On Saturday, Democratic Party presidential candidate Michael Bloomberg opened a campaign headquarters and held a small rally in Phoenix. Bloomberg is touting his tax-the-rich plan to across the country targeting Super Tuesday states like Arizona.
Glad to be back in Arizona. The energy and support for our campaign is stronger than ever in the great Grand Canyon State.
Thank you to everyone in Phoenix who came out to show that they’re part of #TeamBloomberg! pic.twitter.com/LP745GmarB
— Mike Bloomberg (@MikeBloomberg) February 2, 2020
The former New York mayor, with a net worth exceeding $59 Billion, unveiled his tax-the-rich plan which would reverse the tax cuts imposed under President Trump and impose an additional 5% tax on those making more than $5 million a year.
While his plan appeals to the progressives he needs to win the Democratic Party’s nomination in Wisconsin later this year, he does not appear to be a fan of paying taxes in Arizona. According to court documents, an Arizona Administrative Law judge found that Bloomberg owed $2,645,263.21 in additional state and local TPT, plus $304,518.86 in interest through December 31, 2016. Bloomberg’s lawyers filed a challenge in Maricopa County Superior Court in August 2019.
Specifically, the Arizona Department of Revenue alleges that Bloomberg’s proceeds from providing various digital online information products are subject to a transaction privilege tax (“TPT”) assessment.
Does it add up?
Phoenix area attorney, Alexander Kolodin finds irony in Bloomberg’s lawsuit. “To me this looks like something the Goldwater institute would file,” Kolodin told the ADI. “I find it interesting that a business affiliated a such a tax-and-spend presidential candidate would use conservative arguments to try to obtain an exemption for themselves.”
An ardent supporter of tax increases, the former mayor of New York City, did not appear to worry about those at the lower end of the economic scale when as he raised taxes during the 2008 recession. Bloomberg’s move helped balance the budget but increased the burden on the poor and expanded the income gap.
The privileged class?
Bloomberg could take the debate stage for the first time in Nevada later this month. The Democratic National Committee on Friday unveiled new debate rules that dropped the requirement for candidates to obtain a minimum number of campaign contributors, opening a previously closed door for Bloomberg and giving the appearance of attempting to buy his way into office.
Bloomberg, the former Mayor of New York City is no stranger to controversy and exerting power over plebs. In 2013, while serving as New York’s mayor, Bloomberg attempted to ban sugary drinks larger than 16 ounces from restaurants typically patronized by the working class. His scheme was shot down by a state appeals court, finding he overstepped his authority.
Can he sell it in Arizona?
Bloomberg is also a major contributor to Mayors Against Illegal Guns and Every Town for Gun Safety, both which have ties to Southern Arizona with candidates and elected officials. Tucson Mayor Regina Romero recently signed the compact with Mayors Against Illegal Guns. Arizona Democratic Senate candidate Mark Kelly is a stalwart volunteer with Moms Demand Action.
Both the pro-control groups and candidates enjoy some measure of popularity in the more progressive southern Arizona, they lack support in the vast rural regions of Arizona.
While Bloomberg says he should be paying higher taxes, his actions in Arizona to avoid paying them relays an entirely different story. Will this policy and others he is proposing sit well with the Arizona voters? Time will tell.
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The lawsuit below, was filed on August 20, 2019 with the Clerk of the Maricopa County Superior Court-Arizona Tax Court by attorneys with the Cavanagh Law Firm out of Phoenix.
GENERAL ALLEGATIONS
This matter arises from a transaction privilege tax (“TPT”) assessment by the Arizona Department of Revenue (the “Department”) alleging that Bloomberg’s proceeds from providing various digital online information products are subject to TPT under A.R.S. § 42-5061, Arizona’s retail classification, and A.R.S. § 42-5071, Arizona’s personal property rental classification.
Bloomberg, a Delaware limited partnership, is engaged in the business of providing, among other things, various digital online information products.
The Department is an agency of the State of Arizona responsible for the administration of Arizona’s TPT.
The Department audited Bloomberg’s books and records for the period including May 1, 2011 through April 30, 2015.
The audit resulted in the Department issuing an assessment for $2,645,263.21 in additional state and local TPT, plus $304,518.86 in interest through December 31, 2016, but no penalties were assessed (the”Assessment”).
The Assessment alleges that Bloomberg was subject to TPT under A.R.S. § 42-5061, Arizona’s retail classification, and A.R.S. § 42-5071, Arizona’s personal property rental classification, on its proceeds from providing a variety of digital online information products.
Bloomberg timely protested the Assessment and submitted the matter to the Office of Administrative Hearings (”OAH”) for adjudication.
The Administrative Law Judge at OAH upheld the Department’s Assessment.
Consistent with A.R.S. § 42-1254(C), Bloomberg timely filed this Complaint seeking review of the Administrative Law Judge’s decision.
The Arizona Tax Court has jurisdiction of this matter pursuant to A.R.S. § 12-163(A).
Venue is proper in Maricopa County pursuant to A.R.S. § 12-165(A).
