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The city of Charlotte has agreed to refund about $2.6 million in business license fees that it collected improperly from a number of building contractors.
A class-action lawsuit brought in January by Vision Ventures Construction prompted the settlement, which was decided in May.
While other cities may be violating the same state law, the plaintiff's attorney said, Charlotte's fees were particularly high – contractors paid the city as much as $10,000 a year when they should have paid $10.
“Charlotte is just such an extreme example,” said Jameson Wells, the attorney representing Vision Ventures.
He said the decision will affect about 2,100 companies that paid a specific local business privilege tax during a three-year period between July 2006 and July 2009.
In settling the suit, the city agreed that it overcharged certain building contractors, said Bob Hagemann, senior assistant city attorney.
“We said, ‘You know what, the tax office is wrong,'” Hagemann said.
The Mecklenburg County Tax Office collects both city and county taxes. Neither Neil Dixon, director of revenue collections, nor Deputy Tax Collector Keith Gunter could be reached. A county spokesman said they were the only two people in the department authorized to speak to the media.
County Attorney Marvin Bethune said the county only followed the city's direction in collecting the taxes.
“We're just like clerks,” he said. “All we did was collect what they asked us to collect.”
The error relates to a state law that caps building contractors' privilege taxes at $10 a year, Hagemann said. He said that the tax office had wrongly applied that tax cap only to older businesses that had operated before the late '90s, when the state turned over some business regulation to local government.
For newer businesses, the tax office collected a certain percentage of gross receipts, up to $10,000 a year, said Wells, the plaintiff's attorney. He said he believes several cities around the state also charge more than the $10 limit, but Charlotte's system led to particularly high taxes. Other cities might charge around $100 a year, he said.
Charlotte has since changed the fee to $10. Hagemann said the $2.6 million in refunds was part of the fiscal 2010 budget, which starts July 1.
A final court hearing to approve the settlement and set the attorney's fees will be held July 31.
