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TITLE: sales tax exemption; fire apparatus |
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SPONSOR: Driggs |
STATUS: As Introduced |
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PREPARED BY: Leatta McLaughlin |
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Description
The bill would exempt sales on all fire trucks with a gross weight of at least 17,000 pounds from the Transaction Privilege Tax (TPT). Fire districts, fire departments, and private organizations, such as Rural Metro, would all be exempt from the tax. The bill would become effective August 31, 2007.
Estimated Impact
The bill is estimated to reduce General Fund revenues by $(2.1) million in FY 2008 and by $(2.5) million in FY 2009, once fully implemented. Proposition 301 education revenues would decline by $(334,700) in FY 2008 and $(403,200) in FY 2009.
The total city and county revenue loss, once fully implemented, would be $(880,500).
Analysis
There are 2 types of fire trucks that meet the 17,000 pound exemption requirement: pumper and ladder trucks, which are both used to respond to emergencies and suppress fires. Based on information supplied by fire truck manufacturers in Arizona in 2007, there are between 90 and 170 pumper trucks, and between 7 and 30 ladder trucks, sold per year in the state. The above estimate assumes a midpoint of 149 fire trucks sold per year in Arizona, 130 of which are pumpers and 19 of which are ladders.
Arizona fire truck consultants estimate the cost of a pumper truck to be between $325,000 and $500,000. This estimate assumes an average cost of $400,000. For a ladder truck, the cost is estimated to be between $675,000 and $1.0 million. An average cost of $800,000 was used in these calculations.
Based on the above assumptions, there is a total of $67.2 million worth of pumper and ladder truck sales in Arizona each year. At the state sales tax rate of 5.6%, total taxes currently being collected are estimated to be $3.8 million annually. See Table 1 for associated dollar values.
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Table 1 |
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Estimated Revenue Loss |
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State General Fund |
Prop 301 |
Cities |
Counties |
Total |
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FY 2008 |
$2,058,000 |
$334,700 |
$278,900 |
$451,900 |
$3,123,500 |
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FY 2009 |
$2,479,500 |
$403,200 |
$336,000 |
$544,500 |
$3,763,200 |
Local Government Impact
TPT revenues are shared with local governments and any reduction in these collections would result in decreased funding for local governments. Once fully implemented, the proposal would reduce city and county sales tax revenues by an estimated $336,000 and $544,500 per year, respectively. As a result of the lower cost associated with the tax exemption, however, local jurisdictions that purchase fire trucks would generate a savings greater than their loss of state shared revenues.
Besides the tax at the state level, the cities and counties assess their own individual sales taxes. This legislation would not exempt fire districts from the local tax; however, the local governments already have the authority to grant exemptions.
2/16/07