First committee hearing for business tax overhaul bill

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by David Baker

azfamily.com

Posted on February 19, 2013 at 11:44 AM

PHOENIX -- An Arizona House of Representatives committee held its first hearing Monday on Gov. Jan Brewer's proposal to overhaul the state's complex sales tax collections system.

Brewer first announced the bill last week and it was assigned to the House Ways and Means Committee. Under the proposal, businesses would only face a single audit from the state to determine if they paid the right amount of money. The current system has them filing multiple returns with towns and cities. The bill would also limit cities' ability to decide on their own which items are taxable.

"This legislation is going to help taxpayers," said Rep. Debbie Lesko, R-Peoria, chairwoman of the House Ways and Means Committee and sponsor of the bill. "It's going to free up capital and allow businesses to hire more workers."

At Monday's hearing, Michael Hunter, Brewer's director of policy, emphasized that Arizona's current transaction privilege tax (TPT) system is severely outdated. He said 47 other states already have a system that the governor is proposing.

"There are huge problems with the current structure," Hunter told the committee. "The complexity, the confusion, frustration, legislation, litigation, and non-compliance associated with our current system are far disproportionate to the revenue it generates."

However, some lawmakers and cities object to a controversial provision in the bill, concerning taxes on construction. Right now, taxes are paid where the construction is. The provision would change that to where the materials are sold.

Surprise Mayor Sharon Wolcott said her city will lose millions of dollars in TPT construction taxes and the revenue sharing from the state won't be enough to compensate.

"Now what we're looking at is $5 million in losses and what your proposal does is in return for the $5 million in loss, $700,000," Wolcott told the committee. "That is not sustainable. We're talking about cutting police and fire off our streets."

The proposal has a long way to go before getting to the House floor. 

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