Salus Populi Suprema Lex Esto
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Case Number: 1 CA-CV 02-0133
Court: Court of Appeals of Arizona, Division One
William George Jachimek, President of Central Pawn, Inc., appeals the superior court's judgment upholding the validity of Phoenix City Code § 10-151(A). Section 10-151(A) requires pawnbrokers to pay a $3.00 transaction fee for each pawn transaction report filed with the Phoenix Police Department pursuant to Arizona Revised Statutes ("A.R.S.") section 44-1625(A) (2003). The superior court concluded that the ordinance imposes a permissible fee rather than an invalid tax, and that State law does not preempt the City from assessing the fee. For the following reasons, we affirm the superior court's ruling.
FACTS AND PROCEDURAL HISTORY
2 Arizona Revised Statutes § 44-1625(A) requires pawnbrokers to file with the county sheriff, or his designee, a report on an approved form for each "reportable transaction." A.R.S. § 44-1625(A). A "reportable transaction" is defined as "any transaction conducted by a pawnbroker in which merchandise is received through a pawn, purchase, trade or consignment." A.R.S. § 44-1621(15) (2003). The Maricopa County Sheriff designated the Phoenix Police Department as the entity with which pawnshops operating in the City must file their reports. The City adopted a transaction fee ordinance in 1998. Phoenix, Ariz. City Code § 10- 151(A) (1996).
3 Jachimek serves as president of the corporation that operates Central Pawn, a pawnshop in Phoenix, Arizona. On several occasions in 2000, Jachimek filed the reports required by A.R.S. § 44-1625, but failed to pay the transaction fees required by the transaction fee ordinance. The City filed six civil enforcement complaints in Phoenix Municipal Court to collect the fees and fines required under the ordinance. Jachimek defended his failure to pay by arguing that the transaction fee ordinance was an invalid tax that violated the Arizona Constitution. The Phoenix Municipal Court agreed, concluding that A.R.S. §§ 44-1621 through 44-1632 (the "Pawnshop Act") preempted the City's transaction fee ordinance, and the court therefore dismissed the civil complaints against Jachimek with prejudice. The court, however, denied Jachimek's request to enjoin the City from further enforcement of the ordinance and his request for a refund of transaction fees previously paid. The City timely appealed the municipal court's decision to the superior court pursuant to A.R.S. § 22-425(B) (2002).
4 The superior court ruled that the ordinance imposed a valid regulatory fee rather than an unconstitutional tax on each transaction report and that the transaction fee ordinance was not preempted by state law. Jachimek timely appealed the superior court's ruling.1
5 We generally lack jurisdiction over cases appealed to the superior court from a municipal court. See, e.g., Sanders v. Moore, 117 Ariz. 527, 528, 573 P.2d 927, 928 (App. 1977) (holding that A.R.S. § 12-2101(B)'s grant of jurisdiction over appeal from final judgment in cases "brought into a superior court from any other court" does not include jurisdiction over cases appealed from other courts); Morgan v. Cont'l Mortgage Investors, 16 Ariz. App. 86, 91-92, 491 P.2d 475, 480-81 (1971). Nevertheless, we have jurisdiction in cases involving the "validity of a tax, impost, assessment, toll, statute or municipal ordinance." See Ariz. Const. art. 6, § 5; A.R.S. § 12-120.21(A)(1) (2003).
6 Jachimek contends that the City's pawnbroker transaction fee is an unconstitutional "tax" in violation of the Arizona Constitution, Article 9, Section 6. Alternatively, he argues that the state legislature has preempted local control over pawnshops, therefore, the transaction fee ordinance is invalid because it exceeds the limited scope of local regulation allowed by A.R.S. § 44-1632. Finally, he contends that, at the least, the fees are unconstitutionally excessive because they are not in reasonable proportion to the services rendered.
A. The "Transaction Report Fees" Are Not Taxes.
7 In Arizona, a municipality cannot levy a tax unless such authority is clearly delegated to the City by the legislature or is contained in the city charter. City of Phoenix v. Ariz. Sash, Door & Glass Co., 80 Ariz. 100, 102-03, 293 P.2d 438, 439 (1956). Jachimek contends that the "transaction fees" are unenforceable because they are taxes imposed without authority by the City's charter or by state statute. The City concedes that if this court concludes that the transaction fee is actually a tax, then the transaction fee is invalid. However, the City contends that the pawnbroker transaction charge constitutes a fee, not a tax, and that the City has the authority to assess fees under the City charter.
