SB1258 - 451R - House Bill Summary

House of Representatives

SB 1258

NOW: sales tax rate; effective date

Sponsors: Senator Bundgaard

X	Committee on Ways and Means
	Caucus and COW	This bill as introduced contains *an Emergency clause.*
	As Passed the House	This bill as introduced contains *an Emergency clause.*

Clarifies the transaction privilege (sales) tax rate that is due when the state transaction privilege tax rate increases on June 1, 2001.

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 contracts entered into before June 1, 2001 will stay at the 5% transaction privilege tax rate until December 31, 2001 unless there is a pass-through provision in the contract that allows the taxpayer to recover the increased rate from the purchaser.

· The additional tax rate increase will apply beginning January 1, 2002, regardless of whether or not a contract is complete.

· 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 for the difference.

· Contains an emergency clause.

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· 45th Legislature