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PHOENIX — The Arizona Supreme Court heard oral arguments about Pinal County’s Regional Transportation Authority Proposition 417 tax from both sides Thursday morning.

The justices peppered attorneys from the Goldwater Institute and the Arizona Attorney General’s Office, which are challenging the tax, and Patrick Durbin, the attorney representing Pinal County and the RTA, with questions. The justices wanted to know the issue wasn’t objected to before it was placed on the ballot. Also, if justices asked if the county could apply a variable tax rate to a subcategory of goods within a specific tax category and the difference between a modified tax rate and a variable tax rate. The Arizona Attorney General’s Office is representing the Arizona Department of Revenue in the case.

The case, Vangilder v. Pinal County, involves an extra half-cent sales tax that was narrowly approved by Pinal County voters in 2017. Funds from the tax, which have been accruing since the tax’s approval, are supposed to be used for road improvements, such as a north-south freeway connecting U.S. 60 in Apache Junction with Interstate 10 near Eloy. Other improvements would be made in Casa Grande, Maricopa and other parts of the county.

After the tax passed, Harold Vangilder, a Casa Grande resident, teamed up with the Goldwater Institute to challenge the tax in court. Vangilder is no longer a party in the case.

Vangilder and the Goldwater Institute argued that the tax was invalid and unconstitutional because it creates a new type of sales tax with a variable tax rate. According to the wording for the tax, items that cost more than $10,000, such as autos, are charged the half-cent sales tax only on the first $10,000 of the item’s price.

On Nov. 15, 2018, a Maricopa County Superior Court judge, sitting as a tax court judge, ruled that the proposition was “void and unenforceable.” Pinal County and the RTA appealed the ruling to the Arizona Court of Appeals Division 1 in Phoenix.

In January, that court ruled that the tax is valid, and the Goldwater Institute appealed the ruling to the Arizona Supreme Court. The court granted the Goldwater Institute’s petition for review of the case in September.

Goldwater attorney Timothy Sandefur was just warming up in his oral arguments on Thursday when he got his first question from Vice Chief Justice Ann Scott Timmer.

Timmer asked why the situation involving the tax was not brought up before the election. Sandefur explained that the problem was not with how the tax was presented to voters on the ballot but how the county and RTA implemented the tax after it was approved by voters.

The county and RTA had presented the tax to voters as a retail sales tax. After the election the county tried to stretch the tax to cover all 17 of the state’s transaction privilege tax categories, he said.

According to the Arizona Department of Revenue’s website, Arizona doesn’t really have a retail sales tax, it has a retail sales transaction privilege tax. A transaction privilege tax is a tax on vendors who want to do business in the state, business owners use money collected from the sale of products or services provided by their business to pay the tax. Other transaction privilege taxes collected in the state include those on restaurants and bars, hotels, utilities, home and commercial rentals, utilities and more. Cities and counties can charge their own types of TPT or use taxes. Use taxes are taxes that an individual pays on goods or services.

Timmer also asked if a county could apply a variable tax rate to just one class of TPT tax, such as retail sales, or could it apply a variable rate to all TPT classifications that a tax applied to.

Pinal County and the RTA have argued that they can apply a variable rate to the RTA tax, allowing the county and RTA to set one tax rate for the value of the first $10,000 of a good and a different rate for anything above that $10,000 mark.

Scot Teasdale, the attorney for the Arizona Attorney General’s Office, stated that the case is unusual because no political entity in the state had ever attempted a tax rate structure like the one Pinal County and the RTA were proposing, so there was no case law or specific statute that could be applied.

He argued that state statutes allowed the county to vary a tax rate over time, such as phasing out a tax that was due to sunset in 20 years, but he did not believe that state statutes allowed a county to vary a tax rate within a specific tax classification. That would create a series of subcategories within a specific tax classification, such as the sale of retail goods, which would make it increasingly difficult for the Department of Revenue and businesses to keep track of.

Teasdale argued that the “variable” rate that the county had created for the RTA tax was actually an exemption that was created to help businesses that sell goods that cost more than $10,000.

The justices did not interrupt Durbin’s oral arguments quite as quickly as they had Sandefur and Teasdale’s.

Durbin argued that the $10,000 cutoff was not an exemption but a modification of the tax rate. He pointed out that some cities have two tiers of tax rates and there is nothing in state statute that says that a political entity can’t set a zero percent tax rate for a specific category.

Durbin argued that the words of the state’s tax code and statutes were meant to give cities and counties some wiggle room in applying taxes.

He also pointed out that the Legislature, which created the tax code, could easily rein in what it thought might be an incorrect or misuse of the tax system by passing a law prohibiting those kinds of actions. The Legislature has done so in the past, he said.

The court ended the hearing after about 20 minutes of oral arguments from both sides. It is unknown if or when the court will release a ruling on the issue.


Suzanne Adams-Ockrassa is a reporter covering the city of Casa Grande and the surrounding area, as well as Central Arizona College. She can be reached at