IN THE

ARIZONA COURT OF APPEALS

DIVISION ONE

BSI HOLDINGS LLC, Plaintiff/Appellee,

v.

ARIZONA DEPARTMENT OF TRANSPORTATION, Defendant/Appellant.

No. 1 CA-TX 20-0005

Appeal from the Arizona Tax Court

No. TX2014-000444

The Honorable Christopher T. Whitten, Judge

AFFIRMED

COUNSEL

Ryan Rapp Underwood & Pacheo, PLC, Phoenix

By Christopher T. Rapp, Lesli M. H. Sorensen

Counsel for Plaintiff/Appellee

Arizona Attorney General’s Office, Phoenix

By Benjamin H. Updike

Counsel for Defendant/Appellant

FILED 8-12-2021
BSI v. ADOT

Opinion of the Court

2

OPINION

Judge Lawrence F. Winthrop1 delivered the opinion of the Court, in which 

Presiding Judge Paul J. McMurdie and Judge Cynthia J. Bailey joined.

W I N T H R O P, Judge:

¶1 Arizona authorizes the imposition of a state license tax on 

nonresident aircraft owners equal to one-tenth of one per cent of the fair 

market value of the aircraft. A.R.S. § 28-8336. An aircraft subject to this tax 

(1) must not be engaged in any intrastate commercial activity and (2) must 

be “based in” Arizona “for more than ninety days but less than two 

hundred ten days in a calendar year.” Id.

¶2 At issue in this tax appeal is how to calculate the number of 

days such an aircraft is based in Arizona, which requires determining the

meaning of the terms “based in” and “day” used in A.R.S. § 28-8336. The 

tax court concluded these terms are ambiguous, construed them in favor of 

the taxpayer, BSI Holdings, LLC (“BSI”), and granted summary judgment 

in favor of BSI. The Arizona Department of Transportation (“ADOT”)

appeals that ruling, arguing the tax court should have applied a 

“domiciliary analysis” to the definition of the term “based in” and applied 

a “totality of the circumstances” standard to that domiciliary analysis. To

do so here, however, would require us to craft a new weighted-factor test 

based on non-statutory language and previously unannounced factors, and 

would thus deprive BSI of the clear notice that should be afforded any 

taxpayer. Accordingly, we conclude the tax court did not err in declining 

to adopt a domiciliary analysis in this case and in finding the statutory text 

irreconcilably ambiguous as applied to BSI. We therefore affirm the tax 

court’s judgment in favor of BSI.

1 Judge Lawrence F. Winthrop was a sitting member of this court 

when the matter was assigned to this panel of the court. He retired effective 

June 30, 2021. In accordance with the authority granted by Article 6, Section 

3, of the Arizona Constitution and pursuant to Arizona Revised Statutes 

(“A.R.S.”) section 12-145, the Chief Justice of the Arizona Supreme Court 

has designated Judge Winthrop as a judge pro tempore in the Court of 

Appeals, Division One, for the purpose of participating in the resolution of 

cases assigned to this panel during his term in office.
BSI v. ADOT

Opinion of the Court

3

FACTS AND PROCEDURAL HISTORY

¶3 BSI is an Oregon limited liability company formed to own a 

Gulfstream dual-engine turbo jet, FAA tail number N608BG (“the aircraft”). 

BSI purchased the aircraft in 2003 for the personal use of Richard Taylor 

Burke, Sr., an Arizona resident. BSI listed its address and base of operations 

as Portland, Oregon, and has since received mail from ADOT at that 

address.

¶4 BSI registered the aircraft in Arizona and regularly flew in 

and out of Scottsdale Airport. From 2004 to 2012, BSI maintained a monthly 

tie-down/hangar agreement at that airport, but the aircraft also traveled

outside of Arizona, and BSI had similar agreements in other states during 

that time. At no point did BSI have any such agreement in Oregon, nor did 

the aircraft fly to Oregon after BSI purchased it.

