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State Tax Notes

Publication Title (Abbreviation)

St. Tax Notes



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Sometimes, from a taxpayer’s perspective, it is better to be challenging a state or local tax determination than a federal tax determination. One reason for that is the canon that “[tax] statutes are to be construed most favorably for the taxpayer.” Scores, if not hundreds, of federal tax cases espoused that principle, especially during the 1890s to 1940s. However, the principle fell into disuse at the federal level in ensuing decades and, indeed, was replaced by prorevenue canons. A seeming attempt to revivify the canon at the federal level earlier this decade appears to have withered on the vine. In contrast, the pro-taxpayer canon retains vigor in cases involving state and local taxation. The Mississippi Supreme Court remarked: “It is a well-established rule that a taxing statute must be strictly construed against the taxing power and in favor of the taxpayer, and all doubts as to whether or not a tax has been imposed must be resolved in favor of the taxpayer.” Many state decisions have held to the same effect in cases involving a wide range of state and local levies.

Part I below describes the rationales for the pro-taxpayer canon. Part II examines whether the canon is pure boilerplate or whether it actually affects case outcomes. Part III discusses limits on the canon and ways in which state and local revenue authorities can seek to counter it.


© 2009 Steve R. Johnson


First published in State Tax Notes.

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