ARIZONA STATE SENATE
Phoenix, Arizona
FINAL
REVISED
board
of chiropractic examiners
(NOW: tax exemption; nonprofits; cultural; civic)
Purpose
Retroactive to January 1,
1983, excludes, from transaction privilege taxation (TPT) sales and fees
charged by nonprofit organizations at cultural and civic events. Limits the aggregate refund amount to
$10,000 for all qualified taxpayers.
Background
In Arizona, TPT is levied
upon the gross receipts or gross income received from a taxable business
activity. The tax is the liability of
the business or seller, but may be passed through to the consumer or
purchaser. Purchases made outside of
Arizona and then brought into the state are subject to use taxation. Use taxation is applied to the storage, use
or consumption of tangible personal property in this state that has not been
subject to an equivalent excise tax by another state.
Current law allows for
various TPT exemptions from the retail and amusement classifications that apply
to nonprofit organizations, if no part of the net income from these activities
is for the benefit of any private shareholder or individual. Some of the current exemptions from the
retail classification include events connected with major league baseball or a
national touring professional golfing association or rodeos. Some of the current exemptions from the
amusement classification include religious events, events by the state fair
board, cactus league games, rodeos and activities by a musical or dance group,
museums or zoos.
However, there is no
specific tax exemption for sales by and fees charged by a nonprofit
organization that qualifies as a 501(c)(6) under the Internal Revenue Code
(IRC), which applies to nonprofit business leagues, chambers of commerce, real
estate boards or trade or professional football leagues. H.B. 2391, retroactive to January 1, 1983,
excludes from TPT sales by and fees charged by 501(c)(6) nonprofit
organizations at cultural and civic events.
Additionally, this measure limits the total refund amount to $10,000 for
all claims.
Specifically, the Mill
Avenue Merchants Association (MAMA) is such an organization that is exempt
under 501(c)(6) of the IRC, and would qualify for the proposed exemption. MAMA organizes and executes a number of
cultural and civic related festivals during which it sells commemorative
apparel and charges parking fees or gate receipts. The Department of Revenue (DOR) audited MAMA in 1993 and
subsequently imposed TPT on MAMA’s revenue derived from fundraising activities. DOR’s assessment was applied for the period
between January 1983 and May 1993.
Provisions
1. Exempts, from the retail classification of TPT and use taxation, sales of tangible personal property by a nonprofit organization that is exempt from taxation under 501(c)(6) of the IRC, if:
·
That
organization produces, organizes or promotes cultural or civic related
festivals or events; and
·
The
organization’s net earnings in no part benefit any private shareholder or
individual.
2. Exempts, from the amusement classification of TPT, activities and events of, or fees received by, a nonprofit organization that is exempt from taxation under 501(c)(6) of the IRC, if:
·
That
organization produces, organizes or promotes cultural or civic related
festivals or events; and
·
The
organization’s net earnings in no part benefit any private shareholder or
individual.
3. Requires any refund claims to be submitted to DOR before January 1, 2002 and specifies that failure to claim a refund on a timely basis constitutes a waiver of the claim for refund.
4. Specifies that the burden of proof is on the taxpayer to establish the claimable refund amount.
5. Requires DOR to review all timely filed claims, determine the accuracy of the claimable refund amount and notify the taxpayer of DOR’s final determination.
6. Specifies that DOR must not issue any refunds until after a final determination has been made as to the total amount of all refund claims filed by 501(c)(6) exempt nonprofit organizations.
7. Limits the total amount of all refunds claimed to $10,000. If refund claims exceed $10,000, DOR must reduce each claim proportionately so that the total amount of claims does not exceed the $10,000 limit.
8. Specifies that no interest will be paid on the refund amounts unless DOR issues the refund after June 30, 2002.
9. Specifies that section of the bill dealing with retroactivity and refunds is nonseverable.
10. Applies changes retroactively to January 1, 1983.
Amendments
Adopted by Committee
Adopted the strike everything amendment.
House Action Senate Action
HEA 2/8/01 W/D FIN 4/2/01 DPA/SE 7-0-1-0
CED 2/26/01 DPA/SE 8-1-1-0 3rd Read 4/25/01 26-0-3-0
APPROP 3/6/01 W/D
3rd Read 3/13/01 35-23-2-0
Enacted without Governor’s signature 5/4/01
Chapter 314
Prepared by Senate Staff
May 25, 2001