Arizona files suit in US Supreme Court over California business tax
PHOENIX — The Arizona Attorney General’s Office announced Monday that it has filed a lawsuit in the U.S. Supreme Court challenging a business tax in California.
The lawsuit accuses California of collecting over $10 million from Arizona every year even though California courts have ruled the tax illegal under state law.
California assesses taxes against Arizona businesses that “conduct no actual business” in the Golden State but invest in companies there, according to the lawsuit.
The suit alleges that the tax is unconstitutional under the U.S. Constitution’s Due Process and Commerce clauses, and that the Supreme Court has ruled that passive investment in a company is not a sufficient reason to impose a tax.
According to a press release from the attorney general’s office, Arizona loses $484,000 in tax revenue each year due to the “illegal taxation.”
The lawsuit also alleges that California violates the Due Process Clause and Fourth Amendment by ordering out-of-state banks to transfer it funds when the tax is not voluntarily paid.