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  • August 31, 2015

Brewer done altering tax reform bill

Govenor wants movement, but construction tax shift a hard sell

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Posted: Friday, May 10, 2013 1:06 pm

PHOENIX -- Gov. Jan Brewer said Tuesday she is opposed to making further significant compromises in her bid to revamp Arizona laws to pave the way for the state to start collecting taxes on purchases made on the World Wide Web.

Brewer acknowledged the legislation she pushed to alter state tax laws is stalled for the moment. It cleared a single Senate committee but has yet to come to either the House or Senate floor. But failure to act locally could leave Arizona out of the money, at least for the time being.

The U.S. Senate voted Monday to approve the Marketplace Fairness Act. It permits states that have simplified sales tax laws to force out-of-state retailers to collect and remit the proper taxes.

That measure is backed by “brick and mortar’’ retailers, ranging from major chains to mom-and-pop operations, who contend the ability of internet retailers to avoid state and local taxes gives them an unfair advantage. But some congressional Republicans contend it is little more than a bid by states to hike taxes.

It now goes to the U.S. House, though its future there remains less clear, though President Obama has signaled his support.

Only thing is, Arizona’s complex sales tax code does not comply with what the federal legislation requires.

In anticipation of the federal changes, Brewer put together a special panel to recommend changes. But its proposals to put Arizona tax laws into compliance have been blocked, at least in part because of the fear by cities that some of the changes in how contracting is taxed at the local level will leave them with less money than they now collect.

Brewer already has caved a bit. She agreed to add language designed to preserve the right of cities to continue to collect some – but not all – of those taxes.

But Rep. Debbie Lesko, R-Glendale, who is shepherding the measure through the Legislature for the governor, acknowledged Tuesday she is still trying to line up support.

That leaves the question of whether the governor will agree to further concessions.

“We’re not going to compromise to the point where we disrupt anything,’’ the governor said. And Brewer said that, right now, she is “feeling pretty comfortable’’ she can line up the votes.

Still, she conceded, the plan may need “a couple of tweaks.’’ Brewer, however, declined to be specific.

The state legislation has two main ingredients. One would limit what things cities can tax that are not taxed at the state level. The more controversial provision would scrap the current system where new construction and repairs are taxed in the community where the project is constructed. Instead, contractors would pay the regular state and local sales taxes on their building supplies at the time of purchase.

More to the point, those taxes would be collected in the community where the supplies are bought.

That has raised alarm from some rapidly growing suburban cities and towns who fear that developers will be picking up their supplies – and paying their taxes – elsewhere.

Lesko is defending the “point of sale’’ approach.

She said the current system results in “leakage,’’ where contractors buy supplies without paying taxes and then use them in projects where the taxes are not captured.

Brewer and Lesko have agreed to a partial deal: Cities could still collect the equivalent of a sales tax on local construction of new homes and commercial buildings. Lesko called that “a huge concession.’’

City officials, though, have said that still leaves them out of the money on the repair and reconstruction work done by contractors. And in some cities they say that is a significant chunk of change.

Lesko said the cities’ continued opposition “obviously is a factor’’ in her bid to line up votes. But so far neither Brewer nor Lesko has shown any sign of giving in to the demand to leave the contracting taxes alone.

And that leaves the stalemate.

“I honestly don’t believe that the cities would agree to anything,’’ Lesko said. But she said she’s not giving up.

“My goal is to help the businesses, the employers – and to pass whatever bill will get the needed votes,’’ Lesko said.

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