ARIZONA STATE SENATE
Phoenix, Arizona
sales tax exemption;
utilities
Purpose
Reduces the transaction
privilege tax (TPT) rate to four and one-half percent for utility and
telecommunications activities beginning January 1, 2002. Retroactive from January 1, 2001, exempts
school districts or public schools, community college districts, universities
under the jurisdiction of the board of regents, cities, towns, counties and
states agencies from the utilities and telecommunications classification.
The utilities classification
is comprised of businesses engaged in producing and/or furnishing natural gas,
water and electric services. The tax base for the utilities classification
consists of the gross proceeds of sales or gross income derived from sales by
businesses engaged in producing or providing natural gas, water or electricity.
The telecommunications
classification is comprised of business that provides intrastate
telecommunication services. The tax base for the telecommunications
classification is the gross proceeds of sales or gross income derived from
sales derived from tolls, subscriptions and services on behalf of subscribers
or from the publication of a telephone directory.
Current law allows for deductions from gross revenues or gross income from both the telecommunications and utility tax bases. This measure adds the gross proceeds of sales or the gross income derived from sales to a school district or public school, community college district, university under the jurisdiction of the board of regents, cities, towns, counties and state agencies to the tax base deductions of the utility and telecommunications classification.
The current state TPT rate is five percent and will increase to 5.6 percent on June 1, 2001. This measure reduces the TPT rate to four and one-half percent for utility and telecommunications activities beginning January 1, 2002. The six-tenths of a percent increase beginning June 1 will be in addition to the four and one-half percent tax rate.
According to the Department
of Revenue (DOR), a utilities and telecommunications tax classification rate
change of one-half percent would result in a general fund reduction of
$14.9 million in FY 2002. The impact to cities and counties would be a
$2.2 million. The fiscal impact in FY 2003 would be $38.1 million with a $5.7
million dollar loss to the cities and towns.
Additionally, the retroactive effective date will require DOR to issue
refunds for sales to a school district or public school, community college
district, university under the jurisdiction of the board of regents, cities,
towns, counties and other states agencies that have made tax payments under the
utility and telecommunications classification since January 1, 2001. DOR is unable to estimate the amount of
refunds that could be issued under this measure at this time.
1. Reduces the TPT rate to four and one-half percent for utility and telecommunications activities beginning January 1, 2002.
2. Specifies that tax base for the business of every person engaging or continuing in the utility and telecommunications classifications remains at five percent beginning January 1, 2001 through December 31, 2001.
3. Retroactive from January 1, 2001, exempts to the tax base deductions of the utility and telecommunications classifications the gross proceeds of sales or gross income derived from sales to a school district or public school, community college district, universities under the jurisdiction of the board of regents, cities, towns, counties and state agencies.
4. Removes the prime contracting classification and owner builder sales classification from the distribution base for which 20 percent of the tax revenues collected are designated due to a technical error in the house engrossed copy and contrary to the intent of the bill.
5. Designates 20 percent of the tax revenues generated from the tax base computed for the business of every person engaged in the utility or telecommunications classification for the distribution base from which DOR remits and transfers the monies to the Treasurer.
6. Makes conforming changes.
7. Contains a retroactive effective date beginning on January 1, 2001.
House Action
WM 2/27/01 DPA /SE 5-4-1-0
EUT 2/21/01 DP 6-4-0-0
3rd Read 3/14/01 32-22-6-0
Prepared by Senate Staff
March 29, 2001