COTTONWOOD – Will the City of Cottonwood implement a Use Tax?
What is a Use Tax?
Use Tax is a tax on tangible personal property which is purchased or leased for storage or use in the City on which tax was not paid at the time of purchase or rental. The Use Tax protects local vendors because it removes incentives for customers to shop outside of the City to avoid paying the City transaction privilege (sales) tax.
How is Use Tax different from sales tax?
Sales tax is paid by the seller but Use Tax is usually paid by the buyer. Purchases or rentals which would have been taxable but have so far, not been taxed may be subject to Use Tax. Some common situations where Use Tax is due are purchases from out-of-state vendors or vendors not located in an incorporated Arizona city or town, and usage of inventory items by a business which originally purchased the items for resale.
Council discussed the idea at Tuesday’s worksession. The proposed tax would target big-ticket items purchased out of town.
For example, if a resident bought a car in another city or state that has less than a 3 percent sales tax rate, that resident would have to make up the difference upon registration of the vehicle at the Arizona Department of Transportation.
If given the green light, it would take a few months to implement. A public hearing will be held, notices would be given, and there would be a possible amendment to the city’s tax code.
If implemented, the majority of the Council said that amount acquired from the Use Tax should be put into the General Fund.
Use Tax and Cottonwood
According to a staff report, the idea of implementing a Use Tax for the…
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