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ARIZONA STATE SENATE
RESEARCH STAFF
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DENISSE GEE LEGISLATIVE RESEARCH ANALYST FINANCE COMMITTEE Telephone: (602) 542-3171 Facsimile: (602) 542-7833 |
FINANCE COMMITTEE
DATE: April 12, 2002
SUBJECT: Strike Everything Amendment
to H.B. 2247
Purpose
Exempts, from use taxation and the utility classification of transaction privilege taxation (TPT), charges related to the interstate and intrastate pipeline transportation of natural gas and related distribution service charges. 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.
Background
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 the Department of Revenue, there is no corresponding use tax levied on utility services from out of state companies. The strike everything amendment to HB 2247 exempts, 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 Taxation
1. Deducts, from the tax base of the utilities classification of TPT, gross proceeds of sales or gross income derived by a utility:
a) Interstate pipeline transportation charges assessed on a retail customer. (Defines retail customer.)
b) Intrastate transportation and other services relating to the distribution of customer-secured natural gas. (Defines customer-secured natural gas.)
2. Requires, if interstate pipeline transportation charges are not billed separately, the interstate pipeline transportation component to be calculated by multiplying the interstate pipeline cost per by the total number of therms sold to the customer for the billing period.
3. Adds, under the utilities classification of TPT, methane and propane gas, conforming to the definition found under the pipeline classification.
4. Excludes, from the utilities classification of TPT, purchases of natural gas for resale or redistribution.
5. Specifies that the pipeline classification does not apply to a natural gas utility licensed and reporting tax under the utilities classification.
6. Deducts, from the calculation of the purchase price of natural gas by a retail customer for tax purposes:
a) Fees or charges related to the interstate pipeline transportation of natural gas.
b) Fees or charges for the intrastate transportation and other services relating to the distribution of customer-secured natural gas.
7. Expands, for tax purposes, certain deductions applied to the calculation of purchase price electricity by a retail electric customers to the purchase price of natural gas by a retail natural gas customer.
County Excise Tax
8. 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.
9. Requires the board of supervisors to approve the tax by executing one of the following:
a) 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.
b) 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.
10. Requires counties to wait at least 90 days after adopting a resolution to levy the county excise tax on the use or consumption of natural gas by a retail natural gas customer.
11. Requires, for the period through December 31, 2004 , ten percent of the county use tax on natural gas purchases to be transmitted to the State Treasurer and placed into the state general fund, with net revenues to be transmitted by the State Treasurer to the county levying the tax..
Miscellaneous
12. Clarifies the exemption from use taxation for machinery and equipment necessary for cooling milk and livestock.
13. Deletes, in the definition of “retail natural gas customer,” a person who purchases natural gas for retransmission.
14. Deletes, from the definition of “utility business,” persons providing natural gas utility services to retail natural gas customers.
15. Blends multiple enactments.
16. Makes technical, conforming and clarifying changes.
17. Provides for a general effective date.
DG/jas