation.
Subsequently, in Daniel v. Jones, 332 Ark. 489, 966 S.W.2d 226 (1998), this court struck down, as an illegal exaction, a White County one-percent sales tax that had been approved by the voters. There, the ballot specified five uses for the proposed tax. However, it was undisputed that the tax revenues were being used for purposes other than those stated on the ballot based on Act 991 of 1981, which provided that a portion of the tax collected be distributed to the cities on a per capita basis. The funds so received by the cities were being used for purposes other than those specified on the ballot. In reversing the trial court’s dismissal of the action, the Daniel court held that the voters’ right to be fully informed on the matter for which they were casting their votes is paramount. In sum, the Daniel court held that to the extent that Waters I conflicted with its holding, Waters I was overruled. Specifically, the Daniel court stated:
We decline to follow the reasoning of Waters. Instead, we conclude that the holding in Waters is incorrect, and we overrule that decision to the extent that it conflicts with our holding today. We now embrace the reasoning expressed by the dissent in that case, namely that the voters’ right to be fully informed of the matter for which they are casting their votes is paramount. In other words, where the General Assembly has established the right of the voters to approve the imposition of a tax, any consideration of the legislature’s general power to tax is secondary to the voters’ right to full disclosure of the nature of the tax and its proposed purposes. “ [T]he General Assembly only authorizes the imposition of the tax. It is imposed by a vote of the people who will pay it.” Waters, 303 Ark. at 373, 797 S.W.2d at 432 (Newbern, J., dissenting).
Daniel, 332 Ark. at 502.
Based on that holding, a week later, the appellees, Pulaski County taxpayers, filed the present challenge to the use tax imposed by Act 31. They argued that the opinion in Daniel rendered Waters I a nullity, as if it had never existed, and that the holding in Daniel required the trial court to issue an injunction against collection of the use tax in Pulaski County. In response to the complaint, the appellants filed motions to dismiss on the grounds of res judicata, collateral estoppel, and failure to state a claim under Ark. R. Civ. P. 12(b)(6).
The trial court denied the appellants’ motions to dismiss, finding that Daniel overturned Waters I, and that the present lawsuit challenged taxes under a different tax period than that challenged in Waters I. The trial court issued an order certifying the class action and the facts were stipulated. Following a hearing on the issue of prospective or retroactive application of an injunction and submission of the parties’ briefs, the trial court ruled that the appellants’ continued imposition of the one-percent use tax pursuant to Act 31 was an illegal tax because an election on the tax had not been held. Further, based on Pledger v. Bosnick, 306 Ark. 45, 811 S.W.2d 286 (1991), the trial court found that the appellants were entitled to rely on the holding in Waters I and ruled that implementation of its order would be prospective from September 1, 2002. The trial court ordered that any and all amounts of the tax collected after August 31, 2002, were to be held in escrow by the State Treasurer.
Effect of Daniel on Waters I
Before we can address the issue of res judicata^ it is imperative that we address the effect of Daniel on Waters I. As the appellees’ counsel has agreed, the case rises or falls on whether Daniel overrules Waters I. Therefore, this court must determine precisely what Daniel held.
In Daniel, 332 Ark. 489, the court concluded that the sales tax in White County was an illegal exaction because the ballot failed to disclose all the purposes to which the tax revenues were assigned. In addressing the argument that the voters should have known, ostensibly from statutory law, that the cities would be receiving their share of the taxes, the Daniel court examined Waters I, where the court had upheld the imposition of the use tax on the grounds that the General Assembly has the inherent authority to impose a tax and that there is no fundamental right of the citizens to vote on that issue. The Daniel court rejected the broad application of the holding in Waters I, by stating that “where the General Assembly has established the right of the voters to approve the imposition of a tax, any consideration of the legislature’s general power to tax is secondary to the voters’ right to full disclosure of the nature of the tax and its proposed purposes.” Id. at 502. Thus, where the General Assembly delegates its taxing authority to the counties and cities, fully informed voters in the affected areas are entitled to make the ultimate decision. The General Assembly has the inherent authority to either impose a tax directly or to delegate imposition of a tax, and where delegated, the voters’ rights are paramount. Daniel did not, and could not, overrule the General Assembly’s inherent authority to impose a tax directly. Finally, nothing in the law prohibits tying the imposition of a tax directly by the General Assembly to an existing tax that was delegated and approved by the affected voters.1
That analysis of Waters I in Daniel was limited to the facts in Daniel. Like the tax found to be an illegal exaction in Regan v. Venhaus, 289 Ark. 266, S.W.2d 467, the illegal expenditure in Daniel was authorized by the General Assembly but imposed by the county government without a vote by the affected citizens. In neither case was the tax nor the purposes for the tax, respectively, fully disclosed to the voters through the ballot. In other words, to the extent that Waters I allowed county governments to impose a tax without an informed vote, even when authorized by the General Assembly, any tax so collected is an illegal exaction. We reaffirm the holding in Daniel, that when a ballot title states that specific funds will be spent in a certain way, the money must then be spent in that manner. See also Western Foods, Inc. v. Weiss, 338 Ark. 140, 992 S.W.2d 100 (1999); Maas v. City of Mountain Home, 338 Ark. 202, 992 S.W.2d 105 (1999). Waters I does hold that Act 31 is a valid exercise of legislative authority, and Act 31 was never at issue in Daniel.
