ST. LOUIS — A major corporate employer is challenging a city tax applied to payroll from those it says were working outside the city, opening a new front in a legal battle over the city’s payroll and earnings tax policies amid a major shift to remote work during the pandemic.
AT&T Inc. on Monday sued the city and ºüÀêÊÓƵ Collector of Revenue Gregory F.X. Daly, alleging the collector’s office improperly imposed the city’s 0.5% payroll tax on employees who neither live nor work inside the city limits.
It’s the first known lawsuit brought by an employer challenging collection of the city’s payroll tax during the pandemic. The payroll tax produces a sizable stream of revenue for the city, about $40 million in this current fiscal year, or 8% of the city’s general fund.
The company’s lawsuit follows a similar legal challenge filed last year over the city’s 1% earnings tax, which city workers and residents pay. A ºüÀêÊÓƵ judge recently dismissed most of that lawsuit, which sought class-action status, saying individual taxpayers need to pay taxes under protest and file their own appeals under Missouri tax refund statutes.
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AT&T, represented in its lawsuit by Bryan Cave Leighton Paisner, says it did pay $218,634 in payroll taxes under protest and is seeking a refund. It also accuses the collector’s office of violating the Hancock Amendment of the Missouri Constitution, which limits the levying of new taxes.
“Through a variety of pronouncements that do not rise to the level of rules or regulations, the Collector has asserted the right to impose tax upon the wages of persons working outside the physical boundaries of the City ‘due to COVID-19,’ when they are ‘working remotely from home’ and/or working ‘virtually,’†AT&T says in its lawsuit.
The company, which has a sizable downtown office and employee base, said it updated its payroll system in September 2020 to allow workers to identify if they were working somewhere other than their regular office. According to the company’s lawsuit, only about 40% of AT&T’s $53 million payroll calculated by the collector’s office was actually working within the city limits.
“To the extent that work locations were located outside the physical boundaries of the city, plaintiff did not include compensation for such work performed or services rendered within its payroll expense tax base,†the company said in the filing.
The company says the collector’s office has not amended its payroll tax form, which “expressly state(s) that an employer is to enter payroll for the quarter ‘within the City of ºüÀêÊÓƵ.’â€
A spokeswoman for Daly said the office is still reviewing the lawsuit.
The other lawsuit, filed in March, accuses the collector’s office, worried over the millions in revenue at stake because of the pandemic, stopped its past practice of paying earnings tax refunds to people who worked remotely. Much more money is at stake in the earnings tax litigation: more than one-third of the city’s general revenue.
Kansas City, the only other Missouri city with an earnings tax, .
Originally posted at 8 p.m. Monday, Jan. 25, 2022