8 The City's charter enumerates several powers to the City Council, including the power "[t]o fix the fees and charges for all official services not otherwise provided for in this Charter." Ch. IV, § 2(37), Charter, City of Phoenix (2001). If the "transaction fees" are true fees, rather than taxes, we agree that the City's charter provides appropriate authority for enactment of the transaction fee ordinance. We turn then to the question whether the $3.00 charge for filing each transaction report is a fee or a tax. There are three cases in Arizona that discuss this distinction.
9 Last year, in May v. McNally, 203 Ariz. 425, 55 P.3d 768 (2002), our Supreme Court set forth three factors to use in distinguishing a fee from a tax. In May, the Court held that a surcharge on civil and criminal fines imposed under Arizona's clean elections law did not violate the First Amendment rights of those subject to the surcharge. 203 Ariz. at 774, 27, 55 P.3d at 431. One of the amici argued that while a tax might have been appropriately imposed to fund campaigns under the law, the surcharge constituted a fee, and a fee could not be so used. Id. at 773, 23, 55 P.3d at 430. While the Court did not find this argument dispositive, see id., it nonetheless rejected it, finding the surcharge to be a tax rather than a fee. Id. at 774, 24, 55 P.3d at 431. It noted that:
Whether an assessment should be categorized as a tax or a fee generally is determined by examining three factors: "(1) the entity that imposes the assessment; (2) the parties upon whom the assessment is imposed; and (3) whether the assessment is expended for general public purposes, or used for the regulation or benefit of the parties upon whom the assessment is imposed."
Id. at 430-31, 24, 55 P.3d at 773-74 (quoting Bidart Bros. v. Cal. Apple Comm'n, 73 F.3d 925, 931 (9th Cir. 1996) (citation omitted)). Noting that the assessment "was imposed by citizen initiative on a broad range of payers for a public purpose," id. at 431, 24, 55 P.3d at 774, the Court determined that the surcharge was a tax that did not violate constitutional requirements. Id. at 774, 27, 55 P.3d at 431.
10 In Stewart v. Verde River Irrigation & Power District, 49 Ariz. 531, 534, 545, 68 P.2d 329, 330, 335 (1937), the Arizona Supreme Court held that charges in excess of $10,000 in connection with the issuance of a water appropriation permit constituted a fee, not a tax. In distinguishing between a fee and a tax, the court noted that a fee is a voluntary charge paid in return for a public service that bestows a particular benefit on the recipient, "while a tax is a forced contribution of wealth to meet the public needs of the government." Id. at 544-45, 68 P.2d at 334-35 (citations omitted). While a fee can be avoided by not requesting the particular service associated with it, a tax cannot be avoided based on the same premise. Id. at 545, 68 P.2d at 335. A tax relates to the taxpayer's ability to pay based on the taxpayer's "property or income" rather than its relation to any particular government service. Id. at 544-45, 68 P.2d at 334-35.
11 In Kyrene School District No. 28 v. City of Chandler, 150 Ariz. 240, 243, 722 P.2d 967, 970 (App. 1986), the City of Chandler imposed system development charges on new buildings based on the size of the meter installed in the building. Id. at 242, 722 P.2d at 969. The resulting funds were deposited in the City's "water development reserve fund" to be used for later expansion and enlargement of the water system in Chandler. Id. The school district argued that the charge was a tax and, therefore, invalid. Id. Nevertheless, applying the test set forth in Stewart, we concluded that "system development charges" imposed by the City of Chandler were fees, not taxes. Id.
12 We explained that the school district "receiv[ed] the overall benefit of Chandler's water and wastewater systems in exchange for the system development charges." Id. at 243, 722 P.2d at 970. Thus, the amount charged the school district was based on the cost of the systems providing the service and, unlike a tax, the charges were not "based on an ability to pay theory." Id. Moreover, although the funds were used for "the general governmental purpose of providing citywide water and sewer service," the fees charged "represent[ed] part of the capital cost of the wastewater and water systems spread among its users." Id. at 244, 722 P.2d at 971. Thus, we concluded, the charges were appropriately considered fees, not taxes. Id.
13 Applying the factors set forth in May in light of Stewart and Kyrene School District, we conclude that the charges in this case are likewise fees and not taxes.
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Click the case caption above for the full text of the Court's opinion.
Outcome: ¶39 For the foregoing reasons, we affirm the superior court’s ruling, and remand the case to the Phoenix Municipal Court for further proceedings.
Plaintiff's Experts: Unknown
Defendant's Experts: Unknown
Comments: Digested by Kent Morlan