Official Summary Text
SB1745 - 572R - Senate Fact Sheet
Assigned to
GOV����������������������������������������������������������������������������������������������� AS
PASSED BY COMMITTEE
ARIZONA STATE SENATE
Fifty-Seventh
Legislature, Second Regular Session
AMENDED
FACT SHEET FOR
S.B. 1745
local excise
taxes; rate limit
Purpose
Caps at 2.5
percent, for cities and towns with a population of 550,000 persons or more, the
transaction privilege tax (TPT) or excise tax rate that may be imposed on each
TPT classification. Requires a city or town to submit any proposed increase in
a TPT or excise tax to the voters and exempts a TPT or excise tax rate approved
by voters from the tax rate cap. Requires the Attorney General (AG) to withhold
state shared revenues from a city or town that violates the tax rate cap or
voter approval requirements.
Background
All gross
receipts are subject to tax under 1 of the 16 TPT classifications unless
specifically exempted or excluded by statute (
A.R.S. Title 42, Chapter 5,
Articles 2 and 4
). The Model City Tax Code (MCTC) is a uniform sales and
use tax act adopted by most cities and towns in Arizona. A city or town may not
adopt an amendment to the MCTC unless the Municipal Tax Code Commission (MTCC)
has adopted the amendment or the amendment is a result of a statutory change. Changes
in rates of tax are not subject to review or approval by the MTCC, but within 10
days after passing an ordinance imposing a rate change the city or town
imposing a new or different tax rate must notify the MTCC and the Arizona
Department of Revenue. A notification failure renders the new or different tax
rate void (A.R.S. ��
42-6052
and
42-6054
).
A municipality
may not levy or assess a new tax or fee or increase an existing tax or fee on a
business unless the municipality: 1) prepares a schedule of the proposed new or
increased tax or fee; 2) provides written notice of the proposed charge or increase,
the schedule of the proposed new charge or increase and supporting data at
least 60 days prior to approval on the municipality's website; and 3) prepares
a notice of intent to establish or increase taxes, assessments or fees,
published on the municipality's website (
A.R.S.
� 9-499.15
).
Commonly
referred to by the number of the establishing bill, 1487, the AG must
investigate any alleged violation of the Arizona Constitution or state law by a
governing body of a city or town upon the request of a legislative member.
Within 30 days of the request, the AG must make a written report of
investigative findings. If the AG concludes that a volitation has occurred, the
AG must notify the county or municipality of the determination, provide 30 days
to resolve the violation and, if the violation is not resolved, direct the
State Treasurer to withhold and redistribute state share monies from the county
or municipality until the violation is resolved (
A.R.S.
� 41-194.01
).
There is no
anticipated fiscal impact to the state General Fund associated with this
legislation; however, there may be change to municipal tax collections.
Provisions
1.
Prohibits, notwithstanding any other law, ordinance, charter provision,
resolution or special act, a city or town with a population of 550,000 persons
or more from levying or assessing a TPT or excise tax at a rate of more than
2.5 percent on any TPT classification.
2.
Prohibits a city or town from adopting a new TPT or excise tax,
increasing an existing tax rate, expanding a tax base or imposing a surcharge
if doing so would cause the imposed tax rate to exceed the cap, unless the new
TPT or excise tax is approved by voters.
3.
Requires, notwithstanding any other law, ordinance, charter provision,
resolution or special act and for a TPT or excise tax approved by voters on or
after the general effective date, a city or town to submit any proposed
increase in a TPT or excise tax to the city's or town's qualified electors.
4.
Exempts a TPT or excise tax that is approved by the qualified electors
from the tax rate cap, if the rate increase occurs at an election conducted on
a consolidated election date in an even-numbered year.
5.
Subjects a city or town that violates the tax rate cap and voter
approval requirement to enforcement pursuant to the AG's S.B. 1487
investigations.
6.
