ARIZONA STATE SENATE
Phoenix, Arizona
FINAL
REVISED
prime contracting;
lawn maintenance; exemption
Clarifies which lawn maintenance services are exempt and which landscaping activities are not exempt from the prime contracting classification of transaction privilege taxation.
Transaction privilege tax (TPT) is imposed under several separate business activity classifications. Each classification has its own deductions and exemptions. The Arizona Administrative Code (AAC) distinguishes between taxable prime contracting activities, taxable retail sales, and nontaxable service activities. The prime contracting classification imposes TPT on 65 percent of the gross proceeds of sales or gross income derived from the business. The AAC includes lawn mowing and garden maintenance as nontaxable service activities.
In May 2001, the Department of Revenue released a ruling that clarified which lawn maintenance activities constitute nontaxable service activities, taxable retail sales and taxable prime contracting activities.
H.B. 2242 further clarifies which lawn maintenance services are not subject to the prime contracting classification of TPT and which landscaping activities are.
The Joint Legislative Budget Committee fiscal note states that there will be no cost in FY 2001-2002 and for FY 2002-2003 and FY 2003-2004 the cost cannot be determined.
1. Specifies that proceeds received from a contract for lawn maintenance services are not subject to the prime contracting classification of TPT if the contract does not include landscaping activities. Defines lawn maintenance services as:
Replacement of flowers
Refreshing gravel
Lawn de-thatching
Weeding, seeding and raking
Lawn moving and edging
Leaf removal
Tree and shrub pruning
Applying pesticides
Repairing sprinkler or drip irrigation heads
2. Specifies that the following landscaping activities are subject to the prime contracting classification of TPT:
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 of September 1, 2002.
3. Makes a technical change.
Amendments Adopted by Committee of the Whole
1. Classifies sprinkler or water systems repair as a landscaping activity subject to the prime contracting classification of TPT.
2. Makes a technical change.
Amendments Adopted by Conference Committee
· Adds the repair of sprinkler or drip irrigation heads to the list of lawn maintenance services that are not subject to the prime contracting classification of TPT.
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
Final Read 5/20/02 31-23-6-0 Final Read 5/21/02 25-0-5-0
Signed by Governor 5/28/02
Chapter 307
Prepared by Senate Staff
June 4, 2002