ARIZONA STATE SENATE
Phoenix, Arizona
public funds; technical
correction
(NOW: direct broadcast
satellite sales)
Purpose
Creates a new transaction privilege tax (TPT) for residential direct broadcast satellite television services (DBS) and distributes all such monies to the cities and counties.
Background
Section 602(a) of the Federal Telecommunications Act of 1996 exempts a provider of direct-to-home satellite service or DBS “from the collection or remittance, or both, of any tax or fee imposed by any local taxing jurisdiction on direct-to-home satellite service.” In other words, federal law prohibits cities and counties (and other state subdivisions) from imposing sales and similar taxes on DBS services.
Section 602(c) of the Federal Telecommunications Act of 1996 provides authority for states to tax DBS providers and does not prevent receipt by “a local taxing jurisdiction [of] revenue derived from a tax or fee imposed and collected by a State.” In other words, the Telecommunications Act authorizes a state to impose and collect sales and similar taxes on DBS services and permits a state to distribute all or some of those revenues to cities and counties.
Currently 14 states impose a state sales tax (or TPT) on DBS services received by residents of that state. The following states impose taxes at the rates set forth below:
|
States |
Rate (%) |
|
Connecticut |
5 |
|
Florida |
13.17 |
|
Kansas |
4.9 |
|
Louisiana |
4 |
|
Maryland |
5
only on the pay-per-view tier of service |
|
Minnesota |
6.5 |
|
Mississippi |
4 |
|
Nebraska |
4 |
|
New
Mexico |
5
gross receipts tax |
|
North
Carolina |
5
gross receipts tax |
|
Rhode
Island |
7 |
|
Texas |
6.25 |
|
Wisconsin |
5 |
|
West
Virginia |
6 |
S.B. 1062 levies a five percent TPT on gross proceeds of residential direct broadcast satellite television service and distributes this revenue to the cities and counties.
A fiscal note has been requested from Joint Legislative Budget Committee staff, but has not yet been received. Industry sources indicate that this new tax should generate $13.2 million in FY 2002-2003, $14.9 million in FY 2003-2004, $16.7 million in FY 2004-2005 and $18.4 million in FY 2005-2006.
Provisions
1. Creates a new TPT classification for DBS and stipulates that the tax base is the gross proceeds of sale or gross income derived from residential direct broadcast satellite television service.
2. Excludes the following when computing the tax base for DBS:
a) Sales of DBS or data transmission service to a DBS or data transmission service provider for use in its DBS or data transmission operation by a provider.
b) Sales of satellite television services or data transmission services to a cable television system or to a microwave television transmission system that transmits television programming to multiple subscribers.
3. Levies a TPT at the rate of five percent on DBS services.
4. Requires the Department of Revenue to report the amount of TPT revenue from the DBS classification to the State Treasurer for payment in the following month.
5. Requires the State Treasurer to deposit DBS tax revenues as follows:
a) Into an incorporated area account according to the proportion of the population of this State that lives in incorporated cities and towns in Arizona.
b) Into an unincorporated area account according to the proportion of the population of this State that lives in unincorporated areas in this State.
6. Requires the State Treasurer, after depositing the DBS tax revenues into separate accounts, to pay the revenues as follows to:
a) Municipalities, to be used for any municipal purpose, in proportion that the relevant municipality bears to the total population of all incorporated cities and towns.
b) Counties, to be used for any county purpose, in proportion that the county bears to the total state population.
7. Creates a separate tax refund account to be drawn on only for DBS tax refunds and prohibits the Department of Administration from transferring any amount from this separate account to the state general fund.
8. Specifies that the total amount of refunds must be retained from the total amount of revenues received by the State Treasurer pursuant to the distribution of DBS monies to the municipalities.
9. Prohibits cities, towns or other taxing jurisdictions from levying taxes on the sale of DBS services of in-state residential customers.
10. Stipulates that the DBS taxes imposed do not apply to the gross proceeds of sales or gross income derived from the business of transmitting and selling residential direct broadcast satellite television services to residential customers at a service address in this State.
11. Defines “residential direct broadcast satellite television services,” “service address,” “net revenues” and "population."
12. Makes technical changes.
13. Becomes effective on December 31, 2002.
Amendments
Adopted by the Appropriations Committee
· Strike everything amendment was adopted.
Amendments
Adopted by Committee of the Whole
1. Clarifies that the DBS classification consists of the business of transmitting and selling residential DBS services to in-state residential customers.
2. Clarifies that the tax levy does not apply to gross sales or income resulting from the business of transmitting and selling residential DBS services to in-state residential customers.
3. Makes technical changes.
Senate Action
APPROP 3/19/02 DPA/SE 9-1-2-0
FIN 3/26/02 Discharge Petition
3rd Read 4/10/02 DPA 16-13-1-0
Prepared by Senate Staff
April 17, 2002