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PHOENIX — The Pinal Regional Transportation Authority believes it was given the authority to collect a variable rate retail excise tax when voters approved Proposition 417 in 2017.

The Goldwater Institute and even the Arizona Department of Revenue disagree.

Wednesday, lawyers from the PRTA, the Goldwater Institute and the Department of Revenue squared off before the Arizona Court of Appeals Division 1 in Phoenix. The RTA lost an earlier hearing in Maricopa County court in November 2018.

PRTA appealed the decision to the state appeals court.

Voters narrowly passed the initiative in 2017 by 901 votes, creating a new half-cent sales tax to generate funds for transportation projects throughout Pinal County.

Harold Vangilder, a Casa Grande resident, teamed up with the Goldwater Institute to file a lawsuit against the proposition soon after it passed. On Nov. 15, Maricopa County Superior Court Judge Christopher Whitten ruled the proposition was “void and unenforceable.”

The RTA has been allowed to collect the tax while the legal challenges make their way through the court system. The money is collected and held in escrow.

On Wednesday, the appellate court heard an hour of statements from RTA attorneys, Goldwater attorneys and from the Department of Revenue. The court took the matter under advisement and will issue a decision at a later date.

Each side was allowed 20 minutes to present its case.

Patrick Irvine opened the hearing for Pinal County.

“This case comes down to two statutes that are interrelated. They provide for how the RTA and the county get approval for and then levy a county transportation excise tax, which is a very specialized tax that applies to a special district,” Irvine told the court.

He said voters approved the excise tax and “the ballot that they looked at was prepared consistent with the statute.”

Irvine said the Pinal RTA measure contains specific language that institutes an excise tax with a “variable modified rate.”

He said language was placed on the ballot noting the controversial variable modified rate that exempted automobile sales of more than $10,000.

One argument against the excise tax is the measure that was placed onto the ballot and presented to voters was outside state guidelines and is illegal.

Timothy Sandefur, attorney for the Goldwater Institute, said the real issue at hand is the way the RTA is changing the tax rate collected, based on the amount of the retail sale that is being taxed. The RTA has a lower percentage of tax on sales over $10,000. That rate can be 0%.

“We are not arguing that the tax placed on the ballot differs from the tax that was contemplated in the authorizing resolution,” Sandefur said. “That’s their argument. The retail tax was the only tax that the county was authorized to place on the ballot. The question if voters were confused or not is not at issue in this case and never has been.”

Sandefur said what matters is what the county was authorized to place on the ballot.

“They were authorized to place the tax that was referred to in the authorizing resolution. Courts are required to adopt a strict construction of tax statutes, against the government and against the taxing power in the favor of the taxpayer. They cannot strain, stretch and struggle to uncover hidden taxable items. That is exactly what the county is doing — straining, stretching and struggling — trying to get the court to ignore the authorizing resolution,” Sandefur said.

Sandefur maintained that the RTA and the county had no authority to include a variable modified rate, based on current state statutes.

“The county had the authority to place a retail-only tax, period, because that’s what the RTA resolution contemplated. They put on the ballot a retail-only sales tax,” Sandefur told the appellate court.

Though the Arizona Department of Revenue is named as the defendant in the Goldwater Institute lawsuit, Scot Teasdale, attorney for ADR, agrees that the RTA is in violation of state statute.

“The Department of Revenue is very concerned that the county is attempting to alter the statutory tax base. The county cannot impose a transportation excise tax on only a portion of the gross income that is part of the tax base using a zero rate. It is the way the tax system operates,” Teasdale said.

Teasdale said the county can have a fixed percentage rate but cannot change it to zero on all revenues on auto sales.

“Autos are tangible personal property and the retail classification applies to businesses selling tangible personal property,” he said.

The RTA is in violation of a state statute because it is exempting auto sales over $10,000 when it applies a 0% rate to the taxes.

“All this statute allows the county to do is adopt a rate which plugs into an existing system. This statute does not create an entire new taxing system,” Teasdale said. “The counties simply ride along with what the state is doing but adopt rates.”

RTA taxes collected in Pinal County are nothing to sneeze at. In FY 2018-19, more than $17 million was collected and an additional $18 million is to be collected in the current fiscal year. Over a five-year period, the RTA expects to collect $97.5 million with the excise tax.

All sides await the appellate court’s decision.


Jim Headley is a reporter covering breaking news, crime and justice around Pinal County. He can be reached at