Law alters tax-report rules

The Arizona Repubic
Friday, May 10, 2013
Mary Jo Pitzl

Business owners are celebrating a bill Gov. Jan Brewer signed into law Tuesday that streamlines the sales-tax reporting system in Arizona.

“Thank you for fulfilling my dream of 28 years,” Linda Stanfield, owner of Benjamin Franklin Plumbing, said at a bill-signing ceremony packed with business interests and key lawmakers.

But Stanfield will have to wait another 18 months for that dream to come true: The sales-tax-simplification bill won’t take effect until January 2015.

The state needs 18 months to get an online reporting system in place as well as to adopt procedures for businesses to follow. Once those are in place, all sales-tax reports and audits will flow through the state Department of Revenue, giving retailers, contractors and service providers a one-stop shop.

Currently, they navigate different systems in each city where they operate.

The law does not change the sales-tax rate, but it will provide a tax break for consumers, said Rep. Debbie Lesko, R-Peoria, the bill’s prime sponsor.

Service providers, such as handymen or plumbers, will be freed from a contracting tax and required to pay sales tax only on the materials they buy for a repair job. In almost every case, the tax on materials is much smaller than the state’s prime-contracting tax.

Cities and towns worried about the potential loss of sales-tax dollars but ultimately agreed to back the bill with the assurance the state will scrutinize the flow of dollars after the system has been running for a year and a half.

Brewer heralded the bill as “a huge step” toward making Arizona friendlier to business and said it was long overdue.

The state’s sales-tax-reporting system has been crying for a makeover for at least 30 years, dating back to her days in the state Legislature, Brewer said.

“Thirty years of waiting is long enough,” she said as she signed House Bill 2111 into law.

Sen. John McComish, R-Phoenix, served on the task force that created the original recommendations for the state’s transaction-privilege tax, which is the formal name for the sales tax.

He said the new system should allow merchants and contractors to spend more time on their businesses, rather than juggling multiple reports to a variety of cities.

“They spend too much time keeping score and not enough playing the game,” McComish said of his observation of how the current system works.

For her part, Stanfield said, the policy change should allow her staff to spend more of their time on plumbing repairs, not on filing paperwork. That will be a bonus not only for workers but for customers, she said.