The Arkansas Supreme Court will hear oral arguments Thursday in a case that could provide some elaboration on the scope of the court’s rewriting of precedent to say that the state cannot be sued in state courts.

It’s a tax dispute in which a Burger King franchisee is contesting a tax assessment on the cost of meals provided employees.


The latest development is that the state Department of Finance Administration is citing the recent court ruling that the state cannot be sued, particularly when money is at issue. That ruling may or may not have left open avenues for certain types of suits against the state, depending on whether you believe the majority or dissenters in the case.

Does the ruling really mean a taxpayer cannot appeal the interpretation of tax law by the state?


I can see where this is an opportunity for the state to begin to find out what the court really meant in its earth-shaking decision. DFA seems bound to ask. But I can also see where elected officials from the governor on down would be unlikely to publicly endorse such a posture — that any decision by any state bureaucrat is final, unless you have a U.S. constitutional claim you can make in federal court. Otherwise, got to the Claims Commission and the tender mercies of the legislature.

Here’s a good analysis of the Burger King case by Matthew Boch (I( misspelled his name initially) of the Dover and Dixon law firm.


He notes a procedural problem at the outset. Can the state invoke the sovereign immunity protection at the appeals level when it didn’t make it in the trial court? Bloch characterizes the late argument by the state as “reluctantly asserting sovereign immunity.”

He continues with a comment relevant during tax season:

This case will be highly significant in understanding what judicial remedies are still available to taxpayers. It also will be widely watched throughout the Arkansas legal and government world as one of the first post-Andrews cases to further address sovereign immunity.

In the meantime, taxpayers need to bear in mind that judicial remedies may be unavailable for disputes with DFA—at least in state court (perhaps federal court becomes a viable option in some instances). Refund claim or other postpayment remedies seem to be especially vulnerable, and so taxpayers should consider carefully before paying disputed tax amounts to DFA.

There’s another reason this case poses some different questions than a simple waiver by the legislature of the ability to sue.

…this actually is a case where the taxpayer paid a disputed assessment under protest, not a refund claim. (Such a procedural posture is common in Arkansas, where a high 10% interest rate on both over- and underpayments encourages taxpayer prepayment of disputed tax amounts.) That distinction may be sufficient to avoid application of sovereign immunity—unless the court goes so broad as to prohibit all taxpayer litigation