Dove Mountain v. Ador

IN THE

SUPREME COURT OF THE STATE OF ARIZONA

DOVE MOUNTAIN HOTELCO, LLC, ET AL.,
Plaintiffs/Appellants,

v.

ARIZONA DEPARTMENT OF REVENUE,
Defendant/Appellee.

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

Appeal from the Arizona Tax Court
The Honorable M. Scott McCoy, Judge
No. TX2019-000448
AFFIRMED

Opinion of the Court of Appeals, Division One
255 Ariz. 324 (App. 2023)
VACATED

COUNSEL:

David P. Dorner (argued), Reed Smith LLP, Chicago; and Barbara J.
Dawson, Edward J. Hermes, Snell & Wilmer L.L.P., Phoenix, Attorneys for
Dove Mountain Hotelco, LLC and HSL Cottonwood RC Hotel, LLC

Kristin K. Mayes, Arizona Attorney General, Scot G. Teasdale (argued),
Assistant Attorney General, Phoenix, Attorneys for Arizona Department of
Revenue
 DOVE MOUNTAIN, ET AL. V. ADOR
Opinion of the Court

JUSTICE MONTGOMERY authored the Opinion of the Court, in which
VICE CHIEF JUSTICE TIMMER, and JUSTICES BOLICK, LOPEZ, BEENE,
KING, and PELANDER (Ret.) joined. *

JUSTICE MONTGOMERY, Opinion of the Court:

¶1 We must determine whether monies paid to reimburse a hotel
for the cost of a loyalty program member’s complimentary stay constitute
gross income for purposes of Arizona’s transaction privilege tax (“TPT”).
In making this determination, we consider the degree to which State Tax
Commission v. Consumers Market, Inc., 87 Ariz. 376 (1960), applies to our
analysis. We hold that, pursuant to Arizona’s TPT statutes,
reimbursements paid to a hotel for a loyalty program member’s
complimentary stay are gross income, and Consumers Market is not
applicable.

I. FACTUAL AND PROCEDURAL BACKGROUND

¶2 We begin with an overview of the program in question and
the applicable TPT statutes.

A. Marriott Rewards Program

¶3 The Ritz-Carlton Dove Mountain Hotel and Spa (“Dove
Mountain”) 1 participates in the Marriott Rewards Program (the “Rewards
Program”) pursuant to the Amended and Restated Rewards Program
Participation Agreement effective September 1, 2010 (the “Participation
Agreement”). The Rewards Program “serves as a marketing and
promotional tool designed to increase customer loyalty and patronage of
hotels branded by or otherwise affiliated with” Marriott International, Inc.
(“Marriott”). The marketing and loyalty program is operated and
administered by Marriott Rewards, LLC (“Marriott Rewards”). As
required by the Participation Agreement, Dove Mountain and other

* Chief Justice Robert M. Brutinel is recused from this matter. Pursuant to
article 6, section 3 of the Arizona Constitution, Justice John Pelander (Ret.)
of the Arizona Supreme Court was designated to sit in this matter.
1 Dove Mountain Hotelco, LLC operated the hotel for the time in question

and sold it to HSL Cottonwood RC Hotel, LLC in June 2016.
2
 DOVE MOUNTAIN, ET AL. V. ADOR
Opinion of the Court

lodging participants fund the Rewards Program’s marketing efforts by
paying a percentage of room revenues, and also providing rooms for
complimentary stays to Rewards Program Members (“Members”). Airline,
credit card, rental car, and travel companies (collectively “Affiliate
Partners”) may also participate.

¶4 Members can earn and accumulate “Marriott Points”
(“Points”) in four ways: (1) through stays at participating hotels; (2) by
spending money with Affiliate Partners; (3) by directly purchasing Points
from Marriott; or (4) from receiving Points as a gift. In the case of a stay at
a hotel like Dove Mountain, a Member earns Points based on the amount of
qualifying expenses on the hotel bill. Following a Member’s stay in which
points are earned, not redeemed, Dove Mountain then remits a percentage
of the bill (“Remittance”) to purchase Points from Marriott Rewards on the
Member’s behalf. For the tax period in question, a Remittance, as calculated
by Marriott Rewards, was 4.5% of room revenue, or 2.25% if it was a stay in
which the Member first enrolled in the Rewards Program. Marriott
Rewards then credits the Member’s Rewards account with the purchased
Points and holds the funds for the benefit of the Rewards Program.

