In a handful of states, they can't. A lawsuit involving Burger King was supposed to settle the debate in Arkansas.
There is such a thing as a free lunch in Arkansas, but thanks to a recent court ruling you still have to pay taxes on it. That ruling could also have led to an enormous expansion of state power.
Flis Enterprises owns 16 Burger King franchises in central Arkansas. It gives its managers one free meal per shift. The state Department of Finance and Administration said that Flis had to pay taxes on the retail value of those hamburgers and fries, while Flis maintained it should pay only on the wholesale price of the ingredients that go into the meal. Given the number of meals doled out over the years, the dispute involved tens of thousands of dollars.
None of this would have mattered much to anyone not directly involved, except for one thing: It comes on the heels of another ruling from the state supreme court, which held that the Arkansas Constitution grants the state sovereign immunity from lawsuits. Put simply, that means state agencies can’t be sued by private individuals and companies seeking to dispute a regulation, ruling or tax.