Clarkdale is one of several towns in Yavapai County that does not charge sales taxes on food for home consumption. Though the town relies on sales tax for the main bulk of its revenues, the 2001 ordinance establishing its current sales tax setup exempted food bought at a store to take home — separate from restaurant food — from the municipality’s 3% sales tax.
At least, that was how it was supposed to work.In 2017, the Arizona Department of Revenue informed the town that it had been collecting sales tax from retail businesses for food for years.
At a meeting of the Clarkdale Town Council on Tuesday, Jan. 28, representatives of the ADOR gave the council moreinformation, and the town discussed what to do in response.
Jess Rankin, city services team manager for ADOR, detailed the events at the state agency that had led to the mistake, largely showing the problem to have happened on the state’s end, not the town. Members of the Town Council expressed frustration with the ADOR to Rankin.
“You can’t find anything that indicates that we did anything to either cause the cessation or the resumption — it was all done in your office for whatever reason you don’t know?” Vice Mayor Richard Dehnert said. “What you’re telling me is that if there is any fault, it’s that we didn’t find your error?”
According to Rankin, just under $62,000 was mistakenly collected from a total of 42 different businesses in Clarkdale through the sales tax. Since there are only two brick-and-mortar retail stores in Clarkdale that sell food — the Dollar General and the Number 1 Food Store, both on 89A — the vast majority of those businesses were online vendors.
The town of Clarkdale was faced with a choice of either ceasing to collect sales taxes on food by informing the ADOR, in which case the town would have to repay businesses that asked for their money back, or passing a new ordinance extending the town’s sales tax to food for home consumption. If the town opted to repay the taxes, businesses would be eligible to request the town for up to four years of collected taxes, which would be paid back by ADOR, who would then deduct the difference from future payments to the town.
Although the taxes were paid by individual customers, the reimbursements would go to the businesses that sold the food, not the buyers.
Though members of the Town Council expressed continued distaste for taxing food, council members nevertheless felt that the town’s budget was not in a place to be able to pay up to $62,000 back to businesses. The council directed town staff to prepare an ordinance for a future council meeting that would apply the town’s sales tax to food as well.
“I have a personal bias against home food taxes,” Councilman Bill Regner said. “I think it puts a greater burden on low income people. It’s a very regressive tax.
“However, I find we’re in a situation where we have a liability over the next four years for some portion of $64,000 [sic], and I think that we need to protect ourselves …. We don’t have a lot of extra money to do these kinds of things. My opinion would be that we pass an ordinance continuing this, creating a food for home consumption tax, at a level that we come to an agreement with, but I would footnote it that at some point if we were to get a grocery store sometime in the future in Clarkdale, I would like to revisit this issue.”
