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Marina Restaurant, House of Liquors and Pioneer Bar v. Sitka (12/27/91) sp-3791
NOTICE: This opinion is subject to
formal correction before publication in the
Pacific Reporter. Readers are requested to
bring typographical or other formal errors to
the attention of the Clerk of the Appellate
Courts, 303 K Street, Anchorage, Alaska
99501, in order that corrections may be made
prior to permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
MIKE LAGOS and MEI FONG LAGOS, )
Individually, and d/b/a/ MARINA )
RESTAURANT, HOUSE OF LIQUORS, INC. )
d/b/a/ HOUSE OF LIQUORS, an Alaska )
corporation; and PIONEER LIQUOR, )
INC., d/b/a/ PIONEER BAR, an ) Supreme Court No. S-4136
Alaska corporation, )
v. ) Superior Court No.
) 1SI-89-394 Civil
CITY AND BOROUGH OF SITKA, )
) O P I N I O N
___________________________________) [No. 3791 - December 27,
Appeal from the Superior Court of the
State of Alaska, First Judicial District,
Rodger W. Pegues, Judge.
Appearances: William G. Royce,
Anchorage, for Appellants. Theron J. Cole,
Sitka, for Appellees. Barbara J. Blasco,
Juneau, for Amicus Curiae, City and Borough
Before: Rabinowitz, Chief Justice,
Burke, Matthews, Compton, and Moore,
RABINOWITZ, Chief Justice.
I. FACTS AND PROCEEDINGS
This appeal raises the question of the validity of
4.08.040 of the Sitka General Code. This ordinance provides,
A consumer sales tax is levied on all
sales made in the City and Borough of Sitka
at the rate of 4% of the selling price. An
additional 4% consumer sales tax is placed
upon the sale of alcoholic beverages.
Normally the burden of this tax rests upon
In 1989, the City and Borough of Sitka ("Sitka") had
amended this ordinance to include the additional tax on alcoholic
beverages in response to a ballot proposition passed by voters on
October 3, 1989. The ballot proposition also provided for "the
resulting revenue to be dedicated toward the prevention and
treatment of alcohol and drug abuse in Sitka." Just prior to the
election, appellants, as owners of business and businesses which
sold alcoholic beverages, ("Lagos") filed a complaint for
declaratory judgment and injunctive relief, seeking to have the
ballot proposition invalidated.
Lagos alleged that the ballot proposition and the
ordinance were unlawful on three grounds:
(1) AS 04.21.010(c) prohibits
taxing alcoholic beverage sales at a rate
higher than the tax on other sales;
(2) The regulation and taxation of
alcohol has been preempted by state law
except where such power is specifically
conferred on municipalities; and
(3) A municipal tax purporting to
dedi-cate resulting revenues violates Article
IX, 7, of the Alaska Constitution.
Lagos filed for summary judgment on the first ground, that
Sitka's sales tax was illegal under AS 04.21.010(c). This
A municipality may not impose taxes on
alcoholic beverages except
(1) property taxes on alcoholic
(2) sales taxes on alcoholic
beverage sales if sales taxes are imposed on
other sales within the municipality; and
(3) sales taxes on alcoholic
beverage sales that were in effect before
July 1, 1985.
Lagos read subsection two of this statute to ban discriminatory
sales tax rates on alcoholic beverages. In this regard he argued
that the legislative history of AS 04.21.010(c) showed that the
legislature intended to ban discriminatory rates when it enacted
Sitka filed its own motion for summary judgment,
requesting the superior court to dismiss Lagos' complaint for
declaratory and injunctive relief. Sitka argued that none of the
contentions advanced by Lagos raised any "issue as to any
material fact and that [Sitka] is entitled to judgment as a
matter of law."
The superior court granted summary judgment in favor of
Sitka. The court thought Lagos' legislative history argument
unpersuasive, and concluded that "[h]ad uniformity in rates of
taxation been intended, the language of the legislation could
easily have been written to say so. . . . Some legislators may
have opposed a requirement for uniform rates." The superior
court did not address Lagos' remaining preemption and
unconstitutional dedication arguments. This appeal followed.1
In this appeal Lagos raises the same arguments against
Sitka's differential alcoholic beverage sales tax as were urged
before the superior court.
