## Facts

- The City of Newton and Harvey County jointly owned and operated the Newton City–County Airport and the only on-airport public aviation-fuel sales facility.
- Executive Aircraft Consulting, Inc. leased airport space and operated an aircraft refurbishment and aircraft sales business that consumed substantial aviation fuel.
- To obtain lower fuel prices, Executive Aircraft purchased a tanker truck, bought fuel from off-airport suppliers, brought it onto airport premises, and used it to refuel its own aircraft.
- The City and County adopted a joint ordinance after becoming concerned about reduced fuel-sales revenue and the possibility that other airport tenants would bring in off-airport fuel.
- The ordinance required a license to transport aviation fuel onto and upon airport premises, imposed a five-cent-per-gallon “fuel flowage fee” on all aviation fuel transported onto airport premises, and imposed criminal penalties for violations.
- Ordinance proceeds were directed to an airport improvement fund to finance public improvements at the airport.
- Executive Aircraft filed a declaratory judgment action challenging the fuel flowage fee as an illegal tax prohibited by Kansas statutes limiting local taxation, including K.S.A. 79-3424 and K.S.A. 12-194.
- The district court invalidated the fuel flowage fee as an illegal tax, and the City and County appealed.

## Issues

1. Whether the five-cent-per-gallon “fuel flowage fee” was, in substance, a tax rather than a permissible regulatory user fee.
2. If the charge was a tax, whether Kansas statutes barred the City and County from imposing it, including prohibitions reflected in K.S.A. 79-3424 and K.S.A. 12-194.

## Decision

- The Kansas Supreme Court affirmed the district court’s judgment.
- The court held the “fuel flowage fee” operated as a revenue-raising measure and therefore was a tax, not a regulatory fee.
- Because it was a tax imposed by local governments in a manner barred by Kansas statutory limits on local taxation, the fuel flowage fee provision was invalid.

## Legal Principles

- A tax is a forced contribution imposed to raise revenue for governmental services offered to the public; a regulatory fee is imposed under police power to defray the costs of regulation or a specific service.
- Courts determine whether an exaction is a tax or fee by examining its primary purpose and practical operation, not its label.
- A regulatory fee must bear a reasonable relationship to the cost of the regulation or service for which it is charged; directing receipts to general public improvements indicates a revenue purpose.
- Local home-rule and police-power authority does not permit cities or counties to impose revenue measures that function as taxes in areas where the legislature has restricted or prohibited local taxation.

## Conclusion

The court concluded that a per-gallon charge on all fuel brought onto airport property, earmarked for general airport improvements and adopted in response to lost fuel-sales revenue, was a tax in substance and therefore invalid under Kansas statutory limits on local taxation.


Executive Aircraft Consulting, Inc. v. City of Newton, 252 Kan. 421, 845 P.2d 57 (Kan. 1993)