As of Monday, Prescott sales tax will grow to 2.75 percent

New PSPRS tax goes into effect Jan. 1

Sales tax broken down

The sales tax that Prescott business customers pay, as of Jan. 1, 2018, will now:

TOTAL: 9.1%

Includes...

Prescott’s existing 2%

(1% for the general fund, and 1% for a voter-approved street-improvement program)

Arizona’s 5.6%

Yavapai County’s 0.75%

Previous total: 8.35%

A new sales tax that is expected to generate more than $11 million per year is set to go into effect Monday, Jan. 1.

With the start of the new year comes the 0.75-percent tax increase that voters approved this past August as a way of paying down the city’s growing debt with the Public Safety Personnel Retirement System (PSPRS).

With the increase, the city’s sales tax will rise from the previous 2 percent to 2.75 percent.

City Budget and Finance Director Mark Woodfill pointed out that businesses in the city are responsible to collect the new tax.

Under the state’s transaction privilege tax (commonly referred to as a sales tax), Woodfill said, “The tax is on the business, so if they don’t charge it (to customers), they still owe it.”

In preparation for the implementation of the tax, Woodfill said his department sent out notices in November to the local businesses on the Arizona Department of Revenue’s list of sales-taxing businesses in Prescott.

On Aug. 29, voters approved Proposition 443, which calls for the 0.75-percent tax to begin Jan. 1, 2018, and continue for 10 years, or until the city’s unfunded liability is within $1.5 million.

Currently, the debt stands at about $86.4 million — up from last year’s $78.5 million.

City officials earlier estimated that the new tax would raise about $6 million in its first six months (the first half of the current fiscal year, ending June 30).

The estimate was based, in part, upon the $15,236,000 raised per 1-percent sales tax in the city’s previous fiscal year (2017).

That total was up from the $14,745,000 raised in the 2016 fiscal year.

And Woodfill noted that in the first quarter of the current 2018 fiscal year (July 1 to Sept. 30), the city’s taxable sales were up by about 4.55 percent over the previous year, which is above the budget projections.

Overall, the sales tax that Prescott customers pay will now total 9.1 percent — up from the previous 8.35 percent.

That includes the city’s existing 2 percent (1 percent for the general fund, and 1 percent for a voter-approved street-improvement program), the state’s 5.6 percent, and Yavapai County’s 0.75 percent.