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Arizona to reverse course, hire more auditors


 The Arizona Department of Revenue could soon be hiring 25 new auditors.

Since Arizona Governor Doug Ducey took office in January 2015, the Arizona Department of Revenue has reduced its audit and collection staff by a whopping 40 percent. In June 2016, it laid off 52 employees, most of whom worked in the education and compliance division. With fewer auditors, the department’s audit revenue has dropped — the agency failed to recoup an estimated $83 million in 2017 alone. Now Gov. Ducey wants the Department of Revenue (DOR) to rehire 25 tax collectors.

When the DOR was down to four corporate income tax auditors in the fall of 2016, former DOR chief economist Georganna Meyer said, “There is no corporate income tax auditing occurring.” She estimated a full staff of auditors typically bring in between $50 and $100 million annually.

Then DOR spokesman Sean Laux disagreed with Meyer’s assertion, insisting there had been no “drop off in our ability to enforce the state’s tax laws, either on the audit side or the collection side.” Yet it’s now clear that audit activity did drop: The department’s 2017 and 2016 annual reports reveal a drastic reduction in audit revenue year over year.

The 25 new auditors are expected to bring in approximately $31 million in 2018. However, the Joint Legislative Budget Committee is questioning that number, noting that new employees will likely be less effective than seasoned auditors. Whatever revenue is generated will be used to fund education, as the governor’s budget plan calls for investing $400 million in public schools.

Focus on transaction privilege tax

In recent years, the DOR has focused its reduced resources on simplifying transaction privilege tax (TPT) compliance and increasing voluntary compliance. It offered two tax amnesty programs: one in 2015 that brought in $55 million; and a tax recovery program in 2016 that is collecting revenue through October 31, 2018. And the department now collects TPT for more counties and cities than ever before, simplifying compliance for many businesses and increasing the agency’s TPT collections.

As the DOR looks to hire some 25 new auditors, state legislators are considering criminalizing the use of sales suppression devices, or tax zappers. In other words, now is a good time to be sure you’re in compliance with Arizona tax laws.

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.