Justia Tax Law Opinion Summaries

In considering whether online travel companies (OTCs) are subject to municipal privilege taxes under Model City Tax Code (the Code) 444 and 447 the Supreme Court held that the OTCs in this case were subject to taxation under section 444 but not under section 447.In 2013, the City of Phoenix and other cities (the Cities) issued privilege tax assessments against the OTCs based on the Cities' belief that the OTCs owed unpaid privilege taxes under sections 444 and 447 for engaging in the business of operating hotels or, alternatively, for acting as brokers for hotels. The tax court concluded that the OTCs were liable for the taxes. The court of appeals concluded that the OTCS were subject to taxation under section 444 but not under section 447 and that the Cities could assess the taxes, penalties, and interest under section 444 retroactively. The Supreme Court vacated in part the court of appeals' decision, holding (1) the OTCs are subject to taxation under section 444 because they are brokers engaging in the business of operating a hotel; and (2) the OTCs are not subject to taxation under section 447 because they are not hotels. View "City of Phoenix v. Orbitz Worldwide Inc." on Justia Law

The Supreme Court affirmed the decision of the court of appeals in this class action, holding that the surcharge imposed by Maricopa County on car rental agencies to fund a stadium and other sports and tourism-related ventures violated neither the dormant Commerce Clause of the United States Constitution nor the anti-diversion provision of the Arizona Constitution.Plaintiff, which rented vehicles in Maricopa County and paid the car rental surcharges, sued the Arizona Department of Revenue seeking refunds and injunctive relief for all similarly situated car rental companies. The tax court certified the class and granted summary judgment for Plaintiff, concluding that the surcharge did not violate the dormant Commerce Clause but did violate the anti-diversion provision. The court of appeals reversed, concluding that the surcharge did not violate the anti-diversion provision. The Supreme Court affirmed, concluding that the Arizona Constitution’s anti-diversion clause, which requires that revenues derived from taxes relating to the operation of motor vehicles must be allocated for public highways, does not apply to a tax relating to the operation of motor vehicles. View "Saban Rent-a-Car LLC v. Arizona Department of Revenue" on Justia Law

At issue was the meaning of the term “day” as used in Ariz. Rev. Stat. 28-8336, which establishes a license tax for “a nonresident whose aircraft is based in this state for more than ninety days but less than two hundred ten days in a calendar year.”The court of appeals determined that “day” means “any calendar day during which the aircraft was on the ground in Arizona for any period of time.” The Supreme Court reversed and remanded the case to the tax court of further proceedings, holding (1) the meaning of “day” can ultimately be construed only in the context of the days an aircraft is “based in” the state; and (2) because the parties did not fully address, nor did the tax court decide, the meaning of the term “based in,” the issue cannot be fully resolved on the current record. View "BSI Holdings LLC v. Arizona Department of Transportation" on Justia Law

The Arizona Department of Revenue (ADOR) is not authorized to value solar panels owned by SolarCity Corporation and Sunrun, Inc. (collectively, Taxpayers) and leased to residential and commercial property owners.For tax year 2015, ADOR notified Taxpayers that their panels had been assigned full cash values and that taxes would be assessed. Taxpayers sought a declaratory judgment that the panels were considered to have no value under Ariz. Rev. Stat. 42-11054(C)(2) and were not subject to valuation. The tax court ruled that the panels were “general property” that must be valued by county assessors pursuant to section 42-13051(A) and that the county assessors cannot assign a zero value because applying section 42-11054(c)(2)’s zero value provision to the panels would violate the Exemptions Clause and the Uniformity Clause of the Arizona Constitution. The Supreme Court affirmed the tax court’s judgment to the extent it concluded that ADOR lacked statutory authority to value Taxpayers’ leased solar panels but reversed the remainder of the judgment and remanded for a determination as to whether section 42-13054 authorizes county assessors to value the solar panels and, if so, whether section 42-11054(C)(2) requires a zero valuation. If section 42-11054(C)(2) applies, the tax could should determine whether that provision violates the Exemptions Clause or Uniformity Clause. View "SolarCity Corp. v. Arizona Department of Revenue" on Justia Law

Plaintiffs leased state trust land and owned all structures and improvements on the land. Under the terms of the lease, the improvements that existed on the land would become the state's property upon lease termination. After the leases were entered into, the legislature created a property tax classification ("Class Nine") in which property was taxed at a lower rate than that applicable to commercial property. For certain years, Maricopa County classified the improvements under the classification applicable to general commercial property and taxed Plaintiffs accordingly. The State Board of Equalization denied Plaintiffs' request for Class Nine classification. Plaintiffs then filed a declaratory judgment action in the tax court. The tax court granted summary judgment for the County based on Plaintiffs' failure to meet the requirements of Ariz. Rev. Stat. 42-12009(A)(1)(a), which provides that improvements on land leased from the state qualify for a reduced ad valorem tax rate if they become the property of the state on termination of the leasehold interest in the property. The Supreme Court remanded, holding that section 42-12009(A)(1)(a) applies when, at the time of taxation, improvements exist on the land that, under the terms of the lease, would become the state's property upon lease termination. View "CNL Hotels & Resorts, Inc. v. Maricopa County" on Justia Law