¶5 Members may subsequently redeem accumulated Points for
an award certificate. In turn, the certificate can be exchanged for various
rewards, such as a complimentary stay at Dove Mountain or another
participating hotel, merchandise, airline miles, car rentals, or gift cards.
Should a Member exchange an award certificate for a complimentary stay
at Dove Mountain, Marriott Rewards subsequently issues a reimbursement
payment (“Reimbursement”). The amount of a Reimbursement is
calculated pursuant to a formula that factors in the hotel’s room occupancy
rate—whether above or below 89%—and applies a standard cost amount
that reflects “the direct and incremental costs of having a [Member] occupy
a room when redeeming [an awards] certificate.” The Reimbursement
amount does not always cover the full cost of the Member’s stay. Because
Members can earn Points separate from a stay at a participating hotel and
then redeem Points at any participating hotel or for other rewards, in any
given month a hotel may pay more in Remittances than it receives in
Reimbursements, or vice versa.

3
 DOVE MOUNTAIN, ET AL. V. ADOR
Opinion of the Court

B. Applicable Arizona TPT Statutes

¶6 Arizona’s TPT statutes are set forth in A.R.S. title 42, chapter
5, and TPT is specifically defined in A.R.S. § 42-5008:

A. There is levied and there shall be collected by the
department, for the purpose of raising public money,
privilege taxes measured by the amount or volume of
business transacted by persons on account of their business
activities, and in the amounts to be determined by the
application of rates against values, gross proceeds of sales or
gross income . . . .

....

C. The tax levied by and collected pursuant to this article and
article 2 of this chapter is designated the “transaction
privilege tax.”

The TPT therefore serves as “an excise tax on the privilege or right to engage
in an occupation or business.” State ex rel. Ariz. Dep’t of Revenue v. Tunkey, 254 Ariz. 432, 433 ¶ 2 (2023) (quoting Ariz. Dep’t of Revenue v. Action Marine,
Inc., 218 Ariz. 141, 142 ¶ 6 (2008)).

¶7 The TPT rate applicable to a business is determined by its
classification. A.R.S. § 42-5010(A). As a hotel, Dove Mountain carries the
“transient lodging classification,” § 42-5010(A)(2)(a), which “is comprised
of the business of operating, for occupancy by transients, a hotel,” A.R.S.
§ 42-5070(A). A “transient” is further defined as “any person who either at
the person’s own expense or at the expense of another obtains lodging space
or the use of lodging space for less than thirty consecutive days.”
§ 42-5070(F).

¶8 “[T]he gross proceeds of sales or gross income derived from
the business,” with certain exceptions not applicable here, comprises the tax
base for this classification. § 42-5070(C). And “it is presumed that all gross
proceeds of sales and gross income derived . . . from [transient lodging]
business activity . . . comprise[s] the tax base for the business until the
contrary is established.” A.R.S. § 42-5023. Gross income is defined by
A.R.S. § 42-5001(4) as the “gross receipts of a taxpayer derived from trade,
4
 DOVE MOUNTAIN, ET AL. V. ADOR
Opinion of the Court

business, commerce or sales . . . without any deduction on account of
losses.” Gross receipts are “the total amount of the sale, lease or rental
price . . . valued in money . . . including all receipts, cash, credits and
property of every kind or nature.” § 42-5001(7). TPT is thus properly
understood as “a tax on a business’s gross receipts” and not a “sales tax.”
Tunkey, 254 Ariz. at 433 ¶ 2. Furthermore, “[a]lthough liability for the TPT
falls on the business, it may charge customers a separately itemized amount
to cover the tax.” Id. Lastly, a sale is “any transfer of title or possession, or
both, exchange, barter, lease or rental . . . of tangible personal property or
other activities taxable under this chapter, for a consideration.” § 42-5001(18)
(emphasis added).