¶5 Arizona assesses a variable rate license tax against owners of 

private aircraft based on residency and the number of days the plane is

based in Arizona. ADOT’s Aeronautics Division auditors take the position

that the nonresident license tax rate under A.R.S. § 28-8336 cannot apply to 

an owner of an aircraft that is based in Arizona more than 209 days in any 

given calendar year. Thus, ADOT treats aircraft that are based in Arizona 

for at least 210 days each calendar year as subjecting the aircraft owner to 

the license tax rate under A.R.S. § 28-8335(B), which is five times greater 

than the tax rate applicable under A.R.S. § 28-8336.

¶6 Through 2012, BSI claimed nonresident tax status under 

A.R.S. § 28-8336. In its annual filings, BSI represented the aircraft was not 

based in Arizona for more than 209 days each year.

¶7 ADOT first challenged BSI’s claimed tax status in 2003.

Eventually, the parties entered a settlement agreement wherein BSI paid no 

license tax for 2003. BSI then paid the nonresident tax rate under § 28-8336 

for 2004 and claimed the same rate from 2005 through 2012.

¶8 In 2013, ADOT auditors concluded the BSI aircraft had been 

in Arizona for more than 210 days each year from 2004 through 2012 and 

therefore was subject to the full license tax rate prescribed in A.R.S. § 28-

8335 during the audit period. Based on data available on Flightwise, a 

third-party flight tracking website, ADOT calculated the BSI aircraft was in 
BSI v. ADOT

Opinion of the Court

4

Arizona for at least 217 days each year from 2005 through 2012.

2 On that 

basis, ADOT assessed BSI an additional $161,004 and recorded a lien 

against the aircraft.

¶9 BSI brought an unsuccessful administrative appeal that 

focused on the definition of what constituted a “day.” The administrative 

law judge (“ALJ”) adopted ADOT’s interpretation that a “day” as used in 

the statute meant any calendar day during which an aircraft spent any time 

on the ground in Arizona.

¶10 BSI then brought this action in the tax court. The tax court 

considered the residency/tax rate issue on cross-motions for summary 

judgment that focused on the correct interpretation of the word “day” in 

A.R.S. § 28-8336. BSI contended a “day” under § 28-8336 meant a 

continuous 24-hour period from one midnight to the ensuing midnight. 

Consistent with its previous argument and the ALJ’s decision, ADOT 

asserted a “day” meant any calendar day during which an aircraft spent 

any time on the ground in Arizona. The legal question, therefore, turned at 

that point on what constituted a “day” under § 28-8336.

¶11 After learning that no statute, formal administrative rule, or 

written ADOT policy existed interpreting the statute or providing 

definitions for the statutory terminology, the tax court granted summary 

judgment in favor of BSI. The court reasoned that “the legislature did not 

define the word ‘day,’ nor did it define what being ‘based in’ Arizona 

means. . . . The Court simply has nothing before it to indicate whether the 

legislature intended for ‘day’ to mean an entire 24-hour period or some 

lesser portion of it.” The tax court found § 28-8336 ambiguous and, as a 

result, construed it in favor of the taxpayer, BSI.

¶12 On appeal, this court found the statute ambiguous, but 

adopted ADOT’s interpretation, thus effectively ruling in favor of the 

agency pending resolution on remand of the number of days the aircraft 

was in Arizona. See BSI Holdings, LLC v. Ariz. Dep’t of Transp. (“BSI I”), 242 

Ariz. 621, 624-25, ¶¶ 14-20 (App. 2017). The Arizona Supreme Court 

2 The aircraft’s pilot logs subsequently indicated the BSI aircraft was 

in Arizona for all or a portion of at least 232 days each year from 2005 

through 2012. ADOT calculated these totals by considering any time the 

aircraft spent on the ground during a calendar day to constitute a “day,” a 

definition later rejected by our supreme court. See BSI Holdings, LLC v. Ariz.

