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Georgia School District Not Required to Return Taxes

  • Oct 17, 2012 | Gail Cole

Is a school district required to return excess sales and use tax proceeds? The Supreme Court of Georgia has decided it is not.

The details of the Marsh v. Clarke County School District are as follows. 

Voters in the Clarke County School District decided in 2001 to levy a one percent educational sales and use tax (ELOST). It was set to begin the moment a previous ELOST expired, and to be in place for five years. ELOST funds were for specific, authorized projects totaling $87,849,000.

A taxpayer argued that since the funds collected from the 2001 ELOST totaled $93,413,789, the school district should be required to return the excess sales and use tax collected--an amount of $5,564,789. Art. VIII, Sec. VI, Par. IV (h) of the Georgia Constitution was cited:

"Excess proceeds of the tax which remain following expenditure of proceeds for authorized projects or purposes for education shall be used solely for the purpose of receding any indebtedness of the school system. In the event there is no indebtedness, such excess proceeds shall be used by such school system for the purpose of reducing its millage rate in an amount equivalent to the amount of such excess proceeds."

Pursuant to Art. VIII, Sec. VI., Par. IV (h), the appellant "sought a writ of mandamus requiring the school district to return 'excess proceeds' of the 2001 ELOST to the taxpayers of the county by reducing the millage rate in an amount of the excess proceeds." Both the superior court and the Supreme Court of Georgia denied the writ.

The Supreme Court determined that while monies raised by the 2001 ELOST exceeded the projected costs of specific, authorized projects, said monies did not actually meet the real costs of the projects:

"The school district actually spent more (i.e., $95,362,296) than the amount of taxes collected (i.e., $93,413,789) pursuant to the 2001 referendum on school projects authorized by the referendum."

In fact, even after levying an additional ELOST in 2006, the school district had "at least $10,855,000 in debt, an amount greater than the amount of 'excess proceeds.'"

It was therefore determined that the appellant "did not establish a clear legal right to mandamus: he did not prove that 'excess proceeds' remain for the purpose of reducing the millage rate."

These days, it is difficult to imagine any school district with excess cash. States from California to Texas have slashed education funding in recent years, due to the sluggish economy. California voters are being asked to approve tax increases to prevent "about $5.5 billion in cuts from public schools and $500 million from the state's public colleges." In Texas, "the Legislature has eliminated more than $5 billion in financing from public education."

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.