C. Dove Mountain TPT Refund

¶9 On May 19, 2016, Dove Mountain requested a refund of
$162,148.61 from the Arizona Department of Revenue (“ADOR”) for TPT
paid on certain Reimbursements between 2012 and 2016. Dove Mountain
based its request, in part, on the argument that TPT was not due on the
amount in question because Members did not pay any money when
redeeming Points, the purchase of the complimentary stay was part of the
original hotel price, and Reimbursements were not consideration for
complimentary stays. Moreover, Dove Mountain noted that gross receipts
from prior stays in which Members earned Points were subject to TPT.
Notably, Dove Mountain did not seek a refund for TPT levied on
Reimbursements in excess of Remittances paid in the same tax period.
ADOR denied Dove Mountain’s refund request.

¶10 Dove Mountain appealed ADOR’s decision to the tax court,
arguing that the Reimbursements in question were part of a rewards
program not subject to TPT pursuant to this Court’s holding in Consumers
Market. The court acknowledged that although there were some similarities
between Consumers Market and this case, the respective customer loyalty
programs were different. In particular, the court distinguished the two
programs based on the different ways in which customers could earn and
then redeem rewards. The court also found that the record did not support
a conclusion that Dove Mountain was necessarily responsible for paying
TPT on initial Points-earning transactions, “as opposed to some other
entity.” Following review of the parties’ motions for summary judgment
on a largely stipulated record, the court concluded that Dove Mountain was
not eligible for a refund and entered judgment for ADOR.
5
 DOVE MOUNTAIN, ET AL. V. ADOR
Opinion of the Court

¶11 In the court of appeals, Dove Mountain again argued that,
pursuant to Consumers Market, Reimbursements from Marriott Rewards
should not be subject to TPT because “the underlying free stays were mere
‘redemptions of reward points from prior transactions on which tax was
previously paid.’” Dove Mountain Hotelco, LLC v. Ariz. Dep’t of Revenue, 255
Ariz. 324, 326 ¶ 7 (App. 2023). Thus, according to Dove Mountain, the
Reimbursements were not subject to TPT and any tax so levied constituted
double taxation as stated in Consumers Market. Id.

¶12 The court of appeals found that, because the Reimbursements
from the Rewards Program covered the cost of lodging provided for
Members, “Dove Mountain derived the monies from a transient lodging
business transaction.” Id. at 327 ¶ 14. Accordingly, the court held in a split
decision that the Reimbursements fell within the statutory definitions of
gross receipts and gross income and were subject to TPT. Id. The dissent
reasoned that the monies paid to Dove Mountain by Marriott Rewards were
“a disbursement of post-tax reserves” administered by Marriott Rewards
and did not constitute gross income subject to TPT. Id. at 329 ¶ 24 (Furuya,
J., dissenting).

¶13 We granted review to determine whether the
Reimbursements paid by Marriott Rewards to Dove Mountain constitute
gross income for TPT purposes and whether Consumers Market is
controlling precedent. What constitutes gross income for levying TPT on
lodging businesses and the law applicable to making this determination are
questions of statewide importance. 2 We have jurisdiction pursuant to
article 6, section 5(3) of the Arizona Constitution.

II. DISCUSSION

¶14 We review de novo the tax court’s ruling on a motion for
summary judgment, Wilderness World, Inc. v. Ariz. Dep’t of Revenue, 182 Ariz.
196, 198 (1995), as well as the court’s construction and interpretation of
Arizona tax statutes, SolarCity Corp. v. Ariz. Dep’t of Revenue, 243 Ariz. 477,

2 We also granted review as to whether the court of appeals properly
characterized the nature of a Remittance payment made by Dove Mountain
to Marriott Rewards as a payment for membership to a third-party vendor.
However, our resolution of the other issues renders the characterization of
Remittance payments moot.
6
 DOVE MOUNTAIN, ET AL. V. ADOR
Opinion of the Court

480 ¶ 8 (2018). We begin by reviewing Consumers Market, given Dove
Mountain’s assertion that it controls the outcome of this case.

