Ark. Code Ann. § 26-18-406 (2020)

Research References

U. Ark. Little Rock L.J.

Tyler, Survey of Business Law, 3 U. Ark. Little Rock L.J. 149.

Legislative Survey, Taxation, 4 U. Ark. Little Rock L.J. 609.

Case Notes

Appeals.

Appeal to chancery court automatically superseded certificate of indebtedness. Hardin v. Norsworthy, 204 Ark. 943, 165 S.W.2d 609 (1942) (decision under prior law).

State had right of appeal from injunction restraining circuit clerk from issuing writ of execution on certificate of indebtedness. Hardin v. Norsworthy, 204 Ark. 943, 165 S.W.2d 609 (1942) (decision under prior law).

This chapter requires a particular type of protest in order to initiate the administrative review procedures outlined in §§ 26-18-404 and 26-18-405, which involve contesting proposed assessments, while paying the final assessment under protest is required by subdivision (a)(1) of this section in order to preserve the taxpayer's right to judicial review. Hercules, Inc. v. Pledger, 319 Ark. 702, 894 S.W.2d 576 (1995) (decision under prior law).

Burden of Proof.

Where taxpayer was not claiming an exemption from tax, but rather was claiming that a tax could not be levied upon it, the Department of Finance and Administration had the burden of proving the propriety of the tax, and all doubts and ambiguities had to be resolved in favor of the taxpayer. Pledger v. Troll Book Clubs, 316 Ark. 195, 871 S.W.2d 389 (1994).

Certificates of Indebtedness.

Where payment had been made and taxpayer sued to recover overcharge, certificate of indebtedness had performed its function and there was no lien. Hardin v. Gautney, 204 Ark. 723, 164 S.W.2d 427 (1942) (decision under prior law).

Issuance of certificate of indebtedness within 30-day period allowing merchant to appeal to chancery court was proper, since tax amount fixed should have been paid and an action brought for refund of any excess shown to have been collected. Hardin v. Norsworthy, 204 Ark. 943, 165 S.W.2d 609 (1942) (decision under prior law).

Proceeding for issuance of certificate of indebtedness held not a common law action wherein trial by jury was guaranteed, and right to jury trial was not accorded by statute. Hardin v. Norsworthy, 204 Ark. 943, 165 S.W.2d 609 (1942) (decision under prior law).

Regularity of signature to certificate of indebtedness could not be raised for the first time in the Supreme Court. Cook v. Hickenbottom, 212 Ark. 768, 207 S.W.2d 721 (1948) (decision under prior law).

Where merchant did not refute claim of tax indebtedness, filing of certificate of indebtedness became a mandate, and a lien attached from time certificate was entered. Hardin v. Norsworthy, 204 Ark. 943, 165 S.W.2d 609 (1942) (decision under prior law).

Claim Upheld.

Claim for refund survived a motion to dismiss under Ark. R. Civ. P. 12(b)(6). Little Rock Cleaning Sys. v. Weiss, 326 Ark. 1007, 935 S.W.2d 268 (1996).

Due Process.

Collecting interest on taxpayers' delinquent tax obligations did not violate due process because the taxpayers were not denied the ability to contest the interest either administratively or by seeking judicial relief under the Arkansas Tax Procedure Act, § 26-18-101 et seq.Sanford v. Walther, 2015 Ark. 285, 467 S.W.3d 139 (2015).

Exclusivity.

The fact that § 26-18-405(e) states that a “taxpayer may seek relief” under this section takes nothing away from the clarity of the exclusivity language of this section. Nor does the fact that the second sentence of subsection (d) states that there shall be no injunctive relief against assessment or collection. It gives the taxpayer the exclusive method of challenge. Taber v. Pledger, 302 Ark. 484, 791 S.W.2d 361, cert. denied, 498 U.S. 967, 111 S. Ct. 429, 112 L. Ed. 2d 413 (1990).

Injunctions.

