HAROLD VANGILDER, ET AL., Plaintiffs/Appellees/Cross-Appellants, υ. ARIZONA DEPARTMENT OF REVENUE, Defendant/Appellee/Cross-Appellee, PINAL COUNTY, ET AL., Defendants/Appellants/Cross-Appellees.
No. CV-20-0040-PR
SUPREME COURT OF THE STATE OF ARIZONA
March 8, 2022
248 Ariz. 254
Appeal from the Arizona Tax Court, The Honorable Christopher T. Whitten, Judge, No. TX2017-000663. AFFIRMED. Opinion of the Court of Appeals, Division One, 248 Ariz. 254 (App. 2020). AFFIRMED IN PART; VACATED IN PART.
Timothy Sandefur (argued), Christina Sandefur, Scharf-Norton Center for Constitutional Litigation at the Goldwater Institute, Phoenix; and Paul J. Mooney, Mooney, Wright, Moore & Wilhoit, PLLC, Mesa, Attorneys for Harold Vangilder, Dan Neidig, and Arizona Restaurant Association
Patrick Irvine (argued), Taylor Burgoon, Fennemore Craig, P.C., Phoenix, Attorneys for Pinal County and Pinal Regional Transportation Authority
Chris Keller, Chief Civil Deputy, Office of the Pinal County Attorney, Florence, Attorney for Pinal County
William J. Sims, Sims Mackin, Ltd., Phoenix, Attorney for Pinal Regional Transportation Authority
James G. Busby, Jr., Karen C. Stafford, The Cavanagh Law Firm, P.A., Phoenix, Attorneys for Amici Curiae Arizona Tax Research Association and Arizona Free Enterprise Club
Scott A. Holcomb, Vail C. Cloar, Dickinson Wright PLLC, Phoenix, Attorneys for Amicus Curiae Town of Queen Creek
Denis M. Fitzgibbons, Fitzgibbons Law Offices PLC, Casa Grande, Attorney for Amici Curiae City of Maricopa and City of Coolidge
Clifford L. Mattice, Florence Town Attorney‘s Office, Florence, Attorney for Amicus Curiae Town of Florence
JUSTICE KING authored the opinion of the Court, in which CHIEF JUSTICE BRUTINEL, VICE CHIEF JUSTICE TIMMER, and JUSTICE BOLICK joined. JUSTICE MONTGOMERY, joined by JUSTICES LOPEZ and BEENE, concurred in part and dissented in part.
JUSTICE KING, opinion of the Court:
¶1 This case asks us to determine whether the Pinal County Regional Transportation Authority (“RTA“) and the Pinal County Board of Supervisors (“Board“) acted lawfully when they adopted Proposition 416,
¶2 After considering the resolution, ballot provision, and the publicity pamphlet circulated to voters, we hold that Pinal County complied with state law in adopting the transportation excise tax. However, we hold that Arizona law does not permit Pinal County to adopt a two-tiered retail transaction privilege tax on tangible personal property as part of a transportation excise tax. Therefore, Pinal County‘s two-tiered retail transaction privilege tax is invalid.
BACKGROUND
¶3 In 2015, the Board established the RTA to coordinate multi-jurisdictional transportation planning, improvements, and funding. State law authorizes the RTA to develop a plan for transportation projects and propose a transportation excise tax to fund those projects.
¶4 In June 2017, the RTA adopted the Pinal County Regional Transportation Plan (“Plan“), which identified roadway and transportation projects to be developed over a twenty-year period. To fund the Plan, the RTA adopted a resolution (“Resolution“), which asked the Board to call a countywide special election on the Plan and “on the issue of levying a transportation excise tax at a rate equal to one-half percent (0.005%) [sic] of the gross income from the business activity upon every person engaging or continuing in the business of selling tangible personal property at retail” to fund the Plan. The Resolution described the tax rate upon retail sales as “a variable or modified rate,” such that “when the gross income from the sale of a single item of tangible personal property exceeds ten thousand dollars ($10,000), the one-half percent (0.005%) [sic] tax rate shall apply to the first ten thousand dollars ($10,000), and above ten thousand dollars ($10,000), the measure of tax shall be a rate of zero percent (0%).”
