Opinion ID: 2037072
Heading Depth: 1
Heading Rank: 7

Heading: Constitutionality of Classification Created by Act.

Text: The district court stated that it was required to reject the Department's interpretation of § 77-3001(2) and to adopt Big John's interpretation because under the Department's interpretation, the Act created an arbitrary and unreasonable classification in violation of Neb. Const. art. III, § 18. Because we conclude that the language of § 77-3001(2) supports the Department's interpretation and does create a classification which distinguishes between coin-operated pool tables and hourly fee pool tables, we must consider whether such classification violates the Nebraska Constitution. We conclude that the Act creates a classification based on a reasonable distinction and a substantial difference between the objects classified and therefore does not violate Neb. Const. art. III, § 18. A legislative act can violate Neb. Const. art. III, § 18, as special legislation in one of two ways: (1) by creating a totally arbitrary and unreasonable method of classification or (2) by creating a permanently closed class. Haman v. Marsh, 237 Neb. 699, 467 N.W.2d 836 (1991). We have stated that  ` [a] legislative classification, in order to be valid, must be based upon some reason of public policy, some substantial difference of situation or circumstances, that would naturally suggest the justice or expediency of diverse legislation with respect to objects to be classified.... '  Id. at 711, 467 N.W.2d at 846. Classification is proper if the special class has some reasonable distinction from other subjects of like general character, which distinction bears some reasonable relation to the legitimate objectives and purposes of the legislation. Id. Our review of the legislative history of the enactment of the Act reveals that the purpose of the Act was to address the administrative difficulty in auditing the receipts generated by mechanical amusement devices for purposes of monitoring sales tax compliance. See, generally, Committee Records, L.B. 1360, 80th Leg. 12-16 (April 29, 1969), and Floor Debate, L.B. 1360, 80th Leg. 2179 (June 13, 1969). Because coins or other media of payment were directly deposited into such devices, no record of receipts was created which was readily subject to audit. The Legislature therefore proposed to create a separate classification for devices into which coins or substitute media were deposited and for which no record of receipts was created. Operators of such mechanical amusement devices would be subject to a separate mechanical amusement device tax in lieu of sales tax on the receipts from such devices. Id. This classification would create a separate scheme for taxing the operators of mechanical amusement devices which would be less difficult to administer, while maintaining the sales tax scheme for other forms of amusement for which a record of receipts subject to audit was more readily maintained. Id. We disagree with the district court's conclusion that the Act's classification which makes a distinction between coin-operated pool tables and hourly fee pool tables is arbitrary and unreasonable. We conclude that the intent in the enactment of the Act, to provide a separate system of taxation for devices whose receipts were not readily subject to audit, was for a legitimate objective and purpose and that the distinction between amusements which are coin-operated and those for which an hourly fee is paid bears a reasonable relation to such legitimate objective and purpose. See Haman v. Marsh, supra . Because we find that in regard to the legitimate purposes of the Act, a substantial difference of situation or circumstance exists between coin-operated amusement devices and other forms of amusement for which an hourly fee is collected, we conclude that the Act is not special legislation in violation of Neb. Const. art. III, § 18. Thus, there is no constitutional impediment to enforcement of § 77-3001(2) as interpreted by the Department.