AMENDING TITLE 9, CHAPTER 4, ARTICLE 8, ARIZONA REVISED STATUTES, BY ADDING
SECTION 9-499.08; AMENDING SECTIONS 42-1310.01, 42-1409, 42-1453, 42-1482 AND
48-4233, ARIZONA REVISED STATUTES; AMENDING SECTION 42-1310.16, ARIZONA REVISED STATUTES, AS AMENDED BY LAWS 1996, CHAPTER 319, SECTION 1; PROVIDING
FOR THE DELAYED REPEAL OF SECTION 9-499.08, ARIZONA REVISED STATUTES;
RELATING TO TAXATION.
Be it enacted by the Legislature of the State of Arizona:
Section 1. Title 9, chapter 4, article 8, Arizona Revised Statutes, is amended by adding section 9-499.08, to read:
1. THE DISTRICT CONTAINS A LAKE FACILITY THAT EXISTS BEFORE THE
EXPIRATION OF THE CERTIFICATE OF QUALIFICATION UNDER SUBSECTION D OF THIS
SECTION.
2. THE DISTRICT CONTAINS NOT MORE THAN TWENTY-FIVE ACRES, IN ADDITION
TO THE LAKE FACILITY.
3. THE DISTRICT INCLUDES RECREATIONAL, COMMERCIAL AND RETAIL
FACILITIES THAT EXIST BEFORE THE EXPIRATION OF THE CERTIFICATE OF
QUALIFICATION UNDER SUBSECTION D OF THIS SECTION AND THAT MAY BE PUBLICLY OR
PRIVATELY OWNED OR OPERATED.
4. THE DISTRICT IS LOCATED IN A REDEVELOPMENT AREA THAT IS ESTABLISHED
PURSUANT TO TITLE 36, CHAPTER 12, ARTICLE 3.
B. A CITY OR TOWN THAT DESIGNATES A COMMERCIAL ENHANCEMENT REUSE
DISTRICT SHALL PREPARE AN ANNUAL REPORT LISTING ALL NEW CONSTRUCTION ACTIVITY
OF ANY TYPE, AS SHOWN OR MEASURED BY THE ISSUANCE OF BUILDING PERMITS, IN ANY
COMMERCIAL ENHANCEMENT REUSE DISTRICT AND SHALL MAKE COPIES OF THE REPORT
AVAILABLE TO THE PUBLIC.
C. A BUILDER WHO WISHES TO QUALIFY A DEVELOPMENT AS A LAKE FACILITY
DEVELOPMENT FOR PURPOSES OF A TRANSACTION PRIVILEGE TAX EXEMPTION UNDER
SECTION 42-1310.16, SUBSECTION B, PARAGRAPH 8 AND SECTION 42-1453 SHALL APPLY
TO THE CITY OR TOWN FOR A CERTIFICATION OF LAKE FACILITY DEVELOPMENT
QUALIFICATION. ON RECEIVING THE APPLICATION, THE CITY OR TOWN MAY CERTIFY
THE DEVELOPMENT AS A LAKE FACILITY DEVELOPMENT IF IT DETERMINES THAT ALL OF
THE FOLLOWING ARE TRUE:
1. THE DEVELOPMENT WILL CONTRIBUTE TO THE LONG-TERM VITALITY OF THE
COMMERCIAL ENHANCEMENT REUSE DISTRICT.
2. THE QUALITY OF THE PROPOSED DEVELOPMENT IS APPROPRIATE TO THE AREA.
3. THE INVESTMENT TO BE MADE IN THE DEVELOPMENT IS AT LEAST FORTY
MILLION DOLLARS.
D. THROUGH DECEMBER 31, 2004, IF THE CITY OR TOWN DETERMINES THAT THE
DEVELOPMENT QUALIFIES AS A LAKE FACILITY DEVELOPMENT, IT SHALL ISSUE A
CERTIFICATE OF QUALIFICATION TO A BUILDER OR BUILDERS DESCRIBING THE PROPERTY
SO QUALIFYING. A CITY OR TOWN SHALL NOT ISSUE A CERTIFICATE OF QUALIFICATION
AFTER DECEMBER 31, 2004. A CERTIFICATE IS VALID WITH RESPECT TO ANY LAKE
FACILITY DEVELOPMENT OR PORTION THEREOF THAT IS CONSTRUCTED AND COMPLETED FOR
OCCUPANCY OR USE WITHIN FIVE CALENDAR YEARS AFTER THE CERTIFICATE IS ISSUED.
E. IN THIS SECTION:
1. "BUILDER" MEANS A PERSON WHO ACTS AS A PRIME CONTRACTOR, AS DEFINED
IN SECTION 42-1310.16, IN CONSTRUCTING ANY NEW LAKE FACILITY DEVELOPMENT IN
A DESIGNATED COMMERCIAL ENHANCEMENT REUSE DISTRICT.
2. "LAKE FACILITY" MEANS A PUBLICLY OR PRIVATELY OWNED ARTIFICIAL LAKE
OR A PUBLICLY OR PRIVATELY OWNED CONSTRUCTED AQUATIC HABITAT AND RELATED
RESERVOIR THAT COVERS AT LEAST ONE HUNDRED ACRES WITHIN THE EXTERIOR
BOUNDARIES OF THE CITY OR TOWN AND THAT IS IMPOUNDED PRIMARILY IN AN EXISTING
NATURAL RIVERBED OR THAT IS ADJACENT TO AN EXISTING NATURAL RIVERBED, WITH
RELATED FACILITIES FOR USE OF AND ACCESS TO WATER.
3. "LAKE FACILITY DEVELOPMENT" MEANS A LAKE FACILITY AND ANCILLARY
IMPROVEMENTS FOR WHICH THE CONSTRUCTION COSTS DO NOT EXCEED ONE HUNDRED
TWENTY-FIVE MILLION DOLLARS AND FOR WHICH THE BUILDER HAS RECEIVED A
CERTIFICATE OF QUALIFICATION UNDER THIS SECTION. ANCILLARY IMPROVEMENTS MAY
INCLUDE THE FOLLOWING, WHETHER LOCATED IN OR OUTSIDE THE LAKE FACILITY OR
WHETHER NEWLY CONSTRUCTED OR RENOVATED:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Sec. 2. Section 42-1310.01, Arizona Revised Statutes, is amended to read:
A. The retail classification is comprised of the business of selling tangible personal property at retail. The tax base for the retail classification is the gross proceeds of sales or gross income derived from the business. The tax imposed on the retail classification pursuant to this section does not apply to the gross proceeds of sales or gross income from:
1. Professional or personal service occupations or businesses which involve sales or transfers of tangible personal property only as inconsequential elements.
2. Services rendered in addition to selling tangible personal property at retail.
3. Sales of warranty or service contracts. The storage, use or consumption of tangible personal property provided under the conditions of such contracts is subject to tax under section 42-1408.01.
4. Sales of tangible personal property by any nonprofit organization organized and operated exclusively for charitable purposes and recognized by the department and the United States internal revenue service as such a nonprofit organization for charitable purposes.
5. Sales to persons engaged in business classified under the restaurant classification of articles used by human beings for food, drink or condiment, whether simple, mixed or compounded.
6. Business activity by a person which is properly included in any other business classification by that person which is taxable under this article.
7. The sale of stocks and bonds.
8. Drugs and medical oxygen on the prescription of a member of the medical, dental or veterinarian profession who is licensed by law to administer such substances.
9. Prosthetic appliances as defined in section 23-501 prescribed or recommended by a health professional licensed pursuant to title 32, chapter 7, 8, 11, 13, 14, 15, 16, 17 or 29.
10. Insulin, insulin syringes and glucose test strips.
11. Prescription eyeglasses or contact lenses.
12. Hearing aids as defined in section 36-1901.
13. Durable medical equipment which has a federal health care financing administration common procedure code, is designated reimbursable by medicare, is prescribed by a person who is licensed under title 32, chapter 7, 8, 13, 14, 15, 17 or 29, can withstand repeated use, is primarily and customarily used to serve a medical purpose, is generally not useful to a person in the absence of illness or injury and is appropriate for use in the home.
