Please ensure Javascript is enabled for purposes of website accessibilityArizona Supreme Court rules Pinal County tax is illegal – DC QUAKE
April 16, 2024

Arizona Supreme Court rules Pinal County tax is illegal

3 min read

The Arizona Supreme Court struck down a tax Tuesday that was enacted by Pinal County.

The court threw out the county’s transportation excise tax, known as Proposition 417. The 0.5% tax applied to purchases under $10,000. The Goldwater Institute represented a group of taxpayers and business owners that challenged the tax in court.

This excise tax came about because of a pair of 2017 ballot questions in Pinal County. Proposition 416 was a question that proposed a new regional transportation plan, which included new roads throughout the county as well as park-and-ride facilities.

Proposition 417 was the funding mechanism for the proposal; the 0.5% tax on purchases under $10,000 was supposed to be in effect for 20 years to pay off the new infrastructure.

Goldwater Institute Vice President for Litigation Timothy Sandefur celebrated the court’s decision.

“The Arizona Supreme Court has rightly put an end to Pinal County’s illegal tax, and we look forward to the public getting back the money they’ve been unlawfully forced to hand over for years,” Sandefur said Tuesday in a statement. “There’s no doubt Pinal County needs to repair its infrastructure – but the county has repeatedly wasted public money instead of doing that, and then come back to demand more from taxpayers. This time, it did so through an illegal tax. Then, it refused to easily redesign the tax to comply with the law, instead wasting years and even more taxpayer money.

“It’s time public officials respected the law and followed the legal process, and we’re glad the justices insisted on that,” he said.

The Goldwater Institute called the tax “bizarre” and said it was regressive.

“That bizarre tax structure came about when county officials tried to neutralize political opposition to the tax by ensuring that it wouldn’t apply if people bought expensive items such as luxury cars or farm equipment,” according to the Goldwater Institute. “But subdividing the tax in that way violates Arizona law, which creates a carefully designed set of tax categories, and doesn’t allow counties to create their own.”

Pinal County claimed it could subdivide the tax the way it did because state law allows counties to set a “variable rate” in a tax. It argued the rate exceeding $10,000 was zero.

The state’s Supreme Court rejected that argument.

“The term ‘variable’ means ‘something subject to change,’ ” the court’s decision read. “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.”

The Arizona Department of Revenue agreed that Pinal County broke state law by creating a two-tiered tax system, according to the Goldwater Institute, which also said those who paid the tax should seek restitution.

“After the final judgment is issued in the case, Arizona retailers should be entitled to refund the taxes they were illegally forced to pay,” a Goldwater Institute press release said. “Business owners should consult their attorneys and accountants for information on how that process works.”

This article was originally posted on Arizona Supreme Court rules Pinal County tax is illegal

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