A. Consumers Market

¶15 Dove Mountain argues that the loyalty program in Consumers
Market is “materially indistinguishable” from the Rewards Program.
Therefore, it argues, we should adhere to our construction of TPT statutes
in Consumers Market and apply its reasoning and holding to preclude
ADOR from levying additional TPT on Reimbursements. In contrast,
ADOR argues that Reimbursements are readily distinguishable from the
loyalty program transactions in Consumers Market.

¶16 The facts relevant to this Court’s determination in Consumers
Market were either stipulated or otherwise uncontroverted. 87 Ariz.
at 378–80. The taxpayer operated several supermarkets and, as part of its
retail sales business, offered customers trading stamps that could later be
exchanged for merchandise from the taxpayer. Id. at 377–78. The parties
stipulated “that all of the merchandise exchanged by [the taxpayer] . . . for
their stamp plan was purchased by [the taxpayer] from its suppliers in the
ordinary course of business and for resale.” Id. at 378. The taxpayer
asserted—without contradiction—that “the value of the items of
merchandise which were ‘exchanged’ for accumulated trading stamps was
added to the charge made for items sold in the regular course of business.”
Id. at 377–78. Therefore, the value was also included in the taxpayer’s total
gross sales such “that all tax due on such gross sales had been fully paid.”
Id. Based on these facts, the taxpayer argued that no more tax was due. Id.
at 378.

¶17 Although the State Tax Commission (“Commission”)
admitted there were no genuine issues regarding any material fact, the
Commission nevertheless argued that the redemption of trading stamps for
merchandise was a retail sale subject to TPT because the stamps
represented consideration for the merchandise provided by the taxpayer.
Id. Consequently, the Commission asserted that the taxpayer owed taxes
on the value of the merchandise sales in question. Id. at 377.

¶18 In taking a “practical and realistic approach in determining
what the legislature intended” regarding taxation of what this Court called
the “redemption plan,” id. at 379–80, we stated:
7
 DOVE MOUNTAIN, ET AL. V. ADOR
Opinion of the Court

[T]he cost to [the taxpayer] in ‘retailing’ these items of
merchandise was reflected in higher prices which its
customers were in turn required to pay for foodstuffs
purchased from the shelves of [the taxpayer]’s supermarkets.
Hence [the taxpayer]’s gross proceeds from its retail sales, the
basis upon which the transaction privilege tax is assessed,
reflected the cost of retailing this merchandise. Thus, the
‘consideration’ referred to in the [definition of a sale] has
already been paid by [the taxpayer]’s customers.
Id. at 379. Given this assessment, the Court characterized the redemption
plan as “nothing more and nothing less than a system of advanced
spending and deferred enjoyment of the fruits thereof by the [the
taxpayer]’s customers.” Id. In turn, the Court concluded that the exchange
of trading stamps for merchandise was just one part of a “whole
transaction.” Id. at 380.

¶19 Because the monies used to purchase the merchandise for
redemption could be directly traced to the gross receipts from the sales in
which the stamps were issued, this Court concluded that the stamps did
not represent additional consideration. Id. Consequently, the Court
determined that the legislature could not have intended to tax the value of
the merchandise sales because “the imposition of a tax on the [redemption
plan] would amount to double taxation.” Id.

¶20 Overall, the facts and circumstances in Consumers Market
render its reasoning and holding inapplicable to the matter before us.
Customers in Consumers Market could only receive trading stamps in a
transaction with the taxpayer. Stamps could later only be redeemed for
merchandise sold by the taxpayer. Consequently, the taxpayer could
demonstrate, and this Court could conclude, that issuing stamps and later
redeeming them for merchandise constituted a “whole transaction.” See id.
at 379–80. Thus, there was only one sale contributing to gross receipts for
which TPT could be levied.