14. Sales to nonresidents of this state for use outside this state if the vendor ships or delivers the tangible personal property out of this state.
15. Food, as provided in and subject to the conditions of article 1.1 of this chapter and section 42-1310.14.
16. Items purchased with United States department of agriculture food coupons issued under the food stamp act of 1977 (P.L. 95-113; 91 Stat. 958) or food instruments issued under section 17 of the child nutrition act (P.L. 95-627; 92 Stat. 3603; and P.L. 99-661, section 4302).
17. Textbooks by any bookstore that are required by any state university or community college.
18. Food and drink to a person who is engaged in business which is classified under the restaurant classification and which provides such food and drink without monetary charge to its employees for their own consumption on the premises during the employees' hours of employment.
19. Articles of food, drink or condiment and accessory tangible personal property to a school district if such articles and accessory tangible personal property are to be prepared and served to persons for consumption on the premises of a public school within the district during school hours.
20. Lottery tickets or shares pursuant to title 5, chapter 5, article 1.
21. The sale of precious metal bullion and monetized bullion to the ultimate consumer, but the sale of coins or other forms of money for manufacture into jewelry or works of art is subject to the tax. In this paragraph:
(a) "Monetized bullion" means coins and other forms of money which are manufactured from gold, silver or other metals and which have been or are used as a medium of exchange in this or another state, the United States or a foreign nation.
(b) "Precious metal bullion" means precious metal, including gold, silver, platinum, rhodium and palladium, which has been smelted or refined so that its value depends on its contents and not on its form.
22. Motor vehicle fuel and use fuel which are subject to a tax imposed under title 28, chapter 9, article 1 or 2, sales of use fuel to a holder of a valid single trip use fuel tax permit issued under section 28-1559, sales of aviation fuel which are subject to the tax imposed under section 28-1765.01 and sales of jet fuel which are subject to the tax imposed under chapter 9.2 of this title.
23. Tangible personal property sold to a person engaged in the business of leasing or renting such property under the personal property rental classification if such property is to be leased or rented by such person.
24. Tangible personal property sold in interstate or foreign commerce if prohibited from being so taxed by the Constitution of the United States or the constitution of this state.
25. Tangible personal property sold to:
(a) A qualifying hospital as defined in section 42-1301.
(b) A qualifying health care organization as defined in section 42-1301 if the tangible personal property is used by the organization solely to provide health and medical related educational and charitable services.
(c) A qualifying health care organization as defined in section 42-1301 if the organization is dedicated to providing educational, therapeutic, rehabilitative and family medical education training for blind, visually impaired and multi-handicapped children from the time of birth to age twenty-one.
(d) A qualifying community health center as defined in section 42-1301.
(e) A nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code and that regularly serves meals to the needy and indigent on a continuing basis at no cost.
26. Magazines or other periodicals or other publications by this state to encourage tourist travel.
27. Tangible personal property sold to a person engaged in business
classified under the prime contracting classification if the person is
subject to tax under this article by reason of being engaged in such business
28. The sale of a motor vehicle to:
(a) A nonresident of this state if the purchaser's state of residence does not allow a corresponding use tax exemption to the tax imposed by this article and if the nonresident has secured a special thirty-day nonresident registration of the vehicle by applying according to section 28-302.
(b) An enrolled member of an Indian tribe who resides on the Indian reservation established for that tribe.
29. Tangible personal property purchased or leased in this state by a nonprofit charitable organization that has qualified under section 501(c)(3) of the United States internal revenue code and that engages in and uses such property exclusively for training, job placement or rehabilitation programs or testing for mentally or physically handicapped persons.
30. Sales of tangible personal property by a nonprofit organization that is exempt from taxation under section 501(c)(3), 501(c)(4) or 501(c)(6) of the internal revenue code if the organization is associated with a major league baseball team or a national touring professional golfing association and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.
31. Sales of commodities, as defined by title 7 United States Code section 2, that are consigned for resale in a warehouse in this state in or from which the commodity is deliverable on a contract for future delivery subject to the rules of a commodity market regulated by the United States commodity futures trading commission.
32. Sales of tangible personal property by a nonprofit organization that is exempt from taxation under section 501(c)(3), 501(c)(4), 501(c)(6), 501(c)(7) or 501(c)(8) of the internal revenue code if the organization sponsors or operates a rodeo featuring primarily farm and ranch animals and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.
33. Medical oxygen, including delivery hose, mask or tent, regulator and tank, on the prescription of a member of the medical, dental or veterinary profession who is licensed by law to administer medical oxygen.
34. Sales of new semitrailers, as defined in section 28-101, manufactured in Arizona, or new parts manufactured in Arizona for semitrailers sold by the manufacturer to a person who holds an interstate commerce commission license for use in interstate commerce.
35. Sales of seeds, seedlings, roots, bulbs, cuttings and other propagative material to persons who use those items to commercially produce agricultural, horticultural, viticultural or floricultural crops in this state.
36. Machinery, equipment, technology or related supplies that are only useful to assist a person who is physically disabled as defined in section 46-191, has a developmental disability as defined in section 36-551 or has a head injury as defined in section 41-3201, to be more independent and functional.
37. Sales of tangible personal property that is shipped or delivered directly to a destination outside the United States for use in that foreign country.
38. Sales of natural gas or liquefied petroleum gas used to propel a motor vehicle.
39. Paper machine clothing such as forming fabrics and dryer felts, sold to a paper manufacturer and directly used or consumed in paper manufacturing.
40. Coal, petroleum, coke, natural gas, virgin fuel oil and electricity sold to an environmental technology manufacturer, producer or processor as defined in section 41-1514.02 and directly used or consumed in the generation or provision of on-site power or energy solely for environmental technology manufacturing, producing or processing or environmental protection. This paragraph shall apply for fifteen full consecutive calendar or fiscal years from the date the first paper manufacturing machine is placed in service. In the case of an environmental technology manufacturer, producer or processor who does not manufacture paper, the time period shall begin with the date the first manufacturing, processing or production equipment is placed in service.
41. Beginning from and after June 30, 1995, sales of liquid, solid or gaseous chemicals used in manufacturing, processing, fabricating, mining, refining, metallurgical operations or research and development if using or consuming the chemicals, alone or as part of an integrated system of chemicals, involves direct contact with the materials from which the product is produced for the purpose of causing or permitting a chemical or physical change to occur in the materials as part of the production process. This paragraph does not include chemicals that are used or consumed in activities such as packaging, storage or transportation but does not affect any deduction for such chemicals that is otherwise provided by this section.
42. Through December 31, 1994, personal property liquidation transactions, conducted by a personal property liquidator. From and after December 31, 1994, personal property liquidation transactions shall be taxable under this section provided that nothing in this subsection shall be construed to authorize the taxation of casual activities or transactions under this article or article 2 of this chapter. In this paragraph:
(a) "Personal property liquidation transaction" means a sale of personal property made by a personal property liquidator acting solely on behalf of the owner of the personal property sold at the dwelling of the owner or upon the death of any owner, on behalf of the surviving spouse, if any, any devisee or heir or the personal representative of the estate of the deceased, if one has been appointed.
(b) "Personal property liquidator" means a person who is retained to conduct a sale in a personal property liquidation transaction.
43. Sales of food, drink and condiment for consumption within the premises of any prison, jail or other institution under the jurisdiction of the state department of corrections, the department of public safety, the department of juvenile corrections or a county sheriff.
44. A motor vehicle and any repair and replacement parts and tangible personal property becoming a part of such motor vehicle, sold to a licensed motor carrier or a lightweight motor vehicle operator subject to tax under title 28, chapter 9, article 6 who is engaged in the business of leasing or renting such property.
