by Timothy Sandefur
December 6, 2018
A few weeks ago, the Arizona Tax Court ruled that Pinal County violated the law when it imposed the tax known as Proposition 417—that’s the transportation excise tax that’s supposed to fix up the roads (never mind that all the previous taxes were also supposed to fix up the roads, and never did). But now the County has asked the court to let them keep collecting the tax anyway, while they appeal the decision.
The Tax Court’s ruling—which became official on November 15—holds that Proposition 417 was void from the outset and that “no lawful transportation excise tax related to Pinal Regional Transportation Authority Resolution 2017-01 is now in existence.” But the County has filed a motion asking the court to stay that decision while it appeals, because the County could lose money in the interim, and since transportation excise taxes are given a 20-year time limit, the County will lose out on money if it ultimately wins on appeal.
But as we argue in our opposition brief, that doesn’t make sense. First, courts can easily extend that 20-year time limit to make up for any lost time if the County does win on appeal. More importantly, enforcing a tax that even the Arizona Department of Revenue admits is illegal—and which the court has said is not in existence—would mean forcing Pinal County residents to fork over money to the County to which it has no legal entitlement. And most residents won’t get that back. Even if the Court of Appeals agrees that the tax is unlawful, refunds will only be issued to retailers—not their customers, whom it’s impossible to track down. Worse, if a stay is issued, groups like the Arizona Restaurant Association won’t be able to tell whether or not they’re liable to pay the tax in the interim. One reason the court struck down Proposition 417 is because the County at one time said it would only tax retailers, and then said it wanted to tax everyone. The uncertainty that would be introduced by reinstating this illegal tax would be a significant harm to County taxpayers and businesses.
It’s really a shame that County officials decided to waste taxpayer money appealing the decision in the first place, rather than simply going back and doing the tax the right way: by following Arizona law. They could have done that at the election in November. But instead, they chose to defend the legality of a tax that, again, even the state Department of Revenue admits violates state law. That’s a waste of the very taxpayer money that the County claims it has too little of.
In the meantime, unless and until a stay is issued, there is “no lawful transportation excise tax related to Pinal Regional Transportation Authority Resolution 2017-01” now in existence in Pinal County, and no legal obligation to impose that tax on customers.
Timothy Sandefur is the Vice President for Litigation at the Goldwater Institute.