Arizonans Pay Some of the Highest Sales Taxes in the Country

Mar 8, 2012

In Phoenix, State Lawmakers are working on legislation requiring Amazon-dot-com to collect sales taxes on Arizona purchases.

The effort is partially an attempt to reap revenue from all those internet sales.

It’s also an attempt to keep Arizonans from bypassing what one report called the second highest sales tax rate in the country.

According to the DC-based Tax Foundation, the average Arizonan pays 9.12% in sales taxes.

Of course, an average means some people pay more, some pay less, depending on where you live.

Residents of Huachuca City pay about 8.6%.

Consumers in Tuba City pay over 13.

The Tax Foundation says that is the highest rate in the country.

Flagstaff’s sales tax is just under 9.5%

“It’s definitely something that makes me not shop locally," said James Demin.

Not only is he a consumer like the rest of us, he’s also a salesman.

He works at Absolute Bikes in Flagstaff.

“You know," said Demin, "you spend $500 on a bicycle and you’re hoping to walk out of there around $500 and it quickly adds another 50 bucks to the sale of a bicycle and for most people that’s almost a make or break amount of money.”

The tax can really start to add up on big ticket items.

Rich Beecroft sells cars for Babbitt Ford in Flagstaff.

“[I] Had a gentleman purchasing a vehicle today," said Beecroft recently.  "He’s out of New York, his son goes to college here at NAU, and we’re doing the final out-the-door figures, cause we’re doing it by email and phone conversations and the first thing he said was ‘boy you guys sure do have a high sales tax rate out there don’cha.’”

Beecroft says the deal went through anyway, but he said, the guy figured he could have saved about 400 dollars had he bought the car elsewhere.

Most of us aren’t buying 500 dollar bikes and 10 thousand dollar cars every day.

So while we may now and again notice the tax at the bottom of a receipt, it’s usually not enough to fret about.

“I do this stuff for a living and have for 26 years and if I don’t know what I pay in sales tax I have a hunch no one else does," said Kevin McCarthy.

McCarthy works with the Arizona Tax Research Association, a research and business lobbying group.

McCarthy says that because most of us don’t notice it, the sales tax is much more politically palatable than an income or property tax.

“Public entities," said McCarthy, "whether it’s the state of Arizona, or cities or county government talk about wanting to go to the voters for a tax increase, if they have the opportunity to use sales taxes they’re going to lean in that direction because it is viewed as  a relatively minor tax.”

But a sales tax is also viewed as a relatively regressive tax.

That means it hits the lower and middle classes more than the wealthy.

“Relying heavily on a sale tax means you have a higher tax rate on lower workers who consume much more of their income," said Andrew Fieldhouse, with the DC-based Economic Policy Institute.

He points out that while Arizona does exempt food, it taxes clothing and most other essentials, "and those basic needs account for a much larger portion of family budgets for low income workers so they bear a higher proportion of the tax.”

And while taxing the poor more than the rich may raise questions of right and wrong, Fieldhouse says the debate is more complicated.

“In Europe many countries use a regressive Value Added Tax, which is a form of the sale tax to pay for universal health care," said Fieldhouse. "And while the tax disproportionately affects lower income workers, lower income workers disproportionately benefit from universal health care.”

And Fieldhouse said that would be the same for a sales tax going to pay for education, for example.

But high sales taxes do affect more than just consumers.

More than one retailer in Flagstaff said they’ll give discounts to counteract the receipt shock.

That means the retailor is taking the hit…to make a sale.

But Garrick Taylor with the Arizona Chamber of Commerce says there’s a bigger problem.

The Institute on Taxation and Economic Policy shows that in 2007, Arizona’s reliance on sales taxes was about 42% higher than the national average.

And, says Taylor, those taxes are increasingly sending people to shop, not at local stores, not in the next county, but on the internet.

“Our concern," said Taylor, "is that the playing field has become severely un-level, where you have brick and mortar stores who are at a distinct disadvantage over their competitors on the internet.”

The National Conference of State Legislatures has estimated that Arizona could gain more than 700 million dollars this year by taxing internet and catalogue sales.

It might also send consumers back to local businesses.