By Howard Fischer | Capitol Media Services | East Valley Tribune
Gov. Jan Brewer formally proposed an extensive revamp of how Arizona collects sales taxes, drawing immediate fire from cities that fear major financial losses.
In its simplest form, the legislation would limit the ability of individual cities to decide on their own what items are taxable. Creation of a “uniform tax base” would allow Arizona to begin collecting taxes on Internet sales if Congress ever gives its approval.
It also would ensure that businesses would face only a single audit from the state to determine if they had paid the correct amount, eliminating separate reviews by each city.
But the most controversial part would scrap the system where taxes on construction and other kinds of contracting are collected where the work is done. In essence, contractors determine the price of the job and then pay taxes on 65 percent of that, the part that is presumed to be for materials, with the beneficiary being the city where the work is done.
Under this plan, contractors would pay regular state and local sales taxes at the time of purchase on the items they buy — and to the retailer who might be in another city entirely.
Senate President Andy Biggs said that makes this plan a non-starter, at least in its current form.
He said this creates financial problems for rapidly growing communities — especially if the contractors buy their items in other cities. Biggs said that would create a shift of needed funds away from the cities that, by virtue of their growth, are incurring the costs of services.
