Public Hearing, Consideration / Adoption of Resolution No. 2015-15 and Ordinance No. 2015-05: A resolution of the City Council of the City of Flagstaff, Arizona declaring that certain document known as the "2015 City Tax Code Amendments" as a Public Record, and providing for an effective date; and an ordinance of the City Council of the City of Flagstaff, Arizona, amending the Flagstaff City Code, Title 3, Business Regulations, Chapter 3-05, Privilege and Excise Taxes, by adopting “2015 City Tax Code Amendments” as set forth in that public record on file with the City Clerk; providing for penalties, repeal of conflicting ordinances, severability, authority for clerical corrections, and establishing effective dates. (2015 City Tax Code Amendments)

The Model City Tax Code is the City of Flagstaff’s guiding tax document. The Model City Tax Code has been updated by the Model City Tax Code Commission to conform with new laws adopted by the state legislature and to improve uniformity with state transaction privilege tax laws. No new taxes are being imposed by the City. The majority of the changes concern Transaction Privilege (Sales) Tax Licensing, which will move from City control to the Arizona Department of Revenue on January 1, 2016. Many of the changes to the Model City Tax Code are retroactive and are already recognized by the City.

When changes are made to the Model City Tax Code, the City is required to align the City Code with the Model City Tax Code. In addition, by adopting the proposed ordinance, the City is doing its part to help in the Governor's Transaction Privilege Task Force's efforts to make the Model City Tax Code more uniform.

There are no expected financial impacts from these Model City Tax Code changes. The Arizona Department of Revenue will collect the City's Transaction Privilege (Sales) Tax license fees on behalf of the City.

Improve effectiveness of notification, communication, and engagement with residents, neighborhoods and businesses and about City services, programs, policies, projects and developments.

No.

1) Adopt the proposed ordinance. If the City adopts the proposed ordinance, the City of Flagstaff will incorporate the most recent changes to the Model City Tax Code into the City Code.
2) Do not adopt the proposed ordinance. If the City chooses to not adopt the proposed ordinance, the most recent changes to the Model City Tax Code will not be incorporated into the City Code. City staff will abide by the most recent changes to the Model City Tax Code but the City Code will not be uniform to the Model City Tax Code.

In 1987 the City of Flagstaff and other Arizona cities and towns adopted the Model City Tax Code. The Model City Tax Code enables businesses to be taxed uniformly. Cities have the option of establishing the rate (%) of tax applied to taxable income, and there are model and local options under the Model City Tax Code which cities may adopt. The City’s base tax rate is currently 2.051% and there is an additional voter approved 2% BBB tax levied on the restaurant/bar and the hotel/motel classifications.

The City of Flagstaff is required to adopt all changes to the Model City Tax Code issued by the Municipal Tax Code Commission. 

The attached ordinance contains the approved changes from the last Municipal Tax Code Commission meeting in October 2014.  The changes fall into 3 broad categories:

1) Statutory changes passed by the state legislature during the last legislative session;
2) Municipal Tax Code Commission changes approved as part of the transaction privilege tax simplification effort;
3) Miscellaneous cleanup changes (grammar, spelling, numbering, verbiage, etc.).
 
The changes to the Model City Tax Code are noted in the proposed ordinance document.  Below are the major changes that are included in this update.

•Transaction Privilege (Sales) Tax Licensing:  Changes to Division 3-05-004 Licensing and Recordkeeping are part of a larger effort intended to help simplify tax collection, licensing and administration when the Arizona Department of Revenue starts collecting sales tax for all cities beginning January 1, 2016.  Currently the cities are continuing to collect taxes pursuant to an intergovernmental agreement with the Department or Revenue.  These changes make the licensing requirements uniform among cities. The changes mentioned below are not exhaustive, rather, they capture the main points of the changes.

• Requires annual renewal of a Transaction Privilege (Sales) Tax license and prohibits cities that did not have a renewal fee previously to impose one now. (The City of Flagstaff will not have renewal fee).
• Limits maximum license fee charge to $50.
• Removes approval from other departments of the City and compliance to other City Code requirements as a condition to issue a sales tax license.
• Imposes uniform penalty for late payment of sales tax license fee and standardized waiver provisions.
• Separates licensing fee requirements for residential real property, commercial real property and other businesses.
• Clarifies that each property is a separate business location and requires a tax license for each property to be in the name of the property owner, regardless of the owner engaging a property manager.
• Requires all businesses subject to sales tax to obtain a permanent sales tax license, resulting in the removal of Fair Vendor, Peddler and Solicitor licensing provisions previously available under Peddlers Ordinance.
• Repeals Regulations related to Licensing and Recordkeeping and incorporates pertinent requirements of these regulations into the Division 3-05-004 Sections.

None.

Inform.