Can an individual sue a state agency - MA Department of Revenue - when that agency makes mistakes that cause the individual financial hardship?

Yes. Very carefully. You need to file a Letter of presentment to the Attorney General's office and the Department. But look-up Letter of Presentment in the MA government site. Another good reference for legal issues in MA is the MA Law Libraries. The law librarians are very helpful and can help you with any questions. Their web page is:

http://www.lawlib.state.ma.us/