¶5 Before any transportation excise tax election, a county board of supervisors is required to prepare, print, and distribute a publicity pamphlet containing detailed information about the tax and the transportation plan. See
¶6 The publicity pamphlet described the planned transportation projects and explained that the completion of those projects would depend on voters approving the transportation excise tax in Proposition 417. The publicity pamphlet explained:
If Proposition 417 is approved by the voters, the Transportation Excise Tax would . . . be assessed on the same business transactions that are subject to the State of Arizona transaction privilege (sales) tax, but at a rate equal to 10% of the State tax . . . . [T]he Transportation Excise Tax rate will generally be 0.5% or 1 cent on each $2 on State taxable items . . . .
The publicity pamphlet identified each of the business classifications subject to the TPT and detailed the rates at which a transportation excise tax would apply to each of those business classifications. See
¶7 Under Arizona law, an excise tax is assessed on the privilege or right to engage in an occupation or business; it is paid by the business providing the service and is “not a tax upon the sale itself.” Karbal v. Ariz. Dep‘t of Revenue, 215 Ariz. 114, 116 ¶ 10 (App. 2007) (quoting Ariz. Dep‘t of Revenue v. Mountain States Tel. & Tel. Co., 113 Ariz. 467, 468 (1976)). A TPT is “an excise on the privilege or right to engage in particular businesses within the taxing jurisdiction.” Id. ¶ 9 (quoting U.S. W. Commc‘ns., Inc. v. City of Tucson, 198 Ariz. 515, 523 ¶ 24 (App. 2000)). Arizona‘s TPT covers
¶8 The retail classification within Arizona‘s TPT structure applies to “the business of selling tangible personal property at retail.”
¶9 During the special election, voters were asked:
PROPOSITION 417
(Relating to County Transportation Excise (Sales) Taxes)
Do you favor the levy of a transportation excise (sales) tax including at a rate equal to one-half percent (0.5%) of the gross income from the business activity upon every person engaging or continuing in the business of selling tangible personal property at retail; provided that such rate shall become a variable or modified rate such that when applied in any case when the gross income from the sale of a single item of tangible personal property exceeds ten thousand dollars ($10,000), the one-half percent (0.5%) tax rate shall apply to the first ten thousand dollars ($10,000), and above ten thousand dollars ($10,000), the measure of tax shall be a rate of zero percent (0.0%), in Pinal County for twenty (20) years to provide funding for the transportation elements contained in the Pinal Regional Transportation Plan?
Do you favor the levy of a transaction privilege (sales) tax for regional transportation purposes, including at a variable or modified rate, in Pinal County?
YES ______
NO ______
A “YES” vote has the effect of imposing a transaction privilege (sales) tax in Pinal County, including at a variable or modified rate, for twenty (20) years to provide funding for the transportation projects contained in the Regional Transportation Plan.
A “NO” vote has the effect of rejecting the transaction privilege (sales) tax for transportation purposes in Pinal County.
Voters approved both the Plan set forth in Proposition 416 and the transportation excise tax set forth in Proposition 417. Harold Vangilder, Dan Neidig, and the Arizona Restaurant Association (collectively, “Vangilder“) filed suit to enjoin the Arizona Department of Revenue (“ADOR“), Pinal County, and the RTA from collecting the tax. The trial court invalidated the tax and denied Vangilder‘s request for attorney fees. The court of appeals reversed in part, upholding the tax as valid and affirming the denial of Vangilder‘s request for fees.
