Tax Audit Protest and Appeal — Arkansas

Tax Audit Protest and Appeal (ARKANSAS)

Quick-Reference Summary

Part A — Informal Conference Request Letter

[LAW FIRM LETTERHEAD]
[Street Address]
[City], Arkansas [Zip]
Phone: [________________________________]
Email: [________________________________]
Arkansas Bar No.: [________________________________]

Date: [__/__/____]

SENT VIA:

☐ U.S. Mail — Certified, RRR (Tracking No. [____________])
☐ Email: [________________________________]
☐ Hand delivery — Ledbetter Building, Little Rock

TO:

Arkansas Department of Finance and Administration
Revenue Division — Audit Section
Ledbetter Building, 1816 W. 7th Street, Room [____]
Little Rock, AR 72201

Attn: [Auditor Name / Audit Supervisor]

Re: Request for Pre-Assessment Audit Conference

Dear [Auditor / Supervisor]:

1. Representation. Pursuant to Ark. Code Ann. § 26-18-302 (taxpayer representation) and Form ARDFA POA, the undersigned represents the above-referenced taxpayer for all matters relating to the pending audit. A completed Power of Attorney is attached.

2. Conference Request. Taxpayer respectfully requests a pre-assessment conference with the assigned auditor, audit supervisor, and (if appropriate) DFA Revenue Legal Counsel before issuance of any Notice of Proposed Assessment under Ark. Code Ann. § 26-18-403. Preferred format:

☐ In person at the Ledbetter Building
☐ Microsoft Teams / video conference
☐ Telephone at [_____________]
☐ Within [__] business days of this letter

3. Issues to be Addressed.

4. Documents Provided / to be Provided.

☐ General ledger and trial balance
☐ Sales/use tax exemption certificates organized by invoice
☐ Federal returns and Revenue Agent Reports
☐ Apportionment workpapers (Ark. Code Ann. § 26-51-709 et seq.)
☐ Bank statements
☐ Contracts and 1099s
☐ Other: [________________________________]

5. Statute of Limitations. Taxpayer ☐ has / ☐ has not executed a waiver under Ark. Code Ann. § 26-18-306(e). Taxpayer ☐ agrees / ☐ does not agree to extend the SOL.

6. Reservation of Rights. Nothing in this letter waives Taxpayer's right to (a) protest any Notice of Proposed Assessment within 60 days under Ark. Code Ann. § 26-18-404; (b) petition the Arkansas Tax Appeals Commission within 90 days under § 26-18-1110; (c) bypass administrative review under § 26-18-406; or (d) seek judicial relief in circuit court. All rights are expressly reserved.

Respectfully submitted,

[ATTORNEY NAME], Arkansas Bar No. [____]
Counsel for [TAXPAYER]

Part B — Formal Protest / Petition

Part B.1 — Written Protest to DFA (Ark. Code Ann. § 26-18-404)

[LAW FIRM LETTERHEAD]

Date: [__/__/____]

SENT VIA: Certified Mail, RRR (Tracking No. [____________]) AND Email to [email protected]

TO:

Arkansas Department of Finance and Administration
Revenue Legal Counsel — Office of Hearings and Appeals
Ledbetter Building, 1816 W. 7th Street, Room 2380
Little Rock, AR 72201

Re: Written Protest of Notice of Proposed Assessment — Ark. Code Ann. § 26-18-404

1. Identification of Taxpayer and Assessment

1.1. Taxpayer [NAME] ("Taxpayer") timely filed Arkansas [tax type] return(s) for tax year(s) [____] through [____].

1.2. On [__/__/____], DFA issued the Notice of Proposed Assessment ("Notice") under Ark. Code Ann. § 26-18-403 proposing the following adjustments (true and correct copy at Exhibit A):

1.3. Taxpayer protests the Notice ☐ in full / ☐ in part as detailed below.

2. Timeliness and Jurisdiction

2.1. The Notice is dated [__/__/____]. This Protest is filed within 60 days under Ark. Code Ann. § 26-18-404.

2.2. By filing this Protest, Taxpayer invokes administrative review under §§ 26-18-404 and 26-18-405 and reserves rights to (a) appeal to the Arkansas Tax Appeals Commission under § 26-18-1110, and (b) judicial relief under § 26-18-406.