45. Livestock and poultry feed, salts, vitamins and other additives for livestock or poultry consumption that are sold to persons who are engaged in producing livestock, poultry, or livestock or poultry products, or who are engaged in feeding livestock or poultry commercially. For purposes of this paragraph, "poultry" includes ratites.
46. Sales of implants used as growth promotants and injectable medicines, not already exempt under paragraph 8 of this subsection, for livestock or poultry owned by or in possession of persons who are engaged in producing livestock, poultry, or livestock or poultry products or who are engaged in feeding livestock or poultry commercially. For purposes of this paragraph, "poultry" includes ratites.
47. Sales of motor vehicles at auction to nonresidents of this state for use outside this state if the vehicles are shipped or delivered out of this state, regardless of where title to the motor vehicles passes or its free on board point.
48. Tangible personal property sold to a person engaged in business and subject to tax under the transient lodging classification if the tangible personal property is a personal hygiene item which is furnished to and intended to be consumed by the transient during his occupancy.
B. In addition to the deductions from the tax base prescribed by subsection A of this section, the gross proceeds of sales or gross income derived from sales of the following categories of tangible personal property shall be deducted from the tax base:
1. Machinery, or equipment, used directly in manufacturing, processing, fabricating, job printing, refining or metallurgical operations. The terms "manufacturing", "processing", "fabricating", "job printing", "refining" and "metallurgical" as used in this paragraph refer to and include those operations commonly understood within their ordinary meaning. "Metallurgical operations" includes leaching, milling, precipitating, smelting and refining.
2. Mining machinery, or equipment, used directly in the process of extracting ores or minerals from the earth for commercial purposes, including equipment required to prepare the materials for extraction and handling, loading or transporting such extracted material to the surface. "Mining" includes underground, surface and open pit operations for extracting ores and minerals.
3. Tangible personal property, sold to persons engaged in business classified under the telecommunications classification, consisting of central office switching equipment, switchboards, private branch exchange equipment, microwave radio equipment and carrier equipment including optical fiber, coaxial cable and other transmission media which are components of carrier systems.
4. Machinery, equipment or transmission lines used directly in producing or transmitting electrical power, but not including distribution. Transformers and control equipment used at transmission substation sites constitute equipment used in producing or transmitting electrical power.
5. Neat animals, horses, asses, sheep, ratites, swine or goats used or to be used as breeding or production stock, including sales of breedings or ownership shares in such animals used for breeding or production.
6. Pipes or valves four inches in diameter or larger used to transport oil, natural gas, artificial gas, water or coal slurry.
7. Aircraft, navigational and communication instruments and other accessories and related equipment sold to:
(a) A person holding a federal certificate of public convenience and necessity or foreign air carrier permit for air transportation for use as or in conjunction with or becoming a part of aircraft to be used to transport persons, property or United States mail in intrastate, interstate or foreign commerce.
(b) Any foreign government for use by such government outside of this state.
(c) Persons who are not residents of this state and who will not use such property in this state other than in removing such property from this state. This subdivision also applies to corporations that are not incorporated in this state, regardless of maintaining a place of business in this state, if the principal corporate office is located outside this state and the property will not be used in this state other than in removing the property from this state.
8. Machinery, tools, equipment and related supplies used or consumed directly in repairing, remodeling or maintaining aircraft, aircraft engines or aircraft component parts by or on behalf of a certificated or licensed carrier of persons or property.
9. Railroad rolling stock, rails, ties and signal control equipment used directly to transport persons or property in intrastate or interstate transportation for hire.
10. Machinery or equipment used directly to drill for oil or gas or used directly in the process of extracting oil or gas from the earth for commercial purposes.
11. Buses or other urban mass transit vehicles which are used directly to transport persons or property for hire or pursuant to a governmentally adopted and controlled urban mass transportation program and which are sold to bus companies holding a federal certificate of convenience and necessity or operated by a city, town or other governmental entity or by any person contracting with such governmental entity as part of a governmentally adopted and controlled program to provide urban mass transportation.
12. Groundwater measuring devices required under section 45-604.
13. New machinery and equipment consisting of tractors, tractor-drawn implements, self-powered implements, machinery and equipment that are necessary for extracting milk, and for cooling milk and livestock, and drip irrigation lines not already exempt under paragraph 6 of this subsection used for commercial production of agricultural, horticultural, viticultural and floricultural crops and products in this state. In this paragraph:
(a) "New machinery and equipment" means machinery and equipment which has never been sold at retail except pursuant to leases or rentals which do not total two years or more.
(b) "Self-powered implements" includes machinery and equipment that is electric-powered.
14. Machinery or equipment used in research and development. In this paragraph, "research and development" means basic and applied research in the sciences and engineering, and designing, developing or testing prototypes, processes or new products, including research and development of computer software that is embedded in or an integral part of the prototype or new product or that is required for machinery or equipment otherwise exempt under this section to function effectively. Research and development do not include manufacturing quality control, routine consumer product testing, market research, sales promotion, sales service, research in social sciences or psychology, computer software research that is not included in the definition of research and development, or other nontechnological activities or technical services.
15. Machinery and equipment that are purchased by or on behalf of the owners of a soundstage complex and primarily used for motion picture, multimedia or interactive video production in the complex. This paragraph applies only if the initial construction of the soundstage complex begins after June 30, 1996 and before January 1, 2002 and the machinery and equipment are purchased before the expiration of five years after the start of initial construction. For purposes of this paragraph:
(a) "Motion picture, multimedia or interactive video production" includes products for theatrical and television release, educational presentations, electronic retailing, documentaries, music videos, industrial films, CD-ROM, video game production, commercial advertising and television episode production and other genres that are introduced through developing technology.
(b) "Soundstage complex" means a facility of multiple stages including production offices, construction shops and related areas, prop and costume shops, storage areas, parking for production vehicles and areas that are leased to businesses that complement the production needs and orientation of the overall facility.
16. Tangible personal property that is used by either of the following to receive, store, convert, produce, generate, decode, encode, control or transmit telecommunications information:
(a) Any direct broadcast satellite television or data transmission service that operates pursuant to 47 Code of Federal Regulations parts 25 and 100.
(b) Any satellite television or data transmission facility, if both of the following conditions are met:
(i) Over two-thirds of the transmissions, measured in megabytes, transmitted by the facility during the test period were transmitted to or on behalf of one or more direct broadcast satellite television or data transmission services that operate pursuant to 47 Code of Federal Regulations parts 25 and 100.
(ii) Over two-thirds of the transmissions, measured in megabytes, transmitted by or on behalf of those direct broadcast television or data transmission services during the test period were transmitted by the facility to or on behalf of those services.
For purposes of subdivision (b) of this paragraph, "test period" means the three hundred sixty-five day period beginning on the later of the date on which the tangible personal property is purchased or the date on which the direct broadcast satellite television or data transmission service first transmits information to its customers.
C. The deductions provided by subsection B of this section do not include sales of:
1. Expendable materials.
2. Janitorial equipment and hand tools.
3. Office equipment, furniture and supplies.
4. Tangible personal property used in selling or distributing activities, other than the telecommunications transmissions described in subsection B, paragraph 16 of this section.
5. Motor vehicles required to be licensed by this state, except buses or other urban mass transit vehicles specifically exempted pursuant to subsection B, paragraph 11 of this section, without regard to the use of such motor vehicles.
6. Shops, buildings, docks, depots and all other materials of whatever kind or character not specifically included as exempt.
7. Motors and pumps used in drip irrigation systems.
D. In computing the tax base, gross proceeds of sales or gross income from retail sales of automobiles does not include any amount attributable to federal excise taxes imposed by 26 United States Code section 4001.
E. In addition to the deductions from the tax base prescribed by subsection A of this section, there shall be deducted from the tax base the gross proceeds of sales or gross income derived from sales of machinery, equipment, materials and other tangible personal property used directly and predominantly to construct a qualified environmental technology manufacturing, producing or processing facility as described in section 41-1514.02. This subsection applies for ten full consecutive calendar or fiscal years after the start of initial construction.