¶10 We granted review to determine whether the Board and the RTA acted lawfully in adopting the transportation excise tax and whether the two-tiered retail TPT structure on tangible personal property in Proposition 417 is lawful. We have jurisdiction pursuant to
DISCUSSION
¶11 The interpretation and application of a voter-approved measure present questions of law we review de novo. See City of Surprise v. Ariz. Corp. Comm‘n, 246 Ariz. 206, 210 ¶ 10 (2019); Ariz. Citizens Clean Elections Comm‘n v. Brain, 234 Ariz. 322, 325 ¶ 11 (2014).
I.
¶12 Vangilder claims the Resolution is legally deficient because it described the transportation excise tax as applying only to retail sales, as the Resolution described a tax on “the gross income from the business activity upon every person engaging or continuing in the business of selling tangible personal property at retail.” Therefore, Vangilder contends the ballot‘s description cannot be read to describe a tax applying to all TPT
¶13 By contrast, Pinal County argues the Resolution properly requested that the issue of levying a transportation excise tax be placed on the ballot, which is the only statutorily required language for a valid resolution. Additionally, Pinal County maintains that the publicity pamphlet explained how each TPT classification would be taxed. Lastly, Pinal County claims the word “including” on the ballot indicated to voters that there would be a transportation excise tax, and one facet of that tax would be the two-tiered retail TPT structure.
A.
¶14 As a threshold matter, any Resolution-based procedural challenges brought after the election are waived. See Tilson v. Mofford, 153 Ariz. 468, 470 (1987) (“Indeed, we have held that the procedures leading up to an election cannot be questioned after the people have voted, but instead the procedures must be challenged before the election is held.“). However, even if we were to entertain Vangilder‘s claims regarding the Resolution, the actions of the Board and the RTA were permissible.
¶15 Section 48-5314(A)(2) permits the RTA to “[r]equest by resolution certified to the county board of supervisors that the issue of levying a transportation excise tax pursuant to § 42-6106 be submitted to the qualified electors at a countywide special election or placed on the ballot at a countywide general election.” (Emphasis added.) In this case, the RTA did just that. Section 48-5314(A)(2) does not require the RTA to specify or describe the details of the transportation excise tax that would later be placed on the ballot. See State v. Burbey, 243 Ariz. 145, 147 ¶ 7 (2017) (“To determine a statute‘s meaning, we look first to its text. When the text is clear and unambiguous, we apply the plain meaning and our inquiry ends.” (internal citation omitted)). That the Board chose to include a partial description of the transportation excise tax does not invalidate the Resolution or the placement of the tax on the ballot.
¶16 Further, Vangilder‘s reliance on Braden v. Yuma County Board of Supervisors, 161 Ariz. 199 (App. 1989), and Henningson, Durham & Richardson v. Prochnow, 13 Ariz. App. 411 (1970), is misplaced. In those
¶17 In this case, the sole purpose of the Resolution was to request that the Board place a transportation excise tax on the ballot. See
¶18 Accordingly, no basis exists to conclude the Board and the RTA acted unlawfully with regard to the Resolution or the placement of the transportation excise tax on the ballot.
¶19 Further, we disagree with Vangilder‘s arguments regarding the ballot language. Vangilder claims the ballot described an excise tax on only retail sales, contrary to the requirements set forth in
¶20 A county “transportation excise tax” is a term precisely described in
¶21 First, there is no question that the publicity pamphlet listed the tax rate for each of the TPT classifications in addition to the rate for retail sales, indicating that the transportation excise tax would apply to all classifications. Further, the ballot asked voters if they agreed to “the levy of a transportation excise (sales) tax including” a two-tiered tax on retail sales. (Emphasis added.) Vangilder argues that the word “including” limited the tax to only retail sales. The court of appeals, acknowledging the ballot could have been more precise, concluded that the term “including” indicated the tax applied to all TPT classifications, but it applied differently to the retail classification. Vangilder v. Ariz. Dep‘t of Revenue, 248 Ariz. 254, 261 ¶ 18 (App. 2020). In other words, “‘including’ modifies ‘transportation excise (sales) tax,’ and the remainder of the phrase describes the retail-sales component of a broader tax.” Id.
