ADMINISTRATIVE DECISION

STATE OF ARKANSAS DEPARTMENT OF FINANCE & ADMINISTRATION OFFICE OF HEARINGS & APPEALS ADMINISTRATIVE DECISION IN THE MATTER OF REFUND CLAIM DISALLOWANCES (ACCT. NO.: ) (Corporate Income Tax) DOCKET NOS.: 17-372 TAX YEAR: 2011 ($ ) 17-373 TAX YEAR: 2014 ($ ) RAY HOWARD, ADMINISTRATIVE LAW JUDGE APPEARANCES This case is before the Office of Hearings and Appeals upon written protests dated October 11, 2013, and February 22, 2016, signed by and,, the Taxpayer. The Taxpayer protested the denial of refund claims by the Department of Finance and Administration ( Department ). An administrative hearing was held on August 9, 2017, at 10:00 a.m., in Little Rock, Arkansas. The Department was represented by Michael Wehrle, Attorney at Law, Office of Revenue Legal Counsel ( Department s Representative ). Present for the Department were Scott Fryer, Assistant Administrator - Corporate Income Tax Section, Tommy Burns - Tax Auditor, and Faye Husser - Audit Supervisor. The Taxpayer was represented by Senior Tax Manager, and Tax Associate ( Taxpayer s Representatives ). The record remained open for the submission of 1

post-hearing briefs. The Taxpayer s post-hearing brief was filed on September 21, 2017. The Department s post-hearing brief was filed on October 20, 2017. This matter was submitted for decision on Monday, October 30, 2017. ISSUE Whether the Department properly denied the refund claims submitted by the Taxpayer? Yes. FINDINGS OF FACT/CONTENTIONS OF THE PARTIES The Department s Answers to Information Request addressed the denied refund claims and stated, in part: The taxpayer... has taken the position that it can use an equally weighted, three factor apportionment formula, to determine its Arkansas corporation income tax liability for the tax periods at issue. The taxpayer claims that the Department cannot deviate from the equally weighted three factor formula set forth in the Multistate Tax Compact. This claim appears to rest, at least in part, on a similar challenge in the recent California Gillette court case. The Department's position is that a three factor formula with a double-weighted sales factor must be used as required under Arkansas law. See Ark. Code Ann. 26-51-709. The Gillette case was ultimately decided in California's favor and supports the Department's position in this matter. [P. 1]. On October 11, 2013, the Taxpayer submitted a Letter of Protest, for tax year 2011, 1 which stated, as follows: (" ") received the attached Notice of Claim Denial adjusting its overpayment carryforward for the tax year ended 12/31/2011 from $ to $. The discrepancy arises from application of an equally weighted, three-factor apportionment formula for tax year 2011, rather than the three-factor, double weighted sales formula prescribed by Ark. Code Ann. 26-51-709. As discussed below, is entitled to choose between these two formulas. 1 See Department s Answers to Information Request Exhibit A P. 5. 2

While no formal denial letter has been issued, on November 12, 2013, filed refund claims for the 2008 to 2010 tax years using the equally weighted, three-factor apportionment formula. We understand from conversations with Dennis Chisom in the Arkansas Corporate Income Tax Section that Arkansas has similarly adjusted apportionment for the 2008 to 2010 tax years to reflect application of Ark. Code Ann. 26-51-709. We will be protesting the apportionment adjustments for tax years 2008 to 2011 ("tax years at issue"). Arkansas is a signatory member of the Multistate Tax Compact ("MTC"), which it has codified in full. Under Article 3 of the MTC, multistate taxpayers have the option of apportioning income using either the apportionment formula prescribed by state law, or the apportionment formula established in Article 4 of the MTC. In 1995, Senate Bill 532 amended Arkansas's codification of Article 4 by replacing the equally weighted, three-factor apportionment formula with a three-factor, double-weighted sales apportionment formula. The MTC is not merely a statement of intent, but rather a contract between the member states. Given the MTC's contractual nature, member states cannot unilaterally modify its terms to the detriment of third parties. Accordingly, multistate taxpayers may continue to apportion income under the equally weighted, three-factor apportionment formula prescribed by the MTC. No Arkansas court has yet addressed the issue of whether multistate taxpayers have the option of using the equally weighted, three-factor apportionment formula originally established by the MTC. This issue has been addressed by the courts of other MTC signatory members. These courts have ruled that multistate taxpayers are permitted to use the state apportionment formula provided in the MTC, even when otherwise proscribed by state law, on the grounds that the MTC constitutes a binding contractual relationship, and a clear intent to limit the state legislature's power. We respectfully request an administrative hearing to resolve the discrepancy for the tax year at issue. [P. 1, Footnotes omitted]. The Taxpayer s Letter of Protest, for tax year 2014, 2 summarized the Taxpayer s position regarding the refund claim denials and stated, as follows: 2 See Department s Answers to Information Request Exhibit B P. 3-6. 3