2.3. Taxpayer ☐ has / ☐ has not paid the undisputed portion under protest pursuant to § 26-18-406.

3. Statement of Facts

3.1. [Background — entity formation, residency, business nature, tax year, returns filed, audit history.]

3.2. Audit chronology.

3.3. Documentary record. Records maintained in the ordinary course of business and preserved under Ark. Code Ann. § 26-18-506 (six-year retention). See Exhibits B through [___].

4. Items Protested

4.1. Issue 1 — [Concise statement].
4.2. Issue 2 — [Concise statement].
4.3. Issue 3 — [Concise statement].

Taxpayer does ☐ / does not ☐ concede any portion. Conceded amount: $[______].

5. Legal Argument

5.1. Standard of Review and Burden of Proof

The taxpayer bears the burden of proof at the administrative level (Pledger v. Easco Hand Tools, Inc., 304 Ark. 47, 800 S.W.2d 690 (1990)). Tax statutes imposing tax are construed strictly against the State; exemptions are construed strictly against the taxpayer (Weiss v. Chem-Fab Corp., 336 Ark. 21, 984 S.W.2d 395 (1999)).

5.2. Issue 1 — [Heading]

[Legal argument with Ark. Code Ann. citations and Arkansas Supreme Court / Court of Appeals citations.]

5.3. Issue 2 — [Heading]

[Argument.]

5.4. Issue 3 — Penalty Abatement

Penalties under Ark. Code Ann. § 26-18-208 may be waived for reasonable cause. Taxpayer's failure was the result of reasonable cause and not willful neglect because [____].

6. Procedural Elections

☐ Taxpayer requests an in-person hearing before a DFA hearing officer
☐ Taxpayer requests resolution on written submissions (no hearing)
☐ Taxpayer requests further review by the Secretary of DFA under § 26-18-405(d)(4)
☐ Taxpayer requests interim settlement conference

7. Relief Requested

WHEREFORE, Taxpayer respectfully requests:

(a) Cancellation of the Notice in full;
(b) Alternatively, reduction to $[______];
(c) Abatement of all penalties;
(d) Such further relief as is just and equitable.

8. Reservation of Rights

Taxpayer expressly reserves the right to file a petition with the Arkansas Tax Appeals Commission under Ark. Code Ann. § 26-18-1110 within 90 days of any DFA action or decision, and to seek judicial relief under § 26-18-406.

9. Verification and Signature

I, [TAXPAYER OFFICER], verify under penalty of perjury that the factual statements herein are true and correct.

Executed [__/__/____] at [City], Arkansas.

_____________________________________
[TAXPAYER NAME]

Respectfully submitted,

_____________________________________
[ATTORNEY NAME], Arkansas Bar No. [____]
Counsel for Taxpayer

Part B.2 — Petition to the Arkansas Tax Appeals Commission (Ark. Code Ann. § 26-18-1110)

[LAW FIRM LETTERHEAD]

Date: [__/__/____]

SENT VIA: Online filing at https://ig.arkansas.gov/tax-appeals-commission/petition/ AND Certified Mail, RRR

BEFORE THE ARKANSAS TAX APPEALS COMMISSION
900 West Capitol Avenue, Suite 310
Little Rock, AR 72201

PETITION FOR APPEAL

(Ark. Code Ann. § 26-18-1110; TAC Rule 5.11)

Petitioner [NAME], by and through undersigned counsel, files this Petition pursuant to the Independent Tax Appeals Commission Act, Ark. Code Ann. § 26-18-1101 et seq., and respectfully states:

1. Taxpayer Information

2. Action or Decision of DFA Being Appealed

2.1. On [__/__/____], DFA issued the following action/decision (true and correct copy attached as Exhibit A):

☐ Notice of Proposed Assessment (§ 26-18-403)
☐ Notice of Final Assessment (§ 26-18-401)
☐ Notice of Proposed Disallowance of Claim for Refund (§ 26-18-507)
☐ Final Disallowance of Claim for Refund
☐ Final Decision of Secretary (§ 26-18-405)
☐ Decision of DFA Office of Hearings and Appeals
☐ Other: [____]

3. Timeliness

3.1. This Petition is filed within 90 days of the date of the action or decision under appeal, pursuant to Ark. Code Ann. § 26-18-1110 and TAC Rule 5.11. The Petition is the [__]th day after the action/decision.