¶22 We agree with the court of appeals’ construction. The term “including” is rendered meaningless if the tax applied to only retail sales. See Ariz. Dep‘t of Revenue v. Action Marine, Inc., 218 Ariz. 141, 143 ¶ 10 (2008) (“We . . . avoid interpretations that render statutory provisions meaningless, unnecessary, or duplicative.” (internal citation omitted));
II.
¶23 We next consider whether Arizona law permits Pinal County to adopt a two-tiered retail TPT structure on tangible personal property as part of a transportation excise tax on all TPT categories. Vangilder and ADOR argue that such a two-tiered tax rate is not permitted under Arizona law.1 Pinal County argues the two-tiered tax rate is permissible as a “variable rate” or “modified rate” under
¶24 At the outset, we note it is a settled principle of law that as subdivisions of the state, counties and municipalities “have only such legislative powers as have been expressly, or by necessary implication, delegated to them by constitution or by the legislature. These powers will be strictly construed.” City of Phoenix v. Ariz. Sash, Door & Glass Co., 80 Ariz. 100, 102 (1956), amended on reh‘g, 80 Ariz. 239 (1956) (internal citation omitted); see also Associated Dairy Prods. Co. v. Page, 68 Ariz. 393, 395 (1949) (explaining “[t]he boards of supervisors of the various counties of the state have only such powers as have been expressly or by necessary implication, delegated to them by the state legislature” in case involving county ordinance regulating milk and milk products); Ponderosa Fire Dist. v. Coconino County, 235 Ariz. 597, 599 ¶ 1, 602–03 ¶ 25 (App. 2014) (noting “the principle that counties, like cities, have no inherent powers” in case evaluating county‘s discretion to call performance bonds); Transamerica Title Ins. Co. v. Cochise County, 26 Ariz. App. 323, 326 (1976) (explaining
¶25 Specifically in the area of taxation, this Court has explained the “power of taxation under the Constitution inheres in the sovereignty of the state and may be exercised only by the state Legislature.” Home Builders Ass‘n of Cent. Ariz., Inc. v. Riddel, 109 Ariz. 404, 406 (1973) (quoting Home Owners’ Loan Corp. v. City of Phoenix, 51 Ariz. 455, 466 (1938)). Indeed, the Arizona Constitution provides that “[t]he law-making power shall have authority to provide for the levy and collection of . . . excise” and other types of taxes.
¶26 When interpreting the authority of a political subdivision to levy a tax, such authority “must be made clearly to appear and doubts, if any, as to the power sought to be exercised must be resolved against” the political subdivision. Ariz. Sash, Door & Glass Co., 80 Ariz. at 102–03 (emphasis added). Similarly, “the power to levy a tax is never implied, but must directly and specifically be granted.” S. Pac. Co., 63 Ariz. at 347 (emphasis added).
¶27 It is undisputed that
¶28 The legislature did not define “modified rate” or “variable rate,” and therefore it is our role to interpret the meaning of these terms, which is
¶29 The word “modify” means “[t]o change somewhat the form or qualities of.” Modify, Webster‘s New International Dictionary, Unabridged (2d ed. 1949); accord Modify, Webster‘s Third New International Dictionary (3d ed. 1976) (defining “modify” as “to make minor changes in the form or structure of,” “alter without transforming,” “make a basic or important change in,” and “change the form or properties of for a definite purpose“); Modification, Black‘s Law Dictionary (7th ed. 1999) (defining “modification” as “[a] change to something; an alteration“). Because “modify” means to change the form of something, the term “modified rate” as used in
¶30 Next, the term “variable” means “something subject to change,” “able or apt to vary or change,” and “susceptible or subject to variation or changes.” Variable, Webster‘s Third New International Dictionary (3d ed. 1976). These definitions are broad. Significantly, however, each definition contemplates that the something “varied” starts out one way and then is subject to alteration. Applying that meaning here, a “variable rate” means an established rate that itself may change upon the occurrence of specified conditions. Indeed, this meaning is commonly applied in the context of interest rates. See variable rate, Black‘s Law Dictionary (7th ed. 1999) (defining “variable rate” as “[a]n interest rate that varies at preset intervals in relation to the current market rate (usu. the prime rate)“). Likewise, a “variable annuity” is one whose value changes over time. See variable annuity, Black‘s Law Dictionary (7th ed. 1999). As the dissent acknowledges, “tax law does not specify what constitutes a variable tax rate.” Infra ¶ 59.
