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Judge: Tax on freelance author is unconstitutional

Charlottesville’s business license taxation of a freelance author is unconstitutionally vague, according to a recent order from a Charlottesville Circuit Court judge.

Authors Corban Klug and John Hart had lawsuits filed on their behalf in July 2019 claiming that the city and county are unconstitutionally discriminating between different types of speech by taxing freelance writers and not traditional media.

Though Hart’s lawsuit has languished in Albemarle Circuit Court, Klug was vindicated by a Jan. 15 order from Judge Claude Worrell that found one of his constitutional arguments to be in the right.

Per Virginia code, no locality can impose a license fee or levy any license tax “upon 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.”

Klug’s company, Regulus Books LLC, received an assessment from Charlottesville in 2018 for unpaid business license taxes dating back to 2015. Per court documents, Klug received a letter in July 2018 that he might be subject to the business license tax because “he included income from Regulus on Schedule C of his 2017 federal tax return under the category ‘Independent Artists, Writers and Performers.’”

Charlottesville charges a $35 fee for a business license for businesses with $0 to $50,000 in gross receipts, a $50 fee for businesses with $50,000 to $100,000 in gross receipts and businesses with $100,000 or more in gross receipts are taxed based on the type of business.

In Albemarle, businesses with gross receipts less than $100,000 pay a flat fee of $50. For businesses with gross receipts of $100,000 or more, the tax is based on type of business.

Both court filings for Klug and Hart state they were assessed the license tax of $0.36 per $100.00 of gross receipts, under the categories of “misc. business/personal service” and “repair, personal, business, and other services,” respectively.

Eventually, after responding to the commissioner’s request, Klug received an assessment for $2,177.22 for 2015-2018.

Klug has taken issue with the tax, which he argues has been “applied unevenly” to freelance writers.

In the Jan. 15 order, Worrell wrote that in order to be taxed on the code section the city claims Klug falls under the business must provide services. These services are defined as purchases by a customer that “do not have physical characteristics, or which are not goods, wares or merchandising. Claims from the city that Klug met these requirements were unconvincing, Worrell wrote.

“The city has argued that Regulus provides a service or business to his publisher. The Court disagrees,” Worrell wrote. “The Court finds the argument that Regulus provides a service to his publisher to be forced, strained, or contrary to reason.”

As such, Worrell wrote that Regulus cannot be taxed under the city code because it is unconstitutionally vague.

Worrell’s order follows a decision last year that rejected an argument that Charlottesville’s business license violates the First Amendment because it taxes authors while excluding the press.

Following Worrell’s order, Klug’s attorneys weighed in on the decision in a news release claiming victory.

“Charlottesville’s business-license code allowed tax collectors to target anyone in the name of raising revenue, whether they were actually covered by the tax or not,” Renee Flaherty wrote. “Today’s decision means that when Charlottesville taxes its residents, it must do so constitutionally.”

The news release also claims that it is “only a matter of time” until Albemarle County’s highly similar taxation law is also found to be unconstitutional. The case remains active but no hearings have been scheduled since December 2019.


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