I N THE COURT OF APPEALS OF TENNESSEE

EASTERN SECTI ON

LAMAR ADVERTI SI NG OF ) KNOX COUNTY

TENNESSEE, I NC. ) 03A01- 9609- CH- 00294

)

Pl a i ntif f - Appe lla nt )

)

) HON. FREDERI CK D. Mc DONALD,

v. ) CHANCELLOR

)

)

CI TY OF KNOXVI LLE )

)

De f e nda nt - Appe l l e e ) REVERSED AND REMANDED

LAWRENCE P. LEI BOWI TZ OF KNOXVI LLE FOR APPELLANT

SHARON E. BOYCE OF KNOXVI LLE FOR APPELLEE

 O P I N I O N

 Godda r d, P. J .

La ma r Adve r t i s i ng of Te nne s s ee ( La ma r ) appeal s f r om an

or de r of t he Cha nc e r y Cour t of Knox Count y t ha t uphe l d t he

va l i di t y of a pr ovi s i on of t he Knoxvi l l e Ci t y Code , Ar t i c l e V,

Sect i on 10- N ( Or di na nce) t ha t as s e s s e s a l i cens e f ee pe r annum

f or t he i ns pe c t i on of a l l e xi s t i ng gr ound a nd por t a bl e s i gns

wi t hi n t he Ci t y of Knoxvi l l e . La ma r owns a nd ma i nt a i ns 350
2

out door a dve r t i s i ng s t r uc t ur e s wi t hi n t he Ci t y of Knoxvi l l e a nd

ha s c ha l l e nge d t he va l i di t y of t he or di na nc e .

La ma r ’ s cha l l e nge r a i s e s nume r ous i s s ue s . La ma r cl a i ms

t ha t the or di na nc e is in r e a lity a ta x a nd, a s s uc h, re s ults in

i mpe r mi s s i bl e doubl e t a xa t i on a s t o i t ; t ha t t he or di na nc e i s not

uni f or m a nd e qua l a s r e qui r e d by t he Te nne s s e e Cons t i t ut i on; t ha t

t he or di na nc e i s i n vi ol a t i on of t he Equa l Pr ot e c t i on Cl a us e of

t he Four t e e nt h Ame ndme nt of t he Cons t i t ut i on of t he Uni t e d

St a t e s ; a nd t ha t t he or di na nc e i s i n vi ol a t i on of t he Fi r s t

Ame ndme nt of t he Cons t i t ut i on of t he Uni t e d St a t e s . As a l r e a dy

not e d, t he Tr i a l Cour t uphe l d t he va l i di t y of t he or di na nc e .

I n J une 1986, t he Ci t y of Knoxvi l l e pa s s e d a n or di na nc e

r e qui r i ng a n a nnua l i ns pe c t i on of a l l e xi s t i ng gr ound a nd

por t a bl e s i gns f or compl i a nce wi t h zoni ng, el ect r i cal , mecha ni cal

a nd a ny ot he r a ppl i c a bl e c ode s . Ar t i c l e V, Se c t i on 10- N of t he

Knoxvi l l e Ci t y Code r e a ds a s f ol l ows :

N. Annua l i ns pe c t i on f e e s .

1. I n a ddi t i on t o t he pe r mi t f e e s s e t f or t h i n

Se c t i on M, a nd c omme nc i ng on J ul y 1, 1987, a n a nnua l

i ns pe c t i on f e e s ha l l be a s s e s s e d f or a ny e xi s t i ng

gr ound s i gn or por t a bl e s i gn a s f ol l ows :

a . Si gns of f i f t y ( 50) s qua r e f e e t a nd 

 l e ss. $12. 00 

b. Si gns f i f t y- one ( 51) t o one

hundr e d ( 100) s qua r e f e e t . . . . . 25. 00

c . Si gns one hundr e d one ( 101) t o 

f our hundr e d f i f t y ( 450) s qua r e

f e e t.......................... 50. 00
3

d. Si gns l a r ge r t ha n f our hundr e d 

f i f t y ( 450) s qua r e f e e t . . . . . 100. 00

2. These inspection fees shall not apply to any

on-premises sign owned by an organization if

said organization is exempt from taxation

pursuant to paragraph (3) of subsection (C)

of Section 501 of the Internal Revenue Code

of 1954 as amended, if said organization

submits proof of its tax-exempt status to the

sign inspector.

