If not revised, tax simplification bill would punish high-growth areas like Gilbert
After nearly a decade of studies and meetings, Arizona is on the cusp of passing true reform to its Transaction Privilege Tax (TPT). The introduction of Governor Brewer’s tax simplification bill, House Bill 2657, brings with it great opportunities for Arizona businesses.
The current bill is a result of months of extensive deliberation by Governor Brewer’s TPT Simplification Task Force, which issued 10 recommendations to simplify Arizona’s complex tax structure and aid small and large businesses struggling with compliance. We applaud the Governor’s efforts. Tax simplification is long overdue and change needs to occur if Arizona is seriously interested in economic growth and job creation.
The Town of Gilbert and the Gilbert Chamber of Commerce are in agreement with the TPT Task Force recommendations that state and local entities should work to standardize the tax base, definitions and interpretations. That any future proposed changes to the tax base be scrutinized and budgetary impacts clearly understood. That TPT licensing should be standardized and support for federal legislation allowing state taxation of online retail and remote sales. That the online portal required and authorized last year should be expanded to have all licenses issued and all TPT tax returns filed through it, allowing for a single point of entry for businesses. And, that a single audit will be sufficient over a certain period of time eliminating the current frustration of multiple audits being performed by either state or local auditors.
The portion of House Bill 2657 deserving more discussion and dialogue is the proposed elimination of the construction sales tax in favor of a tax on materials at point of sale. This is a massive shift in tax policy that severely punishes high-growth communities such as Gilbert. The Town of Gilbert appreciates the frustrating challenges that impact the ability of our smaller service providers (local plumbers, HVAC repair services, computer services, etc.) to keep their doors open and keep good employeesunder the current prime contracting system and agree this must be resolved. At the same time, Gilbert, along with 90 other Arizona municipalities, relies on construction sales tax to fund costly construction infrastructure improvements that come as a result of growth. These revenues go toward critical items such as streets, police cars, putting officers on the street and fire departments in neighborhoods — all the things a growing community needs.
A tremendous amount of time and energy has been expended on this piece of legislation, and the Town of Gilbert and Gilbert Chamber are supportive of efforts toward a revised bill that does not shift the tax revenues needed by communities like Gilbert and reduces the administrative burden on local service providers classified as prime contractors. We believe through continued deliberation, discussion and compromise, a solution may be found that does not harm municipalities and at the same time, helps our small businesses. Such a solution will bring positive change to Arizona and create a business climate that will be the envy of the nation.
John W. Lewis is mayor of the Town of Gilbert. Jon Olson is the board chairman of the Gilbert Chamber of Commerce.