Title: State v. Staton

State: arkansas

Issuer: Arkansas Supreme Court

Document:

STATE of Arkansas, Department of Finance and
Administration v. Debora STATON

96-215                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
                 Opinion delivered July 15, 1996
   Substituted Opinion on Rehearing delivered October 28, 1996


1.   Taxation -- gross-receipts tax -- service contracts are not
     taxable. -- Although Ark. Code Ann.  26-52-301(3)(C)(i)
     (Repl. 1992) plainly levies a "tax ... upon the gross proceeds
     or gross receipts derived from all sales to any person of ...
     service of ... and repair of motor vehicles," an extended
     warranty is not "service" of a motor vehicle; because the
     promised repairs were completely contingent upon events that
     may not transpire, the contracts at issue could not be said to
     be for service or repairs to automobiles; consequently, the
     supreme court affirmed the part of the chancellor's order
     ruling that the service contracts were not taxable.

2.   Constitutional law -- sovereign immunity -- doctrine is rigid.
     -- Article 5, section 20, of the Constitution of Arkansas
     provides that "[t]he State of Arkansas shall never be made
     defendant in any of her courts"; this sovereign immunity may
     be waived only in limited circumstances; the doctrine of
     sovereign immunity is rigid.

3.   Constitutional law -- sovereign immunity -- waived only in
     appellee's case. -- Arkansas Code Annotated  26-18-
     507(e)(2)(A) (Supp. 1992) grants legislative permission to a
     taxpayer to sue the State after a claim for refund has been
     filed and refused or the Commissioner has not acted upon it;
     there must be full compliance with this type of statute before
     sovereign immunity is waived; because appellee's claim for
     refund was the only one filed and rejected, sovereign immunity
     was waived only in that one case.  

4.   Jurisdiction -- trial court acquires no jurisdiction in suit
     against State absent waiver of sovereign immunity -- no
     subject-matter jurisdiction over entire class. -- A trial
     court acquires no jurisdiction where the suit is one against
     the State and there is no waiver of sovereign immunity; thus,
     the trial court in this case had no subject-matter
     jurisdiction over the entire class of taxpayers who had
     purchased vehicle service contracts; subject-matter
     jurisdiction based on sovereign immunity is an issue that is
     always open, and it is the duty of an appellate court to raise
     the issue of its own volition.

5.   Taxation -- public policy -- taxpayer must comply with
     statutory requirements before sovereign immunity is waived. --
     Interwoven with the doctrine of sovereign immunity in tax
     cases is sound fiscal public policy; the supreme court, with
     one exception, has held that a taxpayer must comply with the
     statutory requirements before sovereign immunity is waived;
     this procedure places the government on notice of the claim
     and informs it that it may be required to refund the money;
     consequently, it should make appropriate financial allowances.

6.   Constitutional law -- sovereign immunity -- earlier case
     reversed in part where supreme court had failed to raise
     sovereign-immunity issue. -- The supreme court reversed part
     of its decision in Pledger v. Bosnick, 306 Ark. 45,