¶32 The legislature could have used other terms that would have expressly delegated to counties the authority to establish two different fixed rates within a single TPT classification—for example, (1) “two-level tax structure,” which is how the Model City Tax Code refers to this structure, infra ¶ 44, (2) “multiple rates,” or (3) “two-tiered” tax rate. But the legislature did not use such express language in
¶33 The dissent cites cases from other jurisdictions that use the term “variable rate.” Infra ¶ 59. But those cases are not instructive here because they do not conclude that a two-tiered tax rate structure, which applies a tax rate only up to a specified dollar amount, is a “variable rate.” Nor do they address the absence of any delegation of taxation authority to a county or political subdivision, which must be expressly delegated under Arizona law. See
¶34 Other statutory provisions governing regional transportation plans and transportation excise taxes support a determination that the legislature did not expressly delegate to Pinal County the authority to adopt a two-tiered retail TPT structure as part of a transportation excise tax. See Orbitz Worldwide, 247 Ariz. at 238 ¶ 10 (“In construing a specific provision, we look to the statute as a whole and we may also consider statutes that are in pari materia—of the same subject or general purpose—for guidance and to give effect to all of the provisions involved.” (quoting Stambaugh v. Killian, 242 Ariz. 508, 509 ¶ 7 (2017))).
¶36 The dissent notes that the TPT and transportation excise tax have different purposes: raising public monies and funding regional transportation plans, respectively. Infra ¶ 68. But even if they have different purposes, our point here is simply that the transportation excise tax law specifically and expressly incorporates the state TPT structure.
¶37 Second, the legislature has made clear the TPT for the retail classification is a tax imposed on the gross receipts derived from business activity or gross proceeds of sales. See
¶38 Third, if “a rate of zero percent” is applied on amounts over $10,000 within a classification, this would effectively exempt part of the state‘s legislatively defined TPT tax base from a county tax. The legislature has created several statutory exemptions and deductions from the tax base within the TPT retail classification. See
¶39 Pinal County, the RTA, and the dissent place great weight on the legislature‘s statement of “Legislative intent” for Senate Bill 1011 in 1990. See 1990 Ariz. Sess. Laws ch. 380, §§ 1, 11 (2nd Reg. Sess.). By way of background, Senate Bill 1011 did not simply grant certain counties the authority to levy a new transportation excise tax with a “variable rate”
¶40 In the statement of legislative intent, the legislature recognized the need to create a new source of funding for certain counties, noting that (a) “[t]ransportation funding needs [were] unmet by any existing transportation-specific funding mechanisms within the area“; and (b) there were “constitutional limitations placed on the use of highway user revenues” and “other sources of funding must be utilized for transportation related purposes other than streets and highways.” 1990 Ariz. Sess. Laws ch. 380, § 1 (2nd Reg. Sess.). In creating this comprehensive regional transportation funding system, the legislature noted that “specific areas in this state possess unique characteristics and . . . the needs produced by these characteristics must be addressed by certain unique strategies.” Id.