F. In computing the tax base, gross proceeds of sales or gross income from retail sales of heavy trucks and trailers does not include any amount attributable to federal excise taxes imposed by 26 United States Code section 4051.
G. In computing the tax base, gross proceeds of sales or gross income from the sale of use fuel, as defined in section 28-1551, does not include any amount attributable to federal excise taxes imposed by 26 United States Code section 4091.
H. If a person is engaged in an occupation or business to which subsection A of this section applies, the person's books shall be kept so as to show separately the gross proceeds of sales of tangible personal property and the gross income from sales of services, and if not so kept the tax shall be imposed on the total of the person's gross proceeds of sales of tangible personal property and gross income from services.
I. If a person is engaged in the business of selling tangible personal property at both wholesale and retail, the tax under this section applies only to the gross proceeds of the sales made other than at wholesale if the person's books are kept so as to show separately the gross proceeds of sales of each class, and if the books are not so kept, the tax under this section applies to the gross proceeds of every sale so made.
J. A person who engages in manufacturing, baling, crating, boxing, barreling, canning, bottling, sacking, preserving, processing or otherwise preparing for sale or commercial use any livestock, agricultural or horticultural product or any other product, article, substance or commodity and who sells the product of such business at retail in this state is deemed, as to such sales, to be engaged in business classified under the retail classification. This subsection does not apply to businesses classified under the:
1. Transporting classification.
2. Utility classification.
3. Telecommunications classification.
4. Pipeline classification.
5. Private car line classification.
6. Publication classification.
7. Job printing classification.
8. Prime contracting classification.
9. Owner builder sales classification.
10. Restaurant classification.
K. The gross proceeds of sales or gross income derived from the following shall be deducted from the tax base for the retail classification:
1. Sales made directly to the United States government or its departments or agencies by a manufacturer, modifier, assembler or repairer.
2. Sales made directly to a manufacturer, modifier, assembler or repairer if such sales are of any ingredient or component part of products sold directly to the United States government or its departments or agencies by the manufacturer, modifier, assembler or repairer.
3. Overhead materials or other tangible personal property that is used in performing a contract between the United States government and a manufacturer, modifier, assembler or repairer, including property used in performing a subcontract with a government contractor who is a manufacturer, modifier, assembler or repairer, to which title passes to the government under the terms of the contract or subcontract.
4. Sales of overhead materials or other tangible personal property to a manufacturer, modifier, assembler or repairer if the gross proceeds of sales or gross income derived from the property by the manufacturer, modifier, assembler or repairer will be exempt under paragraph 3 of this subsection.
L. There shall be deducted from the tax base fifty per cent of the gross proceeds or gross income from any sale of tangible personal property made directly to the United States government or its departments or agencies, which is not deducted under subsection K of this section.
M. The department shall require every person claiming a deduction provided by subsection K or L of this section to file on forms prescribed by the department at such times as the department directs a sworn statement disclosing the name of the purchaser and the exact amount of sales on which the exclusion or deduction is claimed.
N. In computing the tax base, gross proceeds of sales or gross income does not include a manufacturer's cash rebate on the sales price of a motor vehicle if the buyer assigns the buyer's right in the rebate to the retailer.
O. There shall be deducted from the tax base the amount received from sales of solar energy devices, but the deduction shall not exceed five thousand dollars for each solar energy device. Before deducting any amount under this subsection, the retailer shall register with the department as a solar energy retailer. By registering, the retailer acknowledges that it will make its books and records relating to sales of solar energy devices available to the department for examination.
P. If a seller is entitled to a deduction pursuant to subsection B, paragraph 16, subdivision (b) of this section, the department may require the purchaser to establish that the requirements of subsection B, paragraph 16, subdivision (b) have been satisfied. If the purchaser cannot establish that the requirements of subsection B, paragraph 16, subdivision (b) have been satisfied, the purchaser is liable in an amount equal to any tax, penalty and interest which the seller would have been required to pay under this article if the seller had not made a deduction pursuant to subsection B, paragraph 16, subdivision (b) of this section. Payment of the amount under this subsection exempts the purchaser from liability for any tax imposed under article 2 of this chapter related to the tangible personal property purchased. The amount shall be treated as transaction privilege tax to the purchaser and as tax revenues collected from the seller to designate the distribution base pursuant to section 42-1341.
Q. For the purposes of this section:
1. "Aircraft" includes:
(a) An airplane flight simulator that is approved by the federal aviation administration for use as a phase II or higher flight simulator under appendix H, 14 Code of Federal Regulations part 121.
(b) Tangible personal property that is permanently affixed or attached as a component part of an aircraft that is owned or operated by a certificated or licensed carrier of persons or property.
2. "Other accessories and related equipment" includes aircraft accessories and equipment such as ground service equipment that physically contact aircraft at some point during the overall carrier operation.
3. "Selling at retail" means a sale for any purpose other than for resale in the regular course of business in the form of tangible personal property, but transfer of possession, lease and rental as used in the definition of sale mean only such transactions as are found on investigation to be in lieu of sales as defined without the words lease or rental.
R. For purposes of subsection K of this section:
1. "Assembler" means a person who unites or combines products, wares or articles of manufacture so as to produce a change in form or substance without changing or altering the component parts.
2. "Manufacturer" means a person who is principally engaged in the fabrication, production or manufacture of products, wares or articles for use from raw or prepared materials, imparting to those materials new forms, qualities, properties and combinations.
3. "Modifier" means a person who reworks, changes or adds to products, wares or articles of manufacture.
4. "Overhead materials" means tangible personal property, the gross proceeds of sales or gross income derived from which would otherwise be included in the retail classification, and which are used or consumed in the performance of a contract, the cost of which is charged to an overhead expense account and allocated to various contracts based upon generally accepted accounting principles and consistent with government contract accounting standards.
5. "Repairer" means a person who restores or renews products, wares or articles of manufacture.
6. "Subcontract" means an agreement between a contractor and any person who is not an employee of the contractor for furnishing of supplies or services that, in whole or in part, are necessary to the performance of one or more government contracts, or under which any portion of the contractor's obligation under one or more government contracts is performed, undertaken or assumed and that includes provisions causing title to overhead materials or other tangible personal property used in the performance of the subcontract to pass to the government or that includes provisions incorporating such title passing clauses in a government contract into the subcontract.
Sec. 3. Section 42-1310.16, Arizona Revised Statutes, as amended by Laws 1996, chapter 319, section 1, is amended to read:
A. The prime contracting classification is comprised of the business of prime contracting and dealership of manufactured buildings. The sale of a used manufactured building is not taxable under this chapter.
B. The tax base for the prime contracting classification is sixty-five per cent of the gross proceeds of sales or gross income derived from the business. The following amounts shall be deducted from the gross proceeds of sales or gross income before computing the tax base:
1. The sales price of land, which shall not exceed the fair market value.
2. Sales and installation of groundwater measuring devices required under section 45-604 and groundwater monitoring wells required by law, including monitoring wells installed for acquiring information for a permit required by law.
3. The sales price of furniture, furnishings, fixtures, appliances, and attachments that are not incorporated as component parts of or attached to a manufactured building or the setup site. The sale of such items may be subject to the taxes imposed by this article separately and distinctly from the sale of the manufactured building.
4. The gross proceeds of sales or gross income received from a contract entered into for the construction, alteration, repair, addition, subtraction, improvement, movement, wrecking or demolition of any building, highway, road, railroad, excavation, manufactured building or other structure, project, development or improvement located in a military reuse zone for providing aviation or aerospace services or for a manufacturer, assembler or fabricator of aviation or aerospace products within five years after the zone is initially established under section 41-1531. To qualify for this deduction, before beginning work under the contract the prime contractor must obtain a letter of qualification from the department of revenue.
