ARIZONA STATE SENATE
Phoenix, Arizona
sales tax; contractor’s
solar exemption
Purpose
Creates a transaction
privilege tax (TPT) exemption for prime contractors for the installation of
solar energy devises.
Background
In 1991, the Arizona
Legislature enacted two transaction privilege tax exemptions applicable to
solar energy devices. One was for sales of such devices under the retail
classification, and the other was for the contractor's cost of the device
installed under the prime contracting classification. At the time the exemptions were added, both exemptions were set
to expire on December 31, 1996.
However, the exemption under the retail classification was later amended
to delete the expiration clause. Last year’s H.B. 2287 (Laws 2000, Chapter 214)
reinserted the exemption for prime contractors and made the exemption
applicable retroactively to January 1, 1997. The exemption was to expire on January 1, 2011.
H.B. 2622 amends the
existing prime contracting TPT exemption for solar energy devices to include
the cost of the installation of the solar energy device. It allows the
contractor to deduct not only the cost of the device but the installation
proceeds, including the amount a contractor might charge the customer up to a
$5,000 deduction per contract until January 1, 2002.
According to representatives
of the Arizona Solar Industry and the Arizona Department of Revenue (DOR), H.B.
2622 would eliminate contractors’ TPT liability in cases where statutes were
misinterpreted and would ensure that no contractor is assessed for taxes
improperly reported since January 1, 1997.
DOR estimates that there
would be little if any fiscal impact to the state general fund associated with
this measure.
In her veto message, the
Governor states that since a provision of this bill would eliminate a tax
exemption thereby increasing state revenue, the bill needed a two-thirds vote
of the legislature in order to pass. Although
the bill did have the required number of votes, the language of the bill does
not include a separate provision describing the requirement for enactment. This provision is required by the Arizona
Constitution in a case where state revenues are increased "in the form
of…a reduction or elimination of a tax deduction, exemption, exclusion, credit
or other tax exemption feature in computing tax liability."
Provisions
1. Requires, for the tax period from January 1, 1997 to January 1, 2000, a prime contractor to deduct the gross proceeds of sales or gross income derived from a contract to provide and install a solar energy device before computing the prime contracting classification tax base.
2. Repeals statutes in order to blend dually enacted legislation regarding the requirement that DOR account separately for prime contracting tax revenues resulting from the preparation or construction of a multipurpose facility and related infrastructure that is owned, operated or leased by the Tourism and Sports Authority.
3. Makes technical and conforming changes.
4. Provides for a general effective date.
EUT 2/21/01 DP 6-0-4-0-0 FIN 3/26/01 DP
7-1-0-0
WM 3/6/01 DPA 10-0-0-0 3rd
Read 4/27/01 26-2-2-0
3rd Read 3/14/01 45-10-5-0
Vetoed by Governor 5/4/01
Prepared by Senate Staff
May 31, 2001