HB2111: Effective 1/01/2015HB2111: Effective 1/01/2015First, An Important Update!

State Administration Predicated on providing 18 Self-collecting Cities with data

consistent with their current systems Gross receipts, separate deductions, amount paid

-- By Classification, by each Location in townADOR originally planned to focus only on making changes for the 18 required by statuteWe are working with ADOR to include ALL Program cities in the changes, giving you the expanded data the Self-collecting cities have enjoyed

Model City Tax Code…Model City Tax Code…

… is designed to assist the business community in determining which items are taxed by each individual city and town and which items are exempt from taxation.

HistoryHistoryBefore 1984:

Each city and town created and maintained its own code, making multi-jurisdictional business increasingly complex.

1984: •State and Phoenix Chambers attempt preemption of local sales tax authority. •Legislature creates the Municipal Sales Tax Study Commission, includes policy makers and business leaders.

History ContinuedHistory ContinuedMunicipal Sales Tax Study Commission:• Joint Licensing• Joint Auditing• Coordination of State & Local Sales Tax

Regulations• Model Tax Reporting Form• Model City Sales Tax Code

1985:• First draft completed. • Business community rejects draft.• Second draft completed.

History ContinuedHistory Continued1986:• State Chamber attempts to

mandate a uniform base through preemption legislation

• Third Draft distributed to cities and business community

1987:• Preemption bill fails• All cities adopt Model City

Sales Tax Code

History ContinuedHistory Continued1988:• Legislature creates Model Sales Tax Code

Commission, includes city representatives, business leaders, and the Director of DOR.

• Business community agrees to 4 years of peace

1993:• Tucson Chamber creates bill to place Model City

Tax Code in statute. Bill fails.• ATRA and business community pursue

preemptive legislation for 1994 session.

History ContinuedHistory Continued1994:• ATRA bill fails• Negotiations produce compromise:• Cities adopt set of amendments for

manufacturing and TP rights• 5 years of no preemption legislation.

1999:• Limited municipal authority to go outside the Model

City Tax Code• Form Joint Legislative Study Committee to pursue

elimination of the Model City Tax Code.

History ContinuedHistory Continued2000:• Study Committee gives no substantial

recommendations• Non-program cities agree to administrative changes:• Joint auditing at the taxpayer’s option (MJAC)• Consistency between cities and interpretations

• Establish Municipal Tax Hearing Office for Appeals.

Continuing Themes:• Business community dislikes complexity• Cities want to maintain local authority• Bipartisan support for change• Proactive approach is critical• Few states allow this much local control

SummarySummarySections and RegulationsSections and Regulations

Main Goal:Provide a greater degree of simplicity and uniformity to ease the burden on businesses.

IndexIndex• Article I – General Conditions and Definitions• Article II – Determination of Gross Income• Article III – Licensing & Recordkeeping• Article IV – Privilege Taxes• Article V – Administration• Article VI – Use Tax• Article VII – See Prescott, Williams, Winslow and

Yuma individual pages; Access to Care

Sections and RegulationsSections and Regulations

SummarySummaryAppendicesAppendices

Retain the right of individual cities and towns to determine the items taxed, and exemptions granted.

Examples:•Tax food•Residential Rental•Use tax

IndexIndexAppendicesAppendices

• Appendix I – Modifications to Model City Code for Cities and Towns in the State Collection System

• Appendix II – Model Options• Appendix III – Local Options• Appendix IV – Modifications to the Model City

Tax Code for Cities and Towns in State Collection System Performing Supplementary Local Audits

Model OptionsModel OptionsAppendix II & III: The OptionsAppendix II & III: The Options

Allows Cities and Towns to omit language from the Model City Tax Code.

Local OptionsLocal OptionsAllows Cities and Towns to add or substitute language to the Model City Tax Code.

Option ChartsOption ChartsDisplays every option that each city has chosen in a concise and comprehensible way.

Unified Audit CommitteeUnified Audit CommitteeThe UAC is a group of local tax officials and DOR representatives that coordinate joint audit activities among the various jurisdictions. The UAC also publishes uniform guidelines that interpret the Model City Tax Code.

SummarySummaryMunicipal Tax Code CommissionMunicipal Tax Code Commission

The MTCC considers important business related to the Model City Tax Code and creates an annual report for legislative leadership.

10 members:• 1 representative from the Department of Revenue• 9 Mayors or Councilmembers from various cities

Five are appointed by the Governor, and two each from the Senate President and the Speaker of the House. No more than two members may be from the same city or town, and each have a term of 3 years.

What is on the Horizon?What is on the Horizon?

•HB2111HB2111•Model Code Update EffortsModel Code Update Efforts

HB2111: Effective 1/01/2015HB2111: Effective 1/01/2015Three Key Aspects:State Administration

One point of contact One tax return; one point of collection Online portal

Single Audit All audits cover all jurisdictions State & City auditors; administered by ADOR Audit Manual; Training; Certification One appeals process

Contracting Shift taxation of Repair Contracting to tax materials at the

contractor’s point of purchase

HB2389: TPT Clean-up BillHB2389: TPT Clean-up BillKey Aspects:Licensing

State adopts annual renewal City tax license capped at $50; penalty $25 Concern: No license for Use Tax/Zero TPT Liability

Contracting Changes Repairman deduction to exemption

License Renewal Requires ADOR to send a single renewal for 2015 covering

all jurisdictions ADOR plans to use responses to build taxpayer database

– We want conversion of our existing taxpayer dataOnline portal

Eliminated – AZTAXES.GOV Requires all taxpayers with 2 or more locations to file online

Model Code UpdateModel Code UpdateWe continue to seek ways to simplify the tax code and bring us closer to uniformity with the State code while retaining the authority of local jurisdictions to adapt the code to the local economy.

Ongoing elimination of Green Page itemsChanges to the Retail classificationUniform LicensingSeparation of Residential & Commercial RentalManufactured HousingReduction and Reorganization of Options

1820 W. Washington StreetPhoenix, AZ 85007

www.azleague.orgwww.azleague.org

602-258-5786

ModelCityTaxCode.az.govModelCityTaxCode.az.gov

Lee GrafstromTax Policy Analyst