The Supreme Court of Arizona held that local surcharges imposed on car rental companies did not violate the US Commerce Clause or the state constitution’s anti-diversion clause. The surcharges, enacted by local initiative to fund sports facilities, were levied on car rental companies based on their income derived from renting vehicles. Representing a class of car rental companies, the taxpayer argued that the surcharges were enacted with discriminatory intent — to impose the tax on out-of-state visitors who rent most vehicles while effectively shielding residents — as evidenced by the publicity pamphlet for the local initiative. In rejecting this argument, the Court determined that the initiative did “not evidence an intent that out-of-state visitors be treated any differently from residents,” and the “fact that visitors, as a group, pay most of the surcharges collected by car rental agencies is not ‘discriminatory.’” Moreover, the Court found that the surcharge did not violate Arizona’s anti-diversion clause, which prohibits revenues derived from taxes or fees related to the operation of motor vehicles be expended for other than highway and street purposes, because the surcharge was not “imposed as a prerequisite to, or triggered by, the legal operation or use of a vehicle on a public road,” as contemplated by the clause.
Saban Rent-a-Car LLC v. Ariz. Dep’t of Revenue, No. CV-18-0080-PR 905192 (Ariz. Feb. 25, 2019)