Temporary injunction granted on 1% food tax collection

Sebastian County Circuit Court Judge Michael Fitzhugh on Friday granted an injunction stopping collection of the 1% prepared food tax in Fort Smith.

The Citizens for Responsible Taxation on May 24 filed a lawsuit asking to stop collection of a 1% prepared food tax in Fort Smith until a jury trial can be held in the attempt to force an election on implementation of the tax.

The tax was enacted Feb. 24 by the Fort Smith Board of Directors to resolve a more than 10-year search to plug an annual deficit with Fort Smith Convention Center operations predicted to occur when state turnback money dried up. The state turnback program ended for Fort Smith in June 2010 from which the city received about $1.8 million a year.

The lawsuit stems in part from a rejected effort by Eddie York and other members of the Citizens for Responsible Taxation to seek a public election on the 1% tax. On March 26, the group submitted about 4,460 signatures, with 2,822 valid signatures required to force a vote on the issue.

The lawsuit seeking the injunction suggests that “irreparable harm” will come to the “tens of thousands of restaurant owners and patrons” if the tax is implemented only to later by overturned by court action or a public vote.

During the hearing, Fort Smith attorney Jerry Canfield essentially argued that petition organizers failed to abide by the letter of the law in collecting signatures and presenting the signatures to the city.

Fort Smith attorney Brian Meadors, representing the petition organizers, argued that the city failed to provide consistent information during the process and that the petition law is flexible and not a “strict compliance statute.” Meadors said because a few words were omitted in the ordinance language attached to the petitions “doesn’t make it fatally defective.”

After the two hours of testimony, Judge Fitzhugh found that implementing the tax would create irreparable harm because it would be “close to being impossible” to repay restaurant customers if the tax were collected and later overturned.

And in stating that he found “discrepancies” in letters from Fort Smith City Clerk Sherri Gard, Judge Fitzhugh ruled the case would have a “likelihood of success” if it proceeded to trial.

Although Meadors had asked for a jury trial, he said at the end of the hearing he would amend his complaint and accept a bench trial. The trial is set for June 17 with Judge Fitzhugh presiding.

The Fort Smith Advertising & Promotion Commission approved on May 20 the rules and regulations for collection and enforcement of the 1% prepared food tax. The 50 pages of rules and regs are being promulgated this week during a series of meetings with owners and managers of restaurants and other businesses that sell prepared foods.