Cities oppose changes to construction sales tax
PHOENIX — Arizona’s cities and towns are worried a proposal to change how sales taxes are collected from building projects will severely cut the amount they receive from new construction.The reforms outlined in a report by a task force appointed by Gov. Jan Brewer would have contractors pay sales taxes where they buy materials. That’s a big change from the current system that assesses sales taxes on a percentage of the project’s value.
The Arizona Republic reports (http://bit.ly/W0oV1m ) the League of Arizona Cities and Towns estimates cities could lose $168 million a year. That’s because sales taxes that now go to municipalities where a project is built could instead be collected where construction materials are actually sold.
The potential revenue from construction-related taxes helps pay for crucial city services.
“In Scottsdale, we don’t have a lot of places where they purchase these materials,” said Brad Lundahl, Scottsdale government-relations director. “We would lose out on those taxes.”
The reform was outlined in a final report to Brewer on ways to simplify the state’s sales-tax system, which is often criticized as one of the most complicated in the nation.
The report includes a long list of concerns from the cities about the construction sales-tax change. Any change requires action by the state Legislature.