Issue Preservation in Mississippi Tax Appeals: Chancery Court’s De Novo Review under § 27-77-7 Is Limited to Properly Appealed Questions; No Advisory Opinions

Case: Watkins Construction, Inc. v. Mississippi Department of Revenue

Court: Supreme Court of Mississippi

Date: September 11, 2025

Introduction

This decision resolves a recurring tension in Mississippi tax litigation: how far chancery courts may go in a de novo appeal from the Board of Tax Appeals (BTA) under Mississippi Code § 27-77-7. The Supreme Court of Mississippi affirms that, while chancery courts conduct a de novo hearing, the scope of that review is confined to the issues the appealing party properly placed before the court by appeal or cross-appeal. Parties cannot smuggle new assignments of error into the case via summary-judgment briefing, and Mississippi courts will not issue advisory opinions to provide “guidance” on unappealed questions.

The underlying tax dispute arose from audits of Watkins Construction, Inc., a Jackson-based roofing company that primarily performs insurance-related roof repairs. The Mississippi Department of Revenue (MDOR) undertook two audits spanning June 2011 through August 2017. In the first audit, MDOR consciously treated insurance-related repair jobs as nontaxable. In the second, it reversed course, assessing sales tax on those insurance jobs and also attempting to include a period already examined in the first audit. The BTA reduced the assessment on three grounds—(1) Jackson’s one-percent infrastructure tax does not apply to jobs performed outside Jackson, (2) a portion of the second audit period had been previously audited and could not be re-included, and (3) Watkins was entitled to prior-audit relief because MDOR had treated insurance jobs as nontaxable in the earlier audit. MDOR appealed those three rulings to chancery court and lost on summary judgment.

Although Watkins prevailed on the appealed issues, it attempted to obtain a prospective ruling on an unappealed “ancillary” question: whether insurance-related roofing jobs should categorically be treated as nontaxable repairs or taxable installations. Watkins filed a post-judgment motion seeking “guidance.” The chancellor refused, and the Supreme Court now affirms that refusal, reinforcing statutory limits on the scope of review and the bedrock prohibition on advisory opinions in Mississippi.

Summary of the Opinion

The Supreme Court affirms the chancery court’s judgment in full:

The chancellor correctly granted summary judgment for Watkins on all three issues MDOR appealed from the BTA: (1) Jackson’s one-percent infrastructure tax under Miss. Code § 27-65-241(2) applies only to services performed within the municipality and thus cannot be imposed on jobs performed outside Jackson; (2) the January 1, 2014 through August 31, 2014 period had already been audited and was improperly included in the second audit; and (3) Watkins qualified for prior-audit relief under Miss. Code § 27-65-37 because MDOR had previously treated insurance jobs as nontaxable.
The chancellor properly refused to decide Watkins’s “ancillary” classification issue (repairs vs. installations) because neither party appealed or cross-appealed that issue from the BTA. Section 27-77-7(5) obligates the chancery court to decide all factual and legal questions properly presented, but it does not authorize rulings on unpresented issues or advisory opinions.
The chancellor did not abuse her discretion by denying Watkins’s post-judgment motion under Rules 59 and 60. Watkins showed no intervening change in law, no new evidence, and no clear error or extraordinary circumstance warranting relief; the motion sought impermissible advisory guidance.

