The Arizona government recently posed a bill that would eliminate sales tax for tourists coming to the state to buy cars and RVs. The bill was proposed to the state Governor, Katie Hobbs, who ultimately vetoed the proposal. The bill was ultimately presented on behalf of Lucid Motors, whose headquarters and main factory are in Arizona. State Representative Teresa Martinez was the main backer of the bill and the motion to cut sales tax for tourist shoppers.
Martinez was pushing to cut sales tax as she believed it would boost tourism and the economy in her district.
In her veto, Governor Hobbs wrote that she could understand and appreciate the sentiment behind the legislation but does not believe the grounds on which it was written are secure enough. She stated that if they were to come back with a rewritten law with stronger restrictions and structure that would guarantee a boost to the economy, then she would potentially reconsider. With the vetoing of this law the rules for purchasing a car remain the same, tourists and other state visitors will have to pay the sales tax of the state.
Martinez stands behind her motion for this bill as she believes it will truly bring about more tourism to her district, which covers Casa Grande. She grew up there and knows the city very well, which means she knows all of the draws the city has. With the Lucid Factory in the city and the way they market their sales, she believes the sales tax elimination will draw an even bigger crowd to come to purchase a vehicle and then spend more money in the state on food, housing, etc.
Lucid markets to out-of-staters by promoting a sort of trial run, where they offer potential buyers the opportunity to come to the factory and see how the cars are made and drive one on their own test track. The marketing method is modeled after European car manufacturers who do a similar sales method which promotes buyers to go to Europe on a trip in order to test out a car. Martinez believed the proposed cutting of sales tax to be a great encourager for more to travel to Arizona since the price would be reduced if they did that.
However, analysts did some calculations and with the current proposed concept put into action, Arizona’s economy would not grow.
According to the analysts who looked at average out-of-state vehicle sales, the average cost of each vehicle’s sales tax that would be lost is $1,400. But to make up for this loss, visitors would have to spend exponentially more, as they would have to compensate for regular tourism revenue and make up for the $1,400.