WILLIAMS, Ariz. - Williams residents will see an increase in sales tax in March, followed by a decrease in June as city and state rate changes go into effect.
Williams City Council members voted to approve a 0.5 percent sales tax increase and eliminate the city's 2 percent food tax at the Dec. 13 meeting.
Council members originally approved the tax changes in June of last year, but had to start the process over after city officials did not post notification on the city website's homepage 60 days prior to the vote.
The current retail and contracting sales tax is 10.725 percent with city, state and county rates combined. With the Williams sales tax rate increasing from 3 percent to 3.5 percent, the total tax rate will be 11.225 percent starting March 1.
Come March, shoppers will pay an additional 50 cents in tax on a $100 transaction in Williams retail stores compared to the tax they are currently paying.
Money generated from the 0.5 percent city sales tax increase will go toward street repairs.
"It's a system that you constantly have to be putting money back into to maintain or you're going to get even further behind," said City Manager Brandon Buchanan.
Buchanan estimates the tax hike will increase money for road improvement materials in the city's Highway User Revenue Fund (HURF) from approximately $27,000 to $270,000 annually.
The sales tax rate will change again on June 1 when a temporary 1-cent per dollar state sales tax ends.
This tax went into effect June 1, 2010, raising the state sales tax rate from 5.6 percent to 6.6 percent. The tax raised money for education, public safety and health and human services.
With the expiration of the temporary state tax increase, the total sales tax rate in Williams will drop from 11.225 percent to 10.225 percent.
"In June even with our increase, the total tax rate will still be lower than it is right now," Buchanan said.
Another change that will begin March 1 is the elimination of the city's 2 percent tax on food for home consumption. The food tax was generating about $177,000 per year for the city's general fund.
The tax applies to food purchased at grocery stores.
If a family currently spends $100 on groceries, they will pay a food tax of $2. In March, families won't pay any tax on groceries.
"They get a break on a grocery bill," said Julie Walker, the city's finance director.
People will still pay tax on food in Williams restaurants at a rate of 12.225 percent until June 1, when it drops to 11.225 percent.
Buchanan said the city's 0.5 percent sales tax increase coupled with the elimination of the food tax will benefit residents.
"We're shifting some of that tax burden to people that visit but don't otherwise contribute to the system," he said. Buchanan explained that since the sales tax increase applies to retail stores, many of the businesses that will have higher rates will be tourist shops downtown.
"Those are supported not by locals but by people visiting town," he said.
Walker added that residents also benefit more from paying no sales tax on groceries, since they buy more groceries than visitors.
In addition, she said the city's hotel/motel and restaurant/bar tax rates (both at 4.5 percent) are higher than the retail tax rate to help shift the tax burden from locals to visitors.
Since the tax rate changes were originally scheduled to take effect in October, city staff has cut some money from the city's HURF fund and has implemented some cost saving measures in the general fund to account for the shortfall. However, despite the delay, the city still has more money this year for street repairs than last year because it received money from impact fees and the Bed, Board and Booze fund.