3. The sign inspector shall make an annual

inspection of existing ground and portable

signs for compliance with the provisions of

zoning, electrical, and other city codes. 

The inspector shall attach a permanent

numbered tag to each inspected sign and shall

maintain records of all inspected signs.

I n pr e pa r a t i on f or t he a dmi ni s t r a t i on a nd e nf or c e me nt

of t he or di na nc e , a 1987 c ont r a c t wa s e nt e r e d i nt o be t we e n t he

Ci t y of Knoxvi l l e a nd t he Me t r opol i t a n Pl a nni ng Commi s s i on ( MPC) ,

whe r e by t he MPC, a s a ge nt f or t he Ci t y of Knoxvi l l e , wa s t o

pe r f or m t he i ns pe c t i on dut i e s out l i ne d i n t he or di na nc e . Ewi ng

J ohns on, di r e c t or of l ong r a nge pl a nni ng f or t he MPC, wa s a s ke d

t o s upe r vi s e t he s ur ve y of t he s i gns f or t he Ci t y of Knoxvi l l e .

The MPC e mpl oye e s who c a r r i e d out t he dut i e s unde r t he

or di na nc e , a nd who we r e s upe r vi s e d by Mr . J ohns on, di d not

c onduc t el ect r i cal , mecha ni cal or code i ns pect i ons of t he s i gns 

a s di r e c t e d by t he or di na nc e , but onl y i nve nt or i e d t he s i gns .

The s e i ndi vi dua l s ha d no t ool s or e qui pme nt f or us e i n t he

i nve nt or y, ha d no t r a i ni ng i n e ngi ne e r i ng a nd mos t ha d onl y a

hi gh s c hool e duc a t i on. The f or ms c ompl e t e d by t he s ur ve y t e a m

c ont a i ne d a n e nt r y f or t he c ont e nt of t he s i gn a nd i f t he s i gn’ s

pur pos e wa s t o a dve r t i s e , a not a t i on wa s ma de on t he f or m.
4

St e ve El l i s wa s t he n hi r e d a s t he Ci t y Si gn I ns pe c t or

t o ins pe c t t he s i gns a f t e r the y we r e ini t i a l l y inve nt or i e d. He

ha d no expe r i e nce or t r a i ni ng i n el ect r i cal or mecha ni cal

i ns pe c t i ons a nd wa s not t r a i ne d i n t he c i t y e l e c t r i c a l c ode . I n

f a c t, Mr . Ellis te s tif i e d tha t he di d not know wha t r e qui r e me nt s

a r e cont a i ne d i n t he ci t y el ect r i cal code r e l a t i ng t o gr ound

s i gns . Mr . El l i s c onduc t s t he s e s i gn i ns pe c t i ons by dr i vi ng t o

t he s i gn l oc a t i on, vi s ua l l y i ns pe c t i ng t he s i gn, of t e n f r om hi s

c a r , a nd not i ng on a f or m t he da t e of t he i ns pe c t i on a nd whe t he r

t he s t r uc t ur e wa s a ppr ove d or di s a ppr ove d by hi ms e l f . Mr . El l i s

c onduc t s s t r i c t l y a vi s ua l i ns pe c t i on.

At tr i a l, La ma r c a lle d St e ve Ha r b, a c e r tif i e d public

account a nt , t o t e s t i f y as an expe r t wi t ne s s . Mr . Ha r b pr e pa r e d

c ha r t s c onc e r ni ng t he a mount of t i me t ha t Mr . El l i s r out i ne l y

s pe nt pe r f or mi ng hi s j ob of i ns pe c t i ng s i gns . Ba s e d upon Mr .