4. Statement of Facts

[Concise narrative of operative facts. Attach DFA decision document.]

5. Issues Presented for De Novo Review

5.1. Issue 1: [Whether [legal issue] under Ark. Code Ann. § [______].]
5.2. Issue 2: [Issue.]
5.3. Issue 3: [Issue.]

6. Statement of Law and Argument

6.1. Standard of Review

Pursuant to Ark. Code Ann. § 26-18-1115 and TAC Rule 5, the Commission shall review the matter de novo. Taxpayer bears the burden of proof by a preponderance of the evidence.

6.2. Argument on Each Issue

[Detailed brief.]

7. Relief Requested

WHEREFORE, Petitioner respectfully requests that the Commission:

(a) Reverse the DFA action in full;
(b) Alternatively, modify the assessment to $[______];
(c) Order DFA to refund $[______];
(d) Abate penalties under Ark. Code Ann. § 26-18-208;
(e) Grant such further relief as is just and equitable.

8. Hearing Election (TAC Rule 5.20)

☐ Petitioner requests an in-person hearing at the Commission's office in Little Rock
☐ Petitioner requests a remote/video hearing
☐ Petitioner consents to a decision on written submissions
☐ Petitioner requests an in-person hearing outside Little Rock under TAC Rule 5.4

9. Verification

I, [TAXPAYER OFFICER], verify under penalty of perjury under the laws of Arkansas that the factual statements herein are true and correct.

Executed [__/__/____].

_____________________________________
[TAXPAYER NAME]

Respectfully submitted,

_____________________________________
[ATTORNEY NAME], Arkansas Bar No. [____]
[Law Firm], [Address], [Phone], [Email]
Counsel for Petitioner

Exhibits: A — DFA Notice/Decision; B — Audit workpapers; C — Power of Attorney; D — Supporting documents.

Certificate of Service: I certify that on [__/__/____] I served the Arkansas Department of Finance and Administration with a copy of this Petition by certified mail, RRR, addressed to Revenue Legal Counsel, 1816 W. 7th St., Little Rock, AR 72201.

_____________________________________
[ATTORNEY NAME]

Part C — Appeal Cover Letter to Tax Tribunal / Court

Path 1 — Appeal to TAC from DFA Decision

(See Part B.2 above — same petition form.)

Path 2 — Judicial Relief in Arkansas Circuit Court

IN THE CIRCUIT COURT OF [PULASKI / ______] COUNTY, ARKANSAS

Case No. [______]

COMPLAINT FOR JUDICIAL REVIEW OF TAX ASSESSMENT
(Ark. Code Ann. §§ 26-18-406, 26-18-1117)

Plaintiff [TAXPAYER NAME], by and through undersigned counsel, for its Complaint states:

1. Parties and Jurisdiction

1.1. Plaintiff is [a resident of / a corporation organized under the laws of] [____], with its principal place of business at [____].

1.2. Defendant Secretary of DFA is sued in his official capacity. The Arkansas Tax Appeals Commission is named pursuant to § 26-18-1117.

1.3. This Court has jurisdiction under Ark. Code Ann. § 26-18-406 and § 26-18-1117. Venue is proper under § 26-18-406(c) (Pulaski County or county of Plaintiff's residence/principal place of business).

