399 P.3d 696
Ariz. Ct. App.2017Background
- BSI Holdings, an Oregon LLC, owned a twin-engine jet that was based at Scottsdale Airport and used exclusively by an Arizona-resident member for personal flights during the years 2004–2012.
- ADOT and BSI had a 2004 Closing Agreement in which BSI paid a non-resident tax rate for 2004; BSI continued to pay that non-resident rate through 2012.
- ADOT audited and assessed additional tax for 2004–2012, concluding the Jet was based in Arizona more than 209 days each year and thus owed the higher resident rate; ADOT recorded a lien on the aircraft.
- BSI sued in tax court arguing (1) the Closing Agreement barred the 2004 assessment, (2) ADOT was estopped from assessing 2004–2005, and (3) the lien was unlawful; both parties moved for summary judgment.
- The tax court construed “day” as a full 24‑hour period and granted summary judgment to BSI, vacating the assessment and awarding fees; ADOT appealed.
- The Court of Appeals held the proper legal meaning of “day” is any calendar day during which the aircraft is physically on the ground in Arizona for any period, vacated the tax court judgment, and remanded for factual findings applying that definition.
Issues
| Issue | Plaintiff's Argument (BSI) | Defendant's Argument (ADOT) | Held |
|---|---|---|---|
| Meaning of “day” for A.R.S. § 28-8336 (how to count days based in AZ) | "Day" = a discrete 24‑hour period (midnight to midnight); if Jet left AZ during that 24‑hour period it is not based in AZ that day. | "Day" = any calendar day in which the aircraft is physically on the ground in AZ for any part of the day (fractions count as days). | Court adopts ADOT's definition: any calendar day the aircraft is on the ground in AZ for any period counts as a day. Tax court's 24‑hour definition vacated. |
| Application of statute to facts (whether Jet exceeded 209 days per year) | Under BSI's 24‑hour method, day counts fall under the non‑resident bracket for the years in dispute. | ADOT's counting (pilot logs/flight software) shows >209 days each year, making Jet subject to resident rate. | Court did not resolve fact; remanded to tax court to determine factual day counts using the adopted definition. |
| Whether ADOT needed to adopt an administrative policy under APA or A.R.S. §§ 41-1091 et seq. | ADOT impermissibly applied a uniform policy without rulemaking, affecting substantive rights. | ADOT was merely interpreting a statutory term; no complex discretionary policy requiring rulemaking. | Court rejects BSI's rulemaking argument; interpretation of statute does not require APA rulemaking here. |
| BSI's estoppel and Closing Agreement defenses | Closing Agreement bars 2004 assessment; estoppel prevents assessments for 2004–2005. | ADOT enforces statutory tax assessment; defenses not yet adjudicated. | Court did not decide estoppel or Closing Agreement issues on appeal; remand may address them. |
Key Cases Cited
- Ariz. Dep’t of Revenue v. Salt River Project Agric. Improvement & Power Dist., 212 Ariz. 35, 126 P.3d 1063 (App. 2006) (standard of review and taxing‑statute interpretation principles)
- Hayes v. Continental Insurance Co., 178 Ariz. 264, 872 P.2d 668 (1994) (statutory ambiguity and interpretive tools)
- Maciborski v. Chase Service Corp. of Arizona, 161 Ariz. 557, 779 P.2d 1296 (App. 1989) (common‑law rule: any fraction of a day is treated as a whole day)
- Lagandaon v. Ashcroft, 383 F.3d 983 (9th Cir. 2004) (federal precedent treating part‑of‑day presence as a full day in statutory contexts)
- Harris Corp. v. Arizona Dep’t of Revenue, 233 Ariz. 377, 312 P.3d 1143 (App. 2013) (taxpayer‑friendly construction applies only after other interpretive tools are exhausted)