The Arkansas Supreme Court ruled in Larry Walther, Director of the Department of Finance and Administration v. Flis Enterprises Inc., that free meals provided by a restaurant operator to its managers are taxable at the retail price. In addition, the Supreme Court clarified the sovereign immunity issue.
Matt Boch provided comment to Tax Analysts and said that sovereign immunity “is not a matter of subject-matter jurisdiction,” the court didn’t give tax practitioners more guidance, which could cause more issues in the future.
“DFA did not raise the issue of sovereign immunity at the trial court level nor is it asserting it as a defense on appeal,” the court said in its decision. “Our discussion would normally end there,” but “subject-matter jurisdiction based on sovereign immunity is an issue that is always open and it is the duty of an appellate court toraise the issue on its own volition.”
“The opinion was overall good news,” Boch told Tax Analysts on March 2. “The doors to court are still open for taxpayers.”
Boch added that “Governor Asa [Hutchinson] told the press that he instructed his agencies not to assert sovereign immunity without his office’s approval. He said he would like to see the courts open for taxpayers.”
Boch also spoke to Law360 (subscription required) and said the Andrew case “unwound about 20 years of precedent, but the FLIS decision would give some guidance to the circuit courts on how to handle sovereign immunity cases moving forward.
“It seems to be [the] Arkansas [Supreme Court] walking back from a broad reading of the Andrews case,” Boch said.
Arkansas Supreme Court, Arkansas Constitution, Department of Finance and Administration, sovereign immunity