Vangilder v. Ariz. Dep't of Revenue
| Decision Date | 08 March 2022 |
| Docket Number | CV-20-0040-PR |
| Citation | 65 Arizona Cases Digest 31,505 P.3d 274 |
| Parties | Harold VANGILDER, et al., Plaintiffs/Appellees/Cross-Appellants, v. ARIZONA DEPARTMENT OF REVENUE, Defendant/Appellee/Cross-Appellee, Pinal County, et al., Defendants/Appellants/Cross-Appellees. |
| Court | Arizona Supreme Court |
Timothy Sandefur (argued), Christina Sandefur, Scharf-Norton Center for Constitutional Litigation at the Goldwater Institute, Phoenix; and Paul J. Mooney, Mooney, Wright, Moore & Wilhoit, PLLC, Mesa, Attorneys for Harold Vangilder, Dan Neidig, and Arizona Restaurant Association
Mark Brnovich, Arizona Attorney General, Scot G. Teasdale (argued), Jerry A. Fries, Lisa A. Neuville, Assistant Attorneys General, Phoenix, Attorneys for Arizona Department of Revenue
Patrick Irvine (argued), Taylor Burgoon, Fennemore Craig, P.C., Phoenix, Attorneys for Pinal County and Pinal Regional Transportation Authority
Chris Keller, Chief Civil Deputy, Office of the Pinal County Attorney, Florence, Attorney for Pinal County
William J. Sims, Sims Mackin, Ltd., Phoenix, Attorney for Pinal Regional Transportation Authority
James G. Busby, Jr., Karen C. Stafford, The Cavanagh Law Firm, P.A., Phoenix, Attorneys for Amici Curiae Arizona Tax Research Association and Arizona Free Enterprise Club
Scott A. Holcomb, Vail C. Cloar, Dickinson Wright PLLC, Phoenix, Attorneys for Amicus Curiae Town of Queen Creek
Denis M. Fitzgibbons, Fitzgibbons Law Offices PLC, Casa Grande, Attorney for Amici Curiae City of Maricopa and City of Coolidge
Clifford L. Mattice, Florence Town Attorney's Office, Florence, Attorney for Amicus Curiae Town of Florence
JUSTICE MONTGOMERY, joined by JUSTICES LOPEZ and BEENE, concurred in part and dissented in part.
¶1 This case asks us to determine whether the Pinal County Regional Transportation Authority ("RTA") and the Pinal County Board of Supervisors ("Board") acted lawfully when they adopted Proposition 416, a regional transportation plan, and Proposition 417, a transportation excise tax. We must also determine whether a two-tiered retail transaction privilege tax ("TPT") structure, whereby the first $10,000 of any single item is taxed at one rate and any amount in excess is taxed at a rate of zero percent, was lawfully adopted as part of a transportation excise tax in Pinal County.
¶2 After considering the resolution, ballot provision, and the publicity pamphlet circulated to voters, we hold that Pinal County complied with state law in adopting the transportation excise tax. However, we hold that Arizona law does not permit Pinal County to adopt a two-tiered retail transaction privilege tax on tangible personal property as part of a transportation excise tax. Therefore, Pinal County's two-tiered retail transaction privilege tax is invalid.
¶3 In 2015, the Board established the RTA to coordinate multi-jurisdictional transportation planning, improvements, and funding. State law authorizes the RTA to develop a plan for transportation projects and propose a transportation excise tax to fund those projects. A.R.S. §§ 48-5309, -5314. However, to implement any such county transportation excise tax, state law requires the tax first be "approved by the qualified electors voting at a countywide election." A.R.S. § 42-6106(A) ; see also § 48-5314(F).
