Casa Grande Dispatch
Arizona legislators are considering a bill that would simplify sales tax collections. That is desirable, because the process is much more complex than it may seem to the casual observer. But the fix itself is complicated also, and House Bill 2657 needs some changes if it is to become law.
The city of Casa Grande and other cities have opposed a key point of the bill, one that deals with collection of taxes on construction. Now the Legislature’s own analysts are questioning the impact. They say that the streamlining bill, favored by Gov. Jan Brewer, could cost the state coffers $137 million annually. Another part of the analysis says the state could gain $19.5 million by ensuring sales tax is col- lected and expanding what it applies to.
The bill would do away with the current system of calculating construction tax after a project is finished. Instead, it would collect tax at the point materials are purchased. Cities such as Casa Grande fear that would mean a major loss of sales tax to them, especially when the materials are purchased elsewhere. Casa Grande got a windfall when construction was booming and did a good job of using it for one-time spending rather than incurring new regular costs.
The City Council last week passed a resolution supporting the concept of tax simplification but also opposing a radical change in the construction tax. The bill also would prohibit cities from collecting sales tax themselves and employing auditors to ensure businesses are paying, some- thing that cities generally oppose. Arizona cities generally approve of seven of 10 changes proposed, but Casa Grande would lose an estimated $1.5 million annually under the bill as written.
Construction sales tax adds to the cost of building and poses a danger of addicting jurisdictions to growth cycles, but if used properly it can help to cope with the costs of growth. The recent audit report showing the downside of HB2657 to the state should give momentum to the idea of amending the bill.
The measure probably can be salvaged, but it obviously needs changes, especially in the area of the construction tax.
