ST. LOUIS — A judge on Monday dismissed most of a lawsuit seeking city earnings tax refunds for people who began working remotely during the pandemic.
The ruling by ºüÀêÊÓƵ Circuit Court Judge Christopher McGraugh hands a first-round victory to the city in a case affecting a major tax revenue source. More than one-third of the city’s general revenue comes from the 1% earnings tax charged to city residents and nonresidents who work in the city, or about $180 million in 2020.
The majority of that is paid by nonresidents who work at ºüÀêÊÓƵ-based employers — and the pandemic kept many of those employees working from home for months or more. In the past, the ºüÀêÊÓƵ Collector of Revenue has allowed those who travel outside of the city on business to file for refunds of taxes for days when they’re traveling or working at company locations beyond the city limits.
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Attorneys Mark Milton and Bevis Schock filed suit against the city and the collector in March, alleging the city collector’s office, worried over the millions in revenue at stake because of the pandemic, stopped its past practice of paying refunds to people who worked remotely.
McGraugh’s order mostly sided with the collector’s argument that state statute already has a remedy for taxpayers to protest taxes and file for refunds — and that it doesn’t allow for class-action status.
Milton expressed frustration with the ruling and said he plans to appeal, pointing out that because the earnings tax is mostly collected from paychecks and remitted by employers to the city, like other income taxes, most workers would have to file biweekly appeals and have already missed the window for doing so. The collector always had allowed taxpayers to request refunds for days worked outside of the city at the end of the year before changing the policy in 2020, he said.
“You’d have to protest at the time your employer makes a payment,†Milton said. “It’s pretty obvious what they’re doing. Any objective person who sees what the city did knows they did it out of desperation. They’re not following the law.â€
ºüÀêÊÓƵ Collector of Revenue Gregory F.X. Daly’s office, meanwhile, issued a statement saying it was “pleased†the ruling “provided important clarity to our office and to taxpayers regarding several important procedural issues, including that plaintiffs’ lawyers cannot subject to the Collector or City to class actions over this issue.â€
The court did not toss one provision of the lawsuit asserting that the change in earnings tax policy runs afoul of the Missouri Hancock Amendment by levying taxes where it hadn’t before.
Milton said the team plans to continue fighting that claim but pointed out a win would only result in a court saying the city erred in changing its policy — it won’t help people get their money back.
“The only way that’s going to happen, realistically, is if we get class certification,†Milton said.
Kansas City, the only other Missouri city with an earnings tax, .