One of the state’s current legislative issues that’s clearly piqued the attention of Mesa Mayor Scott Smith is House Bill 2111, which affects the manner in which cities collect sales taxes.
He called adjustments the bill proposes to the collection of construction sales tax “troublesome,” at his monthly media briefing Tuesday in his office at Mesa City Plaza.
“If the assumptions that were used in formulating the proposed law don’t play out, it could create significant revenue losses at both the state and the city level,” said Smith. “Our contention is simply that with so much disagreement over whether these variables and the assumptions that were made are correct, this is a subject that warrants more study.”
Smith stopped short of writing off the potential for common ground, calling many of disagreements on data “reasonable.”
Smith suggested a committee be formed to bring into the process municipal leaders to help the state examine the true effects of the proposal.
“We want to know exactly how much of a construction project is in materials and how much is in labor,” Smith said, adding: “We want to know the consequences, the real consequences … if we shift from a collection of construction sales tax at the revenue level — in other words when you finish a house, when you finish a project — to the point of purchase of materials, which is what has been proposed.”
Smith said the measure could lead to huge tax breaks for a select number of businesses, costing the state government about $140 million, alone on top of potential losses in the million for individual cities. He also said the irreversible nature of such tax breaks is another reason for caution.
“If you go down that road … un-ringing the bell — undoing that is nearly impossible,” Smith said.
Smith said he does not foresee agreement coming quickly enough for the measure to be a good risk for cities.
Other elements to the bill that Smith said he and other mayors around the state are working on are what Smith called the single-license, single-pay and single-audit elements of the bill.
Currently, companies that do business across municipalities often have to get sales tax licensing from, pay taxes to and receive audits by each municipality.
Smith said language in the bill essentially eliminates city auditing departments and puts tax collections solely in the hands of the state.
Smith said cities are better equipped to calculate their own sales taxes, adding that most of Mesa’s 25,000 sales-tax license holders do business in Mesa exclusively.
But he said the simplifications are necessary and negotiations are close to fruition.
“Single license, single audit, single pay — we believe we’re very close on all those,” Smith said.
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