The golden goose: Scottsdale acts fast to abolish tax on fine art

Fine art is sold at several local entities in Scottsdale, including specialty events like the annual Bentley Scottsdale Polo Championships. (file photo)

Scottsdale has reaffirmed its affinity for what many believe to be the golden goose of the community: tourism.

Scottsdale City Council with a proverbial head nod Tuesday, May 29 has agreed to disintegrate sales tax on certain transactions — the sales of fine art in particular.

Arizona House Bill 2536 was the topic of discussion during a Scottsdale City Council April 30 study session, an amendment exempting the sales tax on fine art pieces purchased in state, to be shipped or delivered outside of Arizona.

The amendment now provides an exemption to: “the sales of works of fine art, as defined in section 44-1771, at an art auction or gallery in this state to nonresidents of this state for use outside this state if the vendor ships or delivers the work of fine art to a destination outside this state.”

Co-sponsored by District 23 Republicans, Michelle Ugenti-Rita and Jay Lawrence, the bill passed the Arizona Senate and Arizona House in May. Ms. Ugenti-Rita and Mr. Lawrence did not respond to requests for comments from the Scottsdale Independent.

The bill is receiving support from local gallery and auction house owners, as Scottsdale’s combined tax rate adds up to 7.95 percent — 5.6 percent for the state, 0.7 percent for the county, and 1.65 percent for the city.

The rate, especially on fine art is deterring customers from coming to Scottsdale to purchase their art, and spend their time and money, art distributors contend. The added tax to fine art is creating a loss in sales for the city due to customers preferring to save money by bidding online from their home state.
More than 100 art galleries call the city of Scottsdale home, according to the Scottsdale Gallery Associations’ website.

“We are simply asking for the same exemption the state has granted,” stated a letter penned to the city council by Legacy Gallery owners, Brad and Jinger Richardson.

“Due to the 1.65 city tax, our customers have told us they will not attend the auction for this reason. We would much rather have them in the room, viewing the art work and getting caught up in the excitement.”

Josh Levine, who owns J. Levine Auction & Appraisal on Scottsdale Road and Shea Boulevard, illustrated a similar picture.

Josh Levine

“In the past, if you came to an auction and attended the sale, even though you were arranging for me to ship it home, you were subject to tax,” Mr. Levine said in a June 1 phone interview. “If you bid online from your home in California, you didn’t have to pay sales tax.”

Following the state’s approval, the city of Scottsdale was tasked with deciding whether or not to conform to the state’s amendment, create their own language, or not change their code.

Teresa Hoglund, Scottsdale business services manager, presented the city council with a history of tax code in the state of Arizona, along with drafted options.

Ultimately, the seven elected leaders agreed that turning-off visitors was not an option.

David Smith

“I think it is something that we should try to do, and that would certainly be my direction to you,” Councilman David Smith said during the public hearing.

“The reason I think we should try to do it is because we are sending a very awkward message to customers now, who come to the city to this — call it arts mecca in the state of Arizona — they find the peculiar dynamic that the state doesn’t charge them a tax, but we, the affluent city of Scottsdale, and the art mecca of the state, charge them tax on purpose.”

Experience Scottsdale, the city’s tourism firm, tracks local facts and figures including “luxury visitors.”

The luxury visitor is an average of 50-years-old, has a median household income of $247,000, and spends an average of $459 daily on their two-three average night stay. Experience Scottsdale attributes 42 percent of luxury visitors visit Scottsdale more than once a year.

“Not only is it an awkward message to be sending, but it is also, as Brad and Jinger Richardson have pointed out, it is contrary to the message we are trying to send from a visitation and tourism point of view,” Mr. Smith said.

“We try to encourage people to come to the city, to enjoy the arts, to buy the arts, but if you have it shipped to them, we’re going to charge you tax. It has very real and tangible effects that they’ve pointed out. So if we’re trying to promote something that is a tourism dynamic for our city, whether it is car auctions or the sale of art, I think in every case we should be trying to live up to our reputation.”

Mr. Levine says last calendar year his auction house saw about $3 million in fine art sales, and says it is the No. 1 leading sales item.

“A lot of the art galleries that are friends have brought up the fact — and it’s very true — pretty high rollers, they’re going to stay in hotels, spend money, hang out in Arizona and enjoy the restaurants and weather,” Mr. Levine noted. “The buyer has to be concerned if you’re going to spend $100,000, another $7,900 is a lot.”

Scottsdale city staff is expected to begin the statutory process to present this proposed modification to the Model City Tax Code for review. This proposed change would have to be approved and implemented by the Municipal Tax Code Commission, a state appointed body, city officials say.

Northeast Valley News Services Editor Melissa Fittro can be e-mailed at mfittro@newszap.com or can be followed on Twitter at twitter.com/melissafittro.

You are encouraged to leave relevant comments but engaging in personal attacks, threats, online bullying or commercial spam will not be allowed. All comments should remain within the bounds of fair play and civility. (You can disagree with others courteously, without being disagreeable.) Feel free to express yourself but keep an open mind toward finding value in what others say. To report abuse or spam, click the X in the upper right corner of the comment box.