(The Center Square) – The Town of Gilbert is facing a lawsuit from the Goldwater Institute hoping to scrap its recent tax hikes.
The town upped its sales tax to 2% from 0.5%. In addition, the tax for lodging was hiked to 5%, and there is now a 2% tax for certain e-commerce circumstances.
“The Arizona Constitution prohibits ‘any county, city, town, municipal corporation, or other political subdivision of the state, or any district created by law’ from imposing or increasing any transaction-based tax on the ‘privilege to engage in, or the gross receipts of sales or gross income derived from, any service performed in this state,’” the complaint from the conservative think tank argues.
The lawsuit is being filed for short-term rental owner Jonathan Barth and the Home Builders Association of Central Arizona.
“This tax hike makes it all the more difficult to make ends meet in Gilbert,” Barth said in a statement. The institute noted that Barth has an STR on his property that he uses as “supplemental income” as he’s a teacher.
Meanwhile, HBACA CEO Jackson Mol raised concerns that the taxes would add hurdles to the construction sector.
“Gilbert officials are trampling on their own constituents’ rights with no regard for the consequences their illegal actions will have on taxpayers and homebuyers,” Moll stated. “The Arizona Constitution is clear: increasing taxes on services, including on construction contracting, is unlawful.”
The institute raised concerns about the taxes in September, which the town argued were perfectly legal in a statement to The Center Square at the time.
“Contrary to the claims made by the Goldwater Institute, the proposed taxes are in full compliance with Arizona law and the Arizona Constitution,” the town stated at the time. “Our legal team has thoroughly reviewed the relevant statutes and precedents to ensure that any tax increase and associated processes strictly adhere to the requirements of state law.”
Part of the tax controversy has to do with suggested ideas for what the revenue would be spent on, ranging from possible recreational purposes such as pickleball courts and splash pads to fire and police proposals, The Center Square reported.
When asked specifically about the lawsuit, the town did not respond in time for publication.
