The outcome of a court case in Cumberland County could affect other lawsuits in the state between local governments and internet sweepstakes cafe owners. Thirteen business owners filed a suit to prevent the City of Fayetteville from collecting thousands of dollars from each business in privilege license.
Lawyers for internet cafe’s argue the city is violating state law by imposing “punitive” taxes on a business for the sake of filling funding gaps in a recession.
“They must not abuse their authority to do so for subjective purposes,” said Lonnie Player Jr, lawyer for cafe owners, during the court hearing Monday afternoon.
At the heart of the argument is the 9,000 percent increase of fees for the internet cafes. At $2,000 a business and $2,500 a computer, Player says the average tax bill for the cafe’s he represents is around $32,000.
“Most of my clients remain in the red in their businesses because even without the tax, they are trying to recoup their initial opening investments,” said Player.
Player also argues the city is overstepping it’s bounds by classifying property for taxation, which only the state can do. He says the computers are not even games of chance, as defined by the city’s ordinance because they sell phone or internet time, and therefore not subject to the increased fees.
“The businesses are primarily in the business of selling games of chance,” said Bobby Sullivan, the lawyer representing the City of Fayetteville. “You go into their stores, into their operations and pay for the privilege of playing an electronic version of poker, blackjack, slot machines, or something like that where you can win cash prizes.”
Lawyers for the city also argue the local government has a right to raise taxes and fees when needed. They say internet cafe’s present a unique situation.
“They are not like other types of businesses, they have their own burden they impose on town resources,” said Sullivan.
Other cafe owners are waiting to see what happens next in this case to see if it will affect the outcome of similar court cases in other cities.
The superior court judge is expected to make a decision by Friday on whether to continue with the case or to dismiss it. The temporary restraining order preventing the city from collecting the fees will remain in place until the judge makes his decision.