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BSI Holdings, LLC v. Arizona Department of Transportation

Supreme Court of Arizona

May 24, 2018

BSI Holdings, LLC, Plaintiff/Appellee,
v.
Arizona Department of Transportation, Defendant/Appellant.

          Appeal from the Arizona Tax Court The Honorable Christopher Whitten, Judge No. TX2014-000444

         Opinion of the Court of Appeals, Division One 242 Ariz. 621 (App. 2017)

          Mark Brnovich, Arizona Attorney General, Dominic E. Draye (argued), Solicitor General, Mark Ingle, Assistant Attorney General, Phoenix, Attorneys for Arizona Department of Transportation

          Christopher T. Rapp (argued), Ryan Rapp & Underwood, PLC, Phoenix, Attorney for BSI Holdings, LLC

          Timothy I. McCulloch (argued), Erica A. Morris, Dickinson Wright PLLC, Phoenix, Attorneys for Amicus Curiae Arizona Business Aviation Association

          JUSTICE BOLICK authored the opinion of the Court, in which CHIEF JUSTICE BALES, VICE CHIEF JUSTICE BRUTINEL, and JUSTICES PELANDER, TIMMER, GOULD, and LOPEZ joined.

          OPINION

          BOLICK, JUSTICE

         ¶1 Arizona Revised Statute § 28-8336 establishes a license tax for "a nonresident whose aircraft is based in this state for more than ninety days but less than two hundred ten days in a calendar year." We granted review to determine the meaning of the term "day" as used in § 28-8336. Although we reject the court of appeals' holding that it "means any calendar day during which the aircraft was on the ground in Arizona for any period of time, " BSI Holdings, LLC v. Ariz. Dep't of Transp., 242 Ariz. 621, 622 ¶ 1 (App. 2017), ultimately the meaning can be construed only in the context of the days an aircraft is "based in" the state. Because the parties have not fully addressed, nor did the tax court decide, the meaning of the term "based in, " we cannot fully resolve the issue on the current record, and therefore remand to the tax court for further proceedings.

         BACKGROUND

         ¶2 BSI Holdings ("BSI") is an Oregon limited liability company formed to purchase, operate, and maintain a jet used by Arizona resident (and BSI member) Richard Burke and his family for personal purposes. The jet was regularly flown into and out of Scottsdale Airport, where BSI had a tie-down arrangement/hangar agreement during the period at issue.

         ¶3 In 2004, BSI and the Arizona Department of Transportation ("ADOT") resolved an aircraft license tax fee dispute, agreeing that BSI would pay no tax for 2003 and the nonresident rate applicable for aircraft based in Arizona for more than 90 days but fewer than 210 days for 2004. See A.R.S. § 28-8336. BSI subsequently paid the nonresident rate for tax years 2005 through 2012.

         ¶4 ADOT later conducted an audit and concluded the jet was based in Arizona for more than 210 days in each year from 2004 through 2012 and therefore subject to the higher license tax rate prescribed in A.R.S. § 28-8335. The agency assessed BSI for $161, 004 and recorded a lien against the jet.

         ¶5 After an unsuccessful administrative proceeding, BSI filed this action to challenge ADOT's assessment. The parties filed cross-motions for summary judgment disputing, among other issues, the meaning of the term "day" in § 28-8336.

         ¶6 The tax court granted partial summary judgment in favor of BSI. It concluded that the term "day" in § 28-8336 is undefined and unclear. The tax court cited State ex rel. Arizona Department of Revenue v. Capitol Castings, Inc.,207 Ariz. 445, 447 ΒΆΒΆ 9-10 (2004), in holding that when statutes' "legislative intent cannot be determined, they are to be construed liberally in favor of the taxpayer." Applying that rule, the court concluded that BSI was entitled to the discounted, nonresident tax rate in ...


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