5. The gross proceeds of sales or gross income derived from a contract to construct a qualified environmental technology manufacturing, producing or processing facility, as described in section 41-1514.02, and from subsequent construction and installation contracts that begin within ten years after the start of initial construction. To qualify for this deduction, before beginning work under the contract the prime contractor must obtain a letter of qualification from the department of revenue. This paragraph shall apply for ten full consecutive calendar or fiscal years after the start of initial construction.
6. The gross proceeds of sales or gross income from a contract to provide one or more of the following actions in response to a release or suspected release of a hazardous substance, pollutant or contaminant from a facility to the environment, unless the release was authorized by a permit issued by a governmental authority:
(a) Actions to monitor, assess and evaluate such a release or a suspected release.
(b) Excavation, removal and transportation of contaminated soil and its treatment or disposal.
(c) Treatment of contaminated soil by vapor extraction, chemical or physical stabilization, soil washing or biological treatment to reduce the concentration, toxicity or mobility of a contaminant.
(d) Pumping and treatment or in situ treatment of contaminated groundwater or surface water to reduce the concentration or toxicity of a contaminant.
(e) The installation of structures, such as cutoff walls or caps, to contain contaminants present in groundwater or soil and prevent them from reaching a location where they could threaten human health or welfare or the environment.
This paragraph does not include asbestos removal or the construction or use of pollution control equipment, facilities or other control items required or to be used by a person to prevent or control contamination before it reaches the environment. The sale of tangible personal property used in activities under this paragraph does not qualify for the exemption under section 42-1310.01, subsection A, paragraph 27 or section 42-1409, subsection A, paragraph 13, subdivision (g).
7. The gross proceeds of sales or gross income
(a) To be incorporated into real property.
(b) To become so affixed to real property that it becomes a part of the real property.
(c) To be so attached to real property that removal would cause substantial damage to the real property from which it is removed.
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(
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C. Entitlement to the deduction pursuant to subsection B, paragraph 7 of this section is subject to the following provisions:
1. A prime contractor may establish entitlement to the deduction by both:
(a) Marking the invoice for the transaction to indicate that the gross proceeds of sales or gross income derived from the transaction was deducted from the base.
(b) Obtaining a certificate executed by the purchaser indicating the name and address of the purchaser, the precise nature of the business of the purchaser, the purpose for which the purchase was made, the necessary facts to establish the deductibility of the property under section 42-1310.01, subsection B, and a certification that the person executing the certificate is authorized to do so on behalf of the purchaser. The certificate may be disregarded if the prime contractor has reason to believe that the information contained in the certificate is not accurate or complete.
2. A person who does not comply with paragraph 1 of this subsection may establish entitlement to the deduction by presenting facts necessary to support the entitlement, but the burden of proof is on that person.
3. The department may prescribe a form for the certificate described
in paragraph 1
4. If a prime contractor is entitled to a deduction by complying with paragraph 1 of this subsection, the department may require the purchaser who caused the execution of the certificate to establish the accuracy and completeness of the information required to be contained in the certificate which would entitle the prime contractor to the deduction. If the purchaser cannot establish the accuracy and completeness of the information, the purchaser is liable in an amount equal to any tax, penalty and interest which the prime contractor would have been required to pay under this article if the prime contractor had not complied with paragraph 1 of this subsection. Payment of the amount under this paragraph exempts the purchaser from liability for any tax imposed under article 2 of this chapter. The amount shall be treated as a transaction privilege tax to the purchaser and as tax revenues collected from the prime contractor in order to designate the distribution base for purposes of section 42-1341.
D. Through December 31, 1996, in computing the tax base, the contractor shall deduct the contractor's cost of solar energy devices that the contractor supplies and installs pursuant to contracts, but the deduction shall not exceed five thousand dollars for each solar energy device. Before deducting any amount under this subsection, the contractor shall register with the department as a solar energy contractor. By registering, the contractor acknowledges that it will make its books and records relating to sales of solar energy devices available to the department for examination.
E. Subcontractors or others who perform services in respect to any improvement, building, highway, road, railroad, excavation, manufactured building or other structure, project, development or improvement are not subject to tax if they can demonstrate that the job was within the control of a prime contractor or contractors or a dealership of manufactured buildings and that the prime contractor or dealership is liable for the tax on the gross income, gross proceeds of sales or gross receipts attributable to the job and from which the subcontractors or others were paid.
F. Amounts received by a contractor for a project are excluded from the contractor's gross proceeds of sales or gross income derived from the business if the person who hired the contractor executes and provides a certificate to the contractor stating that the person providing the certificate is a prime contractor and is liable for the tax under this article. The department shall prescribe the form of the certificate. If the contractor has reason to believe that the information contained on the certificate is erroneous or incomplete, the department may disregard the certificate. If the person who provides the certificate is not liable for the tax as a prime contractor, that person is nevertheless deemed to be the prime contractor in lieu of the contractor and is subject to the tax under this section on the gross receipts or gross proceeds received by the contractor.
G. For purposes of this section:
1. "Contracting" means engaging in business as a contractor.
2. "Contractor" is synonymous with the term "builder" and means any person, firm, partnership, corporation, association or other organization, or a combination of any of them, that undertakes to or offers to undertake to, or purports to have the capacity to undertake to, or submits a bid to, or does himself or by or through others, construct, alter, repair, add to, subtract from, improve, move, wreck or demolish any building, highway, road, railroad, excavation, manufactured building or other structure, project, development or improvement, or to do any part thereof, including the erection of scaffolding or other structure or works in connection therewith, and includes subcontractors and specialty contractors. For all purposes of taxation or deduction, this definition shall govern without regard to whether or not such contractor is acting in fulfillment of a contract.
3. "Dealership of manufactured buildings" means a dealer who either:
(a) Is licensed pursuant to title 41, chapter 16 and who sells at retail manufactured buildings.
(b) Supervises, performs or coordinates the excavation and completion of site improvements, setup or moving of a manufactured building including the contracting, if any, with any subcontractor or specialty contractor for the completion of the contract.
4. "Manufactured building" means a manufactured home, mobile home or factory-built building, as defined in section 41-2142.
5. "Prime contracting" means engaging in business as a prime contractor.
6. "Prime contractor" means a contractor who supervises, performs or coordinates the construction, alteration, repair, addition, subtraction, improvement, movement, wreckage or demolition of any building, highway, road, railroad, excavation, manufactured building or other structure, project, development or improvement including the contracting, if any, with any subcontractors or specialty contractors and who is responsible for the completion of the contract.
7. "Sale of a used manufactured building" does not include a lease of a used manufactured building.
H. Every person engaging or continuing in this state in the business of prime contracting or dealership of manufactured buildings shall present to the purchaser of such prime contracting or manufactured building a written receipt of the gross income or gross proceeds of sales from such activity and shall separately state the taxes to be paid pursuant to this section.
Sec. 4. Section 42-1409, Arizona Revised Statutes, is amended to read:
A. The tax levied by this article does not apply to the storage, use or consumption in this state of the following described tangible personal property:
1. Tangible personal property sold in this state, the gross receipts from the sale of which are included in the measure of the tax imposed by article 1 of this chapter.
2. Tangible personal property the sale or use of which has already been subjected to an excise tax equal to or exceeding the tax imposed by this article under the laws of another state of the United States.
3. Tangible personal property, the storage, use or consumption of which the constitution or laws of the United States prohibit this state from taxing.
4. Tangible personal property which directly enters into and becomes an ingredient or component part of any manufactured, fabricated or processed article, substance or commodity for sale in the regular course of business.
5. Motor vehicle fuel and use fuel, the sales, distribution or use of which in this state is subject to the tax imposed under the provisions of title 28, chapter 9, article 1 or 2, use fuel which is sold to or used by a person holding a valid single trip use fuel tax permit issued under section 28-1559, aviation fuel, the sales, distribution or use of which in this state is subject to the tax imposed under section 28-1765.01 and jet fuel, the sales, distribution or use of which in this state is subject to the tax imposed under chapter 9.2 of this title.
