Retailers hope to save tax-collection credit - East Valley Tribune: News

Retailers hope to save tax-collection credit

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Posted: Sunday, March 14, 2010 4:40 pm | Updated: 3:24 am, Sat Oct 8, 2011.

Arizona retailers are going to make one last try to keep a special tax break they receive.

Arizona retailers are going to make one last try to keep a special tax break they receive.

One provision of the budget package agreed to between Republican legislative leaders and Gov. Jan Brewer would wipe out a credit retailers get that is designed to help defray the costs of collecting state sales taxes. The move would generate about $19.4 million for the state.

The House voted 50-9 to authorize the legislation late Friday. But the bill stalled in the Senate when they could not marshal the necessary 20 votes for approval, two-thirds of that chamber.

It now is set for vote on Monday. That gives Michelle Ahlmer, executive director of the Arizona Retailers Association, one last chance to see if she can convince 11 senators that the credit should be preserved.

"We've been making some calls," she said.

But Ahlmer admitted she's not optimistic. "It looks like the train has left the station," she said.

The credit, approved by lawmakers in 1984, is based on the argument that retailers are acting as agents of the state when they collect sales taxes. It allows each retailer to pocket 1 percent of the amount of the tax due, up to $10,000 a year.

Ahlmer said a study conducted for her organization shows that it doesn't really cover the costs.

"The average, across all sectors of retail, large versus small, is 3.9 percent to collect it," she said. That covers the administrative costs of figuring out what is owed, filling out the forms and getting the check in the mail.

"The fact that we're getting 1 percent now at least defrays that cost a little bit," she said.

Ahlmer said she recognizes that the Legislature is trying to plug a $2.7 billion hole in the budget for the coming year and looking for every dime it can find. But she said that once the credit disappears, it may be impossible to get it back.

There is a flaw, though, in Ahlmer's contention that retailers are simply collecting a tax from consumers on behalf of the state.

Technically speaking, Arizona does not have a "sales tax." Instead it has a "transaction privilege tax." And while that is usually passed on to and paid by the consumer, it actually is a levy against the merchant.

"That's very true," Ahlmer conceded. But she said that difference is immaterial to her merchants.

"It doesn't change the nature of our claim," she said. "Maybe it should, but it doesn't."

The reason the measure needs 20 votes is that the Arizona Constitution mandates a two-thirds vote for any measure that increases state revenues. While that hurdle normally applies to tax hikes, it also is a requirement for reducing or eliminating any existing tax credit.

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