ARIZONA STATE SENATE
Phoenix, Arizona
(NOW: sales tax
rate; effective date)
Purpose
An emergency measure that specifies that through December 31, 2001, the transaction privilege tax (TPT) increase passed by the voters in the 2000 general election, does not apply to business proceeds or income from contracts entered into before June 1, 2001 unless the contract allows for an increase in the TPT to be passed on to the purchaser.
Arizona’s TPT 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 situation is likely to occur. Proposition 301, passed by the voters in the 2000 general election, levied an additional six-tenths of a percent TPT and use tax (“sales tax”) beginning July 1, 2001.
According to the Department of Revenue (DOR), there will be some fiscal impact to Proposition 301 educational funding in the form of unrealized revenue.
1. Exempts from the increase in transaction privilege tax (TPT) passed by the voters in the 2000 general election (42-2010, subsection G), any gross proceeds or income from a business if a contract was entered into before June 1, 2001 unless the contract contains a provision to allow the contractor to pass the additional tax on to the purchaser.
2. Stipulates that after December 31, 2001 no contracts are eligible for this exemption.
3. Allows DOR to implement the tax rate differences as a credit against the liability established under the higher tax rate and also allows DOR to issue a refund.
4. Provides for an emergency effective date.
Amendments Adopted by Committee
Adopted the strike everything amendment.
1. Eliminates the provision that specifies that, beginning June 1, 2001, when a sate, county, or municipality has a transaction privilege tax (TPT) increase, the tax rate will be computed based on the rate in effect on the date of the sale.
2. Eliminates definitions for "date of sale", "model city code", and "transaction privilege tax".
3. Exempts, starting January 1, 2002, from the TPT rate imposed by section 42-5010, subsection G, A.R.S., the gross proceeds of sales or gross income from a taxpayer's business with respect to contracts entered into before June 1, 2001, unless the taxpayer has entered a contract that contains a provision that entitles the taxpayer to recover from the purchaser the amount of additional tax levied.
4. Specifies the additional TPT rate increment does not apply to any contracts beginning January 1, 2002.
5. Contains an emergency clause.
6. Makes technical and conforming changes.
Senate Action
FIN 3/8/01 DPA/SE 7-1-0-0
Prepared by Senate Staff
April 4, 2001