The State of Arkansas erred in issuing the Notice the Claim Denial by failing to grant the full amount of the refund claimed. In so doing it erred by acting without legal authority and in contravention of statutes and the federal and Arkansas Constitutions on at least 3 bases: 1. The denial was contrary to the apportionment election provision of the MTC, as codified at Ark. Code Ann. 26-5-101, Art. III; 2. The apportionment method used by Arkansas to apportion income fails to fairly represent activity in the state of Arkansas, in violation of the Commerce Clause and the Due Process Clause of the United States Constitution, as well as the Due Process and Equal Protection Clauses of the Ark Constitution, as applied. U.S. Const. Art I. Sec. 8, cl. 3: U.S. Constitution Amd XIV; Ark. Const. Art. 2, 2 and 3. 3. The sales apportionment method asserted by Arkansas that sources sales to the U.S. Government to Arkansas on the basis that property is shipped from an office, store, warehouse, factory, or other place of storage in this state is discriminatory and violates the intergovernmental immunity doctrine. U.S. Const. Art VI, cl.2. [P. 1-2]. The Tax Auditor testified that: (1) he reviewed the Taxpayer s protests and examined the Taxpayer s account; (2) the Department denied a portion of the Taxpayer s claim for an overpayment of tax in 2011; 3 (3) the basis for the denial of the portion of the Taxpayer s refund claim ($ ) 4 was because the Department did not apportion the overpayment the Taxpayer requested to be carried-forward to the next year; (4) the Taxpayer s tax return used an equallyweighted 3-factor formula that Arkansas does not allow so the Department adjusted the Taxpayer s return using a double-weighted sales factor which reduced the Taxpayer s overpayment; (5) prior to filing the 2011 return, the Taxpayer did not file a petition or otherwise request permission from the 3 See Department s Answers to Information Request Exhibit A. 4 The total amount claimed was $. 4

Department to use the equally-weighted 3-factor apportionment formula; (6) a letter attached to the Taxpayer s protests asserted that the Taxpayer should be allowed to use the equally-weighted 3-factor formula as originally included in the Multistate Tax Compact ( MTC ); 5 (7) Arkansas is a member of the MTC but Arkansas amended the apportionment formula to require the double-weighted sales factor; 6 (8) at all relevant times, Ark. Code Ann. 26-51-709 (Repl. 2012) included the double-weighted sales factor in the formula for the apportionment of business income; (9) there is significance to seeking permission to file an alternative apportionment because the Department generally requires a petition under Ark. Code Ann. 26-51-718 (Repl. 2012) to use an alternative apportionment formula before filing the associated return; (10) the position of the Department is that the provisions of Ark. Code Ann. 26-51-718 (Repl. 2012) are mandatory; (11) Exhibit B to the Department s Answers to Information Request relates to the refund claim denial for tax year 2014; (12) the basis for the Department s partial denial of the Taxpayer s refund claim for tax year 2014 was the same as the reason(s) the Department partially denied the Taxpayer s refund claim for tax year 2011; (13) a penalty, in the amount of $, resulted from the Department s adjustment of the Taxpayer s return for tax year 2014; (14) for any applicable tax years, the Taxpayer did not petition to request permission to use the 3-factor formula; (15) with respect to item 3 on the Taxpayer s Letter of Protest, 7 the Department s position is that, under Ark. Code Ann. 26-51-716(b) (Repl. 2012), since tangible personal property is shipped 5 See Department s Answers to Information Request Exhibit A P 4. 6 See Article IV of Ark. Code Ann. 26-5-101 (Repl. 2012). 7 See Page 3 of this Administrative Decision. 5

