Many small businesses in Peoria are having difficult conversations about their futures as the city of Peoria enforces a little-known - and previously unenforced - tax known as the amusement tax.
Specifically, businesses that provide dance, martial arts and gymnastics instruction are receiving letters from the city that say they owe several years of back taxes under Section 12-410 of the city tax cod referred to as the amusement tax.
The businesses being impacted were never made aware that this was a tax they were required to pay and feel this is an inappropriate tax to impose on businesses that provide educational services to support youth and adults throughout our community.
These are businesses that are continuing to regain their footing after the COVID-19 pandemic, and as they were never communicated about this tax when starting their business, renewing their business license, or paying other required city taxes, they were never provided the opportunuity to incorporate the 2.8% tax on gross income into their tuition.
The city of Peoria has stated that a special election held on Sept. 13, 2005, was appropriate communication to the community that this tax exists and is quoted as saying, "An election is an extremely transparent and public notification to the community that a tax exists."
Further investigation shows that the corresponding documentation from said election (Proposition 300) indicates that voters approved "a proposed code amendment increasing the city sales tax by 3/10 of l%.
A total of 7,291 residents voted in the special election, with 68.41% approving the tax increase.
Thus far, over 50 businesses have been contacted that provide dance, martial arts and gymnastics instruction in Peoria, with the overwhelming majority stating they had never heard of this tax, have not received previous communication from the city about the tax, and do not understand how it applies to them.
We at the Peoria Chamber of Commerce agree and believe there has been an "extensive misunderstanding or misapplication of the tax law" per Arizona's Model City Tax Code.
Ambiguous language contained in Option H of the amusement tax adds further confusion and supports a misunderstanding and misapplication of the tax.
We continue to verify these businesses received no prior communication that they were considered amusement and question why the city is now imposing this tax on these businesses when there has been no prior precedent over the last 18 years.
It is heartbreaking to hear the stories being shared with me.
Businesses that have been here for decades, serving thousands of students across the Valley, are now wondering how they can keep their doors open. These are businesses that provide self-defense, character development, leadership, physical education and valuable skills that their students can apply in their daily lives and use for their future career development.
Letters being received by these businesses from the city of Peoria indicate amounts due in the tens of thousands of dollars, with one business facing a bill for $52,000 and $10 per day in interest also being charged.
We hope to work with the city to resolve this matter and remain dedicated to supporting our business community.
If you are a business being impacted by this issue, please contact our office at 623-979-3601 or email me at firstname.lastname@example.org.