On Tuesday, the Arizona Supreme Court handed the Goldwater Institute a victory when it struck down Pinal County’s transportation excise tax. The Goldwater Institute represented a group of taxpayers and business owners in challenging the tax.
In November 2017, Pinal County adopted a new “transportation excise tax” to pay for infrastructure improvements and road construction. But while fixing roads isn’t a problem, says Goldwater, the tax Pinal County officials created is.
Goldwater attorneys argued the tax not only violated state law, it created a confusing set of rules for taxes that Goldwater believes will ultimately hinder economic development in the county.
The tax applies only to retail sales at below $10,000. Goldwater argued that “means the day-to-day purchases of lower-income citizens will be taxed more heavily than expensive items like new cars and jewelry. That isn’t just unfair, it’s also illegal. Arizona law specifies what must be taxed when a county creates a transportation excise tax, and doesn’t allow counties to create their own rules in this way.”
According to Timothy Sandefur, Vice President for Litigation at the Goldwater Institute, “Pinal County claimed it could subdivide the tax in this way because the law lets counties set a “variable rate” in a tax, and that it was simply setting the “rate” of some sales at zero. But the state Supreme Court today rejected that argument. “The term ‘variable’ means ‘something subject to change,’” it declared. “But in this case, Pinal County’s two-tiered tax rate structure—which establishes a positive tax rate and a tax rate of zero percent—sets fixed tax rates that never vary and are never subject to change.”
After the final judgment is issued in the case, Arizona retailers should be entitled to refund the taxes they were illegally forced to pay. Business owners should consult their attorneys and accountants for information on how that process works, advises the Goldwater Institute.