First Claim For Relief (Declaratory Judgment)
Bloomberg incorporates by reference its allegations as contained in the preceding paragraphs as if fully set forth herein.
This Court has the power to declare the rights, status, and other legal relations of the parties to this action pursuant to the Uniform Declaratory Judgments Act, A.R.S. § 12-1831, et seq.
An actual controversy exists between Bloomberg and the Department concerning the interpretation and application of A.R.S. §§ 42-5061 and 42-5071 to Bloomberg’s proceeds from providing digital online information products and concerning the parties’ rights and status relating to those and other state laws, and concerning the constitutionality of the Assessment and/or the Department’s interpretation of Sections 42-5061 and 42-5071 as evidenced by the Assessment.
Bloomberg is entitled to a declaratory judgment from the Court holding that Bloomberg’s proceeds from providing digital online information products are not subject to TPT under A.R.S. §§ 42-5061 or 42-5071, and/or that the Department’s Assessment and/or its interpretation of Sections 42-5061 and 42-5071 as evidenced by the Assessment are unconstitutional based on the legal theories outlined in the Second Claim for Relief in this Complaint.
WHEREFORE, Bloomberg requests that this Court:
A. Determine and declare that the Department’s interpretation and/or application of A.R.S. § 42-5061 and A.R.S. § 42-5071 to Bloomberg’s proceeds from providing digital online information products are illegal and/or unconstitutional;
B. Award Bloomberg its costs and attorneys’ fees pursuant to A.R.S.§§ 12-348, 12-1840 and/or other statutory and common-law provisions for such; and
C. Grant such further relief as the Court may deem proper.
SECOND CLAIM FOR RELIEF (The Assessment is Illegal and Unconstitutional)
Bloomberg incorporates by reference its allegations as contained in the preceding paragraphs as if fully set forth herein.
17. The Department’s Assessment against Bloomberg and the Administrative Law Judge’s decision upholding the same are illegal, erroneous, and/or unconstitutional for any and/or all of the following reasons, among others:
a. The application of A.R.S. § 42-5061 and A.R.S. § 42-5071 to Bloomberg’s proceeds from providing digital online information products is a scope issue that must be construed liberally in favor of Bloomberg and strictly against the Department;
b. Sections 42-5061 and 42-5071 only apply to tangible personal property and Bloomberg does not provide tangible personal property to its customers when it provides digital online information products;
c. Section 42-5061 only applies to retail sales of tangible personal property and Bloomberg does not sell tangible personal property to its customers when it provides digital online information products to them on a subscription basis;
d. Section 42-5071 only applies to rentals or leases of tangible personal property and Bloomberg does not lease or rent tangible personal property to its customers when it provides digital online information products to them (Bloomberg does lease computer hardware to some customers, but it separately invoices and pays TPT on its proceeds from such transactions) and even at this late juncture, the Department still has not unequivocally identified precisely what it thinks Bloomberg is leasing to its customers;
e. The information (data) included with Bloomberg’s digital online information products is stored on Bloomberg’s servers and its servers and the software on its servers that it utilizes to provide its digital online information products are all located outside of Arizona so, even if Bloomberg was engaged in the business of leasing or renting tangible personal property (it is not) when it provides digital online information products, Bloomberg would not be subject to TPT on its proceeds from providing such products because the information (data) included in its digital online information products, its servers, and the software on its servers that it utilizes to provide its digital online information products all are located outside the state;
f. Arizona’s statutory Taxpayer Bill of Rights (A.R.S. § 42-2051, et. seq.) prohibits the Department from applying TPT to new or additional categories or types of Taxpayers, such as Bloomberg and its proceeds from providing digital online information products; and
g. Sections 42-5061 and 42-5071, and/or the Department’s interpretation of them as evidenced by the Assessment, unlawfully violates Bloomberg’s rights under the United States and Arizona constitutions because, among other things: (I) Bloomberg’s right to due process requires that statutes imposing tax be definite, certain, clear and unambiguous and the Department’s interpretations of A.R.S. §§ 42-5061 and 42-5071, as evidenced by the Assessment, are not definite, certain, clear, and unambiguous; (2) the power to tax, including what shall be taxed, who shall pay the tax, and what the tax will be is a legislative power vested in Arizona’s Legislature and, in this case, an executive branch agency (namely, the Department) unconstitutionally usurped that power by unlawfully imposing tax on Bloomberg under the guise of A.RS.§§ 42-5061 and 42-5071; and (3) the Department violated Bloomberg’s right to equal protection under the law by settling one or more similar cases in exchange for payment of a small percentage of the amounts the Department assessed in those cases while not extending a similar settlement offer to Bloomberg.
WHEREFORE, Bloomberg requests that this Court:
A. Render judgment in favor of Bloomberg and against the Department by determining that the Department’s Assessment against Bloomberg is illegal, erroneous, and/or unconstitutional and ordering the Department to abate it;
B. Award Plaintiff its costs and attorneys’ fees pursuant to A.R.S. §§ 12-348 and/or other statutory and common-law provisions for such; and
C. Grant such further relief as the Court deems proper.
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