United States: Kentucky Court Finds Retroactive Application Of Statute Constitutional

In Wal-Mart Stores East, LP v. Department of Revenue, Civ. Action No. 14-CI-870 (Franklin Cir. Court June 9, 2015), the Franklin Circuit Court considered the constitutionality of retroactive application of a 2009 amendment to KRS § 139.570.  During the period for which the taxpayers claimed refunds (2003 to 2008), KRS § 139.570 provided that a seller may deduct on each sales tax return 1% of the tax due in excess of $1,000 as reimbursement for the cost of collecting and remitting the tax.  Three budget bills enacted during the refund period placed a $1,500 cap on the total reimbursement allowed per taxpayer in any month.  Effective July 1, 2008, the Kentucky General Assembly passed a separate bill (that is, separate from the budget bills) formally amending KRS § 139.570 to reflect the $1,500 cap.  In 2009, the General Assembly repealed and reenacted KRS § 139.570 to include the $1,500 reimbursement limit and apply the limit retroactively to July 1, 2003. 

On average, Petitioners Wal-Mart Stores East, LP ("Wal-Mart") and Sam's East, Inc. ("Sam's") collect and remit a combined $17 million in sales tax each month to the Kentucky Department of Revenue (the "KDOR"). For the periods of July 1, 2003 – June 30, 2004 and July 1, 2005 – June 30, 2008, Wal-Mart and Sam's remitted the sales tax collected and withheld $1,500 as vendor compensation.  On September 8, 2008, Wal-Mart and Sam's submitted refund claims to the KDOR for vendor compensation owed to them over the $1,500 limit.  They argued their refund claims were filed after the $1,500 cap provisions in the budget bills expired and within the four year statute of limitations set forth in KRS § 134.580. 

The Petitioners also advanced several constitutional arguments in support of their refund claims:  (1) the budget bills violated the provision of Section 51 of the Kentucky Constitution requiring that an act relate to only one subject and that the subject be expressed in the title of the act; (2) the General Assembly cannot amend tax laws in budget bills; (3) the 2009 legislation repealing and reenacting KRS § 139.570 to include the $1,500 cap violated Section 180 of the Constitution, as it diverted private money to the General Fund; and (4) the general four year statute of limitations in KRS § 134.580 applied instead of the two year statute of limitations set forth in KRS § 134.590(2).  The Petitioners argued KRS § 139.590 did not apply because they were not challenging the constitutionality of KRS § 139.570, but only the attempted amendments to the statute by the budget bills.

After the KDOR denied their refund claims, the Petitioners appealed to the Kentucky Board of Tax Appeals (the "KBTA"), which affirmed the KDOR's final rulings and held it did not have jurisdiction to reach the Petitioners' constitutional challenges.  The Petitioners appealed to the Franklin Circuit Court.

On appeal, the court considered four main issues.  First, the court held the General Assembly's retroactive repeal and reenactment of KRS § 139.570 in 2009 was constitutional.  Citing Miller v. Johnson Controls, 296 S.W.3d 392 (Ky. 2009), cert. den., ___ U.S. ___ (May 24, 2010), the court found the retroactive application of KRS § 139.570 was supported by a legitimate legislative purpose, and the means chosen to advance that purpose were appropriately tailored to the legislature's legitimate objective.  The legitimate objective of the legislation, the court held, was to eliminate the windfall to large retailers that results when their collection costs are calculated as a percentage of the total tax remitted, thus maximizing the tax collected for the general obligations of government.  Moreover, the court found that because the legislature took interim actions to reduce compensation to retailers through the budget bills, the retailers were on notice they could not rely upon the compensation formula, which was suspended in the budgets.  Although the court found its holding on retroactivity compelled a decision in favor of the KDOR, it proceeded to briefly address the other issues in the case.

The court next held the repeal and reenactment of KRS § 139.570 did not violate Section 180 of the Constitution, which provides that every act enacted by the General Assembly levying a tax must specify the purpose for which the tax is levied, and no tax levied and collected for one purpose shall ever be devoted to another purpose.  The Petitioners argued that by taking money that was supposed to be collected for reimbursing vendors and redirecting this money to the General Fund, the money was collected for one purpose and devoted to another.  The court disagreed.  The court noted that taxes collected by retailers are held in trust for the Commonwealth, and the retailers have no property interest or private right to any of the funds collected from consumers.  Thus, the court found the money was collected for the general fund all along and not impermissibly transferred.

The court then held that the cap provision in the budget bills did not violate Section 51 of the Kentucky Constitution because the titles clearly related to appropriations and revenue measures.  The court reiterated that no private funds were at issue, as the retailers have no property interest in the sales tax collected.  The court also noted that Section 51 does not apply to bills that modify or suspend a statute, and the budget bills only modified or suspended (not amended) KRS § 139.570.

Finally, the court found it did not need to determine whether the retailers' claims were barred by the statute of limitations, as the retailers' refund claims were not meritorious.

The Petitioners have appealed the Franklin Circuit Court's Opinion and Order to the Kentucky Court of Appeals.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.