2. Procedural History

2.1. DFA issued a Notice of Proposed Assessment on [__/__/____].
2.2. Plaintiff filed a timely Protest under § 26-18-404 on [__/__/____].
2.3. ☐ Plaintiff petitioned the TAC on [__/__/____].
2.4. ☐ The TAC issued its final decision on [__/__/____].
2.5. ☐ DFA Secretary issued final decision on [__/__/____].
2.6. This Complaint is filed within the period prescribed by Ark. Code Ann. § 26-18-406.

3. Path to Judicial Review

☐ (a) Plaintiff filed within 180 days of final assessment/decision (§ 26-18-406(a)(1) — no prepayment required);
☐ (b) Plaintiff paid $[______] within 1 year of the final assessment and files within 1 year of payment (§ 26-18-406(a)(2));
☐ (c) Plaintiff seeks refund of $[______] previously paid (§ 26-18-406(a)(3), (b));

4. Claims for Relief

Count I — [Error of Law]

[Allegation.]

Count II — [Refund Claim]

[Allegation.]

Count III — [Constitutional Challenge]

[Allegation — Commerce Clause, Due Process, Equal Protection, Uniformity Clause of Ark. Const.]

5. Prayer for Relief

WHEREFORE, Plaintiff prays for judgment:

(a) Reversing the assessment / declaring it void;
(b) Ordering DFA to refund $[______] plus interest under Ark. Code Ann. § 26-18-507(e);
(c) Awarding costs and attorney's fees to the extent recoverable;
(d) Granting such other relief as is just.

Respectfully submitted,

_____________________________________
[ATTORNEY NAME], Arkansas Bar No. [____]
[Law Firm]
Counsel for Plaintiff

Part D — Pre-Filing Checklist

D.1. Path Selection (Post-2023)

☐ Path 1 — DFA Internal Protest (60 days, § 26-18-404)
☐ Path 2 — Direct to TAC (90 days, § 26-18-1110)
☐ Path 3 — Bypass admin review; pay-and-sue (1 year, § 26-18-406(a)(2))
☐ Path 4 — Pay-and-sue without payment (180 days, § 26-18-406(a)(1))

D.2. Deadline Calendar

☐ Date of Notice: [__/__/____]
☐ 60-day DFA protest deadline: [__/__/____]
☐ 90-day TAC petition deadline: [__/__/____]
☐ 180-day judicial relief deadline: [__/__/____]
☐ 1-year payment + suit deadline: [__/__/____] (if pursuing § 26-18-406(a)(2))
☐ Tickler entries with 30-, 14-, 7-day reminders for each

D.3. Engagement and Authority

☐ Engagement letter signed
☐ DFA Power of Attorney executed
☐ Arkansas bar admission verified; pro hac vice via Ark. R. Sup. Ct. XIV if needed
☐ Conflict check completed

D.4. Documentary Record

☐ Notice of Proposed Assessment / DFA Decision / TAC Decision (with date)
☐ DFA workpapers obtained via FOIA request (Ark. Code Ann. § 25-19-105)
☐ All IDRs and responses
☐ Federal returns and RAR
☐ Arkansas returns for all years at issue
☐ Apportionment workpapers
☐ Sales/use exemption certificates
☐ Reasonable cause documentation for penalty abatement
☐ Bank statements and 1099s

D.5. Substantive Analysis

☐ SOL verified (§ 26-18-306): 3 / 6 / unlimited years
☐ Each adjustment categorized as factual / legal / mixed
☐ Arkansas Supreme Court and Court of Appeals research
☐ Comprehensive Tax Acts of 1985 history (§ 26-18-101 et seq.)
☐ Arkansas Gross Receipts Tax (§ 26-52) and Compensating Use Tax (§ 26-53) regulations
☐ Income Tax (§ 26-51) regulations
☐ DFA Legal Opinions (LOs) and Revenue Legal Counsel guidance
☐ Constitutional issues (Ark. Const. art. 16, § 5; Commerce Clause)

D.6. TAC Petition Contents (TAC Rule 5.11)

