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The Governor's Transaction Privilege Tax (TPT) Task Force

Background

On May 11, 2012, Governor Janice K. Brewer issued an executive order establishing the Transaction Privilege Task Simplification Task Force. The purpose of the Task force was three fold: Read full text of the Task Force recommendations

  1. Address the Arizona transaction privilege tax structure (privilege tax is Arizona's equivalent of sales tax), which was deemed to be overly complex
  2. Address tax payer desire to have a simpler and "modernized" tax code
  3. Provide for greater levels of understanding and transparency to aid compliance with Arizona's Transaction Privilege Tax (TPT)

Recommendations as put forth by the Task Force were as follows:
  1. State and local governments should work to standardize tax base definitions
  2. Future changes to the tax base should be done with standardization in mind and with full disclosure regarding potential impacts
  3. Make the Arizona Department of Revenue the sole collector of TPT in Arizona
  4. Standardization of TPT licensing
  5. Full implementation of an on-line portal (as required by HB 2466) that would standardize and simplify the business license application and TPT return filing processes
  6. The Arizona Department of Revenue should perform all audits state wide
  7. That state and local governments should continue to seek public input regarding pending federal legislation to tax on-line remote sales, and to convey that feedback to their congressional delegation.
  8. Ensure Arizona is well positioned to benefit from any legislation passed regarding on-line sales
  9. Continue to provide economic analysis regarding potential impacts of the taxation of on-line sales
  10. That the state and localities should change the taxation of contracting activity from a destination tax to a tax on materials at the point of sale

Areas of Concern

While the City of Goodyear is in support of most of the recommendations made by the Committee, we have several areas of concern: 

#10 - That the state and localities should change the taxation of contracting activity from a destination tax to a tax on materials at the point of sale.

Changing taxation of contracting materials from destination (where the products are used) to point of sale (where the product was originally sold) would have a significantly negative impact on our revenue stream. In FY13 it is anticipated that we will collect approximately $6.5m to $7m in construction sales tax. Under the Task Force proposal we would lose all of that revenue. These revenues are used to fund one-time expenditures such as capital projects. As the economy continues to recover and demand for capital projects grows we will be at an even greater disadvantage in funding those projects. The result of the recommendation will therefore move funding away from growth, where it is needed to serve growing populations.

#6 - The Arizona Department of Revenue should perform all audits state wide.

It is our position that requiring the Arizona Department of Revenue to perform all audits statewide places an undue burden on the State at a time where balancing the annual State budget has proven difficult. Given the limited resources available at the State, and given the effectiveness of a municipality's ability to perform audits more tailored to activities within their boundaries (particularly for small businesses), it is difficult to see why there would be any benefit in changing the current system.

#3 - Make the Arizona Department of Revenue the sole collector of TPT in Arizona

It is our position that mandating that the Arizona Department of Revenue be the sole collector of TPT, given the limited resources available at the State, would likely result in a reduction in the level of effectiveness currently enjoyed by allowing localities to monitor the revenue generation activities within their boundaries. This is all the more true when one considers the significantly increased burden of collecting revenues currently collected by non-program cities, some of whom are amongst the largest cities in the State. And while the City of Goodyear does not currently collect its own TPT, staff has been directed to research what would be involved in making that transition.

At present there is no bill that has been put forward at the legislature. But this should not stop you from contacting your legislators and voicing your concerns for a bill that could have a significantly negative impact on our ability to continue to provide some of the services and programs you currently enjoy.

Read Letter signed by West Valley Mayors


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City of Goodyear • 190 N. Litchfield Road • Goodyear AZ 85338 • Phone 623-932-3910 • Toll-Free 1-800-872-1749