Title
Intergovernmental Agreement with Arizona Department of Revenue Related to Uniform Administration of City's Transaction Privilege Tax
Description
Request to authorize approval of an intergovernmental agreement between the City of Phoenix and the Arizona Department of Revenue regarding the uniform administration, licensing, collection, and auditing of transaction privilege tax, use tax, severance tax, jet fuel excise and use tax and rental occupancy taxes imposed by the State or cities or towns.
Report
Summary
This intergovernmental agreement (IGA) was negotiated with the Department of Revenue (DOR) by a consortium of city/town representatives and the Arizona League of Cities and Towns. Additionally, several attorneys and tax experts from many cities and towns reviewed and commented on the language during the process, resulting in a document that provides the maximum level of information and assurances for the cities possible.
Local Transaction Privilege (TPT) administration is governed by A.R.S. § 42-6001. This statute requires the Arizona DOR to administer the transaction privilege and use taxes imposed by all cities and towns and to enter into an IGA with each city and town to clearly define the working relationship between DOR and Arizona cities and towns.
The IGA covers all aspects of local tax administration. First and foremost, the IGA addresses confidentiality, including the authorized handling of confidential taxpayer information, expectations for the discreet use of taxpayer data to prevent unauthorized disclosure, and the process to follow in the event of a disclosure. There is also guidance on the use of aggregated taxpayer data for public reporting and analysis.
The IGA includes clear direction regarding the sharing of general taxpayer license information, legal interpretations and written guidance, rate and fee tables, and any other pertinent tax information that needs to be shared between the cities and towns and DOR.
Importantly, the IGA identifies exactly which license and tax return data fields must be provided by DOR and identifies in detail the reports DOR provides to all cities.
The IGA formalizes the process for audit request assignment and performance. Key factors include a commitment to audit for all jurisdictions whenever any audit is being done; a process for cities/towns without auditors to request an audit be performed by the DOR; the continued authority for any city or town to perform an audit of taxpayer that is engaged in business only in their town; and the general guidance that DOR will lead all multi-jurisdictional audits coupled with the option for DOR to delegate actual audit performance to a city or town when circumstances indicate it would be the most efficient means of completing the audit.
The IGA provides for a formal review process to resolve disputes or handle complex issues that arise through the "State & Municipal Audit Resolution Team" or SMART, made up of four cities and four DOR tax experts who will work together to iron out any problems or conflicts between the cities and the State.
The term of this IGA runs on a calendar year basis with provision for automatic renewal, with reauthorization by the Phoenix City Council and the DOR only being required following the year the DOR is subject to sunset review. Finally, either party has the right each year to reopen and negotiate the terms according to provisions within the agreement.
Financial Impact
This agreement will not result in any budgetary impact to the City.
Department
Responsible Department
This item is submitted by City Manager Ed Zuercher and the Chief Financial Officer.