Judge Strikes Down Car-Rental Tax to Finance Cardinal Stadium
PHOENIX — A tax on renting cars to help pay off the Cardinals Stadium is illegal, a Maricopa County Superior Court judge ruled Tuesday.
Judge Dean Fink said the levy runs afoul of a state constitutional provision which limits any taxes levied on the use of vehicles on public streets to being used to fund road construction and maintenance and related purposes. And Fink agreed with arguments by attorney Shawn Aiken, representing several car rental firms, that construction of a stadium clearly falls outside that restriction.
While the tax is levied only in Maricopa County, its effects are wider than that. It covers not just those who need a temporary vehicle while theirs is being fixed but anyone who comes to the area and needs a car for a few days or weeks.
The ruling, unless overturned, blows a big hole in the budget of the Arizona Sports and Tourism Authority. It’s nearly $42.1 million operating budget includes more than $12.2 million in revenues from the rental car tax.
It could be even more damaging than that: Aiken said he wants refunds back to 2005 for what was already paid, money that would go to the car rental firms he represents because they are technically responsible for the levy even though they can pass that along to customers. And he said that figure, with interest, now exceeds $150 million — and could top $200 million by the time the case is finally over.
Timothy Berg, attorney for the Arizona Sports and Tourism Authority, said he believes that Fink erred in his interpretation of the scope of the constitutional prohibition.
Berg said that language was designed to keep lawmakers from raiding gasoline tax revenues and vehicle license fees for other government functions. He said the levy at issue here is a tax on the business of renting cars, not a tax on their use on state roads.
But Fink said that ignores the obvious nature of why people rent cars in the first place: to use them on roads.
“Obviously no customer would go through the trouble and expense of renting a car only to leave it in the parking lot,” the judge wrote.
Berg said an appeal is likely.