House of Representatives

HB 2499

sales tax rates; preexisting contracts

Sponsors: Representatives Cooley, Pierce, Graf, Avelar, et al

DPA	Committee on Commerce and Economic Development
DPA	Committee on Appropriations
DPA	Caucus and COW
DPA	Third Read
X	As Passed the House

HB 2499 exempts construction contracts entered into before November 7, 2000, from the six-tenths percent increase in the transaction privilege tax that began June 1, 2001, unless the contracts contain reimbursement provisions for the additional tax.

History

Arizona’s transaction privilege tax (TPT) 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 occurred. Proposition 301 imposed an increase to the TPT rate of six-tenths of a percent beginning 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 2499. It would have provided contracts entered into before the effective date (June 1, 2001) of the TPT increase approved by the voters to pay the TPT at the lower rate, 5% instead of 5.6%. The governor vetoed HB 2376.

Provisions

· Exempts construction contracts and written bids signed prior to November 7, 2000, from the additional TPT rate imposed as a result of Proposition 301. The provisions are retroactive to taxable years from and after May 31, 2001.

· Stipulates that any future increase in the TPT enacted either by the Legislature or by a vote of the people does not apply to contracts and written bids entered into before the enactment. The prime contractor must provide documentation to verify the applicable date.

· Requires the documentation for exemption to be in a form and manner approved by DOR.

· Adopts a Proposition 105 clause that requires a three-fourths affirmative vote for enactment.

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45th Legislature

Second Regular Session 2 May 8, 2002

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