Arizona Supreme Court Upholds Ruling On Car Rental Tax

By Claire Caulfield
Published: Monday, February 25, 2019 - 12:37pm
Updated: Tuesday, February 26, 2019 - 7:07am

The Arizona Supreme Court has ruled that taxing car rentals to pay for sports facilities and tourism projects is legal. The justices upheld a lower court's decision Monday morning.

Car rental companies have been fighting this tax for 14 years, citing a constitutional provision that says all tax revenue “related to” vehicles has to be put toward building and maintaining roads.

In their decision, the justices said there has to be a limit, otherwise revenue from car and tire sales or even vehicle repairs could be diverted — and that would be too broad an impact.

Shawn Aiken, an attorney for a rental car company, says he is considering asking the U.S. Supreme Court to review the ruling.

“I understand the court’s concern about the breadth of the phrase ‘relating to’ but I think all of us though that road taxes have to be used for road purposes," said Aiken.

The second part of their suit said that the tax itself was unfair, since out-of-state visitors pay the bulk of the burden.

Arizona Sports and Tourism authority lawyer Tim Berg said he was pleased that majority of justices ruled the tax was not discriminatory.

“It applies to anyone whether they’re an Arizona resident or not who rents a car in Arizona so it wasn’t discriminatory and I think the court reached that conclusion correctly,” Berg said.

These taxes account for about 25 percent of the Arizona Sports and Tourism Authority budget and are used for the Arizona Cardinals' stadium and spring training facilities.

Nearly $22 million of the authority's budget goes to paying off the debt on the construction of the stadium for the Arizona Cardinals. But it also provides $8.3 million for tourism promotion, almost $5 million to promote the Cactus League and another $1.1 million for youth and amateur sports.

However Justice Clint Bolick did partially dissent, acknowledging that the tax does disproportionally affect out-of-state visitors.  He also said the text of the constitution supports the rental companies’ argument that "If the vehicles are used or operated on public highways, then any fee or tax specially directed toward that use implicates the anti-diversion clause,'' he wrote.  

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