Dep’t of Transp. (“BSI II”), 244 Ariz. 17, 18, ¶ 1 (2018).
BSI v. ADOT

Opinion of the Court

5

accepted review, vacated this court’s opinion, and remanded the case to the 

tax court. See BSI II, 244 Ariz. at 18, ¶ 1.

¶13 In BSI II, our supreme court rejected both interpretations of 

the word “day” posited by the parties. Instead, the court found the word

“day” ambiguous and dependent on context. Id. at 20, ¶¶ 13-14. The court

also stated ADOT’s interpretation was not owed any deference because the 

term “day” is not a technical term that requires expertise to construe, and 

ADOT’s position had not “been reduced to written policy, much less a 

considered and established rule.” Id. at 21, ¶ 17. The court further stated, 

however, that “[d]etermining the meaning of the word ‘day’ [] cannot 

dispose of the issue in this case because the statute cannot be meaningfully 

applied without also knowing what ‘based in’ means.” Id. at ¶ 19. The 

court then noted:

In the tax court, ADOT said it “makes its determination 

of whether an aircraft is ‘based in this state’ by inspecting the 

totality of the circumstances, including: day count, the 

aircraft’s use, and tie-down and hangar agreements.” But it 

never explained how it applies those factors. Indeed, BSI disputes 

that ADOT has used any other criteria other than a day count. 

Because the matter was decided on summary judgment, the 

tax court made no factual findings on this issue.

Id. at ¶ 21 (emphasis added).

¶14 The supreme court next discussed various definitions of the 

word “base,” while noting that “[t]hose definitions imply more of a 

domiciliary analysis rather than physical presence alone.” Id. at ¶ 22.3

Recognizing that “’base’ may have a technical meaning in this statutory or 

factual context,” the court concluded that it could not determine the word’s

meaning on the record before the court and therefore could not fully resolve 

the case without further proceedings. BSI II, 244 Ariz. at 21, ¶ 22.

¶15 The supreme court directed the tax court on remand to 

determine what “based in” this state for a “day” means under § 28-8336 and 

then to apply such definitions to the facts presented. Id. at 22, ¶ 24. The 

supreme court stated that, in making its determinations, the tax court 

3 Cf. DeWitt v. McFarland, 112 Ariz. 33, 33-34 (1975) (recognizing that 

“one is never without a domicile somewhere” and referring to a domicile 

as the place one “intend[s] to make . . . his home for the time at least” 

(citations omitted)).
BSI v. ADOT

Opinion of the Court

6

should “count all days or fractions of a day when the aircraft was based in

the state, even if it was not physically present there.” Id. (emphasis added). The 

court further cautioned, however, that the tax court “should not count days

that the aircraft landed momentarily in Arizona when it was not based there.” 

Id. (emphasis added). The supreme court said that if resolution was 

impossible and the tax court determined the statute was still ambiguous

after it performed the mandated analysis, the court should construe the 

statute in favor of BSI. Id. at ¶ 25 (citing Harris Corp. v. Ariz. Dep’t of Revenue, 

233 Ariz. 377, 384, ¶ 23 (App. 2013); State ex rel. Ariz. Dep’t of Revenue v. 

Capitol Castings, Inc., 207 Ariz. 445, 447, ¶¶ 9-10 (2004)).

¶16 On remand, ADOT proposed a domiciliary-type analysis as 

discussed by our supreme court in BSI II. BSI did not offer a contrary 

interpretation but continued to argue § 28-8336 was ambiguous and 

therefore did not give it or other taxpayers sufficient required notice. After 

renewed cross-motions for summary judgment, the tax court declined to 

adopt ADOT’s new domiciliary analysis. In part, the tax court reasoned:

The common dictionary definition of “base,” suggests 

“more of a domiciliary analysis rather than physical presence 

alone.” This does not leave the terms’ meaning any less 

nebulous. It might imply a “totality of the circumstances” 

standard, as urged by ADOT. The manner in which ADOT has 

historically applied such a standard, however, is neither clear nor 

consistent. It seems to have been a purely subjective decision made 

by very experienced auditors who apply standards which have not 

ever been reduced to writing or published.