El l i s ’ r e por t s a nd de pos i t i on t e s t i mony, Mr . Ha r b c a me t o t he

c onc l us i on t ha t Mr . El l i s s pe nds a n a ve r a ge of 5. 478 mi nut e s on

e a c h i ndi vi dua l s i gn i ns pe c t i on. Mr . Ha r b a l s o de t e r mi ne d t ha t

t he a ve r a ge c os t f or t he Ci t y f or t hi s i ns pe c t i on s e r vi c e wa s

$1. 59 pe r s i gn.

Al l f unds ge ne r a t e d by t hi s s i gn i ns pe c t i on pr oc e s s a r e

pl a c e d i nt o t he ge ne r a l a c c ount of t he Ci t y of Knoxvi l l e . The

s i gn i ns pe c t i on f e e s a r e not s e gr e ga t e d. The f or m whi c h t he Ci t y

s i gn i ns pe c t i on bi l l s a r e pr i nt e d on i s t he s a me f or m t ha t i s
5

us e d f or t he a d va l or e m t a xe s t he Ci t y l e vi e s on bus i ne s s . The

City Fi na nc e De pa r t me nt ha s r e s pons i bility f or c olle c ting

de l i nque nt s i gn i ns pe c t i on f e e s a nd t he Ta x Col l e c t i on Di vi s i on

of t he Ci t y Fi na nc e De pa r t me nt pur s ue s t he c ol l e c t i on of t he s e

f ees i n t he s a me ma nne r as t he y col l ect de l i nque nt t a xe s .

We mus t f i r s t de t e r mi ne whe t he r t he i ns pect i on f ee i s

a c t ua lly wha t it pur por t s to be or whe t he r it is in r e a lity a

t a x. I n Te nne s s e e , t a xe s a r e di s t i ngui s he d f r om f e e s by t he

obj e c t i ve s f or whi c h t he y a r e i mpos e d. I f i t i s pr i ma r i l y f or

t he pur pos e of r a i s i ng r e ve nue , i t i s a t a x. Howe ve r , i f i t s

pur pos e i s f or t he r e gul a t i on of s ome a c t i vi t y unde r t he pol i c e

powe r of t he gove r ni ng a ut hor i t y, i t i s a f e e . Me mphi s Re t a i l

Li quor De a l e r s ’ As s oc i a t i on, I nc . v. Ci t y of Me mphi s , 547 S. W. 2d

244 ( Te nn. 1977) ; S & P Ent e r pr i s e s , I nc . v. Ci t y of Me mphi s , 672

S. W. 2d 213 ( Te nn. App. 1983) . 

Si nc e a muni c i pa l i t y i nc ur s c os t s i n di s c ha r gi ng

c e r t a i n dut i e s c r e a t e d by t hi s t ype of or di na nc e , i t i s onl y

r e a s ona bl e t o r e qui r e t hos e be ne f i t i ng f r om t he s e r vi c e t o de f r a y

t he c os t s c omme ns ur a t e wi t h t he e xpe ns e s i nc ur r e d by t he

muni c i pa l i t y. I t i s onl y r e qui r e d t ha t t he f e e s be a r s ome

r e a s ona bl e r e l a t i on t o t he e xpe ns e i nvol ve d a nd i t i s no

obj e c t i on t o a r e gul a t or y l i c e ns e t ha t i t pr oduc e s mor e i nc ome

t ha n i s r e qui r e d f or i t s a dmi ni s t r a t i on a nd e nf or c e me nt . S & P

