ARIZONA STATE SENATE
Phoenix, Arizona
REVISED
highway work zone safety;
penalties
(NOW: contracts; tax adjustment)
An emergency measure,
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. Requires contracts to provide for a cost
adjustment due to a change of any state or local tax rate.
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. Some contractors accepted contracts prior to
the passage of this proposition that included sales tax calculated at the
current rate. If payment is made pursuant
to these contracts, after July 1, 2001 and the contractor uses a cash basis
accounting method, the contractor will be responsible for the amount of taxes
calculated at the new rate. In many
cases, contractors, because of the terms agreed to in the contract, cannot
charge the customer for the additional sales tax. H.B. 2376 requires contracts to allow for a cost adjustment in
case of an increase or decrease in any state or local tax rate.
There is no anticipated
fiscal impact to the general fund associated with this legislation.
1. Exempts from the increase in TPT passed by the voters in the 2000 general election 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 the Department of Revenue (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. Requires contracts to provide for a cost adjustment in the case of an increase or decrease in any state or local TPT.
5. Applies the cost adjustment to any contract for construction or reconstruction of Arizona Department of Transportation facilities, public building, design-build and any contract that is subject to the procurement code unless the contract is entered into by a city, town or an officer, board or commission of a city or town.
6. Limits the application of the adjustment to changes in the tax rate enacted after the bid opening and only for the months during which the increase or decrease is in effect during the contract period.
7. Requires the contractor to accept the tax adjustment as full compensation for any additional costs related to an increase in the rate of the tax.
8. Prohibits, beginning November 1, 2002, any increase or additional increment in the transaction privilege tax from applying to the gross proceeds of sales or gross income derived from contracts entered into prior to the effective date of the increase or the statewide election date authorizing the increase unless the contract provides for a cost adjustment regard the tax increase.
9. Requires the prime contractor to provide sufficient documentation to verify that the contract was entered into before the effective date of the increase or the election date.
10. Requires DOR to separately account for revenues collected under the prime contracting classification from any prime contractor engaged in the preparation or construction of a multipurpose facility, and related infrastructure owned, operated or leased by the Tourism and Sports Authority.
11. Limits the application of the adjustment to contracts awarded after the effective date of this legislation.
12. Requires the amount of gross proceeds of sales or gross income derived from contracts to perform postconstruction treatment of property for termite and general pest control to be deducted from the gross proceeds of sales or gross income before computing the tax base.
13. Blends a dual enactment.
14. Contains an emergency clause.
Amendments Adopted by Committee
Adopted the strike everything amendment.
Senate Action
TRANS 4/5/01 DPA/SE 8-0-0-0
3rd Read 4/23/01 25-2-2-0-1
Prepared by Senate Staff
May 7, 2001