House of Representatives

HB 2345

tax rates; transaction date

Sponsors: Reps. May, Huppenthal, Cooley, Burton-Cahill

DPA	Committee on Ways and Means REVISED
DPA	Caucus and COW
X	As Passed the House

HB 2345 clarifies when the transaction privilege (sales) tax is due on a transaction. This bill has a proposed strike-everything amendment with the same subject.

History

Arizona’s transaction privilege tax is imposed on the privilege of transacting business in this state. It differs from a sales tax in that the tax burden is imposed on the business, not the purchaser. However, almost all businesses will pass along this tax burden to the purchaser, in the same manner as a sales tax.

As a result, confusion may arise regarding the timing of the tax burden. This is especially true when a tax increase occurs and transactions take place before the tax is increased, but are not paid for until after the tax increase occurs.

With the passage of proposition 301 at the 2000 general election, this scenario is likely to occur. Proposition 301 will impose an increase to the state’s transaction privilege tax and use rate of six-tenths of a percent beginning on June 1, 2001. In order to avoid confusion, the bill clarifies what rate to apply to certain transactions.

Provisions

· Provides that the date of a transaction, or the date specified on an invoice for a transaction, is the date for purposes of computation of the transaction privilege tax. The tax rate in effect on that date will be used regardless of when payment for the transaction is actually received.

Provisions of the proposed strike-everything amendment

· Beginning June 1, 2001, when a state, county or municipality has a transaction privilege tax increase, the tax rate will be computed based on the rate in effect on the date of the sale.

· “Date of Sale” is defined as one of the following:

1. The date that a contract, lease or similar document is executed by all parties.

2. The date that the transfer of title or possession of property for a sale occurs.

3. The first day of the calendar month following the effective date of the tax rate increase for utilities or telecommunication activities.

4. If not covered by any of the above, then it is the date the business activity occurs.

· DOR may implement the tax rate differences as a credit against the liability established under the higher tax rate and they may issue a refund.

Strike everything amendment was adopted in the Ways and Means Committee February 6, 2001.

The Ways and Means strike-everything amendment for HB 2345 was adopted in the Committee of the Whole. HB 2345 was further amended in the Committee of the Whole as follows:

· Removes that beginning June 1, 2001, when a state, county or municipality has a transaction privilege tax increase, the tax rate will be computed based on the rate in effect on the date of the sale.

· Removes the definitions of Date of Sale.

· Provides that contracts signed before June 1, 2001 will stay at the 5% rate of transaction privilege tax until December 31, 2001 regardless of whether or not the contract is complete, unless there is a pass through of the tax in the contract.

· An Emergency clause has also been added.

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· 44th Legislature

· Second Regular Session 2 March 21, 2001

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