from an office, store, warehouse, factory or other place of storage in this state and [1] the purchaser is the United States government or [2] the taxpayer is not taxable in the state of the purchaser, the sales are sourced to Arkansas and included in the numerator of the sales factor; and (16) all of the returns previously filed by the Taxpayer, included sales to the U. S. Government as thrown-back or sourced to Arkansas. Scott Fryer testified that: (1) there is no regulatory authority relating to the applicability of Ark. Code Ann. 26-51-718 (Repl. 2012); however, the Arkansas Supreme Court has construed the provisions of Leathers v. Jacuzzi, Inc., 326 Ark. 857, 935 S.W.2d 252 (1996); (2) the Arkansas Supreme Court held that a petition, under Ark. Code Ann. 26-51-718 (Repl. 2012), must be filed before the filing of a return and not merely attached to a return; (3) Ark. Code Ann. 26-51-718 (Repl. 2012) uses the words or the Director of the Department of Finance and Administration may require so the provisions of the section are considered to be mandatory; (4) with respect to the words taxpayer may petition used in Ark. Code Ann. 26-51-718 (Repl. 2012), the alternative is for a taxpayer to not file a petition and to file a return and live with the consequences of using the statutory apportionment formula; (5) with respect to the Taxpayer s position concerning distortion, the Taxpayer has not presented numerical or documentary evidence in a petition to support an alternative apportionment method; and (6) the Taxpayer s sales are throwback sales to Arkansas under Ark. Code Ann. 26-51- 716(b) (Repl. 2012). The Taxpayer s Representatives contended that: (1) the Taxpayer should be allowed to use the equally-weighted apportionment formula, as provided by 6

the provisions of the MTC, which Arkansas adopted and never repealed except for a piece of it; (2) the Taxpayer should be allowed to use an alternative apportionment formula (not the apportionment formula provided by Ark. Code Ann. 26-51-709 (Repl. 2012)) based upon what is fair given the Taxpayer s business presence in Arkansas and the amount of sales revenue that is being thrown-back as U. S. Government throwback sales; (3) as a federal contractor the Taxpayer should be protected by the doctrine of intergovernmental immunity; (4) Ark. Code Ann. 26-51-718 (Repl. 2012) uses the words may petition so the provisions of the section are not mandatory; (5) the case of Leathers v. Jacuzzi, Inc., 326 Ark. 857, 935 S.W.2d 252 (1996), does not address the lack or presence of a regulation but was merely based upon the interpretation of a member of the Department of Revenue concerning a rule of general applicability; (6) for any of the applicable tax years, the Taxpayer did not petition to request permission to use the 3-factor formula; (7) the Taxpayer s original filings reported governmental sales as being sourced according to Ark. Code Ann. 26-51-716(b) (Repl. 2012); (8) the Taxpayer applied a 3-factor equally weighted apportionment formula for all of the tax years (which is based on the MTC) instead of the doubleweighted sales factor (which was enacted in Arkansas by SB 532 of 1995); (9) the Taxpayer should be allowed to use an alternative apportionment based on distortion and a fair and accurate reflection of income based on the Taxpayer s activities in Arkansas since most of the Taxpayer s products are not used in Arkansas; 8 (10) with respect to Ark. Code Ann. 26-51-716 and 26-51-718 (Repl. 8 See Taxpayer Hearing Exhibits 1 4. The Taxpayer s Representatives contended that based on the data in the Taxpayer s returns the Taxpayer is being taxed excessively on a minimal in-state presence. 7

