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St. Louis wins an initial round in earnings tax dispute

Plaintiffs in the litigation, filed last month, sought a temporary restraining order against the city
Credit: KSDK

ST. LOUIS — A federal judge has denied an initial bid to force the city of St. Louis to change its earnings tax refund forms, an early decision in litigation over the city's interpretation of the tax amid the pandemic.

The lawsuit argues that the city is wrongly denying earnings tax refunds for nonresidents who are employed by firms in the city but worked at homes outside the jurisdiction during the pandemic. For last year, refunds on the 1% tax, which often come because employers withhold the money, could be worth millions of dollars.

Plaintiffs in the litigation, filed last month, sought a temporary restraining order against the city.

They asked Judge Catherine Perry to order the city to stop using its current E-1R form for refunds, which includes a requirement that employers and employees verify that "I understand that a regular workday does not include holidays, vacation, working remotely from home or other work absences." The new form also requires taxpayers to provide "substantiating documentation such as travel and mileage logs, airline or train tickets, lodging receipts, etc." when filing the form, according to the suit.

The E-1R form for 2019 didn't include those requirements, the suit said, adding that the city has long issued refunds for the tax to non-city residents for days they worked outside the jurisdiction, as its earnings tax ordinance says it applies to nonresidents "for work done or services performed or rendered in the City."

Perry gave no reason for denying the bid for a temporary restraining order.

Bevis Schock, an attorney for the plaintiffs, said at issue in the bid for that order was whether the "status quo" could be changed. He argued the status quo was the city's 2019 refund form, while Perry seemed persuaded it was the document for 2020, Schock said.

But "(Perry) seemed to have an open mind for our broader argument," Schock said.

He said the judge is likely to next decide whether the case belongs in federal court, where it's currently being heard, or state court. The suit makes civil rights claims that can be heard in federal court, Schock said.

City Counselor Michael Garvin declined to comment.

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