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Arizona Considers Repealing Individual Use Tax


UPDATE: 2/16/2012 While these bills are pending approval or rejection, Arizona Department of Revenue has revised Publication 610A, Use Tax for Individual Income Taxpayers, to include a copy of the worksheet for computing use tax.

Two bills introduced by Arizona Legislators would eliminate the use tax declaration requirement on individual tax returns.

Arizona HB 2629, which passed the House Ways and Means Committee on January 30, would change use tax law in the following ways:

  • Repeal the use tax on "tangible personal property brought into Arizona by an individual."
  • Leave the use tax requirements for motor vehicles, boats and "tangible personal property used in conducting an Arizona business."
  • Repeal the "use tax declaration requirement on the individual tax return."

Arizona HB 2623 repeals the use tax declaration on the individual tax return, retroactive to July 2011, when Arizona added the declaration requirement.

House Majority Whip Debbie Lesko leads the push to pass these two bills. Lesko believes that "This use-tax line on the income-tax statement causes undue burden on the taxpayer. Most don't know they're supposed to be reporting it." To Lesko, this results in "basically making people criminals for not reporting use tax."

Rep Matt Heinz, D-Tucson, argues against the bills: "The policy that was enacted is to really make this type of taxation fair for the brick-and-mortar business," said Heinz, referring to online retailers who sell into Arizona and do not collect sales tax. Heinz believes that the use tax law helps level the playing field, since it requires individuals to collect and remit the sales tax when online retailers do not. He promises to fight any bill to repeal individual use tax until they can "put people on equal footing, whether or not they're a dot-com or they're selling something on the corner ...."

In response, Lesko states, "Until the U.S. Congress decides they want places like Amazon to charge sales tax, to me, that's a totally different subject."

Currently Arizona is also engaged in direct efforts to require Amazon to collect and remit sales tax. The Arizona senate passed a nexus bill that would require Amazon to collect sales tax, and the state recently gave Amazon a $53 million dollar bill for uncollected sales tax, for the periods March 1, 2006 through December 31, 2010.

Even if individual use tax could theoretically help make up uncollected sales tax from online purchases, a practical question lingers: how effectively can the state enforce use tax law, especially if many people do not even know about the requirement?

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Avalara Author
Will Frei
Avalara Author Will Frei
Will Frei covers sales tax news including best practices, legislation and sales tax technology. He is the Social Media Manager at Avalara.