2012), the Taxpayer is asserting the constitutionally related challenges of intergovernmental immunity and unfair apportionment under the Complete Auto Transit case regarding interstate commerce because there is no market in Arkansas for the Taxpayer s products; and (11) Article 10 of the MTC addresses withdrawal provisions so a partial amendment of the MTC should not be allowed to impair contractual obligations or rights of third parties. The post-hearing brief filed by the Taxpayer proffered three (3) questions for decision which are set forth below with the arguments presented by the Taxpayer, the arguments presented by the Department, and a legal analysis. CONCLUSIONS OF LAW Standard of Proof Ark. Code Ann. 26-18-313(c) (Supp. 2017) addresses the burden of proof to be applied to matters of fact and evidence in this case and states, as follows: The burden of proof applied to matters of fact and evidence, whether placed on the taxpayer or the state, in controversies regarding the application of a state tax law shall be by preponderance of the evidence. [Emphasis added]. A preponderance of the evidence means the greater weight of the evidence. See Chandler v. Baker, 16 Ark. App. 253, 700 S.W.2d 378 (1985). In Edmisten v. Bull Shoals Landing, 2014 Ark. 89, at 12-13, 432 S.W.3d 25, 33, the Arkansas Supreme Court explained that: [a] preponderance of the evidence is not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other. 8

The Department bears the burden of proving that the tax law applies to an item or service sought to be taxed, and a taxpayer bears the burden of proving entitlement to a tax exemption, deduction, or credit. Ark. Code Ann. 26-18- 313(d) (Supp. 2017). Statutes imposing a tax or providing a tax exemption, deduction, or credit must be reasonably and strictly construed in limitation of their application, giving the words their plain and ordinary meaning. Ark. Code Ann. 26-18-313(a), (b), and (e) (Supp. 2017). If a well-founded doubt exists with respect to the application of a statute imposing a tax or providing a tax exemption, deduction, or credit, the doubt must be resolved against the application of the tax, exemption, deduction, or credit. Ark. Code Ann. 26-18- 313(f)(2) (Supp. 2017). Ark. Code Ann. 26-18-507 (Repl. 2012) provides for a refund of any state taxes erroneously paid in excess of the taxes lawfully due. The Taxpayer bears the burden of proving by a preponderance of the evidence that the claimed refund was erroneously paid and in excess of the taxes lawfully due. Refund Claims 1. Was Taxpayer required to obtain permission from the Department prior to using an alternative apportionment formula to calculate its tax liability? The Taxpayer s Representatives contended that there is no statutory requirement or valid administrative rule which mandates the obtaining of the Department s permission prior to the Taxpayer using an alternative apportionment formula and the Taxpayer s post-hearing brief stated, in part: In determining, whether a taxpayer must obtain permission from the Department prior to using an alternative apportionment formula, the starting point is an analysis of the statute. In general, 9

