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Lawsuit Filed Against St. Louis For Denying Earnings Tax Refunds To Remote Workers

earnings tax illustration.jpg
Nat Thomas
St. Louis Public Radio
Attorneys are challenging a city move to not issue earnings tax refunds to people working from home as a result from the coronavirus pandemic.

St. Louis is facing a lawsuit challenging a decision made last year to deny earnings tax refunds to telecommuters during the pandemic.

Attorneys Bevis Schock and Mark Milton filed the suit on Monday in federal court in St. Louis.

They represent plaintiffs Mark Boles, Nicholas Oar and Kos Semonski, residents of St. Louis County and St. Charles County who worked remotely during the pandemic and were denied refunds for the 2020 tax year, according to the lawsuit.

Schock said his plaintiffs were denied refunds “in the hundreds of dollars.” He said there are thousands of other people who would be eligible to join the suit.

“They’re just brazenly holding on to people’s money, which they’re not entitled to,” Schock said of the city's move to collect the tax.

The suit seeks class-action status and requests the city pay damages to the plaintiffs, including all earnings tax paid for work performed outside the city and legal fees.

“You don’t owe the tax if the ordinance doesn’t say you owe the tax,” Schock said. “The next thing is that the city is unbelievably wasteful. It’s a cesspool of corruption and patronage.”

Everyone who lives or works in the city must pay a 1% tax on their earnings, which is withheld from pay by employers. Typically, the government allows those who aren’t city residents to fill out an E-1R earnings tax refund form for days they worked outside the city for business travel.

The city’s earnings tax ordinance doesn’t address telecommuting. But in May, the collector of revenue’s office said people working remotely due to the pandemic would not be eligible for a refund.

The updated form for the 2020 tax year says “a regular workday does not include holidays, vacation, working remotely from home or other work absences.”

A spokesman for St. Louis Collector of Revenue Gregory F.X. Daly said he hadn’t had a chance to read through the lawsuit yet and could not comment on it.

Earlier this month, Daly addressed the question on the Politically Speaking podcast. He said the earnings tax is vital. It brings in about $240 million a year, which accounts for more than a third of the city’s budget and pays for services including police, fire and parks.

Daly said about 70% of that money is paid by people who work in the city but don’t live there.

“When they come in to enjoy the zoo, the parks, the ballpark or whatever, as far as some of the things that we have as a city then obviously we're in a position to provide their safety, their enjoyment, their entertainment, and that's part of what the earnings tax does,” he said.

Daly said a state bill also seeking to force the city to refund earnings taxes to remote workers would cost the city millions of dollars if it were enacted. More than 200,000 workers commute to the city for work, according to U.S. Census data from a 2018 American Community Survey.

St. Louis residents heading to the polls next week will vote on whether to renew the earnings tax. The measure, called Prop E, resurfaces on the ballot every five years, and voters historically have approved it with widespread support.

Schock said that he has no position on Prop E and that the lawsuit is unrelated.

Follow Corinne on Twitter: @corinnesusan

Corinne is the economic development reporter at St. Louis Public Radio.

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