¶41 Express statements of legislative intent can be helpful in construing legislative text. But contrary to the dissent‘s implication, legislative intent does not itself establish or enlarge delegated legislative authority. Delegations of legislative authority to municipal and county governments must be express. See
¶43 The dissent asserts there are only two limitations to the authority of counties to levy a transportation excise tax. Infra ¶ 54. But our search is not for legislative limitations, but rather for legislative authority. Thus, our analysis is not focused on a far-reaching transportation excise tax that might have some limitations placed on its exercise. Instead, as previously noted, our analysis is focused on whether the power to impose a two-tiered retail TPT rate structure was “expressly delegated” to Pinal County by the legislature and “made clearly to appear” in
¶44 Pinal County and the RTA note that cities and towns, under the Model City Tax Code, may exempt proceeds from their retail tax. But this is irrelevant for several reasons. First, the Model City Tax Code only applies to a “city or town,” not counties. See
¶45 Here, where the legislature permitted “the department [to] collect the tax at a variable rate” and at a “modified rate” as part of a transportation excise tax (
III.
¶46 The Town of Queen Creek, Town of Florence, City of Coolidge, and City of Maricopa filed an amicus brief asking that if the tax is found to be invalid, the ruling should be given effect on a prospective basis only. Pinal County and the RTA did not make this request for prospective relief. Because “[a]micus curiae will not be permitted to create, extend, or enlarge the issues” on appeal, we need not resolve amici‘s request for prospective relief. City of Phoenix v. Phx. Civic Auditorium & Convention Ctr. Ass‘n, 99 Ariz. 270, 274 (1965).
IV.
¶47 Vangilder states in his petition for review that pursuant to Arizona Rule of Civil Appellate Procedure 21(a), he “will seek fees” under the Private Attorney General Doctrine and
CONCLUSION
¶48 For the foregoing reasons, we conclude that Pinal County complied with state law in adopting the transportation excise tax. We further conclude, however, that state law does not permit Pinal County to adopt a two-tiered retail TPT structure as part of a transportation excise tax, whereby the first $10,000 of any single item is taxed at one rate and any
¶49 Accordingly, we affirm the court of appeals’ opinion in part and vacate in part. We vacate paragraphs 2 and 23–30 of the court of appeals’ opinion. We affirm the superior court on other grounds. We deny Vangilder‘s request for attorney fees.
I. Legislative Intent
¶51 Unlike most legislation that comes before us, the legislature expressly set forth its intent when it passed Senate Bill 1011 with an emergency clause,6 creating regional transportation authorities and delegating the authority to smaller counties to levy a county transportation excise tax:7 “The legislature recognizes that specific areas in this state possess unique characteristics and that the needs produced by these characteristics must be addressed by certain unique strategies.” 1990 Ariz. Sess. Laws, ch. 380, § 1 (2nd Reg. Sess.). Imposing the type of retail excise tax rate before us reflects just such a unique strategy to address transportation needs and the funding requirements unique to Pinal County that the RTA determined best suited its circumstances and that voters approved. If the legislature disapproves of the way the RTA exercised its
II. Delegation of Authority
¶52 As a starting point, the majority correctly notes that “it is a settled principle of law that as subdivisions of the state, counties and municipalities ‘have only such legislative powers as have been expressly, or by necessary implication, delegated to them by constitution or by the legislature.‘” Supra ¶ 24 (quoting Ariz. Sash, Door & Glass Co., 80 Ariz. at 102). It is equally true that delegated authority is “strictly construed.” Supra ¶ 24; Ariz. Sash, Door & Glass Co., 80 Ariz. at 102. But the statutes in question should not be construed so strictly as the majority does to reach its result. See Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 355-56 (2012) (cautioning against “strict construction” as opposed to “fair construction“). Instead, given the lack of any ambiguity in the statute‘s terms, we should apply
¶53 In this case, we have an express delegation of authority to smaller counties to levy a transportation excise tax and impose excise tax rates if they comply with specific statutory requirements. First, the legislature requires that the issue of whether to levy such a tax pursuant to
¶54 Next, the legislature requires that “[i]f approved by the qualified electors voting at a countywide election, the regional transportation authority . . . shall levy and the department [of revenue] shall collect a transportation excise tax up to the rate authorized by this section.”
