On Monday, Gov. Brewer released a legislative proposal to reform the state’s cumbersome and complex transaction privilege tax, commonly known as the sales tax. The plan is based on the recommendations of the governor’s Transaction Privilege Tax Simplification Task Force, convened last summer, which spent nearly six months looking to other states, hearing public comments, and receiving input from cities, towns, and state policymakers.
The plan is rightly aimed at Arizona’s long-term ability to compete economically with other states by targeting three main elements of the sales tax system:
1.) Stop multiple audits. Many cities have the ability to audit a business even if the state already has audited them on the same set of transactions. This incentive for multiple audits needs to stop, and this plan would institute a “single audit” requirement that would put Arizona on par with many states that don’t allow multiple audits.
2.) Standardize the collections of sales taxes. This reform would make the Arizona Department of Revenue the only collector of sales tax revenue in the state. This would free up resources at the local level and would eliminate confusion from businesses that are currently forced to deal with multiple tax collection bureaucracies.
3.) Goods will be taxed at the point-of-sale. The present system maintains a “prime contractor” category that requires construction companies to pay taxes to multiple jurisdictions when they buy their supplies in one tax jurisdiction but the job site is in other. The proposal eliminates that category and treats contractors like any other business and taxes their supply purchases at the point of sale.
Arizona is behind the curve on making our sales tax system simpler and saner. Getting us up to snuff with forty-six other states will finally clear a path for Arizona policymakers to enact the sorts of big-picture tax reform that can finally put us ahead of our competitor states on tax policy. Governor Brewer’s plan is a vital first-step in that very important direction and should be supported as proposed.
Office of Governor Brewer: Transaction Privilege Tax Simplification Task Force Final Report
Arizona State Legislature: Governor Brewer’s Proposal
Goldwater Institute: A New Tax Plan for a New Economy