A tax mired in obscurity for years has pitted local business owners against the city of Peoria, whose elected officials have called a special study session to discuss the problem.
The public meeting is tentatively scheduled for 5 p.m., Oct. 17.
At issue is a number of businesses saying they owe several years worth of back taxes under section 12-410 of Peoria’s city code, referred to as an amusement tax.
The commonality among these merchants is they had no clue what the amusement tax was until a bill arrived at their door claiming they never paid it.
Local businesses affected by this tax spoke out during the Oct. 10 city council meeting, calling for a resolution and requesting the city call a special meeting.
Peoria Chamber of Commerce CEO and Executive Director Rhonda Carson spoke as an advocate for these businesses, stating they received no prior communication about the tax and they should not be classified as amusement, as they provide instructional services to their student population and not ticketed events.
The amusement tax was approved by Peoria voters in 2005. It requires certain businesses to pay 2.8% of their gross income for each customer for “providing amusement that begins in the city or takes place entirely within the city.”
The code includes businesses such as dance, martial arts as well as gymnastics instruction, and many of the local businesses affected by this tax fall into those categories that are strictly instructional with no ticketed performances or offerings, Carlson said.
“I am simply here as an advocate for small business so our small business community can continue to thrive and our economic development initiatives are not halted due to anti-attraction measures such as this,” Carlson said.
Some local businesses like these are being hit for large amounts of back taxes. At least three individual businesses in Peoria have been billed in the amounts of $52,000; $37,000; and $20,000, according to the chamber.
Lora Wood, owner of LA Dance studio, said in May 2023 she was hand delivered a packet and a letter with an Arizona Department of Revenue letterhead stating her business falls under the amusement tax category and that she owed back taxes.
She said the packet clearly stated income from private or group instructional activities such as performing arts, martial arts, gymnastics, etc., are exempt. Upon reaching out to the city, she was told that was at a state level, and not at a city level. When she asked why that was not included in the packet, the city official said that information had not yet been updated in their system and they could not originally provide it.
Wood said her business of nearly 20 years in Peoria is a reflection of her passion and dedication to her community, where she graduated from a Peoria school and chose to raise her family.
During that time, she said, she has worked tirelessly to ensure her business adheres to the laws governing her operation.
A fair solution is needed to this issue, and the city and business owners should move forward collectively because not doing so will cause many businesses to close their doors and suffer tremendously, Wood said.
“I am not alone in my lack of awareness regarding the amusement tax. Many fellow business owners who, like me, are dedicated to the prosperity of this city were blindsided by the sudden revelation that our businesses fall under the amusement tax category. It is no wonder there is a mass confusion with a lack of clarity, in addition to the years of no communication from the city or awareness to any of the businesses impacted,” she said. “It has caused unnecessary confusion and financial strain. I urge you to consider the impact of the confusion on your local businesses and the integrity of our tax system.”
The Peoria Chamber of Commerce has conducted outreach indicating that a majority of the dance, martial arts and gymnastics instruction businesses are unaware the tax exists, with some businesses being threatened to have their license taken away if the amount owed is not paid immediately, and many questioning why they are even considered an “amusement.”
The Peoria Chamber says there is wide misunderstanding about this tax among the business community.
The chamber identified 40 businesses that operate dance, martial arts and gymnastics academies in Peoria and outreach to those businesses has shown that 25 of them, or 62.5%, were not aware of the tax and had never received prior communication from the city that they are considered an amusement.
Carlson said the chamber is waiting for responses from about 15 other businesses, and she expects they are also not aware of the tax.
If there is an extensive misunderstanding about the tax code, taxpayers can get a break, according to the Arizona Department of Revenue’s Model City Tax Code, a resource designed to help the business community in determining taxable and tax exempt items.
MCTC states if more than 60% of persons in the affected class have failed to properly account for their taxes owing to the same misunderstanding or misapplication of the tax laws, businesses could be forgiven.
Howard Munding, owner of Peoria Championship Martial Arts, said he recently learned his business was classified as an amusement.
He said his business teaches and promotes personal growth, character development as well as life skills, and added that physical activity is part of the curriculum, with a core mission centered around a comprehensive educational experience.
The business also offers free events to the community to empower and protect residents and others.
Munding believes his organization should be reclassified because of the educational-building nature of its services.
“Considering the educational nature of our school and the positive impact we have on the students, and our dedication to teaching individuals with special needs, and the fact that we were never informed of the amusement tax obligation, I kindly request re-evaluation of our classification for amusement tax purposes,” he said. “We firmly believe that Peoria Championship Martial Arts should be classified as educational.”
Meet Philip Haldiman is an award-winning journalist who most recently took first place for investigative reporting in 2023 from Arizona Newspapers Association. He joined Independent Newsmedia, Inc., USA, in 2015, covering Sun City West his first year. Since 2016, he has covered the city of Peoria. Prior to coming to INI, he was a reporter with The Arizona Republic for seven years, covering numerous cities throughout the Valley. Before that, he was a freelance writer.
Community: Haldiman spearheads the Peoria Independent Hometown Heroes Awards program, honoring local individuals and businesses that give back to the community. He has hosted local candidate forums over the years and is a member of the Society of Professional Journalists. Haldiman also served as a member of the Journalism Program Community Advisory Board at Glendale Community College. Outside journalism, Haldiman served as a member of the city of Peoria Complete Count Committee for the Census, 2019-2020. Lastly, he has served as a member of his HOA governing board since 2021.
Education: Arizona State University with a BA in Journalism and Mass Communications and a BA in Theater.
Random Fact: Haldiman is a fourth-generation Arizonan as well as wrote and produced an autobiographical comic book about his time spent in Hollywood and his life as a cult film star.
Hobbies: He enjoys hiking Arizona’s mountainous landscapes and is currently working on a play for the stage.
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