ARIZONA STATE SENATE
Phoenix, Arizona
sales tax exemptions;
pallets; containers
Exempts, from the retail
classification of transaction privilege taxation (TPT) and use taxation,
reusable or returnable pallets and containers.
Reusable pallets and containers are said either to be in an open or closed loop. In an open loop, pallets and containers are rented by farmers or manufacturers from pooling companies that own fleets of pallets or containers. The renter pays a one-time rental fee and uses the pallets or containers to distribute their product through the supply chain as if they had purchased the pallets or containers. Eventually, the end user returns the pallet or container to the pooling company.
In a closed loop, pallets or containers are sold to a manufacturer or farmer who then ships their product to another manufacturer or distributor. The pallets or containers are then returned to the manufacturer or farmer.
Currently, if an item is resold in the regular course of business, the item is not assessed a transaction privilege tax. The Department of Revenue (DOR) requires proof that the item is actually resold in the regular course of business. Therefore, DOR maintains that if an item is not specifically shown to be resold then that item is subject to a tax under the vendor’s retail classification. In this case, whether in an open or closed looping system, if an entity distributes pallets or containers for a fee (assuming the cost for the container or pallets is included in the selling price of the product), the pallet or container is subject to taxation because it is not separately shown as a resale item.
S.B. 1122 specifically
exempts, from TPT, reusable or returnable pallets and containers.
A fiscal note has been
requested from Joint Legislative Budget Committee staff.
1. Exempts, from the retail classification of TPT and use taxation, reusable or returnable pallets and containers.
2. Provides for a general effective date.
Prepared by Senate Staff
January 25, 2001