Interdiction against injunction could only have reference to taxes lawfully assessed and to lawful methods used in collection of taxes. Hardin v. Gautney, 204 Ark. 723, 164 S.W.2d 427 (1942) (decision under prior law).

Evidence that merchant was misled into thinking another hearing would be accorded was insufficient to justify granting of injunction restraining issuance of writ of execution on certificate of indebtedness. Hardin v. Norsworthy, 204 Ark. 943, 165 S.W.2d 609 (1942) (decision under prior law).

One had 30 days from filing of certificate of indebtedness in which to bring injunction proceedings in county where certificate was filed where person alleged that no part of tax amount claimed was owing. Scurlock v. Little, 224 Ark. 109, 271 S.W.2d 914 (1954) (decision under prior law).

Legislative Intent.

In enacting this section, the General Assembly had in mind at least two reasons for requiring a taxpayer to designate specifically any payment as being under protest when seeking judicial review of a final deficiency assessment: first, subsection (c) mandates that all taxes and penalties paid under protest are to be held by the director in an escrow account denominated the “Tax Protest Fund Account,” and that refunds are to be made from this account; second, a taxpayer who has protested and pursued an earlier administrative review of a proposed assessment under § 28-18-404 may reasonably decide not to pursue further adjustments of the assessment or judicial review of the final determination. Hercules, Inc. v. Pledger, 319 Ark. 702, 894 S.W.2d 576 (1995) (decision under prior law).

Notice of Deficiency.

Purchaser of business who was issued a permit was entitled to notice of deficiency, and notice to former owner mailed six months after sale was insufficient. Thompson v. Chadwick, 221 Ark. 720, 255 S.W.2d 687 (1953) (decision under prior law).

Paying Under Protest.

Protest is commonly understood to mean a formal disapproval or objection issued by a concerned party. Hercules, Inc. v. Pledger, 319 Ark. 702, 894 S.W.2d 576 (1995) (decision under prior law).

While a payment which is not made under protest is deposited into general revenues and becomes available for immediate use by the state, a payment made under protest only becomes available for the state's use after the taxpayer fails to file suit within the one year period or after judicial determination that the deficiency assessment was valid. Hercules, Inc. v. Pledger, 319 Ark. 702, 894 S.W.2d 576 (1995) (decision under prior law).

Relief Precluded.

General Assembly has right to designate a period within which one alleged to owe state on tax will be required to make his defense. Hardin v. Gautney, 204 Ark. 723, 164 S.W.2d 427 (1942) (decision under prior law).

Limitation of 30 days applied with equal force to litigant who sought relief in his county of residence where right to assess any tax was challenged and to litigant who only questioned amount of tax that had been legally assessed, some part of which was due. Hardin v. Gautney, 204 Ark. 723, 164 S.W.2d 427 (1942) (decision under prior law).

Where tax was collected by mercantile establishment from its customers, it could not thereafter question the applicability of the tax to particular sales in order either to retain tax money for itself or to recover it from state, since such action would constitute unjust enrichment. Cook v. Sears-Roebuck & Co., 212 Ark. 308, 206 S.W.2d 20 (1947) (decision under prior law).

Taxpayer who was given due notice of filing certificate of indebtedness could not wait six months after filing of certificate and issuance of first execution and then question validity of tax assessed against him. Cook v. Hickenbottom, 212 Ark. 768, 207 S.W.2d 721 (1948) (decision under prior law).

Wife estopped to assert her claim against tax lien where she allowed husband to use her money. Cook v. Pranger, 215 Ark. 2, 219 S.W.2d 420 (1949) (decision under prior law).

Imposition of unpaid withholding taxes, interest, and penalties against employers was proper; there was no error in failing to give the employers additional credit for taxes certain employees claimed they had paid where (1) the Arkansas Department of Finance and Administration's records did not show that the employees had paid their taxes and (2) the employers were not entitled to any credit under § 26-51-916 because they had not shown reasonable cause for failing to withhold and remit taxes. Morris v. Ark. Dep't of Fin. & Admin., 82 Ark. App. 124, 112 S.W.3d 378 (2003).