Ent e r pr i s e s , I nc . v. Ci t y of Me mphi s , s upr a .
6

The Ci t y of Knoxvi l l e a r gue s t ha t a l t hough t he f e e pe r

s i gn i s mor e t ha n t he a c t ua l e xpe ns e i nc ur r e d by t he i ns pe c t i on,

t he f e e mus t onl y be a r s ome r e a s ona bl e r e l a t i ons hi p t o t he

e xpe ns e s i nvol ve d. The Ci t y of Knoxvi l l e a s s e r t s t ha t a c ha r ge

of $100 f or a s i gn i ns pe c t i on of a s i gn l a r ge r t ha n 450 s qua r e

f eet i s r eas ona bl e . Thi s ar gume nt i s ma de de s pi t e t he f act t ha t

t he Ci t y Si gn I ns pe c t or a dmi t s t ha t hi s i ns pe c t i ons a r e onl y

vi s ua l i ns pe c t i ons a nd of t e n i nvol ve s ne ve r l e a vi ng hi s c a r . I n

s uppor t of t hi s a r gume nt , t he Ci t y of Knoxvi l l e r e l i e s upon

Me mphi s Re t a il Li quor De a l e r s ' , s upr a .

I n Me mphi s Re t a il Li quor De a l e r s ' , t he Supr e me Cour t

uphe l d a Ci t y of Me mphi s or di na nc e t ha t i mpos e d a n i ns pe c t i on f e e

upon whol e s a l e r s a nd r e t a i l e r s of a l c ohol i c be ve r a ge s . The

Te nne s s ee Le gi s l a t ur e pa s s e d a s t a t ue t ha t al l owe d muni c i pa l i t i e s

t o c ha r ge a f e e f or l i quor i ns pe c t i on of no mor e t ha n f i ve

pe r cent of t he whol e s a l e pr i ce of al c ohol i c be ve r a ge s . Pur s ua nt

t o t he pr e c e di ng gr a nt e d a ut hor i t y, t he Ci t y of Me mphi s pa s s e d a n

or di na nc e whi c h i mpl e me nt e d t he f i ve pe r c e nt i ns pe c t i on f e e . The

l i quor de a l e r s c ha l l e nge d t he or di na nc e be c a us e t he r e ve nue

ge ne r a t e d by t he or di na nc e i s 200 t i me s t he c os t of r e gul a t i on.

I n uphol di ng t he or di na nc e , t he Cour t c onc e de d t ha t a

c ha l l e nge ba s e d upon t he di s pa r i t y i n t he f e e c ha r ge d a nd c os t of

r e gul a tion in thi s c a s e mi ght be va lid if the a c tivity r e gul a t e d

wa s a nyt hi ng ot he r t ha n t he l i quor bus i ne s s . The Cour t r e l i e d

upon t he St a t e ' s i nhe r e nt pol i c e powe r t o s ubj e c t t he l i quor
1

The Court quoted with approval a decision of the Supreme Court of

Illinois which stated as follows:

"It is true, as a general proposition, that a regulatory license

fee must bear 'some reasonable relation' to the expenses involved

in the supervision and inspection of the licensed business. 

(citations omitted.) But this general proposition 'does not apply

where the license charge is imposed on those occupations which,

while they are tolerated, are recognized as being hurtful to

public morals, productive of disorder, or injuries to the public

such as the liquor traffic' . . . the amount of the license fee

may itself have a permissible regulatory effect."

Memphis Retail Liquor Dealers’ Association at page 246, quoting Lalumio v.

Fasseas, 171 N.E.2d 43, 44 (Ill. 1960).

7

t r a f f i c t o s t r i c t s upe r vi s i on or pr ohi bi t i on be c a us e i t i s

pot e nt i a l l y, i f not a c t ua l l y, da nge r ous t o t he publ i c he a l t h,

mor a l i t y and we l f a r e . 1 Fur t he r mor e , the St a t e Le gi s l a t ur e

a ut hor i z e d a f i ve pe r c e nt i ns pe c t i on f e e on a l c ohol i c be ve r a ge s

wi t h no r e qui r e me nt t ha t t he f e e be a r a ny r e l a t i ons hi p t o t he

c os t of t he i ns pe c t i on.

