Missouri Supreme Court Holds Statutes Creating Lake of the Ozarks Area Lodging Tax Unconstitutional
Guests of Lake of the Ozarks lodging establishments ranging from vacation rentals to resorts will have one less tax to pay thanks to a recent decision by the Missouri Supreme Court. The court found that statutes creating a lake area taxing district violated the Missouri Constitution in this case that was handled at trial and on appeal by Lathrop GPM.
In 1993, the Missouri legislature enacted four statutes governing the creation, operation, and dissolution of a taxing district known as the lake area business district. The governing body of this taxing district is an entity known as the advisory board. The advisory board’s primary purpose is to spend the lodging tax collected in the district for the promotion of tourism in the area. A “lake area business district” was created in Camden, Miller, and Morgan Counties. Thus, every lodging establishment in the Lake of the Ozarks Area collects a lodging tax of up to 3%, which is ultimately remitted to the business district advisory boards for expenditure.
In 2020, Lathrop GPM clients, Gail Griswold and Laura Salamun (on behalf of themselves and their respective lodging businesses, Shawnee Bluff Winery, LLC and Pointe View Management, LLC), filed a lawsuit, challenging (among other things) the constitutionality of the statutes creating the business districts and the lodging tax. The primary challenge claimed the lodging tax statutes were unconstitutional under Article VI, Section 23 of the Missouri Constitution, which prohibited “grant[ing] public money or thing of value to […] any corporation, association or individual, except as provided in this constitution.” The lawsuit alleged the language of the lodging tax statutes allowed a private entity (the business district advisory boards) to control public money (the lodging tax revenue).
Nearly four years later, the Missouri Supreme Court has now agreed with Griswold and Salamun holding all four statutes, which the court found were inseparably connected, are in violation of the Missouri Constitution. On Tuesday, June 25, 2024, the court held as follows:
The judgment is reversed. Pursuant to Rule 84.14, this Court enters the judgment the circuit court should have entered and declares sections 67.1170, 67.1175, 67.1177, and 67.1180 constitutionally invalid and void in their entireties. As a result, this Court enjoins any further action by the county advisory boards and any further collection of lodging taxes pursuant to the unconstitutional statutory scheme. The cases are remanded to the circuit court for appointment of trustees to wind up and dissolve the Camden County and Miller County lake area business districts.
The appeal was handled by Senior Counsel Curt Tideman and Associate Brooke Parsons. Curt and Brooke also handled the trial in 2022. Partner Matthew Jacober was also part of the case team, handling the preliminary injunction hearing with Brooke in 2020.
In the Lake of the Ozarks area, the lodging tax was to be paid by the guests of all lodging establishments. In an area that sees a high volume of tourism, this includes large resorts, small B&Bs, and vacation rentals (such as those advertised on Airbnb and VRBO). With this ruling, however, the payment and the collection of the lodging tax must cease in all regards.
If you or your business is affected by this ruling, please contact your regular Lathrop GPM contact to assist in navigating this new legal landscape.