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City’s tax money in Cass County’s pocket, and judge puts it further from Lee’s Summit’s reach

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A Missouri judge has sided with Cass County in a longtime dispute over nearly $1 million in utility tax money that rightfully belongs to Lee’s Summit but was misdirected to Cass County.

The Missouri Department of Revenue had taken steps to gradually recover the $966,692 by withholding some of Cass County’s current tax revenue.

But at the end of the December, Cole County Circuit Court Judge Jon E. Beetem ruled that the state revenue director doesn’t have authority to do that.

The ruling means that Lee’s Summit must wait even longer to get its money, if it ever does.

“It’s been way too long. Think of the interest lost,” Lee’s Summit Councilwoman Diane Seif said Thursday. “It never should have happened in the first place.”

She said the city will need to figure out its next steps once it’s known whether the Department of Revenue will appeal the judge’s decision.

A different reaction came from the city’s neighbor to the south.

“Cass County is pleased with the Court’s ruling, and we believe it is the legally correct result,” Cass County Attorney Paul Campo said Wednesday.

The dispute began over local sales tax reporting errors by KCP&L (then Aquila, Inc.) on tax returns filed by the utility company over a period of years. In an audit 2012, the Department of Revenue caught the error.

The company had assigned the sales taxes to Cass County instead of Lee’s Summit. KCP&L subsequently amended its tax returns, according to court documents. Local sales taxes are collected by the seller and paid to Missouri, which then distributes them to cities and counties.

This was the second time the issue was heard in a Missouri circuit court. The first time, Cass County’s lawsuit was dismissed because the state had only advised the county of an estimate money owed, but hadn’t ordered it returned.

However, in June 2014, the director notified Cass County the department was going to withhold installments totaling $966,692 over three years, beginning that July.

The county filed its second suit asking for an injunction to stop the withholding. The judge made the injunction permanent in a decision issued Dec. 31.

The judge’s ruling said the Department of Revenue is permanently prohibited from taking any action to recover the funds from Cass County “unless and until” KCP&L files a timely application for a refund under state law.

Cass County contended in its suit that there was no application for a refund by KCP&L, so the Department of Revenue had no jurisdiction to try to recover the money.

KCP&L spokeswoman Rebecca Galati said the company is reviewing the decision and the recommended course of action.

“It has been our understanding to this point that KCP&L would not need to be involved in the process and that the dispute is among the Department of Revenue, Cass County, and Lee’s Summit,” Galati said in an email.

Lee’s Summit City Manager Steve Arbo said the city attorney’s office reviewed the order and indicated that the deadline hasn’t passed for the state to file an appeal. Because the city doesn’t know whether the state will appeal, he said it would not be appropriate to comment until the litigation has been fully resolved.

The Department of Revenue did not respond to a question of whether it would appeal the judgment.

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