¶21 In contrast, the Rewards Program permits Members to earn
Points from participating hotels other than Dove Mountain and from
Affiliate Partners engaged in completely different business activities.
Members can even purchase Points directly from Marriott Rewards. Thus,
Points later redeemed for a complimentary stay can stem from a

8
 DOVE MOUNTAIN, ET AL. V. ADOR
Opinion of the Court

Points-earning transaction that had nothing to do with Dove Mountain.
Likewise, Points earned from a stay at Dove Mountain can be redeemed for
complimentary stays at other hotels, for merchandise, or for other activities
with Affiliate Partners unrelated to lodging. In sum, any complimentary
room stay provided by Dove Mountain as required by the Participation
Agreement has no fixed connection to any particular Points-earning
transaction with Dove Mountain.

¶22 The nature and operation of the Rewards Program therefore
undermines Dove Mountain’s effort to characterize its Points-earning
transactions, subsequent redemptions, and Reimbursements as analogous
to the “whole transaction” at issue in Consumers Market. See id. at 380. Thus,
this Court’s observation that Consumers Market customers were engaged in
“a system of advanced spending and deferred enjoyment of the fruits
thereof by the [taxpayer’s] customers” is inapposite to the Rewards
Program here. See id. at 379. It is far from certain that any Points-earning
transaction at Dove Mountain will necessarily result in a future
complimentary stay at Dove Mountain.

¶23 Additionally, in Consumers Market this Court underscored the
uncontroverted fact that the taxpayer added the specific value of
merchandise exchanged in redemption transactions to what it charged
customers for goods sold in the regular course of business. Id. at 378. Thus,
the record in Consumers Market clearly demonstrated that the particular cost
of merchandise purchased with stamps was included in the cost of goods
sold in the stamp-issuing transaction. See id. In contrast, Dove Mountain is
unable to specify the amount added to the price of a room for a Member’s
Points-earning stay to cover the cost of a future complimentary stay.

¶24 Likewise, Dove Mountain is unable to distinguish in
Remittances paid to Marriott between monies used to purchase Points for a
Member from monies used to cover the cost to market and administer the
Rewards Program. In fact, neither Dove Mountain nor Marriott Rewards
has records correlating the Points redeemed for a Member’s complimentary
stay with any of the Points purchased by Dove Mountain for that Member.

¶25 Ultimately, the nature of the Consumers Market transactions
for earning and redeeming stamps and the direct correlation between gross
receipts and funds used to purchase merchandise for redemption
materially distinguish the case from the matter before us. We therefore
9
 DOVE MOUNTAIN, ET AL. V. ADOR
Opinion of the Court

decline to rely on Consumers Market’s reasoning or holding. See Beck v.
Neville, 256 Ariz. 361, 373 ¶ 45 (2024) (declining to apply holding of a prior
case where facts were distinguishable from matter under consideration); see
also Spring v. Bradford, 243 Ariz. 167, 171 ¶ 19 (2017) (declining to revisit
holding of a prior case “because we find that case materially
distinguishable”).

B. Reimbursements and Gross Income

¶26 As stated by Dove Mountain, “[t]he specific issue in this case
is whether certain [Reimbursements] are gross income within the scope of
Arizona’s transaction privilege tax transient lodging classification.” Dove
Mountain argues that the Reimbursements from Marriott Rewards are not
payments for complimentary stays and are, therefore, not consideration.
Accordingly, Dove Mountain asserts that a rewards redemption transaction
is not a sale subject to the TPT. Instead, Dove Mountain characterizes the
Reimbursements as “post-tax” savings held by Marriott Rewards, like
funds held on deposit with a bank until Dove Mountain’s capital is returned
to it. Therefore, Dove Mountain argues that it is not being paid for
providing free lodging to Members, “but is simply receiving
reimbursements from [Marriott] Rewards for participation in the Rewards
Program.”

¶27 ADOR asserts that once Dove Mountain pays Remittances to
Marriott Rewards, it is no longer the hotel’s money. Thus, when Marriott
Rewards sends the Reimbursement payment to Dove Mountain, it is a
separate transaction generating gross income that is identifiable additional
consideration, meeting the statutory definition of gross income subject to
TPT. See §§ 42-5001(4), -5008.

