State Capitol News
9:10 am
Tue February 12, 2013

Sales Tax Revamp

Governor Jan Brewer proposed a major revamp today of how sales taxes are collected. But Arizona Public Radio's Howard Fischer reports there is pushback from cities that fear losing money.

In its basic form, the measure simplifies the tax code, limiting the ability of cities to tax items not subject to the state levy and restricting their ability to audit businesses. But the real heartburn is coming for the change in the contracting tax. Under the current system contractors pay tax to cities where they work based on 65% of the total price, what is presumed to be the cost of materials.

This measure would have taxes collected when and where the supplies are purchased. Representative John Kavanagh said that's not fair to communities with lots of construction but few lumber yards and building supply firms. Kavanagh said, "it will drain money from their revenue stream and divert it elsewhere. And I don't see how a policy that creates winners and losers is simplification policy."

But, Representative Debbis Lesko said the change will produce more revenues overall and the state will share more of what it collects with the cities. "So we're going to get money coming in if we change it to the point of sale because you can't really cheat that way. And so there's going to be a bigger pot of money in the state general fund distribution base," Lesko said.

Governor Brewer said the bottom line is that simplifying the sales tax system will mean less work for businesses so they can spend more time making and selling things.