House of Representatives

SB 1228

joint legislative tax committee

Sponsors: Senator Bundgaard

 

w/d

Committee on Ways and Means
w/d

Committee on Military, Veterans’ Affairs & Aviation
DPA

Committee on Ways and Means

X

Caucus and COW

 

Third Read

 

 

As Passed the House

 

SB 1228 creates a Joint Legislative Tax Committee.  This bill contains a proposed strike-everything amendment that provides a deduction from the transaction privilege and use taxation of natural gas and related distribution services.  The proposed amendment also allows counties with a population of less than 1.5 million people to levy an excise tax on the use or consumption of natural gas at the same rate of the county general excise tax.

 

Current Status

SB 1228 passed the Ways and Means Committee with a strike-everything amendment on natural gas use taxes and a further amendment on DOR withholding county use taxes to cover state revenue losses.

 

History

Electric deregulation changed the composition of the electric power industry from highly regulated local monopolies to competitive companies. Prior to deregulation, the monopolies provided customers with a total package of all electric services. Under traditional monopoly regulation, the generation, transmission and distribution of power are all provided by one utility company. Under retail competition, customers can select providers of electricity, while transmission and distribution services will continue to be provided by utilities in a regulated environment.

 

Under deregulation, the utility services provided by out of state companies are exempt from TPT because these companies do not have nexus in the State of Arizona. According to DOR, there is no corresponding use tax levied on utility services from out of state companies. The strike everything amendment will exempt, from use taxation and the utility classification of TPT, charges related to the interstate and intrastate pipeline transportation of natural gas and related distribution service charges. The strike everything amendment also allows counties with populations of less than 1.5 million people to levy, at the same rate as county general excise tax, excise taxes on the use or consumption of natural gas by a retail natural gas customer.

 

Provisions

Transaction Privilege and Use Tax

·          Provides a deduction from the tax base of the utilities classification of TPT for the gross proceeds of sales or gross income derived by a utility for:

·          Interstate pipeline transportation charges assessed on a retail customer. (Defines retail customer.)

·          Intrastate transportation and other services relating to the distribution of customer-secured natural gas. (Defines customer-secured natural gas.)

·          Provides that if interstate pipeline transportation charges that are deducted from the tax base are not billed separately, then the interstate pipeline transportation component will be calculated by multiplying the interstate pipeline cost per by the total number of therms sold to the customer for the billing period.

·          Expands the definition of natural gas under the utilities classification of TPT to include methane and propane gas.  This conforms the utilities definition to the definition of natural gas that is under the pipeline classification.

·          Excludes purchases of natural gas for resale or redistribution from the utilities classification of TPT.

·          Provides that the pipeline classification does not apply to a natural gas utility licensed and reporting tax under the utilities classification.

·          Provides that the computation of the purchase price of natural gas by a retail customer for tax purposes does not include:

·          Fees or charges related to the interstate pipeline transportation of natural gas.

·          Fees or charges for the intrastate transportation and other services relating to the distribution of customer-secured natural gas.

·          Provides that current deductions used to calculate the purchase price of electricity by retail electric customers also applies to the purchase price of natural gas by retail natural gas customers.

 

County Excise Tax

·          Allows counties with populations of less than 1.5 million people to levy, at the same rate as county general excise tax, an excise tax on the use or consumption of natural gas by a retail natural gas customer.

·          Requires the board of supervisors to approve the tax by executing one of the following:

·          If the board approved a county general excise tax prior to January 1, 2002, a resolution adopted by the majority of the board of supervisors.

·          If the board did not approve a county general excise tax prior to January 1, 2002, a resolution adopted by a unanimous vote of the board.

·          Provides that the new use tax on natural gas will be imposed at the beginning of a month and at least 90 days after the adoption of a resolution.

·          For the taxable periods through December 31, 2004, requires that ten percent of the county use tax on natural gas purchases be transmitted to the state treasurer and placed into the state general fund, with the net revenues to be transmitted by the state treasurer to the county levying the tax.

 

Miscellaneous

·          Blends multiple enactments.

·          Makes technical, conforming and clarifying changes.

 

Amendments

·        Requires DOR to withhold county use tax on a proportional basis to cover state revenue loss from transportation deductions for natural gas and deposit withheld funds in the state general fund.  Remaining county use tax revenues will go to the appropriate county.

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·        45th Legislature                 

·        Second Regular Session      3          April 23, 2002

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