¶4 In June 2017, the RTA adopted the Pinal County Regional Transportation Plan ("Plan"), which identified roadway and transportation projects to be developed over a twenty-year period. To fund the Plan, the RTA adopted a resolution ("Resolution"), which asked the Board to call a countywide special election on the Plan and "on the issue of levying a transportation excise tax at a rate equal to one-half percent (0.005%) [sic] of the gross income from the business activity upon every person engaging or continuing in the business of selling tangible personal property at retail" to fund the Plan. The Resolution described the tax rate upon retail sales as "a variable or modified rate," such that "when the gross income from the sale of a single item of tangible personal property exceeds ten thousand dollars ($10,000), the one-half percent (0.005%) [sic] tax rate shall apply to the first ten thousand dollars ($10,000), and above ten thousand dollars ($10,000), the measure of tax shall be a rate of zero percent (0%)." Accordingly, the tax rate would apply only to the first $10,000 of a single item of tangible personal property, and any amount in excess would be taxed at a rate of zero percent.
¶5 Before any transportation excise tax election, a county board of supervisors is required to prepare, print, and distribute a publicity pamphlet containing detailed information about the tax and the transportation plan. See § 48-5314(C). To that end, the Board printed a publicity pamphlet for the November 7, 2017 special election, describing Proposition 416 (relating to the Plan) and Proposition 417 (). In October 2017, the RTA "ratified, confirmed, approved and adopted [the publicity pamphlet] in the form presented."
¶6 The publicity pamphlet described the planned transportation projects and explained that the completion of those projects would depend on voters approving the transportation excise tax in Proposition 417. The publicity pamphlet explained:
If Proposition 417 is approved by the voters, the Transportation Excise Tax would ... be assessed on the same business transactions that are subject to the State of Arizona transaction privilege (sales) tax, but at a rate equal to 10% of the State tax .... [T]he Transportation Excise Tax rate will generally be 0.5% or 1 cent on each $2 on State taxable items ....
The publicity pamphlet identified each of the business classifications subject to the TPT and detailed the rates at which a transportation excise tax would apply to each of those business classifications. See A.R.S. §§ 42-5061 to -5076.
¶7 Under Arizona law, an excise tax is assessed on the privilege or right to engage in an occupation or business; it is paid by the business providing the service and is "not a tax upon the sale itself." Karbal v. Ariz. Dep't of Revenue , 215 Ariz. 114, 116 ¶ 10, 158 P.3d 243, 245 (App. 2007) (quoting Ariz. Dep't of Revenue v. Mountain States Tel. & Tel. Co. , 113 Ariz. 467, 468, 556 P.2d 1129, 1130 (1976) ). A TPT is "an excise on the privilege or right to engage in particular businesses within the taxing jurisdiction." Id. ¶ 9 (quoting U.S. W. Commc'ns., Inc. v. City of Tucson , 198 Ariz. 515, 523 ¶ 24, 11 P.3d 1054, 1062 (App. 2000) ). Arizona's TPT covers sixteen enumerated business classifications (e.g., retail, utilities, transient lodging, mining). See §§ 42-5061 to -5076.
¶8 The retail classification within Arizona's TPT structure applies to "the business of selling tangible personal property at retail." § 42-5061(A). With respect to this retail classification, the Board's publicity pamphlet explained that the "Transportation Excise Tax rate shall become a variable or modified rate such that when applied in any case when the gross income from the sale of a single item of tangible personal property exceeds $10,000, the 0.5% Transportation Excise Tax rate shall apply to the first $10,000, and above $10,000, the measure of the Transportation Excise Tax shall be a rate of 0.0%."
¶9 During the special election, voters were asked:
Voters approved both the Plan set forth in Proposition 416 and the transportation excise tax set forth in Proposition 417. Harold Vangilder, Dan Neidig, and the Arizona Restaurant Association (collectively, "Vangilder") filed suit to enjoin the Arizona Department of Revenue ("ADOR"), Pinal County, and the RTA from collecting the tax. The trial court invalidated the tax and denied Vangilder's request for attorney fees. The court of appeals reversed in part, upholding the tax as valid and affirming the denial of Vangilder's request for fees.
¶10 We granted review to determine whether the Board and the RTA acted lawfully in adopting the transportation excise tax and whether the two-tiered retail TPT structure on tangible personal property in Proposition 417 is lawful. We have jurisdiction pursuant to article 6, section 5(3) of the Arizona Constitution.
¶11 The interpretation and application of a voter-approved measure present questions of law we review de novo. See City of Surprise v. Ariz....
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