Charlottesville's Business License Tax
Business license taxes are supposed to defray the cost of infrastructure that businesses and their customers use; they shouldn’t be levied against people who are sitting alone, in a room, writing books.
Corban and John have no storefront and no customers, and are not a burden on city or county infrastructure. They aren’t running a business; they’re writing books.
But with cash-strapped municipalities looking for more sources of revenue, Charlottesville’s creative community represented an untapped well. Albemarle County recently hired two auditors to identify potential targets for taxation. Musicians and writers—among them, bestselling author John Hart—received tax bills as a result.
In addition to requiring a license, Charlottesville and Albemarle County also impose a tax or fee on the basis of a business’s “gross receipts.” Gross receipts are the business’s revenue, without deducting expenses. No tax is imposed on any business with gross receipts less than $100,000 per year.[c]City Code § 14-15(a); County Code § 8-500.[/c]Those smaller businesses pay a $35-50 per year license fee. Not obtaining a business license is a misdemeanor punishable by fines or jail time.[c]City Code § 14-3(d); County Code § 8-103(A). [/c]
There’s one group of businesses in Charlottesville, however, that doesn’t face these taxes: the traditional media. Although Virginia allows municipalities to license businesses, the Commonwealth requires them to exempt much of the print and visual media, including newspapers, magazines, other periodicals, radio and television.[c]Va. Code § 58.1-3703(C)(3) (“No county, city, or town shall impose a license fee or levy any license tax . . . [u]pon the privilege or right of printing or publishing any newspaper, magazine, newsletter or other publication issued daily or regularly at average intervals not exceeding three months, provided the publication’s subscription sales are exempt from state sales tax, or for the privilege or right of operating or conducting any radio or television broadcasting station or service.”).[/c] Other businesses aren’t so lucky. In all, Charlottesville’s ordinance subjects over 130 businesses to licensure, and the county ordinance is similarly comprehensive.
Remarkably, though, nowhere in either ordinance is there any reference to “authors” or “writers.” Instead, both ordinances contain “catch-all” provisions that sweep in other, unlisted occupations. Charlottesville’s business license tax, for example, taxes “[a]ny other repair, personal or business service not specifically included in [the ordinance].”[c]See City Code § 14-19(i)(12).[/c] The county ordinance taxes “repair, personal, business, [or] other service[s].”[c]County Code § 8-712.[/c]
But writers are not “repair” businesses or “personal” or “business” services. The fact that the city and county tax them anyway shows that these catch-all provisions are so vague they let city and county taxing officials tax—or not tax—whomever they wish.
Corban Addison Klug (writing under the pen name “Corban Addison”) has published four novels. He lives in Charlottesville and works out of his home and a small office downtown. Corban travels the world to write and seek inspiration for his books, which are about issues of global human rights. He has written about everything from human trafficking, to piracy in Somalia, to the underside of the consumer economy.
In October 2018, Charlottesville assessed Corban thousands of dollars in business license taxes dating back to 2015. The assessment came as a complete surprise to Corban. A former lawyer, Corban prides himself on going by the book and following the rules, but he never imagined he had to get a license to write novels.
John Hart has written five New York Times bestsellers and has won several awards for his character-driven, literary thrillers. He lives and works from his home in Albemarle County. In January 2019, the county assessed him thousands of dollars in business license taxes dating back to 2013. John, who has been a full-time writer in Albemarle County since 2006, was also stunned that the county was taxing him for sitting at his kitchen table writing books on an old laptop.
Corban and John moved to the Charlottesville area because they love the beauty, history, peace and quiet. They also appreciate and depend on the support and fellowship of Charlottesville’s large community of artists, writers and other creative individuals. Corban and John can’t picture living or working anywhere else, but as a result of the business license tax, they feel much less welcome in Charlottesville.
The Legal Claims
Charlottesville taxes freelance writers while exempting the traditional press. That’s unfair and unconstitutional. Corban and John have two legal claims. First, Charlottesville and Albemarle County’s business license taxes exempt certain speakers who are a part of the traditional media—newspapers, magazines, other periodicals, radio and TV—while placing a burden on freelance writers like themselves. This violates the First Amendment to the U.S. Constitution. The U.S. Supreme Court has been clear that the government isn’t allowed to discriminate based on who is speaking.[c]See, e.g., Sorrell v. IMS Health, Inc., 564 U.S. 552, 564 (2011); Citizens United v. FEC, 558 U.S. 310, 340 (2010) (“Prohibited . . . are restrictions distinguishing among different speakers, allowing speech by some but not others.”).[/c] The Court has also cautioned against laws that favor the traditional press over other speakers.[c]See, e.g., Citizens United, 558 U.S. at 352 (“[The Court has] ‘consistently rejected the proposition that the institutional press has any constitutional privilege beyond that of other speakers.’”) (quoting Austin v. Michigan Chamber of Commerce, 494 U.S. 652, 691 (1990) (Scalia, J., dissenting)); Minneapolis Star & Tribune Co. v. Minnesota Comm’r of Revenue, 460 U.S. 575, 588, 103 S. Ct. 1365, 1373, 75 L. Ed. 2d 295 (1983) (“[T]he very selection of the press for special treatment threatens the press not only with the current differential treatment, but with the possibility of subsequent differentially more burdensome treatment.”).[/c] The traditional press, while important, is not entitled to special government favors that are denied to freelance, creative entrepreneurs.
Corban and John’s second claim is that the Charlottesville and Albemarle County ordinance’s “catch-all” provisions are unconstitutionally vague under the Fourteenth Amendment to the U.S. Constitution. An ordinary freelance writer, like Corban or John, can’t look at the ordinances and figure out that they are subject to the tax. As a result, the ordinances give too much power and discretion to tax officials seeking new sources of revenue.
The Litigation Team
IJ Attorney Renée Flaherty and Senior Attorney Paul Sherman represent Corban Addison Klug and John Hart. Neal L. Walters of Scott Kroner, PLC, serves as local counsel.
About The Institute for Justice
Founded in 1991, the Institute for Justice is the national law firm for liberty. IJ litigates cutting-edge First Amendment cases across the county. This case builds on IJ’s work protecting those who speak for a living.
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