Where taxpayers failed to file their protests on additional sales and individual tax assessments imposed against them by the Department of Finance and Administration until after more than a year had passed since said assessments were paid, dismissal of their complaint was warranted. Mac v. Weiss, 360 Ark. 384, 201 S.W.3d 897 (2005).

Source of Relief.

When the legality of the underlying tax act is not in issue, but only the correctness of the person assessed, the taxpayer does not have a cause of action for an illegal exaction, but the taxpayer's relief is that which is provided by § 26-18-405 and this section. Cook v. State, 312 Ark. 438, 850 S.W.2d 309 (1993).

Venue.

If controversy went only to proposition that transaction was not taxable or, if taxable, person assessed was not person charged by law with payment, such issue was determinable by chancery court of county where it was sought to compel collection, that is, where the certificate, prima facie, created a lien. Hardin v. Gautney, 204 Ark. 723, 164 S.W.2d 427 (1942) (decision under prior law).

If issue in controversy related only to amount of valid tax to be paid, the General Assembly could require payment as a condition precedent to the right to litigate as to any alleged overcharge and since fund was then transmitted to Little Rock, legislature could fix venue in Pulaski County. Hardin v. Gautney, 204 Ark. 723, 164 S.W.2d 427 (1942) (decision under prior law).

Where taxpayer's defense to state's claim for unpaid sales taxes was the three year statute of limitations and he did not claim “no tax due,” venue of his suit to enjoin levy of execution was in Pulaski Chancery Court and not in county in which certificate of indebtedness of record had been placed against him. Scurlock v. Yarbrough, 224 Ark. 113, 271 S.W.2d 916 (1954) (decision under prior law).

It was only where the taxpayer claimed “no tax due” that he would invoke the venue of his county of residence to bring action to enjoin levy of execution of unpaid sales taxes; in other cases, taxpayer had to pay amount claimed and proceed in Pulaski Chancery Court to recover overcharge. Scurlock v. Yarbrough, 224 Ark. 113, 271 S.W.2d 916 (1954) (decision under prior law).

Plaintiff could not obtain jurisdiction by an injunction suit in court of his residence until certificate of indebtedness was filed in that court. Scurlock v. Hardscrabble Country Club, 224 Ark. 629, 275 S.W.2d 638 (1955) (decision under prior law).

Cited: Ragland v. K-Mart Corp., 274 Ark. 297, 624 S.W.2d 430 (1981); Little Rock Mun. Water Works v. Ragland, 279 Ark. 324, 651 S.W.2d 78 (1983); Burlington N.R.R. v. Ragland, 280 Ark. 182, 655 S.W.2d 437 (1983); Ross v. Martin, 800 F.2d 808 (8th Cir. 1986); Ragland v. Gulf Oil Corp., 288 Ark. 182, 703 S.W.2d 449 (1986); Pledger v. Featherlite Precast Corp., 308 Ark. 124, 823 S.W.2d 852 (1992); Martin v. Couey Chrysler Plymouth, Inc., 308 Ark. 325, 824 S.W.2d 832 (1992); Leathers v. A & B Dirt Movers, Inc., 311 Ark. 320, 844 S.W.2d 314 (1992); Pledger v. Worthen Bank & Trust Co., 319 Ark. 155, 889 S.W.2d 732 (1994); Ark. Glass Container Corp. v. Pledger, 320 Ark. 10, 894 S.W.2d 599 (1995); Weiss v. Best Enters., 323 Ark. 712, 917 S.W.2d 543 (1996); Boral Gypsum, Inc. v. Leathers, 325 Ark. 272, 924 S.W.2d 805 (1996); Baker Refrigeration Sys. v. Weiss, 360 Ark. 388, 201 S.W.3d 900 (2005).