House Democrats to Brewer: ‘We’re ready to work together to simplify the TPT process’
STATE CAPITOL, PHOENIX – House Democrats today sent a letter to Gov. Jan Brewer expressing general support for her efforts to simplify and reform the Transaction Privilege Tax. The letter also highlights concerns that her current plan could result in local governments losing revenue and could alter the TPT collection process to the point that the law becomes ineffective and the system more complicated.
“House Democrats believe that TPT reform is necessary to enable employers to spend more time creating jobs and improving Arizona’s economy, instead of navigating difficult and multi-jurisdictional tax systems,” Assistant House Minority Leader Ruben Gallego, D-Phoenix (District 27), said. “The governor’s bill is a good starting point. We’re ready to work together to simplify the TPT process.”
Gallego added that TPT reform is needed to better position the state to take advantage of policy changes being considered at the federal level that would allow Arizona to apply the TPT to Internet transactions.
“This could create $700 million in revenue for the state, which we can invest in creating jobs and funding education,” Gallego said. “Also, it levels the playing field for the local businesses that are already charging TPT and competing with Internet businesses that are not.”
The governor’s plan to reform the TPT is contained in HB 2657. This bill would make several changes to the structure and administration of the TPT and affiliated taxes to establish uniform, state-level administration of tax-related activities and would grant counties permission to impose a use tax.
“Although we agree that we need a simplified TPT system, there are some portions of this bill that are problematic,” Rep. Mark Cardenas, D-Phoenix (District 19), said. “We’ve let the governor know about these concerns. Specifically, the legislation could jeopardize revenue for local governments. It also could place an unreasonable burden on the Arizona Department of Revenue to collect the TPT. This could result in a significant cost to the state or an inability to implement the legislation effectively. In turn, this could cause the TPT collection and auditing process to become more arduous for businesses and local governments.”
The letter to the governor includes suggested changes to the legislation that would result in a bill that the House Democratic Caucus would support. The changes are as follows:
1) Ensure that local governments will not lose existing TPT revenues. This could be accomplished by removing the prime contracting sales tax changes from the bill or potentially establishing a new formula for revenue sharing that holds the cities harmless from revenue loss. HB 2657 could pass and accomplish its stated goals without the inclusion of the prime contracting sales tax provisions.
2) Allow cities the discretion to continue using their collection portal or contract with ADOR for collections activities. As long as this process looks the same to the businesses paying the taxes and no additional fees are assessed on the taxpayer, giving the cities this choice continues to meet the goals of the reform effort while preventing ADOR from being overburdened with this additional responsibility.
3) Allow the cities to have the flexibility to meet audit requirements with their own city auditors. Each city and town is unique, and local government auditors will be better equipped to address, and more sensitive to, the specific concerns of small businesses in their own areas. In addition, there are concerns that, due to recent budget cuts, ADOR lacks the capacity to take on additional auditing responsibilities at this time.
“If we can find a way to address these issues, then House Democrats will support the governor’s bill,” House Minority Whip Bruce Wheeler, D-Tucson (District 10), said. “We’ve been very direct about that. We support TPT simplification and look forward to working with the governor and the bill’s supporters to address these concerns so that Arizona businesses can enjoy a TPT system that is easier to work with and is more equitable.”