Voluntary Disclosure SystemsVoluntary Disclosure Systems

State and City Voluntary Disclosure Procedures Should be Uniform

Procedures, Requirements, and Allowances Should be Codified Within the Taxpayer’s Bill of Rights for both the State and MCTC

Application for Voluntary Disclosure to One Jurisdiction Should Result in Disclosure for All Jurisdictions

Model City Tax Code SimplificationModel City Tax Code SimplificationBy December 31, 2013: Eliminate All “Green Page” Exceptions Complete Reduction of Current Options

27 Options Presently Identified for Removal 14 Options Identified for Incorporation into

the Standard Language Renumber the Remainder in a Single Series

Classification Changes: Separate Food for Home Consumption; Split Residential & Commercial Rental; Replace Transporting for Hire with the State’s Pipeline & Transportation Statutes

Retail Classification StandardizationRetail Classification Standardization

Make All Immediately Feasible Changes to the State and MCTC Retail Classifications, Effective July 1, 2013

Identify Differences Requiring Fiscal Impact Research & Gather Data Needed for Further Consideration

Be Prepared to Act on Any Remaining Differences If Congressional Action Allows Taxation of All Remote Sellers.

Standardize City TPT LicensingStandardize City TPT LicensingBy June 30, 2013; Effective January 1, 2014 Reform Article III of the MCTC

Single License Fee Per Jurisdiction Annual License Renewal Quarterly Proration for First Year Uniform Temporary License Provisions Add Penalty Waiver Provisions

Retain Permanent License Option For Now

Online Portal ProjectOnline Portal Project Expedite Portal Creation to be Online ASAP Revised Goal: Operational Target Date of January

1, 2014 for Self-Collecting Cities Single Point to File Returns and Pay Single Point of Licensing and Renewal Detailed Reporting Capability for Revenues

and Exemptions by Tax Classification Automate Upload Capability for Taxpayers

Once Vetted, Add the State Return and Licensing to Create a Single Point of Administrative Contact

State AdministrationState Administration DOR will absorb all responsibility for the

18 cities that collect their own sales tax, passed by 6/30/2014, in place 1/1/2015

Self-collecting cities cover 74% of the State’s population; 77% of city revenues

Unlike self-collecting cities, DOR cannot provide segregated, detailed information about city taxpayers and revenues

No guarantee that the legislature can or will fund DOR at an adequate level

Single Point of AuditSingle Point of Audit Make DOR the sole auditing authority,

eliminating all local audit programs Adequate audit activity ensures a level

playing field and keeps tax rates low Local audit programs invest in taxpayer

education; work closely with local business owners; address local issues

DOR’s focus is required to be on larger taxpayers and statewide issues

Multi-jurisdictional auditing (MJAC) is a proven system offering single audits available to all businesses in Arizona

Eliminate Contracting TaxEliminate Contracting Tax Replace with a Retail tax on construction

materials, paid at the point of purchase We are NOT opposed to sensible changes

to simplify Contracting, HOWEVER: A massive tax break for the Contracting

industry, dressed up as simplification Dismantles 80 years of solid public policy

developed to address reliance on growth. Jeopardizes State and local budgets,

primarily relying on data from a 1999 study, without current information indicating the true impact on revenues

Eliminate Contracting Tax Eliminate Contracting Tax (cont’d)(cont’d) Without additional data, the level of

noncompliance is purely speculative. Lack of accurate information could significantly impact the State’s General Fund

Shifts revenues away from the local demands created by growth

Statewide, municipalities will lose up to $168M in local sales tax.

Cities, towns, and counties will not make up this loss through Retail taxes.

Eliminate Contracting Tax Eliminate Contracting Tax (cont’d)(cont’d) Construction is essentially a

manufacturing and repairing process. Under this proposal, the product will be treated differently than all other manufactured products.

Giving preferential treatment to the Construction industry ultimately comes at the expense of all others

SOLUTION: Commission a study by third party to gather information and model impacts proposed by policy change.

ConclusionsConclusions• DOR is strapped for resources. Given the many

strains on the General Fund, cost-free alternatives should be utilized. State Administration demands a significant funding increase to work.

• Local auditing supplements State activity. Losing local audits leads to lower revenues, lower compliance, and rising taxes, without improving on the current multi-jurisdictional system.

• Much more information and study is needed before fiscal stability is risked, simply to give one industry a big tax break.