(Emphasis added.)

¶17 The tax court held that § 28-8336 remained ambiguous and 

was too vague to give the taxpayer the type of “clear notice” that tax 

statutes are required to provide to promote compliance. Accordingly, as 

the supreme court had directed, the tax court construed the statutory 

language in favor of the taxpayer and ruled in favor of BSI.

¶18 Following entry of a final judgment, ADOT filed a timely 

notice of appeal. We have jurisdiction under A.R.S. §§ 12-170(C) and

-2101(A)(1).

ANALYSIS

¶19 ADOT argues the tax court erred in declining to apply a 

domiciliary analysis using the totality of the circumstances to define the 
BSI v. ADOT

Opinion of the Court

7

term “based in.” ADOT argues that, had the tax court done so, it would 

have surely found the factors proposed by ADOT weighed in ADOT’s 

favor.

I. Standard of Review and Applicable Law

¶20 We review de novo questions of statutory construction and the 

tax court’s grant of summary judgment, including whether the court

properly applied the law. BMO Harris Bank, N.A. v. Wildwood Creek Ranch, 

LLC, 236 Ariz. 363, 365, ¶ 7 (2015); Duke Energy Arlington Valley, LLC v. Ariz. 

Dep’t of Revenue, 219 Ariz. 76, 77, ¶ 4 (App. 2008). Summary judgment is 

appropriate when “there is no genuine dispute as to any material fact and 

the moving party is entitled to judgment as a matter of law.” Ariz. R. Civ. 

P. 56(a).

¶21 Statutory analysis generally begins with the language of the 

statute. See Sempre Ltd. P’ship v. Maricopa Cnty., 225 Ariz. 106, 108, ¶ 5 (App. 

2010) (recognizing that the language used is “the most reliable indicator” of 

its meaning). “When the statute’s language is clear and unambiguous, we 

must give effect to that language without employing other rules of statutory 

construction.” Parsons v. Ariz. Dep’t of Health Servs., 242 Ariz. 320, 323, ¶ 11 

(App. 2017) (citing Indus. Comm’n v. Old Republic Ins. Co., 223 Ariz. 75, 77, 

¶ 7 (App. 2009)). When the language is ambiguous, however, courts “look 

to the ‘rules of statutory construction’ and ‘consider the statute’s context; 

its language, subject matter, and historical background; its effects and 

consequences; and its spirit and purpose.’” Stein v. Sonus USA, Inc., 214 

Ariz. 200, 201, ¶ 3 (App. 2007) (citations omitted).

 II. A.R.S. § 28-8336 and ADOT’s Proposed Domiciliary Analysis

¶22 Sections 28-8335 and -8336 control Arizona’s annual aircraft 

licensing tax. Unless a statutory exception applies, an annual license tax is 

imposed on the owners of all private aircraft registered in this state. See

A.R.S. § 28-8335(A); see also Ariz. Const. art. 9, § 15. The full annual tax rate 

is “one-half per cent” of the average fair market value of the aircraft. A.R.S. 

§ 28-8335(B). Under A.R.S. § 28-8336, the owner of a nonresident’s aircraft 

may receive the more favorable tax rate of “one-tenth of one per cent” of 

the aircraft’s average fair market value. See also A.R.S. §§ 28-8322, -8335(B). 

At issue here is the interpretation of the nonresident license tax rate 

exception in § 28-8336.

¶23 Section 28-8336 provides as follows:
BSI v. ADOT

Opinion of the Court

8

The 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 is equal to one-tenth of one per cent of 

the average fair market value of the particular make, model 

and year of aircraft if the aircraft is not engaged in any 

intrastate commercial activity.

(Emphasis added.)

