By Luige del Puerto | Arizona Capitol Times
The outlines of a potential compromise between municipalities and supporters of a bill that seeks to simplify the state’s sales tax system emerged this month, a few days after the governor’s office pitched the idea to mayors.
Gov. Jan Brewer has been at odds with cities over key elements of her sales tax proposal. Supporters believe it is necessary to allow Arizona to take advantage of federal legislation to collect remote sales taxes from online transactions.
But cities have been worried about the measure’s impact on their finances. They oppose a provision to eliminate the construction sales tax and to collect taxes on construction materials at the point of sale. Currently, the tax revenues are split with the municipalities where construction activity is taking place.
On March 1, the governor proposed allowing municipalities to continue to tax construction activity while the tax on materials would be collected up front at the stores wherever they are purchased.
Kevin McCarthy, president of Arizona Tax Research Association and of the bill’s ardent advocates, said supporters are now waiting for a response from the cities.
Rep. John Kavanagh, R-Fountain Hills, who is opposed to the introduced version, told Arizona Capitol Times that the proposed fix looks promising. The bill’s prime contracting provision is, thus far, the legislation’s biggest sticking point.
“The governor’s office made considerable concessions on prime contracting, and I think that’s solvable,” Kavanagh said, adding now the stakeholders can potentially move on to the next sticking point – who does the audits. The Arizona League of Cities and Towns has proposed that the audits be coordinated by the state Department of Revenue.
