HB 2702 looks to correct tax inequity that helps out-of-state retailers

Arizonans for Main Street Fairness, a broad, non-partisan coalition of local and national retailers and community leaders, announced the introduction of HB 2702.

This legislation will correct a fundamental unfairness in Arizona law that currently provides an advantage to certain out-of-state sellers and retailers by exempting them from having to impose sales tax on product purchases. Traditional and online retailers with a physical presence in Arizona already must collect the tax, placing them at a marked disadvantage with out-of-state competitors.

“Retail is all about competition, but it’s wrong that Arizona law places my local business at a disadvantage with online sellers in other states,” said John Arterburn, owner of Pinnacle Peak Ace Hardware. “This important legislation will level the playing field for Arizona retailers and small businesses like mine.”

A June 2018 U.S. Supreme Court decision (South Dakota v. Wayfair) established that states may require remote, out-of-state sellers to collect and remit sales tax on product purchases. That’s exactly what 37 states have already done in the wake of the Wayfair decision, ensuring equitable treatment for their in-state retailers. Nationally, Arizona is now among just eight states with a sales tax that haven’t taken action.

“With online shopping consuming an ever-larger proportion of consumer dollars, the unfairness of Arizona’s existing tax code is putting at risk local retailers, small businesses and Arizona jobs,” said Michelle Ahlmer, Executive Director of the Arizona Retailers Association. “HB 2702 is a critical opportunity for Arizona to join the vast majority of states that have already taken action to correct this inequity.”

Among its provisions, HB 2702 will:

• Ensure tax equity by requiring that out-of-state retailers and online marketplace facilitators collect and remit sales tax on all products, including those offered by 3^rd-party sellers;

• Provide a safe harbor for small, out-of-state sellers by exempting those with fewer than $100,000 in gross receipts or 200 transactions annually; and

• Simplify the tax code by ensuring uniform definitions within the retail classification across municipalities and the state.

The legislation will only apply prospectively.