Requires the AG, if a city or town is found in violation of the tax rate
cap and voter approval requirement, to notify the State Treasurer, as
prescribed, to withhold state shared revenues from the city or town in an
amount proportionate to the unauthorized tax increase until the violation is
resolved.
7.
Specifies that a TPT or excise tax approved by the qualified electors of
a city or town is not invalidated by the tax rate cap and voter approval
requirement.
8.
Applies the tax rate cap separately to each TPT classification,
regardless of the number of classifications, components or ordinances under
which TPT or excise tax is imposed.
9.
Defines terms.
10.
Becomes
effective on the general effective date.
Amendments Adopted by
Committee
�
Makes technical changes.
Senate Action
GOV������� 2/11/26������� DPA������ 4-3-0
Prepared by Senate Research
February 11, 2026
MG/ci
Current Bill Text
Read the full stored bill text
SB1745 - 572R - S Ver
Senate Engrossed
local excise taxes;
rate limit
State of Arizona
Senate
Fifty-seventh Legislature
Second Regular Session
2026
SENATE BILL 1745
AN
ACT
Amending Title 9, chapter 4, article 8,
arizona revised statutes, by adding section 9-500.54; relating to local excise
taxes.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it
enacted by the Legislature of the State of Arizona:
Section
1.
1. Title
9, chapter 4, article 8, Arizona Revised Statutes, is amended by adding section
9-500.54, to read:
START_STATUTE
9-500.54.
Municipal
transaction privilege tax and excise tax; rates; limit; voter approval; state
share revenue withholding; applicability; definitions
A. Notwithstanding any
other law, ordinance, charter provision, resolution or special act, a city or
town with a population of five hundred fifty thousand or more persons may not
levy or assess a transaction privilege tax or excise tax that is imposed at a
rate of more than two and one-half percent on any transaction privilege
tax classification.
B. Except as provided
in subsection D of this section, the tax rate limit prescribed by subsection A
of this section applies separately to each transaction privilege tax
classification, regardless of the number of classifications, components or
ordinances under which the transaction privilege tax or excise tax is imposed.
C. A city or town may
not adopt a new transaction privilege tax or excise tax, increase an existing
tax rate, expand a tax base or impose a surcharge if doing so would cause the
tax rate imposed on any transaction privilege tax classification to exceed the
limit prescribed by subsection A of this section unless the new transaction
privilege tax or excise tax is approved pursuant to subsection D of this
section.
D. Notwithstanding any
other law, ordinance, charter provision, resolution or special act, a city or
town shall submit any proposed increase in a transaction privilege tax or
EXCISE tax to the qualified electors of the city or town.� a transaction
privilege tax or excise tax that is approved by the qualified electors of a
city or town is not subject to the limit prescribed in subsection A of this
section if the voter-approved increase occurs at an election that is
conducted on a consolidated election date in an even-number year as prescribed
by section 16-204.� This subsection applies to a transaction privilege tax or
excise tax that is approved by the qualified electors of a city or town on or
after the effective date of this section.
E. A transaction
privilege tax or excise tax imposed pursuant to title 42, chapter 6 that was
approved by the qualified electors of a city or town is not invalidated by this
section.�
F. A city or town that
violates this section is subject to enforcement pursuant to section 41-194.01.�
If a city or town is found to be in violation of this section, the attorney
general shall notify the state treasurer as prescribed by section 41-194.01,
subsection B, paragraph 1.� The state treasurer shall withhold state shared
revenues from the city or town in an amount that is proportionate to the
unauthorized tax increase until the violation of this section is resolved.
G. This section does
not apply to ad valorem property taxes.
H. For the purposes of
this section:
1. "Excise
tax" means any tax that is imposed under title 42, chapter 6 and that is
measured by the privilege of engaging in a transaction or activity.
2. "Transaction
privilege tax classification" means a transaction privilege classification
that is established pursuant to title 42, chapter 5, article 2.
END_STATUTE