6. Tangible personal property brought into this state by an individual who was a nonresident at the time the property was purchased for his own storage, use or consumption if the first actual use or consumption of the property was outside this state, unless the property is used in conducting a business in this state.
7. Purchases of implants used as growth promotants and injectable medicines, not already exempt under paragraph 16 of this subsection, for livestock and poultry owned by, or in possession of, persons who are engaged in producing livestock, poultry, or livestock or poultry products, or who are engaged in feeding livestock or poultry commercially. For purposes of this paragraph, "poultry" includes ratites.
8. Livestock, poultry, supplies, feed, salts, vitamins and other additives for use or consumption in the businesses of farming, ranching and feeding livestock or poultry, not including fertilizers, herbicides and insecticides. For purposes of this paragraph, "poultry" includes ratites.
9. Seeds, seedlings, roots, bulbs, cuttings and other propagative material for use in commercially producing agricultural, horticultural, viticultural or floricultural crops in this state.
10. Tangible personal property not exceeding two hundred dollars in any one month purchased by an individual at retail outside the continental limits of the United States for his personal use and enjoyment.
11. Advertising supplements which are intended for sale with newspapers published in this state and which have already been subjected to an excise tax under the laws of another state in the United States which equals or exceeds the tax imposed by this article.
12. Printed, photographic, electronic or digital media materials for use by the public, which are unavailable for purchase in this state, purchased by publicly funded libraries.
13. Tangible personal property purchased by:
(a) A hospital organized and operated exclusively for charitable purposes, no part of the net earnings of which inures to the benefit of any private shareholder or individual.
(b) A hospital operated by this state or a political subdivision of this state.
(c) A licensed nursing care institution or a licensed residential care institution or a residential care facility operated in conjunction with a licensed nursing care institution or a licensed kidney dialysis center, which provides medical services, nursing services or health related services and is not used or held for profit.
(d) A qualifying health care organization, as defined in section 42-1301, if the tangible personal property is used by the organization solely to provide health and medical related educational and charitable services.
(e) A qualifying health care organization as defined in section 42-1301 if the organization is dedicated to providing educational, therapeutic, rehabilitative and family medical education training for blind, visually impaired and multi-handicapped children from the time of birth to age twenty-one.
(f) A nonprofit charitable organization that has qualified under section 501(c)(3) of the United States internal revenue code and that engages in and uses such property exclusively for training, job placement or rehabilitation programs or testing for mentally or physically handicapped persons.
(g) A person holding a privilege tax license to engage or continue in
business classified under the prime contracting classification under article
1 of this chapter
(h) A nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code if the property is purchased from the parent or an affiliate organization that is located outside this state.
(i) A qualifying community health center as defined in section 42-1301.
(j) A nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code and that regularly serves meals to the needy and indigent on a continuing basis at no cost.
(k) A person engaged in business under the transient lodging classification if the property is a personal hygiene product which is furnished without additional charge to and intended to be consumed by the transient during his occupancy.
14. Commodities, as defined by title 7 United States Code section 2, that are consigned for resale in a warehouse in this state in or from which the commodity is deliverable on a contract for future delivery subject to the rules of a commodity market regulated by the United States commodity futures trading commission.
15. Tangible personal property sold by:
(a) Any nonprofit organization organized and operated exclusively for charitable purposes and recognized by the department and the United States internal revenue service as such a nonprofit organization for charitable purposes.
(b) A nonprofit organization that is exempt from taxation under section 501(c)(3) or 501(c)(6) of the internal revenue code if the organization is associated with a major league baseball team or a national touring professional golfing association and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.
(c) A nonprofit organization that is exempt from taxation under section 501(c)(3), 501(c)(4), 501(c)(6), 501(c)(7) or 501(c)(8) of the internal revenue code if the organization sponsors or operates a rodeo featuring primarily farm and ranch animals and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.
16. Drugs and medical oxygen on the prescription of a member of the medical, dental or veterinarian profession who is licensed by law to administer such substances.
17. Prosthetic appliances, as defined in section 23-501, prescribed or recommended by a person who is licensed, registered or otherwise professionally credentialed as a physician, dentist, podiatrist, chiropractor, naturopath, homeopath, nurse or optometrist.
18. Prescription eyeglasses and contact lenses.
19. Insulin, insulin syringes and glucose test strips.
20. Hearing aids as defined in section 36-1901.
21. Durable medical equipment which has a federal health care financing administration common procedure code, is designated reimbursable by medicare, is prescribed by a person who is licensed under title 32, chapter 7, 13, 17 or 29, can withstand repeated use, is primarily and customarily used to serve a medical purpose, is generally not useful to a person in the absence of illness or injury and is appropriate for use in the home.
22. Food, as provided in and subject to the conditions of article 1.1 of this chapter and section 42-1310.14.
23. Items purchased with United States department of agriculture food coupons issued under the food stamp act of 1977 (P.L. 95-113; 91 Stat. 958) or food instruments issued under section 17 of the child nutrition act (P.L. 95-627; 92 Stat. 3603; and P.L. 99-661; section 4302).
24. Food and drink provided without monetary charge by a taxpayer which is subject to section 42-1310.14 to its employees for their own consumption on the premises during the employees' hours of employment.
25. Tangible personal property that is used or consumed in a business subject to section 42-1310.14 for human food, drink or condiment, whether simple, mixed or compounded.
26. Food, drink or condiment and accessory tangible personal property if they are to be prepared and served to persons for consumption on the premises of a public school in a school district during school hours.
27. Lottery tickets or shares purchased pursuant to title 5, chapter 5, article 1.
28. Textbooks, sold by a bookstore, that are required by any state university or community college.
29. Magazines, other periodicals or other publications produced by this state to encourage tourist travel.
30. Medical oxygen, including delivery hose, mask or tent, regulator and tank, on the prescription of a member of the medical, dental or veterinary profession who is licensed by law to administer medical oxygen.
31. Paper machine clothing such as forming fabrics and dryer felts, purchased by a paper manufacturer and directly used or consumed in paper manufacturing.
32. Coal, petroleum, coke, natural gas, virgin fuel oil and electricity purchased by an environmental technology manufacturer, producer or processor as defined in section 41-1514.02 and directly used or consumed in the generation or provision of on-site power or energy solely for environmental technology manufacturing, producing or processing or environmental protection. This paragraph shall apply for fifteen full consecutive calendar or fiscal years from the date the first paper manufacturing machine is placed in service. In the case of an environmental technology manufacturer, producer or processor who does not manufacture paper, the time period shall begin with the date the first manufacturing, processing or production equipment is placed in service.
33. Motor vehicles that are removed from inventory by a motor vehicle dealer as defined in section 28-1301 and that are provided to:
(a) Charitable or educational institutions that are exempt from taxation under section 501(c)(3) of the internal revenue code.
(b) Public educational institutions.
(c) State universities or affiliated organizations of a state university if no part of the organization's net earnings inures to the benefit of any private shareholder or individual.
34. Natural gas or liquefied petroleum gas used to propel a motor vehicle.
35. Machinery, equipment, technology or related supplies that are only useful to assist a person who is physically disabled as defined in section 46-191, has a developmental disability as defined in section 36-551 or has a head injury as defined in section 41-3201, to be more independent and functional.
36. Beginning from and after June 30, 1995, liquid, solid or gaseous chemicals used in manufacturing, processing, fabricating, mining, refining, metallurgical operations or research and development if using or consuming the chemicals, alone or as part of an integrated system of chemicals, involves direct contact with the materials from which the product is produced for the purpose of causing or permitting a chemical or physical change to occur in the materials as part of the production process. This paragraph does not include chemicals that are used or consumed in activities such as packaging, storage or transportation but does not affect any exemption for such chemicals that is otherwise provided by this section.
37. Food, drink and condiment purchased for consumption within the premises of any prison, jail or other institution under the jurisdiction of the state department of corrections, the department of public safety, the department of juvenile corrections or a county sheriff.