We f i nd t ha t t he de c i s i on i n Me mphi s Re t a il Li quor

Deal e r s ’ i s di s t i ngui s ha bl e f r om t he c a s e a t ba r . The s i gns

c a nnot be c ons i de r e d ha r mf ul t o t he publ i c he a l t h, mor a l i t y a nd

we l f a r e . As a r e s ul t , we hol d t ha t out door a dve r t i s i ng s i gn

i ns pe c t i on f e e s mus t be a r a r e a s ona bl e r e l a t i ons hi p t o t he

s e r vi c e s r e nde r e d by t he muni c i pa l i t i e s . 

We f i nd t he de c i s i on i n Ma r tin Me di a v. He mpf i e l d

Towns hi p Zoni ng He a r i ng Boa r d, 671 A. 2d 1211 ( Pa . Commw. Ct .

1996) , pe r s ua s i ve on t he i s s ue of whe t he r t he f e e c ha r ge d be a r s a

r e a s ona bl e r e l a t i ons hi p t o t he s e r vi c e s r e nde r e d by t he

muni c i pa l i t i e s . The or di na nc e c ha l l e nge d i n Ma r tin Me di a

a s s e s s e d a $100 l i c e ns e f e e pe r a nnum f or t he i ns pe c t i on a nd
8

r e gul a tion of billboa r ds with He mpf i e l d Towns hi p. At tr i a l, the

s i gn i ns pe c t or t e s t i f i e d t ha t he c onduc t e d vi s ua l i ns pe c t i ons

onl y. He a l s o a dmi t t e d t ha t f or s ome i ns pe c t i ons , no one got out

of t he c a r a nd i n s ome c a s e s t he c a r di d not s t op movi ng. An

e xpe r t t e s t i f i e d f or t he pl a i nt i f f a nd opi ne d t ha t t he i ns pe c t i on

c os t wa s muc h l e s s t ha n t he f ee cha r ge d. Ba s e d upon t he s e f act s ,

t he c our t s t r uc k down t he or di na nc e . 

The Cour t i s mi ndf ul t ha t t he r e i s a pr e s umpt i on i n

f a vor of va l i di t y of a n or di na nc e , a nd t he one que s t i oni ng t he

va l i di t y of t he or di na nc e ha s t he bur de n of pr oof t o s how i t s

i nva l i di t y. S & P Ent e r pr i s e s , s upr a . We f i nd t ha t La ma r ha s

s a t i s f i e d t ha t bur de n a nd t ha t t he or di na nc e i s i n r e a l i t y a t a x.

As pr e vi ous l y s t a t e d, t he s i gn i ns pe c t or di d not c onduc t

e l ect r i cal or mecha ni cal i ns pect i ons of t he s i gns as i ns t r uc t e d

by t he s t a t ut e . The s i gn i ns pe c t or c onduc t e d onl y vi s ua l

i ns pe c t i ons of t he s i gns , of t e n f r om hi s c a r . Fur t he r mor e , La ma r

put on pr oof de mons t r a t i ng t he di s pa r i t y i n t he a c t ua l c os t of

t he s i gn i ns pe c t i ons a nd t he f e e s c ha r ge d. The r e c or d c l e a r l y

de mons t r a t e s t ha t t he s i gn i ns pe c t i on f e e s di d not be a r a

r e a s ona bl e r e l a t i ons hi p t o t he s e r vi c e s r e nde r e d by t he s i gn

i ns pe c t or .

