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AZAPP Blog Your resource for news and analysis of cases in Arizona's appellate courts.

Saban Rent-A Car LLC v. Ariz. Dep’t of Revenue - 2/25/2019

Arizona Supreme Court holds that the tax on rental car businesses that funds the Arizona Tourism and Sports Authority does not violate the federal dormant Commerce Clause or Article IX, § 14 of the Arizona Constitution.


Pursuant to legislative authorization, Maricopa County voters approved a tax on car-rental businesses to fund the Arizona Tourism and Sports Authority (AzSTA).  A class of car-rental companies sued the Arizona Department of Revenue to recover their tax payments.  The companies argued that the tax violated the dormant Commerce Clause implied by the United States Constitution and Article IX, § 14 of the Arizona Constitution.  The tax court held that the tax did not violate the dormant Commerce Clause, but did violate Article IX, § 14.  The Department of Revenue and AzSTA appealed and the companies cross-appealed.  The Court of Appeals held that the tax was valid.  The Supreme Court affirmed the Court of Appeals.

The companies argued that the tax was invalid under the dormant Commerce Clause because it was allegedly motivated by the discriminatory intent of forcing out-of-state visitors to pay a special tax that residents were shielded from.  The Court rejected this argument because the tax does not, and was not intended to, treat non-Arizona residents any differently than similarly situated residents.  The Court concluded that although visitors as a group may end up paying most of the tax, that does not make the tax discriminatory.

The companies also argued that the tax was invalid under Article IX, § 14 of the Arizona Constitution.  That provision requires that “moneys derived from . . . excises . . . relating to registration, operation, or use of vehicles on the public highways or streets” be used for “highway and street purposes.”   The proceeds of the tax are not used for highway or street purposes.  But the Court held that the tax, which is levied on the gross proceeds of rental car businesses, was too far removed from vehicle registration or use to come within the meaning of Article IX, § 14.  The Court rejected the companies’ broad interpretation of “relating to” because it would render other phrases in Article IX, § 14 superfluous and was contrary to the purpose of Article IX, § 14 and the representations made to the voters who adopted it by referendum. 

The Court therefore directed that judgment be entered in favor of defendants.

Justice Timmer authored the opinion of the Court.  Justice Bolick concurred in part and dissented in part.

Posted by:  Josh Bendor

Disclosure: Osborn Maledon attorneys were involved with this case.

Posted On: 3/6/2019