A. Does AS 04.21.010(c) prohibit taxing sales of
alcoholic beverages at a higher rate than other
AS 04.21.010(c)(2) authorizes municipalities to impose
a "sales tax on alcoholic beverages if sales taxes are imposed on
other sales within the municipality." Lagos interprets this
provision to mean "that sales taxes on alcoholic beverages are
allowed only to the extent sales taxes are imposed on other
We have stated that the goal of statutory construction
[T]o give effect to the legislature's
intent, with due regard for the meaning the
statutory language conveys to others. In
this respect, we have repeatedly stated that
unless the words have acquired a peculiar
meaning, by virtue of statutory definition or
judicial construction, they are to be
construed in accordance with their common
Tesoro Alaska Petroleum Co. v. Kenai Pipeline Co., 746 P.2d 896,
905 (Alaska 1987).
We do not adhere to the plain meaning rule in
interpreta-tion of statutes. University of Alaska v. Geistauts,
666 P.2d 424, 428 n.5 (Alaska 1983). However, we have stated
that "where a statute's meaning appears clear and unambiguous, .
. . the party asserting a different meaning has a correspondingly
heavy burden of demonstrating contrary legislative intent." Id.
See also State v. Alex, 646 P.2d 203, 208 n.4 (Alaska 1982)
(under Alaska's sliding scale approach to statutory
interpretation, the plainer the language of the statute the more
convincing the evidence of contrary legislative intent must be).
In interpreting a statute, we look first to the language of the
statute. Ward v. State, 758 P.2d 87, 89 n.5 (Alaska 1988).
Here, the language of the statute, on its face, proscribes
imposition of a sales tax solely on alcohol. It does not
explicitly address rates of taxation.
1. The legislative history
The language requiring a municipality to tax sales of
other commodities before taxing sales of alcoholic beverages was
added to AS 04.21.010(c) in 1985. Ch. 74, 20, SLA 1985.
Similar language had been deleted from the statute in 1980.3 Ch.
131, 4, SLA 1980.
Lagos argues that the legislative history supports his
interpretation of the 1985 amendments to AS 04.21.010(c).
Senator Eliason sponsored the amendment to AS 04.21.010(c), and
the Senate Finance Committee deliberated over the merits of the
amendment. In proceedings before the Senate Finance Committee,
Senator Eliason asked Senator Ray to "testify on the background
of this particular amendment." Proceedings of the Senate Finance
Committee, May 8, 1985 ("Proceedings") (testimony of Senator
Eliason). Senator Ray testified as to his involvement with the
1980 recodification of the code dealing with alcoholic beverages.
He noted that the 1980 elimination of the language in the
amendment was inadvertent. He then stated, "[i]n fact, two or
three years after the bill had passed when . . . Juneau . . .
considered adding an additional tax, it surprised me immensely,
and I said, 'Well, they can't do that.'" Id. Senator Ray went
on to explain, "It would seem to me it would be discriminatory to
have an additional tax on anything." Id. Because Juneau did in
fact enact a tax which taxes sales of alcohol at a higher rate
than it taxes other commodities, Lagos concludes that Senator Ray
was interpreting the missing language to prohibit enactment of
differential sales taxes on sales of alcohol.
After listening to Senator Ray's testimony, Senator
The only limitations we're imposing on
local governments is the fact that they
cannot take a specific sales tax on a
specific industry. What we're saying is that
if you want to tax liquor and whatever else
you might want to tax, that's alright. But
we want to--it's keeping any specific
industry--going out and point and saying,
"We're going to tax you and no one else.". .
. They can . . . impose a ten percent tax on
liquor and tobacco--that wouldn't be in
violation of this provision. . . . If the
proposition read, "Shall we impose a ten
percent tax on tobacco only?"they couldn't
under this provision.
Id. Earlier in the proceedings, Senator Eliason had stated,
Under this language, no they can't
discriminate between alcohol or food or
clothing or any other commodity that's sold
in the market. Its reasoning being that the
state does regulate very stringently the
alcoholic program in Alaska, so that's what
the intent of the legislation is to treat
them all equally.
