HomeMy WebLinkAbout03/13/2013 Council Presentation - Tax SimplificationProposed Transaction Privilege
Tax Changes -HB2657
Wednesday, March 13, 2013
Areas
Transaction Privilege Tax (TPT) and the
simplification effort
Key provisions of bill
Town’s use of TPT revenues impacted
Possible impacts and strategies
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Simplification background
TPT is not a true “sales tax”
It is a tax on the “privilege” of engaging in
business.
TPT Simplification Committee established by
Executive Order 2012-01
Committee’s purpose was to identify
opportunities to simplify the tax code and
issue a report (December 2012)
February 2013 –Introduction of HB2657
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Key provisions of HB2657
State Administration
Arizona Department of Revenue (ADOR) collects
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for ALLcities and towns.
Single point of audit
ADOR conducts ALLTPT audits
–
Cities and towns lose ability to audit
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Elimination of construction sales tax
Moves taxable transactions from job site to point
–
of sale (retail) transactions
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State administration
No option to self-collect
State collects for all cities and towns
Challenges of current ADOR system:
ADOR unable to provide accurate and timely
–
return data
Delay in receipt of funds from ADOR
–
Reliability of ADOR website
–
Current Option:
Web portal was created last year which simplifies
–
administration and remittance
/
Single point of audit
ADOR to conduct all audits
Cities and towns lose ability to audit
Challenges of current ADOR system:
ADOR focuses on large corporate taxpayers, not
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local businesses
ADOR lacks the resources to conduct all audits
–
ADOR already has millions in unpaid audit
–
receivables sitting on the books
Current Option:
Multi-jurisdictional audit coordinator (MJAC)
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already exists.
.
Construction sales tax
elimination
Moves taxable transactions from job site to
point of sale (retail) transactions
Construction taxes comprise:
General Fund -12% ($2.4M/$19.8M) of tax
–
revenues budgeted
Transportation Fund –100% of revenues
–
budgeted for the current year
Current Option:
Keep contracting largely as it is. Make changes
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to trades (plumbers, HVAC, etc.)
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Use of impacted TPT revenues
Audit revenues
$250,000 average annual collections (since 2009)
–
Allocated toward one-time costs
–
Contracting revenues
$5,000,000 average annual collections (since
–
2009)
75% allocated to transportation projects
–
In 2008 the town leveraged $39.8M in bonds
–
$3.4M in annual debt service ($2.4 or 70%
–
allocated to Transportation Fund
,
Possible impacts and strategies
Audit revenue loss:
$250,000 one-time revenue
–
Options:
–
Reduce one-time projects/programs
Contracting revenue loss (estimate):
General Fund -$1,250,000
–
Transportation Fund -$3,750,000
–
Options:
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Restructure debt to minimize General Fund exposure
Begin allocating existing revenues to pay debt
Identify new revenue sources to pay debt
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Questions?
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