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Sales-tax reduction for high-ticket items? Council to hold public hearing Dec. 6
By CAROL BROEDER/Arizona Range News
Willcox residents can tell the City Council their thoughts on a proposal to reduce city sales tax on high-ticket items.
The public hearings are scheduled for Monday, Dec. 6 and Monday, Dec. 20 at 7 p.m. in council chambers, 207 W. Maley St.
City Manager Gilbert Davidson proposed a change to the city's sales-tax structure, allowing for a reduction in sales tax from three to two percent on the sale of a single item or one-day point-of-sale purchase over $2,500.
Mayor Marlin S. "Mick" Easthouse gave the examples of purchasing a car, a trailer, or lumber in a package to build a house.
Councilman Phil Rodriguez asked why the threshold could not be lowered, using the example of getting a tax break on a $1,000 refrigerator bought in Willcox.
Davidson said he considered a number of different businesses in the community that would benefit by this and also did research with the state.
He said that the range with other cities in Arizona is from $500 to $25,000.
"The lower you go, it begins to eat into the street-improvement money," Davidson said. "People from Willcox may not go grocery shopping in Tucson, but they do go for the high-ticket items."
Willcox businessman Jim Martin said that under the current sales-tax code, construction is not considered retail, but rather applies to things sold over the counter.
"Do you want it to apply to construction?" Martin said. "You still have to pay the full transaction privilege sales tax. If you build a $100,000 home, you're exempt from both the state and the city on the first 35 percent."
"If you really want to encourage growth, give them the one percent of the construction of that $100,000 house," he said. "Now we're not talking $25. You're still going to pay that 9.1 percent on 65 percent of your gross sales price. Do you want those people to pay 9.1 percent or 8.1 percent? You're talking about a $100,000 sale -- somebody building a taxable sale."
Martin, a State Transportation Board member, also referred to the Exit 340 project scheduled to begin in May.
"If you want to pay ADOT back a little bit, this construction project on your bridge is going to be $12 million," he said. "Do you want that one-percent to apply to that transaction?"
Davidson said that while only retail sales are being considered in this proposal, future discussions could include construction in the same ordinance or as a separate ordinance.
The change "will promote more shopping locally and enable local businesses to be more competitive with other communities in the trade area," said Davidson in a letter to the council.
Discussion should center on Willcox's ability to attract new retail businesses and retain shoppers as much as possible, he said.
"Sales leakage, whereby customers travel to outside trade areas to purchase items, will never be entirely eliminated," Davidson said. "The goal of a modification such as this is to increase Willcox's ability to compete with other trade areas and decrease sales leakage based solely on tax consideration."
Davidson will consult with the Arizona League of Cities and Towns and the Arizona Department of Revenue prior to implementation, he said.
Once proper review is complete and public hearings conducted, "the council will have the ability to approve the final ordinance with an emergency clause stipulating a start date," Davidson said.
An emergency clause allows the city to implement the plan immediately upon council approval.
All members of the public are invited to attend the December hearings.
Those wishing to comment but are unable to attend the public hearings may make written comments until 4 p.m. on the public hearing days, in the Office of the City Clerk at 101 S. Railroad Ave., Suite B.
The public hearings are scheduled for Monday, Dec. 6 and Monday, Dec. 20 at 7 p.m. in council chambers, 207 W. Maley St.
City Manager Gilbert Davidson proposed a change to the city's sales-tax structure, allowing for a reduction in sales tax from three to two percent on the sale of a single item or one-day point-of-sale purchase over $2,500.
Mayor Marlin S. "Mick" Easthouse gave the examples of purchasing a car, a trailer, or lumber in a package to build a house.
Councilman Phil Rodriguez asked why the threshold could not be lowered, using the example of getting a tax break on a $1,000 refrigerator bought in Willcox.
Davidson said he considered a number of different businesses in the community that would benefit by this and also did research with the state.
He said that the range with other cities in Arizona is from $500 to $25,000.
"The lower you go, it begins to eat into the street-improvement money," Davidson said. "People from Willcox may not go grocery shopping in Tucson, but they do go for the high-ticket items."
Willcox businessman Jim Martin said that under the current sales-tax code, construction is not considered retail, but rather applies to things sold over the counter.
"Do you want it to apply to construction?" Martin said. "You still have to pay the full transaction privilege sales tax. If you build a $100,000 home, you're exempt from both the state and the city on the first 35 percent."
"If you really want to encourage growth, give them the one percent of the construction of that $100,000 house," he said. "Now we're not talking $25. You're still going to pay that 9.1 percent on 65 percent of your gross sales price. Do you want those people to pay 9.1 percent or 8.1 percent? You're talking about a $100,000 sale -- somebody building a taxable sale."
Martin, a State Transportation Board member, also referred to the Exit 340 project scheduled to begin in May.
"If you want to pay ADOT back a little bit, this construction project on your bridge is going to be $12 million," he said. "Do you want that one-percent to apply to that transaction?"
Davidson said that while only retail sales are being considered in this proposal, future discussions could include construction in the same ordinance or as a separate ordinance.
The change "will promote more shopping locally and enable local businesses to be more competitive with other communities in the trade area," said Davidson in a letter to the council.
Discussion should center on Willcox's ability to attract new retail businesses and retain shoppers as much as possible, he said.
"Sales leakage, whereby customers travel to outside trade areas to purchase items, will never be entirely eliminated," Davidson said. "The goal of a modification such as this is to increase Willcox's ability to compete with other trade areas and decrease sales leakage based solely on tax consideration."
Davidson will consult with the Arizona League of Cities and Towns and the Arizona Department of Revenue prior to implementation, he said.
Once proper review is complete and public hearings conducted, "the council will have the ability to approve the final ordinance with an emergency clause stipulating a start date," Davidson said.
An emergency clause allows the city to implement the plan immediately upon council approval.
All members of the public are invited to attend the December hearings.
Those wishing to comment but are unable to attend the public hearings may make written comments until 4 p.m. on the public hearing days, in the Office of the City Clerk at 101 S. Railroad Ave., Suite B.
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