Knox schools owed over $1 million in mixed drink taxes

Local residents are not happy to hear Knox County and Farragut have not paid the school system money owed due to the liquor-by-the drink tax.

Stan McCroskey of Karns said, "I think they should have to pay a penalty just like a tax payer would if they didn't pay their taxes."

Valerie Whiting of Farragut said, "If I forgot to pay a tax, IRS would make some kind of demand. They would make a lien. So if I forget to pay my taxes I'm going to be held accountable and I've got to pony up. That's just a given."

Knox County and Farragut officials plan to meet next week to figure out just how much the two governments owe the Knox County school system from revenues connected to the local mixed-drink tax that were never turned over.

At this point, the county more than likely owes as much as $350,000, and Farragut is probably on the hook for at least $1.1 million dating back to 1999.

Knox County Finance Director Chris Caldwell said the matter was initially brought to his attention a couple of weeks ago after officials received an email from the Tennessee Governmental Finance Officers Association.

"They said 'by the way, are your cities paying this to your schools?'" Caldwell said. "We looked at it and then met with our auditors and realized we weren't. But, it's not just us, though, it's a statewide issue and the TGFO just made everyone aware of it. It's really an obscure tax that you don't always think about."

The City of Knoxville is up-to-date on its payments, Caldwell said.

State law says that 50 percent of the mixed drink tax has to go to education. Neither Farragut, which passed an ordinance in 1988 to allow establishment to serve mixed drinks, nor Knox County, which approved its ordinance in 2009, has ever paid the tax.

"We've been in conversations with everyone and we're meeting next week to go over that piece (that Farragut owes)," Caldwell added. "Technically we could go back to when the ordinance was passed or maybe just negotiate some kind of agreement."

Once they iron out the details, Caldwell said, the county each year will probably turn over roughly $100,000 from the tax to the schools system and Farragut will pay about $80,000.

Knox County Schools spokeswoman Melissa Ogden said the school administration was made aware of the matter about a week ago.

"We understand the county is working with the Town of Farragut to ascertain the scope of the issue," she said, referring questions to the county's finance department "since they manage all of the revenue for the county."

Knox County Mayor Tim Burchett said the county has no problem paying whatever is owed.

"Whatever the rules say, we'll do it," he added.


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