38. A motor vehicle and any repair and replacement parts and tangible personal property becoming a part of such motor vehicle, sold to a licensed motor carrier or a lightweight motor vehicle operator subject to tax under title 28, chapter 9, article 6 who is engaged in the business of leasing or renting such property.
39. Tangible personal property which is or directly enters into and becomes an ingredient or component part of cards used as prescription plan identification cards.
40. Overhead materials or other tangible personal property that is used in performing a contract between the United States government and a manufacturer, modifier, assembler or repairer, including property used in performing a subcontract with a government contractor who is a manufacturer, modifier, assembler or repairer, to which title passes to the government under the terms of the contract or subcontract. For purposes of this paragraph:
(a) "Overhead materials" means tangible personal property, the gross proceeds of sales or gross income derived from which would otherwise be included in the retail classification, and which are used or consumed in the performance of a contract, the cost of which is charged to an overhead expense account and allocated to various contracts based upon generally accepted accounting principles and consistent with government contract accounting standards.
(b) "Subcontract" means an agreement between a contractor and any person who is not an employee of the contractor for furnishing of supplies or services that, in whole or in part, are necessary to the performance of one or more government contracts, or under which any portion of the contractor's obligation under one or more government contracts is performed, undertaken or assumed, and that includes provisions causing title to overhead materials or other tangible personal property used in the performance of the subcontract to pass to the government or that includes provisions incorporating such title passing clauses in a government contract into the subcontract.
41. Through December 31, 1994, tangible personal property sold pursuant to a personal property liquidation transaction, as defined in section 42-1310.01. From and after December 31, 1994, tangible personal property sold pursuant to a personal property liquidation transaction, as defined in section 42-1310.01, if the gross proceeds of the sales were included in the measure of the tax imposed by article 1 of this chapter or if the personal property liquidation was a casual activity or transaction.
B. In addition to the exemptions allowed by subsection A of this section, the following categories of tangible personal property are also exempt:
1. Machinery, or equipment, used directly in manufacturing, processing, fabricating, job printing, refining or metallurgical operations. The terms "manufacturing", "processing", "fabricating", "job printing", "refining" and "metallurgical" as used in this paragraph refer to and include those operations commonly understood within their ordinary meaning. "Metallurgical operations" includes leaching, milling, precipitating, smelting and refining.
2. Machinery, or equipment, used directly in the process of extracting ores or minerals from the earth for commercial purposes, including equipment required to prepare the materials for extraction and handling, loading or transporting such extracted material to the surface. "Mining" includes underground, surface and open pit operations for extracting ores and minerals.
3. Tangible personal property, sold to persons engaged in business classified under the telecommunications classification under article 1 of this chapter, consisting of central office switching equipment, switchboards, private branch exchange equipment, microwave radio equipment and carrier equipment including optical fiber, coaxial cable and other transmission media which are components of carrier systems.
4. Machinery, equipment or transmission lines used directly in producing or transmitting electrical power, but not including distribution. Transformers and control equipment used at transmission substation sites constitute equipment used in producing or transmitting electrical power.
5. Neat animals, horses, asses, sheep, ratites, swine or goats used or to be used as breeding or production stock, including sales of breedings or ownership shares in such animals used for breeding or production.
6. Pipes or valves four inches in diameter or larger used to transport oil, natural gas, artificial gas, water or coal slurry.
7. Aircraft, navigational and communication instruments and other accessories and related equipment sold to:
(a) A person holding a federal certificate of public convenience and necessity or foreign air carrier permit for air transportation for use as or in conjunction with or becoming a part of aircraft to be used to transport persons, property or United States mail in intrastate, interstate or foreign commerce.
(b) Any foreign government for use by such government outside of this state, or sold to persons who are not residents of this state and who will not use such property in this state other than in removing such property from this state.
8. Machinery, tools, equipment and related supplies used or consumed directly in repairing, remodeling or maintaining aircraft, aircraft engines or aircraft component parts by or on behalf of a certificated or licensed carrier of persons or property.
9. Rolling stock, rails, ties and signal control equipment used directly to transport persons or property in intrastate or interstate transportation for hire.
10. Machinery or equipment used directly to drill for oil or gas or used directly in the process of extracting oil or gas from the earth for commercial purposes.
11. Buses or other urban mass transit vehicles which are used directly to transport persons or property for hire or pursuant to a governmentally adopted and controlled urban mass transportation program and which are sold to bus companies holding a federal certificate of convenience and necessity or operated by a city, town or other governmental entity or by any person contracting with such governmental entity as part of a governmentally adopted and controlled program to provide urban mass transportation.
12. Groundwater measuring devices required under section 45-604.
13. New machinery and equipment consisting of tractors, tractor-drawn implements, self-powered implements, machinery and equipment that are necessary for extracting milk, and for cooling milk and livestock, and drip irrigation lines not already exempt under paragraph 6 of this subsection used for commercial production of agricultural, horticultural, viticultural and floricultural crops and products in this state. In this paragraph:
(a) "New machinery and equipment" means machinery or equipment which has never been sold at retail except pursuant to leases or rentals which do not total two years or more.
(b) "Self-powered implements" includes machinery and equipment that is electric-powered.
14. Machinery or equipment used in research and development. In this paragraph, "research and development" means basic and applied research in the sciences and engineering, and designing, developing or testing prototypes, processes or new products, including research and development of computer software that is embedded in or an integral part of the prototype or new product or that is required for machinery or equipment otherwise exempt under this section to function effectively. Research and development do not include manufacturing quality control, routine consumer product testing, market research, sales promotion, sales service, research in social sciences or psychology, computer software research that is not included in the definition of research and development, or other nontechnological activities or technical services.
15. Machinery and equipment that are purchased by or on behalf of the owners of a soundstage complex and primarily used for motion picture, multimedia or interactive video production in the complex. This paragraph applies only if the initial construction of the soundstage complex begins after June 30, 1996 and before January 1, 2002 and the machinery and equipment are purchased before the expiration of five years after the start of initial construction. For purposes of this paragraph:
(a) "Motion picture, multimedia or interactive video production" includes products for theatrical and television release, educational presentations, electronic retailing, documentaries, music videos, industrial films, CD-ROM, video game production, commercial advertising and television episode production and other genres that are introduced through developing technology.
(b) "Soundstage complex" means a facility of multiple stages including production offices, construction shops and related areas, prop and costume shops, storage areas, parking for production vehicles and areas that are leased to businesses that complement the production needs and orientation of the overall facility.
16. Tangible personal property that is used by either of the following to receive, store, convert, produce, generate, decode, encode, control or transmit telecommunications information:
(a) Any direct broadcast satellite television or data transmission service that operates pursuant to 47 Code of Federal Regulations parts 25 and 100.
(b) Any satellite television or data transmission facility, if both of the following conditions are met:
(i) Over two-thirds of the transmissions, measured in megabytes, transmitted by the facility during the test period were transmitted to or on behalf of one or more direct broadcast satellite television or data transmission services that operate pursuant to 47 Code of Federal Regulations parts 25 and 100.
(ii) Over two-thirds of the transmissions, measured in megabytes, transmitted by or on behalf of those direct broadcast television or data transmission services during the test period were transmitted by the facility to or on behalf of those services.
For purposes of subdivision (b) of this paragraph, "test period" means the three hundred sixty-five day period beginning on the later of the date on which the tangible personal property is purchased or the date on which the direct broadcast satellite television or data transmission service first transmits information to its customers.
C. The exemptions provided by subsection B of this section do not include:
1. Expendable materials.
2. Janitorial equipment and hand tools.
3. Office equipment, furniture and supplies.
4. Tangible personal property used in selling or distributing activities, other than the telecommunications transmissions described in subsection B, paragraph 16 of this section.
5. Motor vehicles required to be licensed by this state, except buses or other urban mass transit vehicles specifically exempted pursuant to subsection B, paragraph 11 of this section, without regard to the use of such motor vehicles.
6. Shops, buildings, docks, depots and all other materials of whatever kind or character not specifically included as exempt.
