TX2024-000440 11/18/2025 Barth v. Town of Gilbert

Clerk of the Superior Court
*** Electronically Filed ***
11/20/2025 8:00 AM
THE SUPERIOR COURT OF THE STATE OF ARIZONA
IN THE ARIZONA TAX COURT
TX 2024-000440 11/18/2025
Docket Code 926 Form T000 Page 1
CLERK OF THE COURT
HONORABLE ERIK THORSON G. Duran
Deputy
JOHNATHAN BARTH STACY C SKANKEY
v.
HOME BUILDERS ASSOCIATION OF
CENTRAL ARIZONAPL
ANDREW GEORGE PAPPAS
SCOT G TEASDALE
RULING
The Court held oral argument on September 19, 2025, regarding Defendant Arizona
Department of Revenue’s Motion to Dismiss, filed March 31, 2025, and Defendant Town of
Gilbert’s Motion to Dismiss, filed March 31, 2025, as well as subsequent filings related thereto.
The Court has considered the filings and arguments of the Parties, the relevant authorities and
applicable law, as well as the entire record of the case. The Court hereby finds as follows
regarding the Motions.
Plaintiffs challenge the Town of Gilbert’s increased transaction privilege tax rates for
transient lodging, construction contractors, and speculative builders. (See generally Amended
Compl., filed March 10, 2025.) Plaintiffs contend that the ordinance enacting the taxes violates
article IX § 25 of the Arizona Constitution and seek to enjoin Defendants from enforcing the
subject taxes. (See generally Amended Compl.)
The Town of Gilbert seeks to dismiss Plaintiffs’ Complaint based on the following
arguments: (1) Arizona courts lack jurisdiction to enjoin collection of a tax; (2) Plaintiffs failed
to exhaust mandatory administrative remedies; (3) Plaintiff Homebuilders Association of Central
Arizona (“HBACA”) lacks standing because individualized analysis of its members’ tax
transactions would be necessary for the case to proceed with it as an organizational plaintiff; and

SUPERIOR COURT OF ARIZONA
MARICOPA COUNTY
TX 2024-000440 11/18/2025
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(4) facial challenges to constitutionality fail because not all potential applications within the
broad categories would be unconstitutional. (Gilbert’s Mot., at 1–2.)
Similarly, the Arizona Department of Revenue (“ADOR”) seeks to dismiss Plaintiffs’
Complaint based on the following arguments: (1) lack of subject matter jurisdiction because of
Plaintiffs’ failure to exhaust administrative remedies; (2) failure to state a claim because the tax
on transient lodging is not a tax on services; (3) lack of standing because HBACA is not a
taxpayer; (4) failure to state a claim because contracting should be evaluated at a department
level; and, finally, (5) an injunction is prohibited. (See generally ADOR’s Mot.)
Defendants have postured the Motions in part as contesting subject matter jurisdiction
under Rule 12(b)(1), Ariz. R. Civ. P., with subject matter jurisdiction being this Court’s statutory
or constitutional power to hear and determine a particular type of case. See Church of Isaiah 58
Project of Arizona, Inc. v. La Paz Cty., 233 Ariz. 460, 462–63 ¶9 (App. 2013) (citing State v.
Maldonado, 223 Ariz. 309, 311 ¶14 (2010)).
In resolving such a challenge, the Court may take evidence and resolve factual disputes
essential to its disposition of the motion. See Church of Isaiah, 233 Ariz. at 463 ¶9. The Court
has determined that there are no factual disputes in this matter at this point for which resolution
thereof would assist the Court in resolving the jurisdictional question. At this point, on this
record, the Court resolves it in Plaintiffs’ favor as further discussed below.
In Response to the issues raised by Defendants, Plaintiffs contend that (1) their claims are
not barred by the relevant anti-injunction statute because it only applies to property tax, and
Plaintiffs are only challenging the constitutionality of the tax rather than seeking monetary relief;
(2) administrative exhaustion is not required and is futile; (3) the Ordinance is facially
unconstitutional because construction contracting and hotel/lodging are always “services;” and
(4) Plaintiff HBACA has associational standing. (Resp. filed May 12, 2025, at 2.)
“It is the well-established policy of this state to prevent the validity of a tax from being
tested by injunctive means.” Church of Isaiah, 233 Ariz. at 464 ¶17 (internal quotations omitted).
In an appeal to the Tax Court, “[a]n injunction, writ of mandamus or other legal or equitable
process may not issue in an action in any court in this state against an officer of this state to
prevent or enjoin the collection of any tax, penalty or interest.” A.R.S. § 42-1254(D)(1). The
plain language of A.R.S. § 42-1254(D)(1) and that of the pertinent statutory scheme does not
limit its application to property tax as Plaintiffs contend. Yet Plaintiffs also contend that they are
not seeking monetary relief but only challenging the constitutionality of the tax. (Resp., at 2.)
In addition, it is “unfailingly held that tax matters must be exhausted within ADOR
before being brought in superior court.” Moulton v. Napolitano, 205 Ariz. 506, 512 ¶14 (App.

