Scottsdale City Council decides to leave food tax unchanged

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A view of Scottsdale City Hall at 3939 N. Drinkwater Blvd. (File Photo)

Residents of Scottsdale will continue to pay tax on food for home consumption.

Scottsdale City Council at a Feb. 24 work session opted to not have city staff further pursue changes to the fiscal year 2015-16 General Fund budget, which would ultimately allow to abolish or reduce the existing food tax.

Model City Tax Code separates tax on retail sales and tax on food sales for home consumption, allowing different sales tax rates on each. Scottsdale is one of 20 Phoenix metropolitan cities and towns that implement this setup, states a Feb. 10 staff report compiled by the City Treasurer’s Office.

Scottsdale’s current privilege, or sales tax rate is 1.65 percent for all retail sales, and has been effective since January 2004, the report explains.

David Smith

David Smith

The Treasurer’s Office offered several options for reducing or eliminating the food tax, but Councilman David Smith believes the majority of city council felt it was too soon and the city not far enough out of the most recent recession to consider any reductions in tax collection.

According to the staff report, city revenue from food tax is divided among the General Fund, McDowell Sonoran Preserve, transportation and public safety. Phasing out food tax in its entirety over a period of three years would result in a loss of approximately $12.4 million by the end of fiscal year 2017-18.

“All we need to do is decide not to spend the $12 million; we’ll give it back to the voters,” said Councilman Smith in a Feb. 26 phone interview, adding that there has been a $25 million increase in sales tax collection since fiscal year 2009-10.

Although the city has not increased the tax rate, the amount collected in the last several years has gone up, Councilman Smith explained. In addition, sales tax collections are expected to further increase within the next five years.

Suzanne Klapp

Suzanne Klapp

According to Councilwoman Suzanne Klapp, however, other factors make it difficult to adjust city sales taxes at this time.

“I believe we should be reducing tax on food for home consumption,” Councilwoman Klapp said in a Feb. 26 phone interview. “But not this year. This would be for a different year.”

The Arizona Legislature and governor decided last year to transition the collection of city sales taxes from the cities themselves to the Arizona Department of Revenue. This means instead of Scottsdale collecting Scottsdale city sales taxes and passing them on to the state, the Department of Revenue will collect city sales taxes directly, Councilwoman Klapp explained.

The city of Scottsdale is still coordinating this transition, Councilwoman Klapp said, and making changes to food taxes now could confuse the process.

“That’s pretty much how the rest of the council felt about it, too,” recalled Councilwoman Klapp.

The transition of tax collection to the state is estimated to be completed in January 2016, Councilwoman Klapp said. A discussion about relieving the food tax burden at this time next year could have a very different result, she said.

“I think there was a general acknowledgement that the food sales tax is a burden most to those who can least afford it,” Councilman Smith confirmed.

Councilman Smith plans to continue initiating conversation, promising in a year from now the council will see this issue on the agenda again.

Ms. Walker is a freelance journalist under contract with the North Valley Office of Independent Newsmedia Inc. USA

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