Dove Mountain Hotelco, LLC, et al. v. Arizona Department of Revenue1 min read

Arizona Supreme Court: Dove Mountain Hotelco, LLC, et al. v. Arizona Department of Revenue

Case No. CV-23-0176-PR    Filed June 7, 2024

ISSUES:

1. Whether reimbursements paid to a hotel for a loyalty program member’s complimentary stay constitute gross income for purposes of Arizona’s transaction privilege tax (TPT).
2. The applicability of State Tax Commission v. Consumers Market, Inc. (1960) to the current case.

DECISION:

1. The Arizona Supreme Court held that reimbursements paid to a hotel for a loyalty program member’s complimentary stay are gross income and subject to TPT.
2. The Court determined that Consumers Market is not applicable to this case due to material differences in the loyalty programs and transaction structures.

Synopsis:
The Arizona Supreme Court considered whether reimbursements paid to Dove Mountain Hotel by Marriott Rewards for complimentary stays under the Marriott Rewards Program should be subject to Arizona’s transaction privilege tax (TPT). The Court distinguished this case from the earlier Consumers Market decision, noting significant differences in how loyalty points are earned and redeemed in the Marriott Rewards Program compared to the stamp redemption program in Consumers Market. Applying Arizona’s TPT statutes, the Court determined that the reimbursements fall within the statutory definitions of gross receipts and gross income, making them subject to TPT.

Outcome of the Case:
The Arizona Supreme Court vacated the Court of Appeals’ opinion (while agreeing with its result) and affirmed the tax court’s grant of summary judgment in favor of the Arizona Department of Revenue.