Opinion ID: 1265656
Heading Depth: 2
Heading Rank: 2

Heading: Retroactivity of This Decision

Text: The Department argues that if we find that the tax is applicable to Wilderness World, then our decision should be given prospective effect only, citing Tax Comm'n v. Ensign, 75 Ariz. 376, 376-77, 257 P.2d 392, 392 (1953), and City of Tempe v. Del E. Webb Corp., 14 Ariz. App. 228, 229, 482 P.2d 477, 478 (1971). However, those cases are distinguishable because in them the courts found the tax applicable, whereas here we find the tax inapplicable. It is not the common practice, where the court finds a tax has been improperly imposed, to give a decision prospective effect only. See, e.g., Pittsburgh & Midway Coal Mining Co. v. DOR, 161 Ariz. 135, 138-39, 776 P.2d 1061, 1064-65 (1989); Ebasco, 105 Ariz. at 98-99, 459 P.2d at 723-24; Dennis Dev. Co. v. DOR, 122 Ariz. 465, 468-69, 595 P.2d 1010, 1013-14 (App. 1979). An honorable government would not keep taxes to which it is not entitled, and the legislative scheme supports that result. Pittsburgh & Midway Coal, 161 Ariz. at 138-39, 776 P.2d at 1064-65 (holding that taxpayer need not have paid its taxes under protest to later receive refund when found that taxpayer overpaid). The presumption in civil cases is that opinions will operate retroactively. Fain Land & Cattle Co. v. Hassell, 163 Ariz. 587, 596, 790 P.2d 242, 251 (1990). We have set forth a three-part test for determining whether the presumption of retroactivity has been overcome and a decision should be applied prospectively only: 1. Whether the decision establishes a new legal principle by overruling clear and reliable precedent or by deciding an issue whose resolution was not foreshadowed; 2. Whether retroactive application will further or retard operation of the rule, considering the prior history, purpose, and effect of the rule; 3. Whether retroactive application will produce substantially inequitable results. Fain Land & Cattle, 163 Ariz. at 596, 790 P.2d at 251. These are known as the reliance, purpose, and inequity factors. Id. With respect to the first factor, Moki Mac, which the court of appeals overruled, was not clear and reliable precedent because Moki Mac itself did not follow earlier case law. Furthermore, the Department assessed these taxes on Wilderness World before Moki Mac was decided. Therefore, the Department cannot argue that it was relying on Moki Mac when it assessed the taxes. Regarding the second factor, applying this decision retroactively would only further the purpose of the rule, which is that the amusement tax does not apply to river rafting trips. And finally, regarding the third factor, it would be inequitable not to apply this decision retroactively; otherwise, the state would be keeping taxes to which it was not entitled. Another reason for giving a decision prospective effect only is that retroactivity may threaten the financial stability of the taxing body. Fain Land & Cattle, 163 Ariz. at 602, 790 P.2d at 257 (Corcoran, J., concurring), quoting Bade v. Drachman, 4 Ariz. App. 55, 70, 417 P.2d 689, 704 (1966). Under this alternative great economic hardship test, we find that the financial integrity of the state will not be substantially impaired by applying this case retroactively. See Fain Land & Cattle, 163 Ariz. at 602, 790 P.2d at 257 (Corcoran, J., concurring).