Arizona’s Lawsuit Against California’s Business Tax Gains Support

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Five national organizations and a group of law professors have come out in support of the Arizona Attorney General’s Office legal challenge to California’s “doing business” tax. The Arizona Attorney General’s Office claims that the tax is illegally imposed on Arizona individuals and businesses.

According to the Arizona Attorney General’s Office, the National Taxpayers Union Foundation (NTUF), DRI Voice of Defense Bar (DRI), National Federation of Independent Business (NFIB), Southeastern Legal Foundation, Cato Institute, and Law Professors together filed four amicus briefs in support of Arizona’s lawsuit.

In February, the Arizona Attorney General’s Office filed a lawsuit in the U.S. Supreme Court against the State of California seeking to invalidate California’s extraterritorial tax assessments and seizures, which result from an unconstitutional “doing business” tax against businesses and individuals that don’t actually conduct any business in California.

California continues to assess these “doing business” taxes even though both its state court and tax appeals agency have held that the taxes are illegal under California law. Every year, California assesses an $800 “doing business” tax against Arizona businesses that conduct no actual business in California. Instead, their only connection to California is a mere passive investment in a California company. Arizona estimates its citizens pay over $10 million in these unconstitutional taxes to the State of California every year. Since the “doing business” taxes are deductible, Arizona loses an estimated $484,000 in tax revenue every year.

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