¶28 We construe tax statutes by giving words their plain and
ordinary meaning. Wilderness World, 182 Ariz. at 198. When construing the
statutes relating to the TPT, we read them together as a whole. SolarCity,
243 Ariz. at 480 ¶ 8. And we construe such statutes in favor of the taxpayer
and against the government. State ex rel. Ariz. Dep’t of Revenue v. Capitol
Castings, Inc., 207 Ariz. 445, 447 ¶ 10 (2004).

¶29 We first address Dove Mountain’s various characterizations
of Reimbursements as “post-tax” reserves, returns of capital, or bank
deposits. Importantly, when Dove Mountain purchases Points for a
10
 DOVE MOUNTAIN, ET AL. V. ADOR
Opinion of the Court

Member, they are credited to the Member’s account and are held for the
benefit of the Rewards Program, not Dove Mountain. And, as noted, Points
are redeemed at the direction of a Member. A Member can redeem Points
at Dove Mountain, at other participating hotels, or with Affiliate Partners
offering a wide variety of other services or merchandise. Dove Mountain
has no control over Points that are purchased and credited to a Member’s
account. Thus, when Dove Mountain receives Reimbursements from the
Rewards Program, there is no way to know whether the Reimbursements
are sourced from Remittances it previously paid to Marriott Rewards.

¶30 In support of the characterization that Reimbursements are
transfers of reserves or a return of capital from funds held by Marriott akin
to monies on deposit with a bank, Dove Mountain points out that, in the
event of program termination, funds paid to Marriott Rewards through
Remittances would be returned. In the event of a termination of the
Rewards Program, the Participation Agreement provides that Marriott
Rewards “shall distribute any remaining Excess Funds to Participating
Hotels that were participants in the Rewards Program at the time of its
termination and shall allocate the Excess Funds to the Participating Hotels
in a fair and reasonable manner, as determined by [Marriott Rewards] in its
reasonable discretion.” However, unlike a bank account, there is no
acknowledgment of any account or account balance by participating hotels
or reference to amounts previously remitted or maintained on behalf of any
participating hotel. Any post-termination distribution of funds is based on
Marriott Rewards’ “reasonable discretion.” Thus, Dove Mountain does not
have an identifiable or quantifiable interest in Remittances once they are
paid to Marriott Rewards, and Remittances are not held for Dove
Mountain’s benefit.

¶31 Lastly, before applying the TPT statutes to the
Reimbursements, we note that Dove Mountain conceded in its motion for
summary judgment and acknowledged at oral argument before this Court
that certain “excess” Reimbursements “may be from Points-earning
activities that were not included in an Arizona hotel’s taxable gross receipts
at the time of the original point-earning transaction. Therefore, Dove
Mountain is willing to concede that the excess Reimbursements are subject
to lodging TPT.”

11
 DOVE MOUNTAIN, ET AL. V. ADOR
Opinion of the Court

¶32 Dove Mountain’s willingness to pay TPT on the amount of
Reimbursements that exceed the amount of Remittances—but not pay TPT
on amounts less than Remittances—requires a distinction in the type of
gross income derived by Dove Mountain from its lodging business that
Arizona’s TPT statutes do not make. And for us to recognize such a
distinction, we would have to effectively rewrite the TPT statutes to create
a category of “new” or “net” gross income and provide a method for
properly categorizing Reimbursements. That is beyond the constitutional
role of this Court. Valencia Energy Co. v. Ariz. Dep’t of Revenue, 191 Ariz. 565,
574 ¶ 25 (1998) (noting that “our cases have long recognized the limitations
imposed by article III [of the Arizona Constitution] on exercising judicial
power in tax matters”); see also Ariz. Sch. Bds. Ass’n v. State, 252 Ariz. 219,
229 ¶ 45 (2022) (“[W]e heed our constitution’s fundamental premise that the
division of powers necessarily impels judicial restraint, particularly in the
realm of lawmaking.”). 3

¶33 We now turn to application of the TPT statutes. As previously
discussed, Dove Mountain is subject to the TPT for business activities
consisting of providing lodging space. § 42-5070(A). The base for

