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Mo. Judge Urged To Preserve St. Louis Teleworker Tax Row

By Asha Glover · July 19, 2021, 7:52 PM EDT

A proposed class of Missouri individuals asked a state circuit judge to reject a request by St. Louis to dismiss their suit over the city's rules on tax refunds for nonresidents for days worked outside the city.

In a filing Wednesday, the proposed class defended their challenge against St. Louis and its revenue collector, Gregory Daly, over limits on nonresident refunds of the city's 1% earnings tax, saying the case involved violation of rights rather than a simple refund request.

"This case is about much more than plaintiffs and those similarly situated receiving their earnings tax money for teleworking days," the proposed class said. "Plaintiffs seek redress for defendants' blatant violation of the earnings tax laws and the extraordinary measures they have taken to thwart otherwise lawful refund claims, which underlies the due process and equal protection violations for plaintiffs and the proposed classes."

The proposed class pushed back against the city's claim that they must simply file refund requests to resolve their concerns.

"Whether the 'refund statute' provides adequate relief to plaintiffs involves questions of fact that should be explored through discovery, rendering a motion to dismiss premature," they said.

The case stems from a complaint filed in federal court March 29 by Mark Boles, Nicholas Oar, Kos Semonski and Christian Edward Stein III. They were denied tax refunds for 2020 after Daly issued new guidance and required additional documentation that effectively refused refunds to individuals teleworking outside the city, according to the complaint.

The proposed class said Daly's guidance and additional documentation requirements for refund requests effectively limited tax refunds to nonresidents traveling for work and excluded individuals teleworking outside the city, violating the state and U.S. constitutions, including those teleworking due to the coronavirus pandemic. In their motion filed in April, the individuals asked the court to remove the new document requirements, arguing that the treatment they considered unconstitutional would irreparably harm them and served no public interest.

Boles, Oar and Semonski seek to represent a class of nonresidents of St. Louis whose employers withheld the tax and paid it from Jan. 1, 2020, onward and who have been denied similar refund requests. Stein is also seeking to represent a separate class of similar nonresidents who have either not yet submitted a request or not sought a refund for days teleworking.

A judge in May denied a request of the proposed class for an order and preliminary injunction against the city. The court agreed with the city's argument that nonresidents could seek relief absent a temporary restraining order to undo the rule by simply protesting the taxes directly, as several nonresidents have appeared to have done.

The city had requested July 1 that the judge dismiss the challenge as a complication of a straightforward refund action. St. Louis said that the residents have not and cannot show that they lack an adequate remedy at law because the refund statute provides a mechanism to seek a refund of taxes that they allege they do not owe. The city added that the refund statute is the only mechanism by which the residents can receive a tax refund whether they were paid erroneously, under duress or were illegally assessed.

The proposed class said that the city has not shown that the refund statute affords them adequate relief because it arguably requires a protest at the time of payment. Given the proposed class's allegation that the city had a prior practice of issuing refunds for teleworking without requiring protests at the time of payment, there was no reason to protest when it was paid, according to the brief. As a result, if the proposed class were to file a protest, St. Louis could challenge the timeliness of the protest.

If the proposed class brings a claim under the state's refund statute, "the number of nonresident teleworkers whose money the city is holding (and will continue to hold) unlawfully against their will is vast, and each taxpayer has a constitutional interest in his or her wages," according to the brief. "This case is thus about far more than the four named plaintiffs claiming a few hundred dollars in refunds via a 'refund suit.'"

The lawsuit was originally brought against the city under the administration of former Mayor Lyda Krewson, who was replaced by Mayor Tishaura Jones on April 20.

Representatives for the city did not immediately respond to a request for comment Monday.

Representatives for the proposed class did not immediately respond to a request for comment Monday.

Daly is represented by David H. Luce and Zachary R. McMichael of Capes Sokol Goodman & Sarachan PC.

The city is represented by Michael A. Garvin and Robert H. Dierker of the city counselor's office.

The case is Mark Boles et al. v. City of St. Louis et al., case number 2122-CC00713, in the Missouri Circuit Court for the City of St. Louis.

--Editing by Neil Cohen.

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