Af t e r de t e r mi ni ng t ha t t he s i gn i ns pe c t i on f e e s a r e i n

r eal i t y a t a x, we mus t ne xt de t e r mi ne whe t he r t he or di na nce i s an

i mpe r mi s s i bl e doubl e t a xa t i on. Doubl e t a xa t i on i s pr ohi bi t e d by

t he Te nne s s e e Cons titution unl e s s it is pl a i n tha t the
2 We d o n o t f i n d i t n ecess a r y t o d eci d e wh e t h e r t h e ab o v e d i scuss e d

o r d i n a n ce i s an ad v a l o r e m t a x o r a p r i v i l e g e t a x o n ad v e r t i s i n g co mp a n i es.

9

l e gi s l a t ur e i nt e nde d t o t a x t he s a me pr ope r t y t wi c e . St a l c up v.

City of Ga tlinbur g, 577 S. W. 2d 439 ( Te nn. 1978) . I f a s t a t ut e i s

e na c t e d by t he Te nne s s e e Le gi s l a t ur e , whi c h a l l ows f or doubl e

t a xa t i on, t he s t a t ut e mus t c ont a i n l a ngua ge whi c h pl a i nl y

i ndi c a t e s s uc h a n i nt e nt i on a nd t he r e i s a l s o a pr e s umpt i on

a ga i ns t s uc h a n i nt e nt i on. Williams v. Ma s s a c hus e tts Mut ua l Li f e

I ns ur a nc e Co. , 221 Te nn. 508, 427 S. W. 2d 845 ( 1968) . 

La ma r pa ys a gr os s r e c e i pt s t a x t o t he Ci t y on r e ve nue

ge ne r a t e d f r om l e a s i ng out door a dve r t i s i ng s i gns . The a bove

di s c us s e d or di na nc e i s a s e c ond t a x t ha t La ma r mus t pa y t he Ci t y

of Knoxvi l l e .

2

 Thus , La ma r i s s ubj e c t t o doubl e t a xa t i on. The

Ci t y of Knoxvi l l e poi nt s t o no l a ngua ge t ha t i ndi c a t e s t he

Le gi s l a t ur e i nt e nde d t o doubl e t a x a dve r t i s i ng c ompa ni e s .

The r e f or e , we hol d t ha t t he a bove di s c us s e d or di na nc e r e s ul t s i n

i mpe r mi s s i bl e doubl e t a xa t i on.

Si nc e we f i nd the f i r s t i s s ue to be di s pos i t i ve , we do

not a ddr e s s t he ot he r i s s ue s r a i s e d by La ma r . Fur t he r mor e , i t i s

we ll e s t a blis he d tha t a c our t will not pa s s on the is s ue of the

c ons titutiona lity of a s t a t ut e unl e s s it is a bs ol ut e l y ne c e s s a r y

f or t he de t e r mi na t i on of t he c a s e a nd of t he pr e s e nt r i ght s of

t he pa r t i e s to the li t i ga t i on. We s t v. Ca r r , 212 Te nn. 367, 370

S. W. 2d 469 ( 1963) . Cour t s s houl d a voi d de a l i ng wi t h
10

c ons t i t ut i ona l que s t i ons a bs t r a c t l y or i s s ui ng a dvi s or y opi ni ons .

St a t e v. Ki ng, 635 S. W. 2d 113 ( Te nn. 1982) . 

For t he r e a s ons s t a t e d a bove , t he j udgme nt of t he Tr i a l

Cour t i s r e ve r s e d. The $19, 577 pa i d i nt o t he Re gi s t r y of t he

Cour t , pl us a c c r ue d i nt e r e s t , i s di r e c t e d t o be pa i d t o La ma r ,

a nd t he c a us e i s r e ma nde d t o t he Tr i a l Cour t f or s uc h f ur t he r

pr oc e e di ngs a s ma y be ne c e s s a r y a nd c ol l e c t i on of c os t s be l ow

whi c h ar e , as ar e cos t s of appeal , adj udge d aga i ns t t he Ci t y.

_______________________________

Hous t on M. Godda r d, P. J .

CONCUR:

________________________________

Cha r l e s D. Sus a no, J r ., J .

________________________________

Wi l l i a m H. I nma n, Sr . J .