Analysis

Precedents and Authorities Cited

Miss. Code § 27-77-7(1), (3), (5) (Rev. 2024): Governs appeals from the BTA. Subsection (5) directs the chancery court to conduct a de novo hearing on “factual and legal issues raised by the taxpayer” and to decide all questions presented, while placing the burden on “the party bringing the appeal.” Here, MDOR was the appealing party. The statute also permits taxpayers to file a cross-appeal; Watkins did not do so.
Equifax, Inc. v. Miss. Dep’t of Revenue, 125 So. 3d 36 (Miss. 2013): Recognized the chancery court as the first judicial forum for MDOR decisions and emphasized the burden on the party appealing. Equifax also reflected an earlier statutory requirement to defer to the agency’s legal interpretations.
Toolpushers Supply Co. v. Miss. Dep’t of Revenue, 379 So. 3d 333 (Miss. 2024): Notes legislative amendment to § 27-77-7 removing deference to the BTA; chancery review is de novo on both facts and law without deference. The Court flags this change, although deference is not outcome-determinative here.
Hughes v. Hosemann, 68 So. 3d 1260 (Miss. 2011); Tallahatchie Gen. Hosp. v. Howe, 49 So. 3d 86 (Miss. 2010); Sheldon v. Ladner, 205 Miss. 264, 38 So. 2d 718 (1949): Reaffirm the longstanding prohibition against advisory opinions; Mississippi courts resolve concrete disputes, not hypothetical or prospective guidance requests.
Brooks v. Roberts, 882 So. 2d 229 (Miss. 2004): Rule 59(e) standards—movant must show intervening change in law, new evidence, or the need to correct clear error or prevent manifest injustice. Watkins showed none.
Briney v. U.S. Fid. & Guar. Co., 714 So. 2d 962 (Miss. 1998): Rule 60(b)(6) relief is reserved for “extraordinary and compelling circumstances,” not present here.
Miss. Code § 27-65-241(2) (Rev. 2024): Authorizes Jackson’s special one-percent infrastructure tax only on services “within the municipality.” This underpins the ruling that the tax cannot be imposed on jobs performed outside city limits.
Miss. Code § 27-65-37 (Rev. 2024): Prior-audit relief. Where MDOR has previously examined and accepted a taxpayer’s treatment of particular transactions and there has been no material change in law or facts, the Department cannot “flip-flop” and assess tax on the same type of transactions in a subsequent audit covering overlapping facts.

Legal Reasoning

The Court’s reasoning proceeds in three steps.

1) Scope of de novo review under § 27-77-7(5)

The Court parses the statute’s text: the chancery court “shall try the case de novo” and decide “all factual and legal questions presented,” but those questions are limited to the “issues raised by the taxpayer” that “address the … actions of the Department of Revenue being appealed,” and the court must determine whether “the party bringing the appeal” (emphasis added) carried its burden. In this case, MDOR appealed three issues. Watkins neither appealed nor cross-appealed additional issues from the BTA. The result: the chancery court’s de novo remit covered only the three appealed issues.

The taxpayer’s reliance on Equifax to demand resolution of “all” questions misreads the context: in Equifax, the taxpayer was the appellant and actually raised the questions it wanted resolved. Here, Watkins did not invoke the appellate mechanism for the “ancillary” classification question and could not retrofit jurisdiction by styling the question as part of a cross-motion for summary judgment. Section 27-77-7(5) does not permit parties to expand the issues by motion practice; it directs the court to adjudicate the issues “presented” by a proper notice of appeal or cross-appeal.

2) No advisory opinions

Watkins candidly sought “guidance” on whether insurance-derived roofing work should be categorized as taxable “installations” or nontaxable “repairs,” both for the audited periods and “going forward.” Mississippi courts do not issue advisory opinions. Because the issue was not properly before the chancery court and was prospective in character, the chancellor correctly refused to reach it. The Supreme Court endorses that restraint and reiterates the policy against advisory rulings.

3) Post-judgment relief denied

The chancellor did not abuse discretion in denying relief under Rule 59(e) or Rule 60. Watkins identified no intervening change in law, no previously unavailable evidence, and no clear legal error or manifest injustice in the summary-judgment order—indeed, Watkins had already prevailed on every appealed issue. Nor did Watkins show the “extraordinary and compelling circumstances” necessary for Rule 60(b)(6). The motion essentially sought advisory advice; that is not a cognizable basis for altering or amending the judgment.

What the Court’s Affirmance Means on the Three Substantive Tax Issues

Jackson’s one-percent infrastructure tax is territorial: Under § 27-65-241(2), the levy applies only to services “within the municipality.” Contractors located in Jackson are not liable for that special tax on services performed outside Jackson. The Court’s affirmance of summary judgment cements that territorial limitation.
No re-auditing an already audited period on the same ground: The January–August 2014 period had already been examined during the first audit. Including it again in the second audit was improper—the BTA so held based on the auditor’s testimony, and the chancellor’s ruling (affirmed) accepts that determination.
Prior-audit relief protects consistent treatment: Section 27-65-37 bars MDOR from reversing its audited position on insurance-related roofing work absent a change in law, facts, or other qualifying circumstance. Having affirmatively treated such jobs as nontaxable in the first audit, MDOR could not assess tax on the same kind of transactions in the second audit.