¶24 As discussed, the aircraft licensing statutes do not define the 

terms “day” or “based in.” We need not dive deeply into an analysis of the 

word “day” at this point, as our supreme court has already determined that 

term is contextual. See BSI II, 244 Ariz. at 21, ¶ 19 (“Determining the 

meaning of the word ‘day’ [] cannot dispose of the issue in this case because 

the statute cannot be meaningfully applied without also knowing what 

‘based in’ means.”). Our review focuses, therefore, on the “based in” 

language that was the core issue the supreme court directed the tax court 

to resolve on remand. Accordingly, we will examine whether ADOT’s 

proposed domiciliary analysis might satisfactorily resolve the issue.

¶25 In attempting to determine the meaning of the term “based 

in,” our supreme court in BSI II and the tax court on remand considered the 

ordinary meaning of “based in” and various statutory construction tools—

including dictionary definitions, legislative intent, the statutory scheme, the 

term’s contextual use, and policy considerations—and found them 

unavailing. See id. at 21-22, ¶¶ 19-24. Based on the record before it, each 

court found the statute’s language and underlying policy ambiguous. See 

id. Although the supreme court surmised that the term might have a 

technical meaning not immediately apparent in the statutory or factual 

context, id. at 21, ¶ 22, on remand neither party presented anything showing

that “based in” has a technical meaning, for example, one commonly used 

by the FAA. See generally U.S. Parking Sys. v. City of Phoenix, 160 Ariz. 210, 

211-12 (App. 1989); A.R.S. § 1-213 (“Technical words and phrases and those 

which have acquired a peculiar and appropriate meaning in the law shall 

be construed according to such peculiar and appropriate meaning.”). 

Accordingly, the tax court found no support for such a conclusion.

¶26 Like the supreme court and the tax court examining this issue 

before us, our de novo application of the various means of statutory 

construction reveals no clear answer to the term’s meaning. As the parties 

recognize, there is no legislative record that lends an understanding of the 

legislature’s meaning of the term “based in,” and nothing supports the 

notion that “based in” is a technical term meriting deference to ADOT.
BSI v. ADOT

Opinion of the Court

9

¶27 On remand and before this court, ADOT seizes upon the 

supreme court’s observation that certain dictionary definitions of the word 

“base” “imply more of a domiciliary analysis rather than physical presence 

alone,” BSI II, 244 Ariz. at 21, ¶ 22, to argue we should resolve the ambiguity 

in A.R.S. § 28-8336 by using a domiciliary analysis to interpret the term 

“based in.” ADOT asserts a domiciliary analysis “is a reasonable 

interpretation of the statute” and maintains it established that BSI’s aircraft 

was “based in” Arizona for at least some period during each year of the 

audit period under such an analysis.

4 ADOT further argues that although

an aircraft might have multiple bases from which it operates during a year, 

we should use a domiciliary analysis to presume the aircraft’s base never 

changed from Arizona during the audit period, a presumption ADOT 

maintains BSI bore the burden of disproving but did not meet.

¶28 Even assuming without deciding that a domiciliary analysis 

might be consistent with the text of the statute and the statutory scheme 

and that it could be used to resolve the ambiguity in A.R.S. § 28-8336, such 

an analysis would first require a method for determining the domicile of an

aircraft. ADOT does not have any written regulation5 or formal or informal 

written policies interpreting “based in” (or “days”) in the statute and has 

apparently never provided notice to BSI or other taxpayers as to how it 

defines those terms. Not only has ADOT never before publicly interpreted 

the statute to require a domiciliary approach, it likewise has never informed 

taxpayers that it would retroactively apply a “totality of the circumstances” 

test to its proposed domiciliary analysis.

¶29 The record is not clear, morever, that ADOT actually relied in 

BSI’s case on the factors it now argues should be part of its totality of the 

circumstances standard for determining domicile, the weight it gave (if any) 

to such factors, and the extent to which the factors are supported by the 

record. Although ADOT could have sought to clarify these issues on 

4 No question exists that BSI was “based in” Arizona for at least some 

period during each of the audit years. The supreme court recognized this 

when it stated, “BSI conceded it was ‘based in’ Arizona for the 24-hour 

periods it was on the ground during the years in question, a concession it 

may not now relitigate.” BSI II, 244 Ariz. at 21, ¶ 20.

