Oro Valley is considering adding several new local taxes in response to projections by tow staff that the Town will face a revenue shortfall by 2030. At last week's council study session, Town staff outlined three possible new taxes for the council to consider: A use tax, a telecommunications tax, and a commercial rental tax. These taxes are already in place in nearby communities such as Tucson, Marana, and Sahuarita, but are not currently collected in Oro Valley. The main goal is to generate additional revenue to help maintain the Town’s financial stability in the years ahead.
Understanding the Use Tax: Who pays and how it works
The proposed use tax would apply to goods purchased out of state or online and brought into Oro Valley for use. Technically, both businesses and individual residents are responsible for paying this tax if the seller did not collect Oro Valley sales tax at the time of purchase. In practice, most compliance comes from businesses, since they are subject to tax audits and must routinely report these purchases. For individuals, use tax is mainly self-reported and rarely enforced, except for large items like vehicles, where tax collection is linked to registration. The Town acknowledges that use tax collection from individuals is challenging and not always realistic. The primary intent is to create a level playing field for local retailers and generate new revenue for capital improvements. Based on the town’s projections, the use tax could generate from $375,000 to $600,000 annually.
The proposed use tax would apply to goods purchased out of state or online and brought into Oro Valley for use. Technically, both businesses and individual residents are responsible for paying this tax if the seller did not collect Oro Valley sales tax at the time of purchase. In practice, most compliance comes from businesses, since they are subject to tax audits and must routinely report these purchases. For individuals, use tax is mainly self-reported and rarely enforced, except for large items like vehicles, where tax collection is linked to registration. The Town acknowledges that use tax collection from individuals is challenging and not always realistic. The primary intent is to create a level playing field for local retailers and generate new revenue for capital improvements. Based on the town’s projections, the use tax could generate from $375,000 to $600,000 annually.
A telecommunications tax is also being considered, which would add a charge to every cell phone bill in Oro Valley. This tax is already common in other Arizona towns. If adopted, it would mainly affect local residents, since the fee is typically passed directly to the consumer. Vice Mayor Barrett noted that many residents are already seeing several fees and taxes on their phone bills and expressed concern about adding another cost. Town staff estimate this tax could bring in about $650,000 each year.
Commercial Rental Tax would affect businesses and individuals
The commercial rental tax would apply to all businesses renting commercial space in Oro Valley, including offices, retail stores, and self-storage units. In most cases, business tenants would pay the tax, but those renting storage units—often individuals—would also be affected. Council members, including Mayor Winfield and Councilmember Murphy, raised concerns about the impact on small businesses, especially given other rising expenses. The projected annual revenue from the commercial rental tax is about $1.1 million.
The commercial rental tax would apply to all businesses renting commercial space in Oro Valley, including offices, retail stores, and self-storage units. In most cases, business tenants would pay the tax, but those renting storage units—often individuals—would also be affected. Council members, including Mayor Winfield and Councilmember Murphy, raised concerns about the impact on small businesses, especially given other rising expenses. The projected annual revenue from the commercial rental tax is about $1.1 million.
Council shows mixed reactions to the new taxes
Council members expressed a range of reactions to the proposed taxes. Mayor Winfield was clear about his reservations regarding the commercial rental tax, stating that it "gives me the most heartburn" because of its potential impact on small businesses. Councilmember Murphy also emphasized the need to protect local entrepreneurs. Vice Mayor Barrett expressed strong concern about the telecommunications tax, noting that "many residents are already seeing several fees and taxes on their phone bills." While there was less direct opposition to the use tax, it was generally regarded as more feasible, since it brings Oro Valley in line with neighboring towns and primarily targets out-of-town and online purchases.
Council members expressed a range of reactions to the proposed taxes. Mayor Winfield was clear about his reservations regarding the commercial rental tax, stating that it "gives me the most heartburn" because of its potential impact on small businesses. Councilmember Murphy also emphasized the need to protect local entrepreneurs. Vice Mayor Barrett expressed strong concern about the telecommunications tax, noting that "many residents are already seeing several fees and taxes on their phone bills." While there was less direct opposition to the use tax, it was generally regarded as more feasible, since it brings Oro Valley in line with neighboring towns and primarily targets out-of-town and online purchases.
LOVE's Opinion: There is no need at this time for the town to implement new taxes..there is much the town can do to meet the spending challenge in other ways
Staff is recommending new taxes when there is no immediate need. The need, according to them, is based on a forecast they developed about a possible revenue shortfall in 2030. It is their forecast—a point estimate that makes many assumptions and could be completely wrong by then. In addition, the Council should not approve new taxes until it has undertaken an independent, third-party study, reporting directly to Council, on efficiency and potential ways to reduce spending and costs. It has been many years since the last such independent study was done—specifically, in 2008—and much has changed now that the Town has matured as a community. It is not possible for staff to “do surgery on themselves.” Like most organizations, they do not have the ability to critically examine and remove activities that are no longer needed. Therefore, the study must report directly to the Council. Finally, the only area that might be excluded from such a study is the police department. The reason is not that the police department should never be reviewed, but that including it would create unnecessary anxiety in the community among those who strongly support our police force. That is exactly what happened with the 2008 study.
You need to get involved
As we reported last week, you need to get involved. Last week, Town staff emphasized that a community engagement process is underway to gather feedback on these proposed taxes before any final decisions are made. A series of online public meetings and outreach events are scheduled for July, but several council members raised concerns that holding sessions during the middle of summer could limit participation, as many residents are away or may not be aware that important tax changes are being considered. Council members also noted that many residents may not fully understand the details or impact of the proposed taxes, and they encouraged staff to expand and improve the outreach effort to reach a broader audience. The engagement process will include online sessions and feedback opportunities, with additional input to be sought through town boards and commissions, leading up to council consideration later this year. LOVE will continue to follow this issue and will report on any other fee or revenue changes being proposed.
As we reported last week, you need to get involved. Last week, Town staff emphasized that a community engagement process is underway to gather feedback on these proposed taxes before any final decisions are made. A series of online public meetings and outreach events are scheduled for July, but several council members raised concerns that holding sessions during the middle of summer could limit participation, as many residents are away or may not be aware that important tax changes are being considered. Council members also noted that many residents may not fully understand the details or impact of the proposed taxes, and they encouraged staff to expand and improve the outreach effort to reach a broader audience. The engagement process will include online sessions and feedback opportunities, with additional input to be sought through town boards and commissions, leading up to council consideration later this year. LOVE will continue to follow this issue and will report on any other fee or revenue changes being proposed.
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Next Tuesday: Stormwater Fee Changes In the Offing
Next Wednesday: Increases in Facility Use and Rental Fees Are On The Table
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