Impact

On appellate practice in Mississippi tax cases

Issue preservation is paramount: A party wishing to enlarge the scope of chancery review must file its own appeal or cross-appeal under § 27-77-7(3). Attempting to add new issues by summary-judgment motion is ineffective.
De novo does not mean “anything goes”: Chancery courts owe no deference to the BTA (post-amendment), but they are constrained to decide only the questions properly presented by the parties’ appellate pleadings.
No advisory relief: Courts will not render “guidance” on unpresented or prospective issues, even when a party urges the need for clarity “going forward.”

On substantive sales-tax administration

Municipal add-on taxes are bounded by geography: The Court’s affirmance reinforces that municipal special sales taxes (like Jackson’s one-percent infrastructure tax) attach based on where the service is performed, not merely the taxpayer’s business location.
Audit finality and taxpayer reliance: Prior-audit relief under § 27-65-37 provides meaningful protection against agency “flip-flops” across audit cycles. Taxpayers can rely on prior audited treatments unless the governing law or material facts have changed or an exception applies.
Limits on re-opening periods: Re-including an already audited period in a subsequent assessment raises legal barriers, particularly where the earlier audit reflects a considered position on the same transactions. Agencies must carefully document and justify any departure.

Complex Concepts Simplified

De novo review: The chancery court hears the tax appeal as if for the first time—taking evidence and deciding facts and law anew. But de novo review is limited to the issues the parties properly appealed or cross-appealed.
Board of Review (BOR) vs. Board of Tax Appeals (BTA): The BOR is an internal MDOR review body. The BTA is an independent tribunal reviewing agency determinations. From the BTA, a party may seek judicial review in chancery court under § 27-77-7.
Cross-appeal: When one party appeals a BTA decision, the opposing party can file a cross-appeal to raise its own issues. Failure to cross-appeal generally forfeits the right to expand the issues for judicial review.
Advisory opinion: A court’s pronouncement on a hypothetical or future scenario, not anchored to a concrete case or controversy. Mississippi courts do not issue advisory opinions.
Prior-audit relief (§ 27-65-37): If MDOR audited and accepted a taxpayer’s treatment of certain transactions, the Department ordinarily may not later assess tax on the same treatment for comparable transactions without a material change in the law or facts.
Summary judgment: A procedural mechanism to resolve a case without trial when there is no genuine dispute of material fact and the movant is entitled to judgment as a matter of law. It cannot be used to inject jurisdictionally barred issues.
Rule 59 vs. Rule 60: Rule 59(e) allows a court to alter or amend a judgment to address new law, new evidence, or clear error/manifest injustice. Rule 60 provides limited, exceptional relief from judgment for specified reasons (e.g., mistakes, newly discovered evidence, fraud) or, under subsection (b)(6), for extraordinary and compelling circumstances.

Conclusion

Watkins Construction clarifies a procedural cornerstone of Mississippi tax appeals: chancery courts’ de novo jurisdiction under § 27-77-7 extends only to issues properly raised by appeal or cross-appeal. Parties cannot enlarge the scope of judicial review through summary-judgment briefing, and courts will not issue advisory opinions for “guidance.” On the merits, the Court’s affirmance preserves three key substantive determinations reached below: Jackson’s one-percent infrastructure tax applies only to services performed within city limits; a previously audited period cannot be re-assessed in a subsequent audit on the same basis; and a taxpayer may obtain prior-audit relief when MDOR attempts to reverse a settled audited treatment without a material change in law or facts.

The decision refines Mississippi’s tax-litigation landscape in two practical ways. First, it elevates the importance of formal issue preservation—especially timely cross-appeals—when moving from the BTA to chancery court. Second, it reinforces predictability in tax administration by honoring statutory prior-audit protections and geographic boundaries on municipal special taxes. Together, these features promote both procedural discipline in tax appeals and substantive consistency in sales-tax enforcement.

Key Takeaways

To raise additional issues in chancery court on an appeal from the BTA, a taxpayer must file a cross-appeal under § 27-77-7(3).
Chancery courts conduct de novo review but will decide only the questions properly “presented” by the appealing party’s pleadings; no advisory opinions.
Jackson’s one-percent infrastructure tax applies only to services performed within the municipality (Miss. Code § 27-65-241(2)).
MDOR cannot re-include a previously audited period in a later assessment on the same ground without statutory authority.
Prior-audit relief (§ 27-65-37) prevents MDOR from “flip-flopping” on audited treatments absent a material change in law or facts.
Rule 59 and Rule 60 cannot be used as vehicles for advisory guidance or to cure a failure to appeal or cross-appeal.