Ark. Code Ann. 26-51-718 governs the circumstances under which a taxpayer may use or the Department may require an alternative apportionment formula. Ark. Code Ann. 26-51-718 states: "If the allocation and apportionment provisions of this Act do not fairly present the extent of the taxpayer's business activity in this state, the taxpayer may petition for or the Director of the Department of Finance and Administration may require, in respect to all or any part of the taxpayer's business activity, if reasonable: (a) separate accounting; (b) the exclusion of any one or more of the factors; (c) the inclusion of one or more additional factors which will fairly represent the taxpayer's business activity in this state; or (d) the employment of any other method to effectuate an equitable allocation and apportionment of the taxpayer's income (emphasis added)." As written, the statute does not require a taxpayer to file a petition with the Department prior to using an alternative apportionment formula. The operative term "may" is permissive not mandatory, as recognized in several Arkansas decisions. See, e.g., First United Bank v. Phase II, Edgewater Addition Residential Prop. Owners Improvements Dist. No. 1 of Maumelle, 69 S.W.3d 33, 48 (Ark. 2002) ("The word 'may' is usually employed as implying permissive or discretional, rather than mandatory, action or conduct and is construed in a permissive necessary to give effect to an intent to which it is used.'"); Ray Townsend Farms, Inc. v. Smith, 207 S.W.3d 557, 562 (Ark. Ct. App. 2005) ("The word 'may' is generally interpreted to mean permissive or discretionary rather than mandatory.'"). A. Failure to Promulgate a Rule At the hearing, the Department's witness, Mr. Burns, stated that it was an internal policy and long-standing practice of the Department to require taxpayers to request permission prior to using an alternative apportionment formula. Mr. Burns' statements were not contradicted by any of the Department personnel present at the hearing. Arkansas law defines a "rule" for purposes of administrative procedures, as "an agency statement of general applicability and future effect that implements, interprets, or prescribes law or policy, or describes the organization, procedure, or practice of an agency and in hides, but is not limited to, the amendment or repeal 10

of a prior rule." Ark. Code Ann. 25-15-20 (9)(A). The Department's internal policy and long-standing practice of requiring taxpayer to request permission prior to using an alternative apportionment formula is an implementation of an interpretation of Ark. Code Ann. 26-51-718. A rule that is not properly promulgated is void from the outset. Pursuant to Ark. Code Ann. 25-15-203(b), it is clear that "[n]o agency rule, order, or decision shall be valid or effective against any person or party, nor may it be invoked by the agency for any purpose, until it has been filed and made available for public inspection as required in this subchapter (emphasis added)." Since the Department failed to follow the required procedure, its internal policy of requiring pre-approval is unenforceable. B. Rulings in Neighboring States Neighboring states to Arkansas have reached similar conclusions in reviewing ''rules that were not properly promulgated. [Citations omitted].... C. The Department's Reliance on the Jacuzzi Ruling To support its internal policy and long-standing practice, the Department cites Leathers v. Jacuzzi, 326 Ark. 857, 865 (1996). In Jacuzzi, the Court relied on the unchallenged statements of Charles Bellott, assistant manager of the corporation income tax section of the Department and a nineteen-year employee. Specifically, the Court noted the following: "On redirect, [Charles Bellott] testified as follows: Ark. Code Ann. 26-51-718 deals with the allocation and apportionment provisions of the UDITPA section. A taxpayer who wishes to deviate from the standard formulary apportionment has to petition for a change. Jacuzzi has not petitioned for a change. The Director never authorized the deviation before the filing of the returns. Jacuzzi deviated without the Director's permission from the formulary apportionment by filing these returns. That's an additional basis for rejecting the returns. A taxpayer cannot petition by filing a return. From my review of the returns, a petition to utilize combined unitary reporting is not contained in any of the returns. In Jacuzzi, the appellee asserted that "even were such a petition required, Jacuzzi's filing for refund using the combined method and filing returns using the 11

combined method certainly constitutes a 'petition' to employ the combined reporting method' Id. at 865. However, the Court rejected this argument without a full explanation. The Department's position that Jacuzzi supports its internal policy and long-standing practice is erroneous for several reasons: 1. The issue of whether the statutory language of Ark. Code Ann. 26 51-718 supports the Department's position was not raised in Jacuzzi. 2. The issue of whether the Department's internal policy was an illegal regulation or rule was not raised. As in number 1 above, nothing in the Jacuzzi case suggests that a question was raised regarding whether the Department's policy was an invalid rule or regulation. The Jacuzzi decision instead focused on whether tax return filings would constitute a request to use an alt apportionment formula. 3. Most importantly, the critical language of Ark. Code Ann. 25-15-203 was not amended to its current form until 1993. Subpart (b) is a clear statement from the legislature that policies that constitute "rules" under the Administrative Procedures Act must be promulgated to be valid. It is important to note that this current language was not added until 1993 by Ark. Acts 1967, No. 4. 4, 2. Jacuzzi, on the other hand, involved the years 1981 and 1982. The current language of Ark. Code Ann. 25-15-203(b) was not even in effect for those years and thus could not be considered in the Jacuzzi ruling. Jacuzzi can hardly be said to sanction an interpretation that includes a statute that was not even in existence at that time. Rather, Jacuzzi has been legislatively overruled, to what extent the Department's interpretation is correct, by the subsequent 1993 amendment of Ark. Code Ann. 25-15-203(b). Accordingly, there is no legal basis to deny use of a three-factor, equally-weighted alternative apportionment formula. [Emphasis added]. The Department s Representative contended that the Jacuzzi case supports the petitioning requirement of 26-51-718 9 and set forth the following response: 9 See Department s post-hearing brief P. 1. 12

