Georgia State Representative Allen Peake owns 20 restaurants and this year he took his frustrations with his tax bills to the state capitol, where he helped push through legislation creating a new state tax court. "I've had several sales tax audits done and disputed them, and never felt I had a fair shake," said Peake, echoing the views of other business owners.
Before Peake's bill passed, Georgia taxpayers challenging state tax authorities had to pay disputed taxes before appealing them. Their appeals were heard by the same Department of Revenue that levied the tax in the first place. And further appeals could be overruled by the revenue commissioner or heard by a judge without tax expertise. Under the new system, tax appeals will be heard by a tax expert who is independent of Georgia's Department of Revenue, and taxpayers will not have to pay disputed taxes before appeal.
Six U.S. states have established or considered establishing independent tax tribunals in the last two years, a trend supported by the business community, but one which also is stirring debate about the need for these new tribunals.
In addition to Georgia, Illinois approved a law last year to create a tax court by 2013. In Alabama, Governor Robert Bentley announced Thursday that he will pocket veto legislation that would create a new state tax tribunal, due to flaws in the bill, but will support its reintroduction in the next legislative session. Eighteen other states have well-established tax courts, and another nine states and the District of Columbia offer independent tax courts or forums that do not have to be staffed by tax experts.
Twenty-one states, including Alabama, do not have independent tax courts at all, among them are three of the largest states - California, Texas and Florida.
CRITICS SEE MORE COMPLEXITY
Some critics say independent tax tribunals layer costs and complexity onto systems that already are slow and cumbersome, helping tax lawyers perhaps more than their clients. States set them up nonetheless, in part because the systems make them appear friendlier to business at a time of high unemployment and interstate rivalry for jobs.
"How you're treated as a taxpayer does impact your perception of the business climate," said Douglas Lindholm, president of the Council on State Taxation (COST), a group of large companies that is a driving force for state tax courts. "In the fiscal downturn, states are becoming more cognizant of this, as they should," he said.
Of the 18 established state tax courts or tribunals, four have been created since 2003 - in West Virginia, Alaska, Kansas and Mississippi. Counterparts in Oregon, Wyoming, New Hampshire, New York and Indiana date to the 1990s and 1980s. Another nine have been around for more than 30 years.
Their structures vary from state to state, but generally these tribunals offer a place where taxpayers can challenge the decisions of tax authorities, from individual and corporate income taxes to sales and property taxes.
States without an independent court generally rely on administrative hearing systems within their revenue departments to adjudicate tax disputes, like the one Georgia had. Unhappy taxpayers in these systems often may appeal to state courts, but these lack specialized tax judges.