Res Judicata and Collateral Estoppel
In light of our analysis of the effect of Daniel on Waters I and in light of the holding in Waters I, we agree with the appellants that the trial court erred in denying their motions to dismiss under the doctrine of res judicata. Further, we find that the issue of a different taxable period is irrelevant.
The concept of res judicata has two facets, issue preclusion and claim preclusion. Carwell Elevator Co. v. Leathers, 352 Ark. 381, 101 S.W.3d 211 (2003); Huffman v. Alderson, 335 Ark. 411, 983 S.W.2d 899 (1998). Under claim preclusion, a valid and final judgment rendered on the merits by a court of competent jurisdiction bars another action by the plaintiff or his privies against the defendant or his privies on the same claim. Carwell Elevator, supra. Res judicata bars not only the re-litigation of claims which were actually litigated in the first suit, but also those which could have been litigated. Where a case is based on the same events as the subject matter of a previous lawsuit, res judicata will apply even if the subsequent lawsuit raises new legal issues and seeks additional remedies. Id.
Issue preclusion or collateral estoppel bars re-litigation ofissues. Crockett & Brown v. Wilson, 314 Ark. 578, 864 S.W.2d 244 (1993). In State v. Thompson, 343 Ark. 135, 34 S.W.3d 33 (2000), we stated of collateral estoppel:
When an issue of ultimate fact has once been determined by a valid and final judgment, collateral estoppel precludes re-litigation of that issue between the same parties in any future proceeding. E.g., Edwards v. State, 328 Ark. 394, 943 S.W.2d 600; cert. denied, 522 U.S. 950 (1997) (quoting Schiro v. Farley, 510 U.S. 222, 232 (1994)). In order to establish collateral estoppel, proof of the following is required: 1) the issue sought to be precluded must be the same as that involved in the prior litigation; 2) the issue must have been actually litigated; 3) the issue must have been determined by a final and valid judgment; and 4) the determination must have been essential to the judgment. Edwards, 328 Ark. at 401-02, 943 S.W.2d at 603.
Thompson at 139-140.
In the instant case, the trial court ruled that res judicata and collateral estoppel did not bar this matter on two grounds: (1) Daniel overturned Waters I, “as if the prior decision did not exist,” and (2) the matter related to a different taxable period. As stated above, we disagree.
The constitutional and statutory challenges in Waters I were: (1) Act 31 violated the Equal Protection provisions of the U.S. and Arkansas Constitutions because the General Assembly imposed a tax as a matter of law and did not provide for a separate vote of the people; (2) Act 31 was local legislation in violation of Amendment 14 to the Arkansas Constitution; (3) Act 31 was an improper piece of legislation by reference; (4) the delegation of authority in Act 31 was unconstitutionally vague; and (5) a successful court decision should not be undone by an action of the General Assembly. None of these arguments were successful on appeal and could not be relitigated under the doctrine of res judicata. As the trial court found, the same claims that were raised in Waters I are raised in the present action.
Further, because the class in an illegal exaction suit is composed of every inhabitant of the area affected by the alleged illegal exaction, every citizen is bound by the judgment. Worth v. City of Rogers, 351 Ark. 183, 89 S.W.3d 875 (2002). If an illegal exaction suit were not a bar to another suit, one citizen after another might file suit on behalf of himself or herself until every citizen has sued. Id. Regardless of the parties involved, the claims and issues addressed in Waters I are barred.
Finally, in an attempt to distinguish their claims and avoid res judicata, the appellees argue that the issue of different taxable periods gives rise to different causes of action. Under their argument, every time that the tax is collected, a new cause of action would arise. As pointed out by the appellants, this argument is faulty. Even though the use tax is collected annually, Act 31 was enacted only once in 1987. In sum, the tax imposed by Act 31 of 1987, is the same tax collected in subsequent years. The appellees cite no authority, and we know of none, that would allow multiple litigation for each collectable period for a tax that has been determined to be within the authority of the General Assembly to impose.
Under the doctrines of res judicata and collateral estoppel, the claims and issues presented in this case are barred from relitigation. The court’s decision in Daniel did not overrule Waters I to the extent discussed above, and we need not address the appellants’ remaining arguments. Our decision renders the appellees’ cross-appeal moot and it is dismissed. Therefore, we reverse and remand on direct appeal for actions consistent with this opinion.
Reversed on direct appeal; dismissed on cross-appeal.
Corbin, Imber, and Hannah, JJ., dissent.As stated, we agree with the dissent that where voters are empowered to decide a tax issue, their rights to full disclosure are paramount. However, the dissent ignores the fact that Act 31 empowers the General Assembly, not the voters, to impose a tax. Under the dissent’s argument the legislature could never impose a tax directly without a vote of the affected populace.This would make all taxes to imposed suspect and this is not what our constitution requires.