public works contracts;
increasing amount
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Committee on Ways and Means |
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Committee on Appropriations |
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Caucus and COW |
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Third Read |
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As Passed the House |
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HB 2495 requires public works contracts signed between November 8, 2000 and June 1, 2001 to increase the amount of the contract by the amount of the increased education sales tax unless the contract already allowed for an increase for the tax amount.
Arizona’s transaction privilege tax is imposed on the privilege of transacting business in this state. It differs from a sales tax in that the tax burden is imposed on the business, not the purchaser. However, almost all businesses will pass along this tax burden to the purchaser, in the same manner as a sales tax.
As a result, confusion may arise regarding the timing of the tax burden. This is especially true when a tax increase occurs and transactions take place before the tax rate is increased, but are not paid for until after the tax rate increase occurs.
With the passage of Proposition 301 at the 2000 general election, this scenario has occurred. Proposition 301 imposed an increase to the state’s transaction privilege tax (TPT) rate of six-tenths of a percent beginning on June 1, 2001. In order to avoid confusion, the bill clarifies what rate to apply to certain transactions.
During the 2001 regular session, the Legislature passed HB 2376. That bill was similar to HB 2495. It would have provided that all contracts (public and private) entered into before June 1, 2001 (the effective date of the TPT increase approved by the voters) to pay the TPT at the lower rate, 5% instead of 5.6%. HB 2376 was vetoed by the governor.