House of Representatives

HB 2409

comprehensive transaction privilege tax

Sponsors: Representatives Camarot, Loredo, Lugo, et al.

 

X

Committee on Counties & Municipalities

 

Committee on Ways & Means

 

Committee on Commerce & Economic Development

 

Caucus and COW

 

Third Read

 

 

As Passed the House

 

HB 2409 eliminates numerous transaction privilege tax (TPT) and use exemptions and adds various activities to the overall TPT base in a newly created services classification.

History

Current statute (A.R.S. § 42-5010) outlines Arizona’s TPT rates and distribution structure. Currently the rates vary from 0 to 6.1%, depending on the type or classification of business. The largest business category is taxed at the 5.6% rate and includes 14 classifications.

Provisions

·              Removes the existing TPT rates and replaces them with rates yet to be determined.

·              Eliminates the following tax exemptions from the retail classification (A.R.S. § 42-5061):

1.        Warranty or service contracts.

2.        Sales of tangible property to any nonprofit organization.

3.        Lottery tickets. *

4.        Taxable sales on property, to property used in environmental response or remediation.  

5.        Sales of tangible property by nonprofit organizations associated with a Major League Baseball team or a national touring golfing association.

6.        Sales of natural and liquefied gas used to propel a vehicle.

7.        Coal, petroleum, coke, natural gas, virgin fuel oil and electricity sold to a qualified environmental technology manufacturer. *

8.        Sales of motor vehicles at auction to nonresidents for use outside the state

9.        Sale of alternative fuel to a used oil fuel burner.  *

10.    Tangible personal property sold to commercial airline, consisting of food, beverages and condiments and accessories used for serving the food and beverages, if those items are provided without additional charge to the passenger.  *

11.    Sales of alternative fuel vehicles, if the vehicle was manufactured as a diesel fuel vehicle and converted to run on alternative fuel and equipment that is installed into the conventional diesel engine.  *

12.    Sales of tangible personal property to be incorporated or installed as part of environmental response or remediation activities.

13.    Machinery, equipment or transmission lines used directly in producing or transmitting electrical power and transformers and control equipment used at transmission substation sites.  *

14.    Pipes or valves four inches in diameter or larger used to transport oil, natural gas, artificial gas, water or coal slurry.   *

15.    Railroad rolling stock, rails, ties and signal control equipment used directly to transport persons or property.  *

16.    Machinery or equipment used to drill for oil or gas.  *

17.    Tangible property that is used to receive, store, convert, produce, generate, decode, encode, control or transmit satellite television telecommunications information.  *

18.    Machinery or equipment that enables a television station to originate and broadcast or to receive and broadcast digital television signals.  *

19.    The sale or transfer of wireless telecommunications equipment as an inducement to a customer to enter into or continue a contract.  Gross proceeds of sales or gross income does not include sales commissions or other compensations.

20.    The sale of wireless telecommunications to a person who holds the equipment for sale or transfer to a customer is considered to be a sale for resale.

·              Imposes tax on fees charged for the installation of tangible personal property by the seller of the property.

·              Eliminates the following tax exemptions from the transporting classification (A.R.S. § 42-5062):

1.        Transporting freight or property for hire by a railroad operating in this state, involving more than one railroad, from a point in this state to a point outside this state or vice versa.

2.        Gross proceeds of sales or gross income derived from transporting for hire persons, freight or property pursuant to a contract with another railroad.

·              Removes the following tax exemptions from the utilities classification (A.R.S. § 42-5063):

1.        Sales of natural gas or liquefied petroleum gas used to propel a motor vehicle.

2.        Sales of alternative fuel, to a used oil fuel burner.

3.        Sales of services that are related to providing electricity to a wholesaler or a retail electric customer who is located outside this state, for use outside this state.  *

·              Changes the telecommunications classification to be comprised of the business of providing interstate telecommunications services rather than intrastate telecommunications services.

·              Removes the following tax exemptions from the telecommunications classification (A.R.S. § 42-5064):

1.        Sales of interstate telecommunications services by a cable television system or a microwave television transmission system that transmits television programming to multiple subscribers. 

2.        End user common line charges.

3.        Sales of direct broadcast satellite television services.

 

·              Removes the following tax exemption from the pipeline classification (A.R.S. § 42-5067):

Ř        Sales of natural gas and liquefied petroleum gas used to propel a motor vehicle.

·              Removes the following tax exemption from the personal property rental classification (A.R.S. § 42-5071):

Ř        Leasing or renting films, tapes or slides used by theaters or movies, which are engaged in business under the amusement classification.

·              Adds secondary, postsecondary and intercollegiate sports events into the amusement classification

·              Removes the following tax exemptions from the amusement classification (A.R.S. § 42-5073):

1.        Private or group instructional activities such as performing arts, marshal arts, gymnasium and aerobics.

2.        Exhibition events sponsored, conducted or operated by nonprofit organization that is exempt from taxation and is associated with a Major League Baseball team or a notional touring professional golfing.

3.        Sales of admission to intercollegiate football contest even if operated by a nonprofit organization and not held in a multipurpose facility.

4.        The gross proceeds of sales or gross income derived from memberships, which provide for the right to use a health of fitness establishment or a private recreational establishment.

·              Removes the following tax exemption from the prime contracting classification (A.R.S. § 42-5067):

Ř        The gross proceeds of sales or gross income from a contract, for site preparation, constructing, installing machinery, to perform actions in response to a release of hazardous substance.

·              Establishes a services classification and subjects following businesses to taxation under the classification (A.R.S. § 42-5078):

1.        Personal services.

2.        Dating and escort services.

3.        Business services, credit reporting and collection services, commercial art and graphic services, computer and data processing, advertising agency and detective, private investigator, armored car and security guard services.

4.        Automotive services.

5.        Hunting and fishing guide services.

6.        Garment services.

7.        Interior design services.

8.        Telephone services, including telephone answering and telemarketing services.

9.        Carpet and upholstery cleaning services.

10.    Legal services (Exemption revenues for the first $20.000 in legal fees to each individual client).

11.    Engineering and management services.

12.    Dwelling and building services.

13.    Pet grooming services.

14.    Management consulting services.

15.    Environmental consulting services.

16.    Scientific and technical consulting services.

17.    Laboratory and facility testing services.

18.    Linen and uniform supply services.

19.    Diet reduction services.

20.    Industrial sewer and refuse services.

21.    Gift and package wrapping services.

22.    Health club services.

23.    Swimming pool services.

24.    Water softening and conditioning services.

25.    Window cleaning services.

26.    Computer services.

27.    Cable television services.

28.    Chartered flight services.

29.    Taxidermy services.

30.    Installation services.

·              Removes the following exemptions from the use tax section of statute (A.R.S. § 42-5159):

1.        Revenues received from sales of ancillary services, electric distribution, generation, transmission, and other services related to providing electricity to a retail electric customer located outside this state.

2.        All exemptions denoted with an “*” previously in this summary.

·              Repeals A.R.S. § 42-5159 as amended by Laws 2001, Chapter 115, Section 14.

·              Requires Legislative Council to prepare proposed legislation conforming remaining statutes to the provisions of this act.

·              Contains a delayed effective date of December 31, 2002.

·              Contains other technical and conforming changes.

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·              45th Legislature               

·              Second Regular Session   3          March 25, 2002

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