3 Accordingly, the decisions of out-of-state taxing authorities that support
Dove Mountain’s argument are unavailing, though we recognize that it
would avoid any risk of double taxation and may very well make for sound
tax policy for the legislature to consider. See In re Marriot Int’l, Inc., Div. of
Tax App. No. 821078 (N.Y. Tax App. Trib. Jan. 14, 2010),
https://www.dta.ny.gov/pdf/archive/Decisions/821078.dec.pdf; see also Fla. Dep’t
of Revenue, Transient Rental Taxes Rewards Points Programs, TIP 06A01-
01 (Mar. 3, 2006),
https://floridarevenue.com/taxes/tips/documents/TIP_06A01-01.pdf
(“Because tax on room charges has previously been paid on the funds
contributed to the central program fund, no tax is due when a participating
hotel contributes more to the fund in any given month that it receives in
reimbursements for that same month.”); Tex. Comptroller of Pub. Accts.,
Pol’y Letter on Taxation of Hotel Reward Nights, No. 200405570L (May 10,
2004),
https://star.comptroller.texas.gov/view/200405570L?q1=200405570L
(“For reimbursements to not be taxable, hotel records must show that the
hotel had paid the rewards fund at least an amount equal to a specific
month’s reimbursement, as well as administrative charges, prior to
receiving the reimbursement.”).
12
 DOVE MOUNTAIN, ET AL. V. ADOR
Opinion of the Court

determining the amount of TPT due is the gross receipts measured by total
sales. §§ 42-5001(7), -5070. Therefore, obtaining or using lodging space is a
taxable activity that constitutes a sale when the space is provided for
consideration. § 42-5001(18); see also § 42-5070 (levying the TPT on hotels).

¶34 The Reimbursement provided from Marriott Rewards to
Dove Mountain is a transfer of monies to cover a Member’s complimentary
stay. Therefore, it is consideration for lodging space provided by the hotel
in the course of its business activities. Our conclusion is underscored by
Dove Mountain’s concession that excess Reimbursements are subject to
TPT. Whether excess or not, Reimbursements can only be subject to TPT if
they are, in fact, consideration for a sale of lodging space for a Member’s
complimentary stay that results in gross income.

¶35 Thus, a Member’s stay at Dove Mountain pursuant to the
Rewards Program is a sale. Consequently, the “total amount of the sale [of
the lodging space utilized by the Member] valued in money” constitutes
Dove Mountain’s gross receipts for the transaction. § 42-5001(7). Given
that Reimbursements constitute the gross receipts of a taxpayer derived
from business, Reimbursements are gross income, § 42-5001(4), and are
therefore a part of Dove Mountain’s tax base and subject to the TPT. Other
taxing authorities have reached similar conclusions involving programs
like the one before us. See Ga. Dep’t of Revenue, Letter Ruling on Taxation
of Hotel Rewards Points Exchanged for Accommodations, LR SUT-2015-22
(Dec. 16, 2015), https://dor.georgia.gov/document/sut-lr/lr-sut-2015-
22/download (ruling that when a hotel receives a reimbursement for
complimentary accommodations, “either as a payout for the Program or as
an offset to contributions owed by the hotel, the reimbursement is subject
to Georgia sales tax”); N.Y. Dep’t of Taxation and Fin., Advisory Op. on
Taxation of Hotel Rewards Points Exchanged for Accommodations, TSB-A-
04(19)S (Sept. 2, 2004),
https://www.tax.ny.gov/pdf/advisory_opinions/sales/a04_19s.pdf
(when a “separate entity” administers a rewards program and reimburses
the hotel for free stays, the reimbursements are taxable consideration).

III. CONCLUSION

¶36 We vacate the court of appeals’ opinion, although we agree
with its result, and we affirm the tax court’s grant of summary judgment in

13
 DOVE MOUNTAIN, ET AL. V. ADOR
Opinion of the Court

favor of ADOR. Because no refund is due, we deny Dove Mountain’s
request for attorney fees pursuant to A.R.S. § 12-348.

14