ARIZONA STATE SENATE
Phoenix, Arizona
sales tax, transient lodging
Purpose
Retroactive to June 8, 1988,
excludes, from transaction privilege taxation (TPT), food and drinks that are
served complimentary by and at a hotel or any other temporary lodging.
Background
Currently, if an item is
resold in the regular course of business then the item is not assessed a
TPT. The Department of Revenue (DOR)
requires proof that an 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, if a hotel provides food to customers for free
(even if the food is ultimately incorporated in the room rate), the food is
subject to taxation because it is not separately shown as a resale item. Essentially, the hotel is assessed a TPT on
the room rate and the hotel restaurant is assessed a TPT on the food.
S.B. 1130 specifically
exempts, from TPT, food and drink that are served complimentary by and at the
hotel.
According
to a Joint Legislative Budget Committee staff fiscal note, this bill will have
a minimal state fiscal impact, as the large majority of hotels are not
currently paying retail sales tax on their food and drink purchases.
Provisions
1. Exempts, from the retail classification of TPT and use taxation, food and drink served free of charge at hotels and other temporary lodgings.
2. Excludes alcoholic beverages from the items that a hotel can purchase free of tax.
3. Requires that in order for food or non-alcoholic beverages to be free of tax, the items must be provided free of charge.
4. Applies changes retroactively to June 8, 1994.
Senate Action House
Action
FIN 1/29/01 DP 4-3-1-0 WM 3/13/01 DP 7-3-0-0
3rd Read 2/26/01 24-6-0-0
Prepared by Senate Staff
March 15, 2001