Id. This history suggests that both senators intended to
eliminate differential rates of taxation on sales of alcohol.
Additional support for Lagos' position is found in a
comment by Senator Ferguson. At the May 7, 1985 proceedings of
the Senate Finance Committee, Senator Ferguson asked, "Dillingham
is thinking about raising the taxes on alcohol, and would they be
allowed to continue their movement? I guess they wouldn't be
able to after July 1, 1985?" Id. Senator Kerttula in response
stated that "[a]s long as their ordinance is fully implemented
prior to July 1st, they would be grandfathered in." Id.
Apparently, both these senators believed that the amendment in
question prohibited differential rates on alcohol sales tax.
Subsequently, at the same May 7, 1985 Senate Finance
Committee meeting, the strongest statement concerning the subject
of differential rates of taxation was made by the then Acting
Commissioner of the Department of Community & Regional Affairs,
in response to the comment by Senator Ferguson. The Acting
Commissioner stated, "I understand then in the amendment that
this refers to tax equalization and you cannot set a sales tax
for alcohol higher than any other commodity within the
Sitka counters by noting that
the Lagos' are relying upon the
statements of individual legislators made in
a single committee. There are no committee
findings, no report, no journal entries, no
indication that the whole legislature knew of
or considered the statements or even
considered anything beyond the words of the
amendment that was part of a much larger
bill. . . . Since there is no indication
that the statements made in the committee
were before the legislature, the
legislature's intent must be presumed to be
that expressed in the words of the statute.5
Sitka, and the amicus, also rely on an opinion from an
Assistant Attorney General and a memorandum from the then Deputy
Director of the Division of Legal Services for the Legislative
Affairs Agency, both of which concluded that the 1985 amendment
to AS 04.21.010(c) did not speak to the rate of taxation.6
2. The effect of AS 04.21.010(c)(3)
Lagos further argues that the grandfather clause of AS
04.21.010(c)(3), which permits the continuation of "sales taxes
on alcoholic beverage sales that were in effect before July 1,
1985," demonstrates that the legislature intended to prohibit
differential rates of taxation when it enacted its amendments to
AS 04.21.010(c). Lagos asserts that this grandfather clause
applied to the communities of Craig, Juneau, and Kotzebue,
because those communities had in place differential taxes on the
sale of alcoholic beverages at the time the 1985 amendments were
enacted. Additionally, Lagos points to the discussions of the
Senate Finance Committee which indicate that the committee
believed these three communities were the only communities
affected by the grandfather clause. From a review of the
legislative history of the amendment to AS 04.21.010(c)(3), and
the differential sales tax ordinances of Juneau, Craig, and
Kotzebue, Lagos concludes that AS 04.21.010(c)(3) was enacted for
the specific purpose of preserving the two-tiered municipal sales
taxes on alcohol in these three communities. Thus, Lagos
concludes that any ambiguity as to whether AS 04.21.010(c)(2)
prohibits discriminatory rates of taxation on sales of alcoholic
beverages is resolved by the provisions of AS 04.21.010(c)(3).
The City and Borough of Sitka reply that there is no
indication in the wording of AS 04.21.010(c)(3) that it is
limited to instances of unequal taxation or that it is limited to
the communities of Craig, Juneau, and Kotzebue. "It could just
as easily be applied to communities taxing alcohol alone prior to
July 1, 1985."
Our review of the merits leads us to the conclusion
that Lagos' position is the more persuasive one. We therefore
hold that the Sitka ordinance which taxes the sales of alcoholic
beverages at a 4% higher rate than sales made on other
commodities within the City and Borough of Sitka is violative of
The text of AS 04.21.010(c)(2) is ambiguous in that it
fails to clearly indicate whether it prohibits the imposition of
discriminatory rates of sales taxes on sales of alcoholic
beverages. On the other hand, the text of AS 04.21.010(c)(3) and
the relevant legislative history concerning this 1985 amendment
to AS 04.21.010(c), indicate that the legislature intended its
amendments to prohibit the imposition of discriminatory sales
taxes, whether in the form of sales tax rate differentials or a
sales tax imposed solely on the sale of alcoholic beverages.7
Thus, we conclude that AS 04.21.010(c)(2) and AS 04.21.010(c)(3)
when read together, bar a municipality from taxing only the sale
of alcoholic beverages and further require that if sales taxes
are imposed on other commodities then the rate of taxation on the
sale of alcoholic beverages may not exceed the rate of taxation
imposed upon such other commodities sales.
