Arizona is on a roll. Weeks after it shot down a legislative proposal to limit public funding and subsidies for professional sports stadiums, ballparks and arenas, the state’s Court of Appeals ruled that car rental taxes can be used to pay for such public facilities.
“In a key victory for the state’s two largest counties, the judges overruled a lower-court decision that said the Arizona Constitution requires levies connected with driving to be spent only on road and other transportation projects,” reports Tucson.com. “Judge Diane Johnsen, writing for the court, said there’s a key difference between the act of renting a car and actually operating it.
“At issue is a law designed to help counties attract and retain sports teams and spring training by building facilities,” the news article continues. “The chosen method in Maricopa County was a 3.5 percent surcharge on car-rental contracts, paid by the car-rental companies; Pima County put in a flat $3.50 per-rental charge. Shawn Aiken, representing Saban Rent-A-Car, challenged the levy as illegal.”
The judge determined that a 2014 ruling by the Maricopa County Superior Court — which claimed the state constitution limits any taxes levied on the use of vehicles on public streets to road projects — was not in play.
“The surcharge is not imposed on the road user [the driver-customer], but instead is imposed on the car-rental business,” Johnsen wrote, acting on an appeal by the state Department of Revenue and the Sports and Tourism Authority. “The taxable event that triggers the surcharge is the rental of a vehicle, not its operation or use. While most every car-rental transaction will result in the customer using the car on public highways or streets, the surcharge is imposed regardless of whether, how much or how often the customer drives the car.”
As the news website notes, the ruling — which could be challenged and reviewed by the Arizona Supreme Court — is “a crucial victory” for the Tourism and Sports Authority. The state’s car-rental tax generates more than $14 million of its $55 million annual budget.