Assigned to FIN                                                                                                                 AS PASSED BY THE SENATE

 

 

 

ARIZONA STATE SENATE

Phoenix, Arizona

 

REVISED

FACT SHEET FOR H.B. 2242

 

prime contracting; lawn maintenance; exemption

 

Purpose

 

Clarifies which lawn maintenance services are exempt from prime contracting transaction privilege tax (TPT) and which landscaping activities are not exempt from prime contracting TPT.

 

Background

 

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 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.

 

The Joint Legislative Budget Committee fiscal note states the fiscal impact of this bill cannot be determined.

 

Provisions

 

1.      Specifies that the proceeds derived from a contract for lawn maintenance services that does not include landscaping activities 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

            Tree and shrub pruning

            Applying pesticides

 

2.      Specifies 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

            Repairing sprinkler or water systems

           

3.      Makes a technical and conforming change.

 

4.      Becomes effective on September 1, 2002

 

Amendments Adopted by Committee

 

1.      Specifies that nontaxable proceeds must derive from a contract for lawn maintenance that does not include landscaping activities.

 

2.      Adds an effective date for taxable periods beginning from and after August 31, 2002.

 

3.      Makes a technical change.

 

Amendments Adopted by Committee of the Whole

 

1.      Makes repairing sprinkler or water systems a landscaping activity subject to gross sales or income TPT.

 

2.      Makes a technical change.

 

House Action                                                                   Senate Action                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

 

WM                 3/28/02            DPA/SE    5-4-0-1           FIN             4/15/02      DPA    7-0-1-0

3rd Read           4/04/02                              32-18-10-0                3rd Read       5/2/02                    26-2-2-0

 

 

Prepared by Senate Staff

May 7, 2002