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More than five years after it began, a dispute over business license fees between Hilton Head Island and laser component manufacturer Kigre went to trial Wednesday.
Beaufort County Master In Equity Marvin Dukes heard opening arguments, all of the town's case and part of the company's case. The trial resumes at 9:30 a.m. today.
Kigre, which has operated on Hilton Head since 1986, pays the minimum amount of business license fees -- about $62 per year.
The company, the defendant in the case, says it is exempt from paying more than that, primarily because almost all its sales occur outside South Carolina. The company says its fee should be based only on what it sells in the state.
The town traditionally calculates the fee on a company's gross receipts.
Kigre challenged the 27-year-old business license ordinance on several fronts, saying it is written unfairly and enforced arbitrarily and capriciously.
As evidence, Kigre's attorney, Tom Taylor of Hilton Head, listed 28 entities, including homeowner associations, that are not licensed, even though other similar organizations are.
"The whole thing really needs to be thrown out," testified Kigre chief operating officer Jeffrey Myers.
The town, which sued Kigre, said its ordinance is legal, Kigre shouldn't be exempt and should pay more than $41,000 in unpaid business license fees, penalties and fees for tax years 2002-05.
Town attorney Gregg Alford said the company could claim an exemption only if it paid a business license fee elsewhere, but it has not.
He called Kigre's argument for an exemption "an utter red herring" and "rather nonsensical."
Steven Markiw, the town's deputy director of finance since 2004, said the town enforces the ordinance as diligently as possible with limited staff. There are 5,500 licensed businesses on the island.
The dispute began shortly after Markiw arrived, when town officials inquired about the few businesses that pay the minimum fee.
After staff determined Kigre should pay more, they had Kigre's tax documents audited. The town then filed suit to collect the fees. The company paid $41,000 but did so under protest, which should have triggered an appeal hearing before Town Council, according to the ordinance.
By mistake, the town never held that hearing, Alford said. The town refunded the money to Kigre, pending the court's decision, he said.