Arizona’s tourism tax statutes, A.R.S. §§ 5-839 and 5-840, impose a transaction privilege tax on car and hotel room rentals. Karbal, a Michigan resident, rented a car and a hotel room while visiting Arizona, paid the Tourism Tax, and then brought suit in the Arizona tax court seeking a refund. The tax court dismissed the suit for failure to file an administrative refund claim, and Karbal timely appealed. On appeal, the Arizona Department of Revenue argued that Karbal lacked standing to challenge the taxes because the Tourism Tax falls on vendors, not their customers. The Court of Appeals agreed, finding that the Tourism Tax is an excise tax, rather than a sales tax, meaning that the tax burden falls directly on the business activity of the vendor and not on the customer. Karbal thus lacked standing to bring the suit because he was not the actual taxpayer. Although, vendors may choose to pass along the costs associated with the Tourism Tax to their customers, nothing in the statutes requires them to do so. More importantly, any refund obtained by Mr. Karbal would belong to the vendors who paid the tax, and nothing in Arizona law would require the vendors to pass along the refund to Mr. Karbal. Thus, a favorable decision would not redress Karbal’s alleged injury.
Judge Portley authored the opinion; Judges Kessler and Irvine concurred.