The statute requires a taxpayer to petition the Department to use an alternative apportionment formula. The statute reads that the taxpayer may petition for, not that the taxpayer may use an alternate apportionment method. Petition is defined as to make or present a formal request to (an authority) with respect to a particular cause. The statue specifically states may petition for which means a taxpayer has permission to make or present a formal request (petition) to the Director for an alternative apportionment method thus allowing an option for the taxpayer that otherwise does not exist. The inclusion of the word petition used as a verb in the sentence is what is important and gives the statute its meaning. The taxpayer may petition for use of an alternate apportionment or the Director may require it. The statute is permissive in that it allows the petition for option action.... The simple plain language of the statute says that the taxpayer may formally request (petition) for an alternative method of apportionment, not that they may use it anyway if they don't want to petition. No petition has been filed to date, and the filing of a return does not constitute a petition. [P. 2]. The Department has interpreted Ark. Code Ann. 26-51-718 (Repl. 2012) to impose a mandatory requirement on taxpayers to file a petition for authorization to use an alternative apportionment formula. The Department s interpretation of a tax statute is entitled to deference unless the interpretation is clearly erroneous. The Arkansas Supreme Court has recognized that administrative agencies are often required to interpret statutes and rules. In Walnut Grove School Distr. No. 6 of Boone County v. County Board of Education, 204 Ark. 354, 162 S.W.2d 64 (1942), the court s opinion stated, in part:... The administrative construction generally should be clearly wrong before it is overturned. Such a construction, commonly referred to as practical construction, although not controlling, is nevertheless entitled to considerable weight. It is highly persuasive. Id. at 359, 162 S.W.2d at 66. 13

The opinion of the Arkansas Supreme Court in Leathers v. Jacuzzi, 326 Ark. 857. 935 S.W.2d 252 (1996) 10 supports the Department s position that a petition must be submitted in writing prior to the filing of an original return and not in conjunction with the filing of an amended return under the provisions of Ark. Code Ann. 26-51-718 (Repl. 2012). The Department s interpretation of Ark. Code Ann. 26-51-718 (Repl. 2012) (i.e. the filing of a petition is mandatory) is not clearly wrong. Since the Taxpayer did not file a petition for tax year 2011 or 2014 prior to utilizing an alternative apportionment formula, the Department correctly denied the Taxpayer s refund claims. 2. Does the application of Arkansas throwback rule under Ark. Code Ann. 26-51-716(b) and the three-factor, double-weighted sales apportionment formula under Ark. Code Ann. 26-51-709 fairly and accurately reflect [Taxpayer s] business activity in Arkansas? Since the evidence supports a finding that sales to the U. S. government were properly classified under Ark. Code Ann. 26-51-716(b) (Repl. 2012) and the Taxpayer s failed to file a petition prior to filing returns using an alternative apportionment formula, the issues set forth in this question were rendered moot. To the extent the Taxpayer s Letters of Protest or the Taxpayer s Representatives raised constitutional challenges to Ark. Code Ann. 26-51-709 (Repl. 2012) or 26-51-716 (Repl. 2012), the statutes are presumed to be constitutional. See Parkman v. Sex Offender Screening and Risk Assessment Committee, 2009 Ark. 205 at 1 (2009). Furthermore, the Office of Hearings and Appeals does not have 10 The Taxpayer s argument, that the Arkansas Supreme Court s decision in Leathers v. Jacuzzi, supra, was legislatively overruled by the 1993 amendment of Ark. Code Ann. 25-15-203(b), is not persuasive. 14

