Governor's sales tax proposal may not add up

February 11, 2013

Lawmakers prepared for a fight over sales tax reform at the state capitol Monday. Supporters say one piece of a new bill will simplify a complex system that is time consuming and burdensome to businesses. But as KJZZ’s Al Macias reports many Arizona cities fear they could be hurt by it.

sales tax Gov. Jan Brewer unveils her sales tax proposal at the state capitol on Monday. (Photo by Al Macias - KJZZ)

AL MACIAS: Governor Jan Brewer was surrounded by business leaders and state legislators at her morning news conference.

JAN BREWER: I want Arizona to be the easiest place in the country for small businesses to set up shop.

MACIAS: Part of that simplification would be to change the way the construction sales tax is collected. Under the current system, sales tax rates depend on where and what kinds of business is conducted. Andrew John owns a refrigeration repair service. He explained the problems small business owners like him face when working in so many cities.

ANDREW JOHN: Under the current tax laws we would need about 10 different price books in each one of our trucks, just to collect the correct ax from each one of our customers at the time we are there in each city.

MACIAS: Under the proposed legislation the taxes would be collected on raw materials at the point of sale, rather than the city where the final product is completed. So if the lumber for a new home in Gilbert is purchased in Phoenix, then Phoenix gets the sales tax. Supporters say simplifying the process benefits all cities in Arizona. But Ken Strobeck with the League of Cities and Towns says the governor’s explanation doesn’t make sense.

KEN STROBECK: Theory is that Phoenix revenue would go into the state shared revenue pool and then would be distributed and somehow since there’s an increase in the total volume, somehow the town of Gilbert would be made whole. We just don’t think those numbers add up.

MACIAS: Strobeck says cities could lose millions of dollars in tax revenues if governor’s proposal makes it through.

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