Amended City Council Regular


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  ITEM 24.       
Meeting Date: 06/11/2019  
Submitted For: Vicki Rios
Department: Budget and Finance  

Subject
RESOLUTION NO. R19-66
 
A RESOLUTION OF THE COUNCIL OF THE CITY OF GLENDALE, MARICOPA COUNTY, ARIZONA, AUTHORIZING AND DIRECTING THE ENTERING INTO OF AN INTERGOVERNMENTAL AGREEMENT WITH THE ARIZONA DEPARTMENT OF REVENUE REGARDING THE ADMINISTRATION, COLLECTION, AUDIT AND/OR LICENSING OF TRANSACTION PRIVILEGE TAX, USE TAX, SEVERANCE TAX, JET FUEL EXCISE AND USE TAXES AND RENTAL OCCUPANCY TAXES IMPOSED BY THE STATE, CITIES, OR TOWNS.
Presented by:  Lisette Camacho, Interim Director, Budget and Finance
Purpose and Recommended Action
This is a request for City Council to waive reading beyond the title and adopt a resolution authorizing the City Manager to enter into an intergovernmental agreement (IGA) with the Arizona Department of Revenue (DOR) regarding the administration, collection, audit and/or licensing of transaction privilege tax, use tax, severance tax, jet fuel excise and use taxes and rental occupancy taxes imposed by the State, cities, or towns.
Background
In October 2008, the City Council authorized entering into an intergovernmental agreement (C-6636) with the DOR for taxpayer joint audits and the uniform method of administration, collection, audit and licensing of transaction privilege tax, use tax, jet fuel excise and use tax and rental occupancy taxes imposed by the State or Cities or Towns.

In June 2013, Governor Brewer signed into law House Bill (HB) 2111 with an implementation date of January 1, 2015. The intent of this legislation was to simplify and centralize transaction privilege (sales) tax administration for businesses operating in Arizona.  Upon full implementation in January 2017, responsibility for tax licensing, remittance, collection, and return processing shifted from the City to the DOR.
Analysis
This Intergovernmental agreement (IGA) was negotiated with the DOR by a consortium of city/town representatives and the League of Arizona Cities and Towns.  Additionally, attorneys and tax experts from multiple cities and towns reviewed and commented on the language during the process. This resulted in a document that provides the maximum possible level of information and assurances for the cities.

Local Transaction Privilege Tax (TPT) administration is governed by A.R.S. § 42-6001.  This statute requires the DOR to administer the transaction privilege and use taxes imposed by all cities and towns and to enter into an IGA with each city and town to clearly define the working relationship between DOR and Arizona Cities and towns.

The IGA covers all aspects of local tax administration.  First and foremost, the IGA addresses confidentiality, including the 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.

The IGA identifies exactly which license and tax return data fields must be provided to the city by DOR and identifies in detail the reports DOR provides to all cities.

The IGA formalizes the process for audit request assignment and performance.  Key factors include a commitment to audit for all jurisdictions whenever any audit is being done; a process for cities/towns without auditors to request an audit be performed by the DOR, 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 DOR will lead all multi-jurisdictional audits coupled with the option for DOR to delegate actual audit performance to a city or town when circumstances indicate it would be the most efficient means of completing the audit.

The IGA provides for a 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 city and four DOR tax experts who will work together to resolve 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 the DOR only being required following the year the DOR 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.
 
Previous Related Council Action
At the August 9, 2016 Voting Meeting, City Council authorized entering into a modification to an intergovernmental agreement with the DOR regarding the administration of certain taxes imposed by the City which are commonly referred to as Transaction Privilege (Sales) Taxes.

At the June 23, 2015 Voting Meeting, City Council authorized entering into an intergovernmental agreement (C-10091) with the DOR regarding the administration, collection, audit and/or licensing of transaction privilege tax, use, tax, severance tax, jet fuel excise and use taxes and rental occupancy taxes imposed by the State, cities, or towns.

At the December 18, 2014 Voting Meeting, City Council authorized entering into a modification to the intergovernmental agreement with the DOR to provide for an interim method for disclosure of information and taxpayer auditing.

At the October 28, 2008 Voting Meeting, City Council authorized entering into an intergovernmental agreement (C-6636) with the DOR for taxpayer joint audits and the uniform method of administration, collection, audit and licensing of transaction privilege tax, use tax, jet fuel excise and use tax and rental occupancy taxes imposed by the State or Cities or Towns.
Attachments
R19-66
IGA_AZDOR Feb 2019v


    

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