'Pickleball Tax' Battle Heads to Court in Clash Over Recreation Revenue

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The town of Gilbert, Arizona may be sued over one of the most unlikely reasons: splash pads and pickleball courts.

As Kiplinger reported, the town had increased hotel, bar, and restaurant taxes, enacted a new 2% use tax, and resulted in Arizona "pickleball taxes". Some of these taxes haven't seen an increase in twenty-five years.

But The Goldwater Institute, a policy research and litigation organization, has filed a lawsuit against the town, stating the tax increases are illegal.

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The Institute writes, “Even as Arizonans struggle with the rising cost of living, government officials in Gilbert are raising taxes on their citizens to fund everything from pickleball courts to splash pads.”

Here’s the scoop.

Gilbert Arizona sued over taxes that fund pickleball courts

Beginning in January 2025, Gilbert, Arizona increased multiple sales, use, and bed taxes, ranging from an increase of .5% to 2.2%. According to the town’s website, these tax rate increases are comparable to other Arizona municipalities.

However, The Goldwater Institute doesn’t take issue with the amounts themselves, but rather the type of increases they are.

The Institute writes in a news release, “The Arizona Constitution does not allow any new taxes or tax increases on ‘services’.” Services may include intangible goods, such as:

Advertising
Photography
Hotel and lodging
Construction

And according to Goldwater, increased taxes on these and other services is illegal. In particular, the Institute takes issue with two aspects of the tax hike:

The need for some of the “critical” projects the taxes will fund, including pickleball courts, splash pads, a ropes course, and a “statement bridge.”
The impact the tax increases will have on the homebuilding and short-term rental property industries.

Concerned residents have also complained about the recent tax hikes. Some commenters on Instagram generally seemed opposed to a few of the proposed tax increases, before they were approved, citing water bills and other taxes that are already high.

Indeed, sales taxes in Arizona are above average compared to those in other states. The average combined (state and local) Arizona sales tax rate is over 8%. This makes the Copper State the twelfth highest in the nation according to the Tax Foundation, barely missing the list of the 10 states with the highest sales taxes.

So how has the town responded to backlash against the higher tax rates?

Since September, the Town of Gilbert has defended the legality of the sales, use, and bed tax increases, reiterating that the taxes would support “critical infrastructure needs,” according to a local news outlet.

After the tax increases were approved in an October town council meeting, Goldwater filed its lawsuit at the end of December, reiterating the claim that the increases are unlawful.

Goldwater also claims Gilbert homebuilders will see “a rise in construction costs” and that the hospitality industry “will be hit the hardest” by the tax increases. The Institute also argues that the subsequent financial hardship homebuilders experience will contribute to rising housing prices.

And Arizona is already contending with a home shortage crisis.

Arizona home prices

Kiplinger already reported that Arizona repealed its rental tax to help residents with rising home costs and cost of living. Due to rising inflation and long delays for new construction permits (as well as other factors) the state’s housing shortage has dramatically affected home affordability.

Trade associations such as The Home Builders Association of Central Arizona (HBACA) call for action from leaders to help mitigate the housing affordability crisis. According to the HBACA, actions that could be taken include:

Reducing regulations
Approving new projects faster
Promoting affordable options like increasing housing density

The HBACA is one of the plaintiffs in the lawsuit. The other is a local property owner.

Earlier this month, as first reported by 12News, the town responded by saying the following:

“Contrary to the claims made by the Goldwater Institute in the lawsuit, the taxes are in full compliance with Arizona law and the Arizona Constitution,” and, “...these funds support projects that protect the quality of life for all Gilbert residents, including necessary and vital improvements to police, fire, parks, and recreational facilities. The types of projects that would be funded by these tax increases are listed on the Town’s website.”

The Goldwater Institute filed its complaint in Maricopa County Superior Court. As of this writing, the court date is still pending.

Kate is a CPA with experience in audit and technology. As a Tax Writer at Kiplinger, Kate believes that tax and finance news should meet people where they are today, across cultural, educational, and disciplinary backgrounds.