News and Insights

Arkansas Tax Opinions Subject to FOIA Disclosure

Tax Development Nov 13, 2007

The Supreme Court of Arkansas (“Court”) held on September 27, 2007, that legal opinions issued by the Arkansas Department of Finance and Administration relating to Arkansas sales taxes, issued under Gross Receipts Tax Rule GR-75, are public records that must be disclosed under Arkansas Code Ann. § 25-19-103(5)(A) (Supp. 2005) with any and all facts that could identify a person or entity fully redacted. The Court found that the Pulaski Circuit Court (“Circuit Court”) had erred in finding that the opinions were exempt from disclosure under the Freedom of Information Act (FOIA). The Circuit Court had held that the redaction identifying facts from requested tax opinions would require a qualitative analysis and thus require a creation of a new record, which is in violation of Arkansas Code Ann. 25-19-205(d)(C)(3) (Supp. 2005).

The case was filed by Ryan & Company AR, Inc., a subsidiary of Ryan, Inc. (“Ryan”), after the Arkansas Department of Finance and Administration rejected Ryan’s October 4, 2005 request for GR-75 legal opinions in redacted form. At the Circuit Court hearing, documentation was presented showing that many states release similarly redacted information, many providing the opinions electronically along with useful search engines to assist taxpayers in finding applicable rulings. Trisha C. Fortune, a Principal with Ryan, testified as to the important guidance these opinions provide, allowing taxpayers to determine the proper taxability of their sales and purchases. Additionally, release of the letter rulings by a taxing authority helps to ensure that all taxpayers receive fair treatment under the statute.

Testimony at the hearing revealed that the Arkansas Department of Finance and Administration maintains an information database that includes the Rule GR-75 legal opinions that are indexed and searchable. This database is utilized by auditors to make taxability decisions during audits, applying the results of the letter rulings to various taxpayers.