7. Motors and pumps used in drip irrigation systems.
D. The tax levied by this article does not apply to the storage, use or consumption in Arizona of machinery, equipment, materials or other tangible personal property if used directly and predominantly to construct a qualified environmental technology manufacturing, producing or processing facility, as described in section 41-1514.02. This subsection applies for ten full consecutive calendar or fiscal years after the start of initial construction.
E. For the purposes of subsection B of this section:
1. "Aircraft" includes:
(a) An airplane flight simulator that is approved by the federal aviation administration for use as a phase II or higher flight simulator under appendix H, 14 Code of Federal Regulations part 121.
(b) Tangible personal property that is permanently affixed or attached as a component part of an aircraft that is owned or operated by a certificated or licensed carrier of persons or property.
2. "Other accessories and related equipment" includes aircraft accessories and equipment such as ground service equipment that physically contact aircraft at some point during the overall carrier operation.
Sec. 5. Section 42-1453, Arizona Revised Statutes, is amended to read:
A. A city, town or special taxing district shall not levy a transaction privilege, sales, use or other similar tax on:
1. Exhibition events in this state sponsored, conducted or operated by a nonprofit organization that is exempt from taxation under section 501(c)(3), 501(c)(4) or 501(c)(6) of the internal revenue code if the organization is associated with a major league baseball team or a national touring professional golfing association and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.
2. Interstate telecommunications services, which include that portion of telecommunications services, such as subscriber line service, allocable by federal law to interstate telecommunications service.
3. Sales of warranty or service contracts.
4. Sales of motor vehicles to nonresidents of this state for use outside this state if the vendor ships or delivers the motor vehicle to a destination outside this state.
5. Interest on finance contracts.
6. Dealer documentation fees on the sales of motor vehicles.
B. A city, town or other taxing jurisdiction shall not levy a transaction privilege, sales, use, franchise or other similar tax or fee, however denominated, on:
1. Natural gas or liquefied petroleum gas used to propel a motor vehicle.
2. Any business activity conducted at or tangible personal property purchased, leased or rented by any qualified theme park, themed amusement park or other nonathletic entertainment facility that is subject to taxation under section 42-1581.
C. A city, town or other taxing jurisdiction shall not levy a transaction privilege, sales, gross receipts, use, franchise or other similar tax or fee, however denominated, on gross proceeds of sales or gross income derived from any of the following:
1. A motor carrier's use on the public highways in this state if the motor carrier is subject to tax under title 28, chapter 9, article 6.
2. A person's use of a lightweight motor vehicle on the public highways in this state if such person is subject to tax under title 28, chapter 9, article 6.
3. Leasing, renting or licensing a motor vehicle, including lightweight motor vehicles, subject to and upon which the tax has been paid under title 28, chapter 9, article 6.
4. The sale of a motor vehicle and any repair and replacement parts and tangible personal property becoming a part of such motor vehicle, to a licensed motor carrier or a lightweight motor vehicle operator who is subject to tax under title 28, chapter 9, article 6 and who is engaged in the business of leasing, renting or licensing such property.
D. From and after January 1, 1994, a city, town or other taxing jurisdiction shall not levy a transaction privilege, sales, use, franchise or other similar tax or fee, however denominated, in excess of one-tenth of one per cent of the value of the entire product mined, smelted, extracted, refined, produced or prepared for sale, profit or commercial use, on persons engaged in the business of mineral processing, except to the extent that the tax is computed on the gross proceeds or gross income from sales at retail.
E. In computing the tax base, any city, town or other taxing jurisdiction shall not include in the gross proceeds of sales or gross income a manufacturer's cash rebate on the sales price of a motor vehicle if the buyer assigns the buyer's right in the rebate to the retailer.
Sec. 6. Section 42-1482, Arizona Revised Statutes, is amended to read:
A.
B. The net revenues collected under this section shall be deposited in the regional area road fund pursuant to section 28-1594.01.
C. The tax levied under this section may be in effect for a term of not more than twenty years unless, before the expiration of that period of time, a majority of the qualified electors voting on the issue at a countywide general or special election approves an extension of the term of the tax. An election and extension of the term of the tax under this subsection are subject to the following conditions and procedures:
1. The county and the municipalities in the county, through their regional planning agency, shall adopt a definite or indefinite term for the extension as part of the regional transportation plan of the county. The term shall be stated on the ballot.
2. The election may be held on the same date as a proposed transportation excise tax election under section 42-1482.01, and, at the request of the regional planning agency and the regional public transportation authority, the county board of supervisors may submit the extension of the tax levied under this section and the tax levied under section 42-1482.01 to the voters as one combined question on the ballot.
3. In addition to any other requirements prescribed by law, the board of supervisors shall prepare and print a publicity pamphlet concerning the ballot question and distribute one copy of the pamphlet at least ten but not more than thirty days before the election to each household containing a registered voter in the county. The publicity pamphlet shall contain the following:
(a) The date of the election.
(b) The individual household's polling place and the times the polling place will be open.
(c) A summary of the regional transportation plan adopted for the county.
(d) A summary of the principal provisions of the issue presented to the voters.
(e) The form of the ballot.
4. The provisions of title 16, chapter 2, article 3 do not apply to the election.
5. Except as otherwise provided by this section, the general or special election held under this subsection shall be conducted as nearly as practicable in the manner prescribed for general elections in title 16.
6. Regardless of the outcome of the election, the state treasurer shall pay the costs listed in this paragraph with respect to the election from any monies in or thereafter paid to either the bond proceeds account or the construction account of the county's regional area road fund on submission of the bill by the county election officer, and if a court determines that the following costs may not be paid from the regional area road fund, the county election officer shall submit the bill to the secretary of state who shall include the claim in the next budget request, and the legislature shall appropriate sufficient monies to pay the following costs of the election:
(a) Costs of mailing, publishing, posting and printing ballots, publicity pamphlets, notices, election materials and other matters concerning the election.
(b) Legal and other consulting fees and costs relating to calling and holding the election.
(c) Telecommunications costs.
(d) Compensation of the election board, county election officers and employees and other labor costs incurred to administer, hold, announce the results of and canvass the election.
(e) Any other costs attributable to the election.
Sec. 7. Section 48-4233, Arizona Revised Statutes, is amended to read:
A. If a major league baseball franchise is awarded within the district, the board of directors may levy and, if levied, the department of revenue shall collect a transaction privilege tax pursuant to this section to be used for any lawful expenditure of the district. If a major league baseball franchise is not awarded within the district, the tax shall not be levied. The board of directors may pledge all or part of the revenues from a tax under this section to secure the district's bonds or other financial obligations issued or incurred under this chapter.
B. The board shall set the rate of tax
1.
2. In the case of persons subject to the tax imposed under section 42-1572, subsection A, at a rate of not more than .1525 cents per gallon of jet fuel sold.
C. Unless the context otherwise requires, section 42-1485 governs the administration of a tax imposed under this section.
D. Each month the state treasurer shall remit to the district treasurer the net revenues collected under this section during the preceding month. The district treasurer shall deposit the monies in the county stadium district fund. Revenues from a tax under this section shall not be commingled with revenues collected pursuant to this article for use with respect to major league baseball spring training but shall be separately accounted for and used solely with respect to a major league baseball franchise stadium.
Sec. 8.
A. Except as provided by subsection B of this section, section 9-499.08, Arizona Revised Statutes, as added by this act, is repealed from and after December 31, 2004.
B. Any outstanding certificates of qualification issued before December 31, 2004 pursuant to section 9-499.08, subsection D, Arizona Revised Statutes, as added by this act, remain valid for the purpose of the transaction privilege tax exemption provided by section 42-1310.16, subsection B, paragraph 8, Arizona Revised Statutes, as amended by this act, for the full term of their validity.
APPROVED BY THE GOVERNOR APRIL 24, 1997.
FILED IN THE OFFICE OF THE SECRETARY OF STATE APRIL 24, 1997.
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