5 Although the Arizona Administrative Code (“A.A.C.”) contains a 

variety of rules and regulations relevant to ADOT and “Transportation 

Aeronautics,” including a list of definitions, see A.A.C. R17-2-101, none 

addresses the terms at issue here.
BSI v. ADOT

Opinion of the Court

10

remand, it did not do so. Instead, as the tax court found, ADOT’s view of 

whether an aircraft is “based in” Arizona appears to be “a purely subjective 

decision made by very experienced auditors who apply standards which 

have not ever been reduced to writing or published.” That finding is 

supported by the record developed before the tax court.

¶30 Consequently, on this record, ADOT has not justified its 

proposed domiciliary analysis and totality of the circumstances test. 

Adopting such an analysis would require us to fashion some type of 

weighted-average test still not clearly defined or explained by ADOT, using 

factors not previously disclosed to BSI. Although ADOT invites this court 

to fashion such a test, it is not our province to act as a legislative body or to 

develop administrative rules or other guidance. As importantly, the factors 

ADOT claims “experienced auditors” would use to make the determination 

are not listed in published rule, regulation, or department policy, and there 

is nothing that gives a taxpayer notice of how the statute is going to be 

interpreted or applied. Having exhausted all other tools of statutory 

construction, we conclude § 28-8336 remains too ambiguous to apply to a

taxpayer. See BSI II, 244 Ariz. at 22, ¶ 25.6

¶31 As our supreme court has recognized, ambiguities in 

“revenue statute[s] should be construed liberally in favor of the taxpayer 

and strictly against the state.” Ebasco Servs. Inc. v. Ariz. State Tax Comm’n,

105 Ariz. 94, 97 (1969) (citations omitted); accord Capitol Castings, 207 Ariz. 

at 447, ¶ 10 (recognizing that when legislative intent cannot be determined, 

the statute is to be construed liberally in favor of the taxpayer).

¶32 “Tax statutes should provide clear notice of obligations so 

that taxpayers may comply and order their affairs accordingly.” BSI II, 244 

Ariz. at 22, ¶ 25; accord City of Phoenix v. Orbitz Worldwide Inc., 247 Ariz. 234, 

244, ¶ 37 (2019). On this record, and given the absence of any defining 

written rule, regulation, or departmental policy, § 28-8336 does not provide 

the “clear notice” to aircraft owners necessary for compliance and tax 

planning purposes. On a going-forward basis, however, the legislature can 

easily amend the statute to correct or clarify its ambiguous language. 

Alternatively, ADOT can propose, adopt, and publish rules or other 

6 Because we resolve the matter based on the statutory ambiguity, we 

need not and do not address other issues the parties’ briefs raise. See 

Kondaur Cap. Corp. v. Pinal Cnty., 235 Ariz. 189, 193, ¶ 8 (App. 2014).
BSI v. ADOT

Opinion of the Court

11

guidance that provide clarity and the requisite notice to taxpayers such as 

BSI.

7

 III. Costs and Attorneys’ Fees on Appeal

¶33 BSI requests costs and attorneys’ fees on appeal pursuant to 

A.R.S. §§ 12-342 and 12-348. BSI is the successful party on appeal, and we 

grant taxable costs and an award of attorneys’ fees to BSI upon compliance 

with Arizona Rule of Civil Appellate Procedure 21.

CONCLUSION

¶34 For the above reasons, we affirm the tax court’s judgment.

7 Absent the clear notice that only legislative or agency clarification

can provide, we seriously question whether and, if so, to what extent ADOT 

can enforce this statute and/or disprove taxpayers’ claims of nonresident 

tax status. Further, with those factors clearly identified and published, 

ADOT will also be in a better position to demonstrate in any future 

assessment proceeding how it has applied those factors in evaluating 

residency/tax status under the statute.