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Public Policy – Advocacy Committee Report as of March 13, 2019

The top priority for BOMA Greater Phoenix during this state legislative session has evolved into killing HB 2702. This Bill involves establishing a “nexus” to allow the State to tax remote sellers. This bill was introduced at the behest of Amazon, Wal-Mart, the Retailers Assn. and the League of Cities. It is being opposed by NFIB, ATRA, the largest utility providers in the State, and BOMA. The Arizona Chamber is currently neutral.

The reason the CRE industry needs to remain opposed to this bill is that, while we are sympathetic and supportive of treating internet remote sellers the same as brick and mortar retailers, this bill does NOT satisfy the legal standards established in the recent “Wayfair” Supreme Court case. In that case, it was established that a uniform sales tax base be a pre-requisite to providing a level playing field for taxation purposes. This is because Arizona has a differing TPT code at the state versus the local level. Even within the local level, there are 90+ differing municipal tax base treatments.

The more fundamental reason for Commercial Real Estate to oppose the bill is that, for more than a decade, a top priority has been to eliminate the Prime Contracting law that is patently unfair and capricious to GCs. It is the subset of prime contracting tax treatment that deals with the existence of a speculative builder’s tax that even GPEC has advocated be eliminated despite half of their membership being composed of mayors. Furthermore, we have a differing state tax treatment of commercial leases which was phased out and eliminated by the State Legislature in the mid-1990s yet remains being taxed and at differing levels by all the municipalities.

HB 2702 misses the opportunity to eliminate the prime contracting law (or at least simplify it/make more equitable) while also missing the opportunity to eliminate the spec builder’s tax and commercial leases by having the locals conform to the existing state tax treatment.

We are winning at the moment as a majority of House Republicans have been lobbied by us to oppose this bill mainly because it is viewed as a $100M+ annual tax increase on their constituents without getting meaningful tax reforms in exchange. More technically, the bill is being held in the Rules Committee and is vigorously opposed by that chairman and can only proceed with a discharge petition or as a “striker” in the other chamber.

The compromise we have asked for but which has been rejected by the other side is to specifically put the retail classification directly into the state tax code rather than being referenced by the Model Cities Tax Code that remains de facto outside the state tax code and is the crux of the reason our state cannot comply with the interstate commerce taxation standard established by “Wayfair’.


We DO support the formation of a study committee of all the stakeholders on this issue in order to push a more consensus business community response to “Wayfair.” It would also appear that the Ducey Administration implicitly endorses our approach as they would like to embrace a comprehensive tax reform package next year (election year) that would also deal with K-12 funding. This issue may contain the resources necessary for that reform to be financed which may also include pro-economic development tax polices good for CRE.


On a final note, our unanimous position was established more formally in February by the Public Policy Committee and is consistent with the platform unanimously approved by the 2018 Board. Specifically, this support relates to the platform section that reads “SUPPORT EFFORTS TO STREAMLINE OUR ONEROUS AND UNCOMPETITIVE SALES TAX SYSTEM” that is found on page 2, #5.


Respectfully submitted,
The Advocacy and Public Policy Committee


PS: Below, please find a link to an article authored by our BAE, Tim Lawless in the Capitol Times

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