jurisdiction or authority to determine the constitutionality of a statute. See Arkansas Tobacco Control Bd. v. Sitton, 357 Ark. 357, 166 S.W.3d 550 (2004). 11 3. Is a three-factor, equally weighted apportionment formula a reasonable alternative? The Taxpayer s post-hearing brief answered this question by stating that, [a] three-factor, equally-weighted alternative apportionment formula is reasonable because [Taxpayer] has minimal property and payroll in Arkansas, and the overwhelming majority of [Taxpayer s] apportionable income is derived from sales of tangible personal property that originate in Arkansas and are shipped to the U.S. Government outside the state. [P. 2]. question: The Department s post-hearing brief provided the following answer to this No. This is the method used by the taxpayer in the filing of the original returns. The Department does not agree that the use of a three-factor, equally-weighted apportionment formula would be a reasonable alternative. Since the taxpayer has small property and small payroll percentages in Arkansas, the use of a single weighted sales factor would reduce the taxpayer' Arkansas percentage and resulting tax liability, but that alone does not make it more or less fair or accurate. The increased sales factor percentage is primarily larger as the result of the inclusion of sales made to the US Government which are not being taxed in other states. [P. 4]. Since the evidence supports a finding that sales to the U. S. government were properly classified under Ark. Code Ann. 26-51-716(b) (Repl. 2012) and the Taxpayer s failed to file a petition prior to filing returns using an alternative apportionment formula, the issue set forth in this question does not give rise to a justiciable controversy. 11 See also Gillette Company et al. v. Franchise Tax Board, 62 Cal.4 th 468 (2015) cert. denied, 137 S.Ct. 294 (2016), wherein the California Supreme Court upheld the apportionment formula requiring the double-counting of in-state sales. 15

DECISION AND ORDER The refund claim denials are sustained. 12 The file is to be returned to the appropriate section of the Department for further proceedings in accordance with this Administrative Decision and applicable law. Pursuant to Ark. Code Ann. 26-18-405 (Supp. 2017), unless the Taxpayer requests in writing within twenty (20) days of the mailing of this decision that the Commissioner of Revenues revise the decision of the Administrative Law Judge, this Administrative Decision shall be effective and become the action of the agency. The revision request may be mailed to the Assistant Commissioner of Revenues, P.O. Box 1272, Rm. 2440, Little Rock, Arkansas 72203. A revision request may also be faxed to the Assistant Commissioner of Revenues at (501) 683-1161 or emailed to revision@dfa.arkansas.gov. The Commissioner of Revenues, within twenty (20) days of the mailing of this Administrative Decision, may revise the decision regardless of whether the Taxpayer has requested a revision. The Taxpayer may seek relief from the final decision of the Administrative Law Judge or the Commissioner of Revenues on a final notice of a denial of a claim for refund by following the procedure set forth in Ark. Code Ann. 26-18- 406 (Supp. 2017). 12 The Taxpayer s Representatives requested that, the appeals for tax years 2008, 2009, and 2010 be included in the hearing officer s written decision. See Taxpayer s post-hearing brief P. 1. The Department s Representative argued that, [t]he taxpayer s request to include tax years 2008, 2009 and 2010 within this administrative review should be denied. The Office of Revenue Legal Counsel s hearing file does not contain protests for these three additional periods. See Department s post-hearing brief P. 1. The Office of Hearings and Appeals does not have case files for tax years 2008, 2009, or 2010, and no docket numbers were generated for refund claims relating to those tax years, so this administrative decision will not address the refund claims relating to tax years 2008, 2009, and 2010. 16

OFFICE OF HEARINGS & APPEALS DATED: December 1, 2017 17