¶55 Lastly, the legislature requires that “[t]he department [of revenue] shall collect the tax at a variable rate if the variable rate is specified in the ballot proposition.”
III. Validity of Retail Tax
¶56 The legislature has expressly and unambiguously granted Pinal County precisely the authority it relied upon to levy the tax and to set an excise tax rate on retail sales, and the county did not violate a single express statutory condition on the exercise of the delegated authority. The retail sales excise tax rate is less than 10% of that prescribed by
¶57 The majority‘s analysis errs at the outset by resting on a cramped and inapplicable definition of “variable rate.” Supra ¶¶ 30-31. This error is then compounded by the majority‘s insistence that the legislature must delegate with precision the specific rates that can be imposed within the delegated authority to impose a transportation excise tax beyond the specific guidance already provided. Supra ¶ 32. Lastly, the majority reads too much into the references in
A. Varying Definitions
¶58 As noted, the first error in the majority‘s analysis lies with its definition of “variable” in the context of a variable tax rate. Supra ¶¶ 30-31. After accurately defining variable as “something subject to change,” the majority inexplicably conflates the common meaning with acontextual definitions from Black‘s Law Dictionary that only pertain to financial markets in which interest rates vary over time and where one might purchase a variable annuity. Supra ¶¶ 30-31. There is no statutory basis for the proposition that the legislature intended to restrict a variable excise tax rate to the type of variable rate used in setting interest rates or anything akin to a variable annuity. See Glazer, 237 Ariz. at 164 ¶ 14 (“We give these terms their usual and commonly understood meanings unless the legislature intended a different meaning.” (emphasis added)).
¶59 While tax law does not specify what constitutes a variable tax rate, it likewise does not limit the basis for variance in tax rates to time and
¶60 The majority further errs in negating the variable nature of the retail excise tax by dissecting it into two distinct tax rates, “a positive tax rate and a tax rate of zero percent,” and then declaring that the two rates never vary or change. Supra ¶ 31. This is bizarre. Dissecting the majority‘s definition of a variable rate in the same way achieves the same result: an interest rate that varies from quarter to quarter is really just a fixed rate because the rate never changes or varies during the quarter in which the rate is in effect. This argument ignores the nature of change. While the conditions applicable to the imposition of any given tax or interest rate are present, of course there is no variance or change.
¶61 In the absence of any statutory language even suggesting that a variable excise tax rate should be treated like interest rates or variable annuities, there is no reason for us to impose such a restriction. Using the majority‘s own understanding that “a ‘variable rate’ means an established rate that itself may change upon the occurrence of specified conditions,” supra ¶ 30, it is readily evident that the excise tax rate is valid. In this case, the RTA‘s transportation excise tax imposes a rate of 0.5% on gross income from the sale of tangible personal property up to $10,000. When the specified condition, the amount of the gross income from a sale of tangible personal property, exceeds $10,000, the tax rate changes—varies—to a 0% rate. The consequence of this needless restriction not commanded by the statute is evident: it leads directly to the majority invalidating a lawfully approved tax rate.
¶62 The majority further compounds its error in defining variability by asserting that the legislature must specifically delegate the authority to impose a “two-tiered” rate as the majority has characterized it. See supra ¶ 2. This argument conflates a tax levy with a tax rate and confuses the authority the legislature must expressly delegate. It is the power of taxation, not the imposition of a specific tax rate, that must be expressly delegated. Ariz. Sash, Door & Glass Co., 80 Ariz. at 102 (stating that “the power of taxation under the constitution inheres in the sovereignty of the state and may be exercised only by the legislature except where expressly delegated to political subdivisions of the state“); see also Salt River Project Agric. Improvement & Power Dist. v. Apache Cnty., 172 Ariz. 337, 339-40 (1992) (discussing tax levy distinct from tax rate); El Paso Nat. Gas Co. v. State, 123 Ariz. 219, 221 (1979) (discussing separate functions of levying a tax and computing a tax rate).
