It’s important to the nearly 2,600 businesses that the Greater Phoenix Chamber of Commerce represents that policymakers make every effort to create a simplified tax code to promote equity, ease of administration, and increased compliance.
SB 1331 (model city tax code; changes) reinforces a 1988 policy that required cities wishing to impose a sales tax to adopt the Model City Tax Code (MCTC), along with the model and local option preference each city had. The Master Version of the MCTC was maintained by the League of Arizona’s Cities and Towns until 2012, when maintenance responsibility was transferred to the Arizona Department of Revenue.
This system greatly benefited the business community, especially businesses with locations in multiple cities. By referencing the Master Version of the MCTC, businesses could determine which cities imposed which taxes, which items were taxed and other particulars required by the business to ensure full compliance with the law.
Unfortunately, the 1988 legislation required cities and towns that wanted the ability to control their own tax base to adopt the MCTC and inform the holder of the Master Version of the MCTC when an ordinance passed adopted or exempting a specific tax. It did not, however, clarify the consequence of not updating the Master Version of the MCTC.
Without compliance and notifications from cities and towns, businesses cannot rely on the Master Version of the MCTC to ensure that they are collecting and paying the correct taxes. This leaves them potentially liable for a tax they were unaware of and defeats the original intent of the Model City Tax Code.
SB 1331 requires cities and towns that make a change in their tax code to notify the Department of Revenue and the Municipal Tax Code Commission so that the change can be reflected in the MCTC. If a city or town fails to provide notification of a change, the change will be considered null and void, meaning businesses will not be held liable.
The business community supports this measure that will restore reliability to the Model City Tax Code.