1. The parties agree that this appeal does not raise any
issues of fact, but rather concerns the interpretation of
statutes. This court will employ de novo review to a grant of
summary judgment, Kollodge v. State, 757 P.2d 1028, 1032 (Alaska
1988), and will adopt the rule of law which is "most persuasive
in light of precedent, reason and policy." Langdon v. Champion,
745 P.2d 1371, 1372 n.2 (Alaska 1987) (citations omitted).
2. Before the superior court Lagos argued in part:
If one restricts the analysis to the
language amending (c)(2), one may argue (as
Sitka does) that the statute allows Sitka to
tax alcoholic beverages at any rate, so long
as sales taxes are imposed on some other
sales within the municipality. It is true
that (c)(2) contains no discussion regarding
the rate of taxation on alcoholic beverage
sales. Thus, so long as the analysis is
restricted to (c)(2), one could argue (as
Sitka does) that municipalities are free to
single out sales of alcoholic beverages for
taxation at a rate greater than taxes imposed
on other sales. Others could argue with
equal convincing force that sales taxes on
alcoholic beverages are allowed only to the
extent sales taxes are imposed on other sales
within the municipality -- thus requiring an
equality of rate.
Thus, it is necessary to consider
the meaning and intended effect of (c)(3)
adopted as part of the 1985 amendment. . . .
(Emphasis in original.)
3. The original language read, "nor shall any municipality
impose taxes other than property taxes on liquor inventories and
sales taxes on liquor sales when such taxes are levied on other
property and sales within the community." Ch. 86, 1, SLA 1960.
Apparently, the language requiring taxes on all commodities was
inadvertently eliminated when the code was revised in 1980. See
Senate Finance Comm. Proceedings, May 7, 1985 (testimony of Sen.
Eliason); id., May 8, 1985 (testimony of Senator Ray).
4. After hearing the testimony of the Acting Commissioner,
the committee then questioned the drafter of the amendment,
Tamara Cook (of the legislative affairs committee staff). She
stated, "[a]s I read this language, if a municipality, whether it
be a city or a borough, in fact imposed a sales tax on anything
other than alcohol, it would be free to then also include alcohol
within its sales tax structure." Proceedings, May 7, 1985.
5. The amicus, City and Borough of Juneau, argues in part
Under the statute, a preexisting sales
tax on alcoholic beverages was
"grandfathered"regardless of whether the tax
was part of a two-tiered sales tax system
(such as Juneau's sales tax on alcoholic
beverages) or part of a single-tiered system
which imposed a tax on the sales of alcoholic
beverages only. Thus, the only sales tax
system proscribed by the statute is one which
would impose a tax on the sales of alcoholic
beverages only and which was not in effect
before July 1, 1985.
(Emphasis in original.)
6. In support of its reliance on these two documents Sitka
cites State, Dep't of Natural Resources v. City of Haines, 627
P.2d 1047, 1049 nn. 6 & 7 (Alaska 1981) and Carney v. State, Bd.
of Fisheries, 785 P.2d 544, 548 (Alaska 1990) ("Opinions of the
Attorney General, while not controlling on matters of statutory
interpretation are entitled to some deference.").
7. In addition to the text and legislative history
surrounding the adoption of AS 04.21.010(c)(3), the legislative
history of AS 04.21.010(c)(2) noted above, provides evidence that
some members of the Senate Finance Committee, including the
amendment's sponsor, intended that there be no discrimination in
a municipality's rate of taxation concerning alcoholic beverages.
8. Our holding that the ordinance in question is unlawful
makes it unnecessary to address any of the remaining issues in