A federal judge has halted proceedings in a lawsuit against the Town of Hilton Head Island by laser-component maker Kigre.
U.S. District Judge Sol Blatt Jr. of Charleston issued the order Tuesday, delaying the lawsuit until the company's appeal of a related ruling is handled in state court.
The company has disputed the town's business-license ordinance for years. Kigre's assertion that it is illegal was rejected Feb. 7, 2012, by Beaufort County Master in Equity Marvin Dukes III.
The company's challenge of that ruling is pending before the S.C. Court of Appeals. Oral arguments have not yet been scheduled.Blatt's ruling to delay the federal case followed a request by the town to dismiss it. The town argued that federal law bars a U.S. District Court inquiry into a state tax matter.
In May, the town told the company it owed about $318,500 in unpaid business-license fees for the tax years 2007-12. Kigre paid the amount under protest and appealed May 17.
The town later lowered the amount owed to about $85,000, after Kigre supplied copies of its federal income tax returns from 2009-12 -- the only years it argues are applicable for review under state statute of limitations, according to court records.
However, Kigre argues the amount is still excessive. The company's attorney, Tom Taylor, maintains U.S. Supreme Court rulings say the town cannot base the fee on sales from manufactured goods sold outside the state. Doing so, Taylor argues, would violate the "dormant" Commerce Clause in the U.S. Constitution, which implies states, cities and towns are prohibited from passing legislation that discriminates against or excessively burdens interstate commerce.
Dukes, however, said the business-license ordinance is legal, and Kigre is required to pay the fees based on gross income.
State courts have ruled that municipalities have the right to impose license fees on companies doing business within their limits, even if a portion of that business is outside the town and state.
Kigre challenged the fee on several fronts, saying it was written unfairly and enforced arbitrarily. The town denies those accusations, and Dukes found no evidence to support them.