¶63 The legislature expressly delegated authority to levy a transportation excise tax in
¶64 The authority to impose specific rates within the limitations set forth at
¶65 The majority‘s misreading of the nature of the taxing authority the legislature must expressly delegate and the incorrect definition of “variable rate” are the erroneous premises the majority relies on to prohibit and invalidate the retail rate as approved by Pinal County voters. See supra ¶ 35. While we must resolve doubts about the scope of delegated legislative authority against political subdivisions, that does not mean we may create such doubts where the taxing authority is expressly delegated and the delegee complies with every express statutory requirement. See, e.g., Ariz. Sash, Door & Glass Co., 80 Ariz. at 102.
C. Appearances and Mirrors
¶66 The majority discerns that “it appears the legislature intended the county transportation excise tax to mirror the state tax in form” and then concludes that the statute “expressly incorporates the state TPT structure” because
The tax shall be levied and collected:
- At a rate that, by itself or together with any tax imposed pursuant to
§ 42-6107 , is not more than twenty percent of the transaction privilege tax rate prescribed by§ 42-5010, subsection A in effect on January 1, 1990 to each person engaging or continuing in the county in a business taxed under chapter 5, article 1 of this title.
The first reference the majority relies on,
D. Different Taxes
¶68 The majority‘s approach overlooks the significant difference in purpose for the respective taxes. The TPT is a general tax “on the privilege or right to engage in an occupation or business in the State of Arizona.” Carter Oil Co. v. Ariz. Dep‘t of Revenue, 248 Ariz. 339, 342 ¶ 6 (App. 2020) (quoting Mountain States Tel. & Tel. Co., 113 Ariz. at 468). And the general purpose is to raise public monies.
¶69 The majority emphasizes that the TPT does not utilize a “two-tiered” rate for any of the TPT classifications. Supra ¶ 35. But this does not prohibit the RTA from imposing such a retail excise rate. The absence of a two-tiered tax rate among the TPT classifications has no bearing on the legislature‘s intent to address the uniqueness of the smaller counties’ circumstances and to allow flexibility in the funding of regional transportation plans.
¶70 The majority also argues that the legislature could have used language as set forth in the Model City Tax Code to expressly authorize the variable retail rate used here. Supra ¶ 32. But the regional transportation framework was passed in 1990, while the Model City Tax Code was passed in 1997. 1997 Ariz. Sess. Laws ch. 150, § 144 (1st Reg. Sess.). The fact that the legislature seven years later authorized a particular two-tier tax structure for cities and towns does not support the conclusion that a previous legislature necessarily precluded the RTA from imposing a similar rate pursuant to
¶71 The majority next asserts that the imposition of a retail excise tax rate must be based on the gross proceeds of sales. Supra ¶ 37. While this is certainly consistent with the claim that a transportation excise tax must “mirror” a TPT tax, this reads too much into
¶72 Lastly, the majority‘s effort to equate the RTA‘s imposition of a zero percent rate on amounts in excess of $10,000 as an exemption, supra ¶ 38, further reflects confusion between the levying of a tax and the imposition of a tax rate. Items and entities may be exempted from the levying of a tax. See
¶73 The TPT statutes are instructive because the legislature likewise does not exempt commercial leases from the TPT levy but instead imposes a rate of zero percent “for the business of every person engaging or continuing in this state in the commercial lease classification” as described in statute.
V. Conclusion
¶74 Because the Pinal County Regional Transportation Authority and the Pinal County Board of Supervisors properly authorized and presented a regional transportation plan and a transportation excise tax, which Pinal County voters approved, all pursuant to a valid exercise of authority delegated by the legislature, we conclude that the retail excise tax is a valid tax with a variable rate.