Barth v. Home Builders Ass'n of Cent. Arizonapl

• Docket Number: TX 2024-000440
• Decision Date: 18 November 2025
• Citation: Barth v. Home Builders Ass'n of Cent. Arizonapl, TX 2024-000440 (Ariz. Tax Nov 18, 2025)
• Parties: JOHNATHAN BARTH v. HOME BUILDERS ASSOCIATION OF CENTRAL ARIZONAPL
• Court: Arizona Tax Court

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JOHNATHAN BARTH
v.
HOME BUILDERS ASSOCIATION OF CENTRAL ARIZONAPL

No. TX 2024-000440

Tax Court of Arizona

November 18, 2025

STACY C SKANKEY, ANDREW GEORGE PAPPAS SCOT G TEASDALE

RULING

HONORABLE ERIK THORSON

The Court held oral argument on September 19, 2025, regarding Defendant Arizona Department of Revenue's Motion to Dismiss, filed March 31, 2025, and Defendant Town of Gilbert's Motion to Dismiss, filed March 31, 2025, as well as subsequent filings related thereto. The Court has considered the filings and arguments of the Parties, the relevant authorities and applicable law, as well as the entire record of the case. The Court hereby finds as follows regarding the Motions.

Plaintiffs challenge the Town of Gilbert's increased transaction privilege tax rates for transient lodging, construction contractors, and speculative builders. (See generally Amended Compl., filed March 10, 2025.) Plaintiffs contend that the ordinance enacting the taxes violates article IX § 25 of the Arizona Constitution and seek to enjoin Defendants from enforcing the subject taxes. (See generally Amended Compl.)

The Town of Gilbert seeks to dismiss Plaintiffs' Complaint based on the following arguments: (1) Arizona courts lack jurisdiction to enjoin collection of a tax; (2) Plaintiffs failed to exhaust mandatory administrative remedies; (3) Plaintiff Homebuilders Association of Central Arizona ("HBACA") lacks standing because individualized analysis of its members' tax transactions would be necessary for the case to proceed with it as an organizational plaintiff; and

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(4) facial challenges to constitutionality fail because not all potential applications within the broad categories would be unconstitutional. (Gilbert's Mot., at 1-2.)

Similarly, the Arizona Department of Revenue ("ADOR") seeks to dismiss Plaintiffs' Complaint based on the following arguments: (1) lack of subject matter jurisdiction because of Plaintiffs' failure to exhaust administrative remedies; (2) failure to state a claim because the tax on transient lodging is not a tax on services; (3) lack of standing because HBACA is not a taxpayer; (4) failure to state a claim because contracting should be evaluated at a department level; and, finally, (5) an injunction is prohibited. (See generally ADOR's Mot.)

Defendants have postured the Motions in part as contesting subject matter jurisdiction under Rule 12(b)(1), Ariz. R. Civ. P., with subject matter jurisdiction being this Court's statutory or constitutional power to hear and determine a particular type of case. See Church of Isaiah 58 Project of Arizona, Inc. v. La Paz Cty., 233 Ariz. 460, 462-63 ¶9 (App. 2013) (citing State v. Maldonado, 223 Ariz. 309, 311 ¶14 (2010)). In resolving such a challenge, the Court may take evidence and resolve factual disputes essential to its disposition of the motion. See Church of Isaiah, 233 Ariz. at 463 ¶9. The Court has determined that there are no factual disputes in this matter at this point for which resolution thereof would assist the Court in resolving the jurisdictional question. At this point, on this record, the Court resolves it in Plaintiffs' favor as further discussed below. In Response to the issues raised by Defendants, Plaintiffs contend that (1) their claims are not barred by the relevant anti-injunction statute because it only applies to property tax, and Plaintiffs are only challenging the constitutionality of the tax rather than seeking monetary relief; (2) administrative exhaustion is not required and is futile; (3) the Ordinance is facially unconstitutional because construction contracting and hotel/lodging are always "services;" and (4) Plaintiff HBACA has associational standing. (Resp. filed May 12, 2025, at 2.)

"It is the well-established policy of this state to prevent the validity of a tax from being tested by injunctive means." Church of Isaiah, 233 Ariz. at 464 ¶17 (internal quotations omitted). In an appeal to...