McLane Co. of Temple, Texas, a distributor of groceries, convenience-store items and tobacco products, and some of its subsidiaries have sued two Arkansas agencies and their directors, claiming that a tax law passed in the most recent legislative session is unconstitutional.
The lawsuit was filed in Pulaski County Circuit Court against the state Department of Finance and Administration and its director, Richard Weiss, and Arkansas Tobacco Control and its director, J.R. Thomas.
Certain changes in the law, Act 631 of the 89th General Assembly, are void because of vagueness, McLane argued in the lawsuit, filed Tuesday. The law changes the traditional definition of wholesalers, such as McLane, to be manufacturers, the lawsuit said.
The law applies to tobacco products other than cigarettes.
Act 631 defines a manufacturer as a person who produces or offers a tobacco product for sale, the lawsuit said. Before the act passed, a manufacturer was defined as a person who produces a tobacco product for sale, the lawsuit said.
“We’re not trying to avoid an appropriate tax,” said Clifford Block, a spokesman for McLane.
McLane has “had a continuing effort to attempt to avoid paying any [tobacco] taxes in Arkansas contending that they’re not a wholesaler within the definition,” said Timothy Leathers, deputy director of the Finance and Administration Department. “Last session we had a law passed to clarify that. And it looks like [McLane] is also challenging the law that passed last session.”
The state has contended all along that McLane should collect the tax, Leathers said.
“[McLane claims] it has another entity set up to do [McLane’s] wholesaling, so they are not a wholesaler and therefore they get out of paying the tax,” Leathers said. “They want to claim whatever they can to try to avoid the tax, trying to find a loophole.”
McLane always pays its taxes, Block said.
“We don’t think we should be paying a tax that is unconstitutional,” Block said. “The only tax we’ve been trying to avoid is what we’ve explained in the lawsuit as one that is an illegal tax that violates the constitution. Any time a tax is illegitimate, then the taxpayer has the right to question it.”
Act 631 took effect Aug. 16. McLane asks in the lawsuit that any taxes it already has paid under the law be considered illegal and be repaid to the company.
Business, Pages 27 on 09/20/2013