Over the years, taxpayers have argued that an assessment is barred by a claim of equal protection under the Fourteenth Amendment. A recent Tennessee Court of Appeals case highlights the difficulties that taxpayers face in successfully making a claim of equal protection.

At issue in Smith v. Gerregano was a taxpayer that provided horse-drawn (and mule-drawn) carriage rides in Nashville, Tennessee. No. M2022-00941-COA-R3-CV (Tenn. Ct. App. Sept. 28, 2023). The Tennessee Department of Revenue assessed sales tax on the rides as admission to a place of amusement. The taxpayer challenged the assessment on two bases: (1) the carriage rides were not “places of amusement;” and (2) the assessment violated the taxpayer’s equal protection rights as no other carriage operators were assessed sales tax on the rides.

On the first argument, the Court held that the carriage rides were places of amusement, in part, because carriage rides were an impractical means of transportation due to location and time restrictions. (It is clear that the Court never tried to take a taxi in New York City during rush hour—while impractical, as a snail can outpace the taxi, it is still a means of transportation.) But the holding on the second argument is more interesting.

On the equal protection argument, the Court noted that the taxpayer had the burden to prove that: (1) it was “singled-out” for assessment (i.e., the assessment had a discriminatory effect); and (2) the Department’s choice to issue the assessment was based on an impermissible consideration, such as race or gender (i.e., the assessment had a discriminatory purpose).

In support of its argument, the taxpayer stated that no other carriage operators were assessed sales tax on the carriage rides. No other evidence on this issue was submitted. That was largely due to the fact that the taxpayer was denied discovery regarding sales tax assessments issued to other carriage operators. The Department alleged that taxpayer confidentiality prevented it from responding to the discovery requests. As the taxpayer did not provide any evidence of discrimination, the Court dismissed the argument.

On its face, this evidentiary issue makes an equal protection claim seem almost insurmountable when the Department refuses to provide the support necessary for the claim. However, there may be ways to obtain the requested information without violating taxpayer confidentiality, such as requesting how many carriage operators had been assessed sales tax as a place of amusement or what industries had been assessed as a place of amusement. While it is possible to get affidavits from the other carriage operators, that is unlikely as it could be inviting an assessment for those entities. Although there are certain evidentiary hurdles to the equal protection argument, it should not be tossed aside without further consideration.

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