Consideration and Adoption of Resolution No. 2019-21:  A resolution of the Flagstaff City Council, approving an Intergovernmental Agreement Between the State of Arizona Department of Revenue and City of Flagstaff for local tax administration; providing for expiration of the existing agreement; and establishing an effective date.

Local Transaction Privilege Tax (TPT) administration is governed by A.R.S. § 42-6001. This statute requires ADOR to administer the transaction privilege and use taxes imposed by all cities and towns and to enter into an IGA with each municipality to clearly define the working relationships.  ADOR and the City entered into an IGA effective July 1, 2016.  This intergovernmental agreement covers key aspects of tax administration, which municipalities have agreed to update, since that time.

The State requires each municipality to pay a proportionate share of the costs for state administration of local tax collection.  The City's cost for FY2018-2019 was $172,658.

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

Yes. The City has approved:

December 5, 1990 Agreement to Establish a Unified or Coordinated Audit Program and Exchange of Information

January 28, 2015, Modification to IGA between the State of Arizona and City/Town (related to audits/1990 agreement)

January 28, 2015, Agreement between the ADOR and the City/Town of Flagstaff (local TPT licensing to continue until 1/1/17)

June 16, 2015, IGA Between the State of Arizona and the City/Town of Flagstaff (state and local roles for administration, audits)

February 7, 2017 Modification to Intergovernmental Agreement (IGA) Between The State of Arizona Department of Revenue and City of Flagstaff (related to State Administration of Local Sales Tax) (in effect)

1. Approve the IGA;
2. Do not approve the IGA, possibly delaying the receipt of revenues due to the City of Flagstaff collected by ADOR.

In 2013, the Arizona Legislature adopted a new law requiring ADOR to administer and collect all local transaction privilege, use and licensing taxes, in addition to all state taxes (a single point of return). Starting January 1, 2017, ADOR has been administering all local taxes. All businesses now must file both state and local tax returns with ADOR.
 
This IGA was negotiated with ADOR by a consortium of city/town representatives and the League of Arizona 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.
 
This IGA covers key aspects of tax administration, such as:

• 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.


• 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 ADOR.


• Identifying exactly which license and tax return data fields must be provided by ADOR and identifies in detail the reports ADOR provides to all cities.


• Formalization of the process for audit request assignment and performance. Key factors include a commitment to audit for all jurisdictions whenever an audit is being done; a process for cities/towns without auditors to request an audit be performed by the ADOR, the continued authority for any city or town to perform an audit of a taxpayer that is engaged in business only in their town; the general guidance that ADOR will lead all multi-jurisdictional audits coupled with the option for ADOR to delegate actual audit performance to a city or town when circumstances indicate it would be the most efficient means of completing the audit.


• Guidance for handling voluntary disclosure by taxpayers, closing agreements in lieu of litigation and sets up the responsibilities and authorities of both parties in terms of code or statute interpretations and legal support for protests.


• 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 ADOR 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 a provision for automatic annual renewal, with reauthorization by the Council and ADOR only being required following the year ADOR is subject to sunset review. Finally, either party has the right each year to reopen and renegotiate the terms according to provisions within the agreement.

The IGA will clarify the responsibilities of ADOR and the City related to local TPT administration.

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 Inform

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