May 25 (Reuters) - Georgia State Representative Allen Peake owns 20 restaurants and this year he took his frustrations with his tax bills to the state capitol, where he helped push through legislation creating a new state tax court.

"I've had several sales tax audits done and disputed them, and never felt I had a fair shake," said Peake, echoing the views of other business owners.

Before Peake's bill passed, Georgia taxpayers challenging state tax authorities had to pay disputed taxes before appealing them. Their appeals would be heard by the same Department of Revenue that levied the tax in the first place. And further appeals could be overruled by the revenue commissioner or heard by a judge without tax expertise.

Under the new system, tax appeals will be heard by a tax expert who is independent of Georgia's Department of Revenue, and taxpayers will not have to pay disputed taxes before appeal.

Six U.S. states have established or considered establishing independent tax tribunals in the last two years, a trend supported by the business community, but one which also is stirring debate about the need for these new tribunals.

In addition to Georgia, Illinois approved a law last year to create a tax court by 2013.

In Alabama, Governor Robert Bentley announced Thursday that he will pocket veto legislation that would create a new state tax tribunal, due to flaws in the bill, but will support its reintroduction in the next legislative session.

Eighteen other states have well-established tax courts, and another nine states and the District of Columbia offer independent tax courts or forums that do not have to be staffed by tax experts.

Twenty-one states, including Alabama, do not have independent tax courts at all, among them are three of the largest states - California, Texas and Florida.

CRITICS SEE MORE COMPLEXITY

Some critics say independent tax tribunals layer costs and complexity onto systems that already are slow and cumbersome, helping tax lawyers perhaps more than their clients.

States set them up nonetheless, in part because the systems make them appear friendlier to business at a time of high unemployment and interstate rivalry for jobs.

"How you're treated as a taxpayer does impact your perception of the business climate," said Douglas Lindholm, president of the Council on State Taxation (COST), a group of large companies that is a driving force for state tax courts.

"In the fiscal downturn, states are becoming more cognizant of this, as they should," he said.

Of the 18 established state tax courts or tribunals, four have been created since 2003 - in West Virginia, Alaska, Kansas and Mississippi. Counterparts in Oregon, Wyoming, New Hampshire, New York and Indiana date to the 1990s and 1980s. Another nine have been around for more than 30 years.

Their structures vary from state to state, but generally these tribunals offer a place where taxpayers can challenge the decisions of tax authorities, from individual and corporate income taxes to sales and property taxes.

States without an independent court generally rely on administrative hearing systems within their revenue departments to adjudicate tax disputes, like the one Georgia had. Unhappy taxpayers in these systems often may appeal to state courts, but these lack specialized tax judges.

Proponents of the new tax courts include lawyers' groups and corporations. They say the courts handle appeals more quickly and in ways that are fairer to taxpayers than when the appeals are under the control of state revenue departments.

COST, Lindholm's group, publishes a scorecard every few years grading state tax administrations, including whether a state has an independent forum staffed by tax experts. Georgia's grade in the latest survey, done before the new court was created, was a C minus. That should now improve.

But that kind of grading is misguided, say critics, who argue that the new courts are expensive and unnecessary.

"We are in a terrible budget crunch, and this just creates another level of bureaucracy and another thing to fund," said David Stout, a spokesman for the Alabama Education Association, which represents school employees and has opposed creating a tax court in that state.

STATE COURTS MORE OPEN

Like the U.S. Tax Court for federal taxes in Washington, D.C., the state courts allow taxpayers to appeal tax assessments. Unlike the U.S. Tax Court, state courts often make their hearings and records public, sometimes including taxpayers' tax returns.

State income tax collections from corporations have fallen in recent years, but state taxes have also become more complex, said Michael Mazerov, a state tax expert at the Center on Budget and Policy Priorities, a Washington fiscal policy think tank.

Corporate tax departments are spending more time dealing with state taxes, which makes businesses more interested in expert appeals reviews, said Bruce Ely, an Alabama tax lawyer and long-time proponent of forming a tax court in that state.

In Alabama, tax appeal cases rose to 1,135 in 2009 from 387 in 1995, according to state records.

State tax cases are not restricted to small, local firms. Several Trump casino properties are appealing their Atlantic City property tax assessments in New Jersey tax court. Online travel group Expedia has brought a case in the Hawaii Tax Court that is expected to go to trial in October.

Companies also increasingly push similar litigation strategies in multiple states at once, raising the complexity of cases state judges must decide, state tax court experts said.

Individuals as well as businesses can use the tax courts, and some of the courts, including Georgia's new one, provide for expedited, less-expensive "small claims" divisions.

That is not enough to satisfy critics, however, who say the tax courts are not needed and administrative tax reviews serve taxpayers well. They cite figures showing taxpayers win more often than they lose these appeals, even when there is no specialized court.

The Illinois Department of Revenue, which has traditionally heard tax appeals itself, was one of the opponents of that state's new court.

Department spokeswoman Susan Hofer said a tax court will make appeals more time-consuming and costlier since taxpayers will have to hire lawyers. She said the present administrative review system collects $30 million in delinquent taxes each year for the state, something an independent judge may be less concerned about expediting.

(Reporting by Nanette Byrnes; additional reporting by Patrick Temple-West)

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