SUPERIOR COURT OF ARIZONA
MARICOPA COUNTY
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2003). However, Plaintiffs contend that exhaustion is not required here because ADOR has no
authority to declare a law unconstitutional—the substantive relief Plaintiffs seek. (Resp., at 11.)
See Stagecoach Trails MHC, L.L.C. v. City of Benson, 231 Ariz. 366, 370 ¶16 (2013)
(“Exhaustion is not required when the pursuit of administrative remedies would be futile.”); see
also Moulton, 205 Ariz. at 513 ¶20 (“ADOR is unable to declare a law unconstitutional.”); cf.
Vangilder v. Arizona Dep’t of Revenue, 252 Ariz. 481 (2022) (affirming the Tax Court
invalidating a tax).
THE COURT FINDS that Plaintiffs may have pleaded, but have not yet pressed, relief
that would violate the relevant anti-injunction statute and also that exhaustion would be futile
based on the substantive relief sought.
The purpose of a Rule 12(b)(6) motion, on the other hand, is to test the sufficiency of the
Complaint. In ruling on the motion, the Court will “assume the truth of the well-pled factual
allegations and indulge all reasonable inferences therefrom.” Cullen v. Auto-Owners Ins. Co.,
218 Ariz. 417, 419 ¶7 (2008). “Because Arizona courts evaluate a complaint’s well-pled facts,
mere conclusory statements are insufficient to state a claim upon which relief can be granted.”
Id.
Yet, Arizona law disfavors motions to dismiss for failure to state a claim upon which
relief can be granted. State ex rel. Corbin v. Pickrell, 136 Ariz. 589, 594 (1983). Moreover, such
motions are not to be used as a vehicle to resolve disputes about the facts or merits of the case.
Coleman v. City of Mesa, 230 Ariz. 352, 363 ¶46 (2012). Instead, the narrow question presented
by the Motions pursuant to Rule 12(b)(6), Ariz. R. Civ. P., is whether the facts alleged by
Plaintiffs are sufficient “to warrant allowing [them] to attempt to prove their case” on those
claims. See id.
As to HBACA’s standing, “[t]he issue in Arizona is whether, given all the circumstances
in the case, the association has a legitimate interest in an actual controversy involving its
members and whether judicial economy and administration will be promoted by allowing
representational appearance.” Armory Park Neighborhood Ass’n v. Episcopal Cmty. Services in
Arizona, 148 Ariz. 1, 6 (1985). Additionally, standing is a prudential rather than a jurisdictional
concern in Arizona. See Dobson v. State, 233 Ariz. 119, 122 ¶9 (2013).
Given the foregoing, THE COURT FURTHER FINDS that the issues raised by
Defendants are more properly addressed in cross-motions for summary judgment or similar
briefing. Arizona is a notice pleading jurisdiction, and so perfection in pleading is not required.
See Rosenberg v. Rosenberg, 123 Ariz. 589, 592–93 (1979). In any event, Defendants appear to
be well on their way to formulating responsive pleadings that fairly respond to the substance of
the allegations at issue. Ariz. R. Civ. P. 8(c)(2). Therefore,

SUPERIOR COURT OF ARIZONA
MARICOPA COUNTY
TX 2024-000440 11/18/2025
Docket Code 926 Form T000 Page 4
IT IS ORDERED denying Defendant Arizona Department of Revenue’s Motion to
Dismiss, filed March 31, 2025.
IT IS FURTHER ORDERED denying Defendant Town of Gilbert’s Motion to Dismiss,
filed March 31, 2025. Defendants are directed to comply with Ariz. R. Civ. P. 12(a)(2)(A) within
the timeframes stated in that rule.
IT IS FURTHER ORDERED directing the Parties to meet and confer on a proposed
schedule for this matter and to make an appropriate joint filing with the Court, pursuant to the
deadline set forth in the Court’s Order filed June 24, 2025. Disputes regarding scheduling or
other disputes related to the content of any proposed scheduling order may be addressed in the
joint filing and proposed order, and the Court will resolve them before entering it.