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New Law Adds Line to State Income Tax Form

By Howard Fischer

Phoenix, AZ – Officially speaking, Arizonans are supposed to pay what is called use tax on any purchases made from out of state retailers. But the odds are that most individuals just do not bother. Now a new law will put a line on the state income tax form requiring Arizonans to declare how much they spent on these purchases and cough up the 6.6 percent state sales tax. So on the purchase of a $100 piece of equipment or software you would owe the state $6.60. Rep. Jack Harper said he thinks this will result in more compliance.

(If somebody doesn't know to report use tax, then they're not cheating on their taxes. But if it's on a line on their taxes and they have to write that they don't owe any use tax, it'll make them think about it.)

One estimate suggests Arizona might take in an additional half million dollars a year based on what's happened in other states. But that ultimately depends on whether people self report each of their purchases. Ernest Powell of the Department of Revenue said he cannot comment on any policies about how and when his agency audits individual taxpayers. And Rep. Matt Heinz, who first came up with the idea, acknowledged that taxpayers could simply say they have no use tax liability, whether that is true or not.

(But I believe that there are a great deal of honest people in the state. And when they know they actually have to account for that in some way, that they owe that already, it beats putting in a new tax or a new assessment of some kind, I would say. We should enforce the ones we have on the books.)

There is reason to believe the move might work. Michigan collected $240,000 in voluntary use taxes in 1998. The next year, after the question was put on to income tax forms, it skyrocketed to $2.9 million. For Arizona Public Radio this is Howard Fischer.