☐ Taxpayer information (name, address, ID)
☐ DFA action/decision attached as exhibit (TAC cannot access DFA records)
☐ Letter ID, Account ID, Tax Period(s)
☐ Tax type at issue
☐ Type of DFA decision being appealed
☐ Statement of why DFA action is wrong (factual and legal grounds)
☐ Relief requested
☐ Signature of taxpayer or authorized representative
☐ Hearing election

D.7. DFA Protest Contents

☐ Identification of taxpayer and assessment
☐ Statement of timeliness
☐ Statement of facts
☐ Items protested and issues
☐ Legal argument
☐ Relief requested
☐ Procedural elections (hearing, Secretary review, settlement)
☐ Reservation of rights to TAC and judicial review
☐ Verification under penalty of perjury

D.8. Filing and Service

☐ TAC: Online filing via https://ig.arkansas.gov/tax-appeals-commission/petition/ AND certified mail backup
☐ DFA Protest: Certified mail, RRR, to Revenue Legal Counsel, Ledbetter Building, Room 2380
☐ Service on DFA when petitioning TAC
☐ Tracking numbers recorded
☐ File-stamped copies retained

D.9. Hearing Preparation (TAC)

☐ Answer received within 30 days; reply within 30 days if needed (TAC Rule 5.13)
☐ Hearing scheduled within 30 days after pleadings close (§ 26-18-1115(e)(1)(A))
☐ Witness list and exhibits
☐ No discovery available (TAC Rule 5.18) — prepare evidence carefully
☐ Stipulations explored
☐ Pre-hearing statement

D.10. Collection and Payment

☐ Confirmed collection stay during DFA protest and TAC petition (§ 26-18-403(c))
☐ Strategic decision on pay-under-protest under § 26-18-406
☐ Interest continues to accrue — calculate ongoing exposure
☐ Tax liens (§ 26-18-701) monitored

Sources and References

• Arkansas Code Title 26 Subtitle 2 Chapter 18 (Administration of State Tax Laws): https://law.justia.com/codes/arkansas/title-26/subtitle-2/chapter-18/
• Ark. Code Ann. § 26-18-403 (Proposed assessment): https://codes.findlaw.com/ar/title-26-taxation/ar-code-sect-26-18-403/
• Ark. Code Ann. § 26-18-404 (Protest of proposed assessment): https://codes.findlaw.com/ar/title-26-taxation/ar-code-sect-26-18-404/
• Ark. Code Ann. § 26-18-405 (Hearing and decision): https://codes.findlaw.com/ar/title-26-taxation/ar-code-sect-26-18-405/
• Ark. Code Ann. § 26-18-406 (Judicial relief): https://codes.findlaw.com/ar/title-26-taxation/ar-code-sect-26-18-406/
• Ark. Code Ann. §§ 26-18-1101 et seq. (Independent Tax Appeals Commission Act): https://law.justia.com/codes/arkansas/title-26/subtitle-2/chapter-18/subchapter-11/
• Arkansas Tax Appeals Commission: https://ig.arkansas.gov/tax-appeals-commission/
• TAC Rules of Procedure (243 Ark. Code R. 001): https://www.law.cornell.edu/regulations/arkansas/243-01-24-Ark-Code-R-001
• TAC Petition Form: https://ig.arkansas.gov/tax-appeals-commission/petition/
• Arkansas DFA Revenue Division: https://www.dfa.arkansas.gov/income-tax/
• Arkansas FOIA (Ark. Code Ann. § 25-19-101 et seq.)
• Pledger v. Easco Hand Tools, Inc., 304 Ark. 47, 800 S.W.2d 690 (1990)
• Weiss v. Chem-Fab Corp., 336 Ark. 21, 984 S.W.2d 395 (1999) (strict construction of exemptions)
• Walther v. Flis Enters., Inc., 2018 Ark. 64, 540 S.W.3d 264

This template is provided for informational purposes only and is not legal advice. Arkansas's 2023 procedural overhaul significantly changed tax appeal practice; always verify current statutes, TAC rules, and case law. Deadlines are strict and jurisdictional. Consult a qualified Arkansas attorney admitted to the Arkansas Bar.