ARIZONA STATE SENATE
Phoenix, Arizona
prime contracting;
lawn maintenance; exemption
Clarifies what lawn maintenance services are exempt from prime contracting transaction privilege tax (TPT) and what landscaping activities are not exempt from prime contracting TPT.
The transaction privilege tax (TPT) is imposed under several separate business activity classifications. Each classification has its own deductions and exemptions. Arizona Administrative Code (AAC) distinguishes between taxable prime contracting activities, taxable retail sales, and nontaxable service activities. Prime contracting classification imposes the TPT on 65 percent of the gross proceeds of sales or gross income derived from the business. AAC includes lawn mowing and garden maintenance as nontaxable service activities.
In May 2001, the Department of Revenue (DOR) released a ruling that provided clarification on lawn maintenance activities that constitute nontaxable service activities, taxable retail sales and taxable prime contracting activities.
H.B. 2242 provides clarification of what lawn maintenance services are not subject to the TPT and what landscaping activities are subject to the TPT.
A fiscal note from JLBC has been requested.
1. Clarifies that lawn maintenance services are not subject to gross sales or income TPT including:
Replacement of flowers
Refreshing gravel
Lawn de-thatching
Weeding, Seeding and Raking
Lawn moving and edging
Leaf removal
Repairing sprinkler or watering systems
Tree and shrub pruning
Applying pesticides
2. Clarifies that landscaping activities are subject to gross sales or income TPT including:
Lawn installing
Grading or leveling ground
Removing tree stumps
Gravel or boulder installing
Felling trees
Installing underground sprinkler or water systems
Planting trees
Building irrigation berms
Installing railroad ties
3. Makes a technical and conforming change.
4. Provides for a general effective date.
WM 3/28/02 DPA/SE 5-4-0-1
3rd Read 4/04/02 32-18-10-0
Prepared by Senate Staff
April 11, 2002