A recent article in Forbes grabbed our attention because of the major implications of one state’s decisions about sales tax guidance. The Arkansas Supreme Court heard a case about applying sales tax to copies of medical records. The taxpayer who brought the case before the Arkansas Supreme Court cited a nonpublic opinion letter issued by the Arkansas attorney general that noted that copies of medical records were not subject to sales tax. After the taxpayer used this to prove her case, the attorney general issued a statement essentially revoking the previous opinion, while openly disagreeing with the Department of Finance and Administration, and deferred to the Department’s judgment.
In the end, the Supreme Court ruled in favor of the Department of Finance and Administration — but that doesn’t clear things up as much as you might think. The issue becomes significantly more clear when speaking with the legal counsel for the Department of Finance and Administration. The taxpayer originally asked the attorney general for an opinion on a state statute that explained what a medical records provider can charge for their services to customers but remains silent on the issue of taxation. For the past half-century or so in Arkansas, the Department of Finance and Administration has always been the body to issue opinions on taxation-related statutes.
Because the statute the taxpayer was bringing into question was silent on taxation, the opinion went to the Attorney General and not the DF. Businesses seeking opinions in Arkansas concerning taxation should always contact the legal counsel at the DF, not the attorney general. This is particularly important when you consider that the state attorney general has been allowed to retract or supersede a letter of opinion (in Arkansas and in other states) when there has been no change to the law. Your business might feel confident about a decision when you’ve made the effort to check your legal position… but it is clear that things can change, even in the middle of a court case. Our advice? If your sales tax issues are complex enough that you need an opinion from the state, you’ll want to hire a professional who knows sales tax lawfully and will be able to guard your best interests.