Assigned to FIN & COM                                                                                 FOR CAUCUS & FLOOR ACTION

 

 

 

ARIZONA STATE SENATE

Phoenix, Arizona

 

REVISED

FACT SHEET FOR H.B. 2499

 

sales tax rates; preexisting contracts

 

Purpose

 

Retroactive to June 1, 2001, exempts, from the 0.6 percent increase in the transaction privilege tax (TPT) passed by the voters in the 2000 general election, contracts and written bids entered into by prime contractors on or before November 7, 2000.  Contains a Proposition 105 clause.

 

Background

 

Proposition 301, passed by the voters in the 2000 general election, levied an additional six-tenths of a percent TPT and use tax (sales tax) beginning June 1, 2001.  Some contractors accepted contracts prior to the passage of this proposition that included sales tax calculated at the prior rate of five percent.  If payment is made pursuant to these contracts after June 1, 2001 and the contractor uses a cash basis accounting method, the contractor will be responsible for the amount of taxes calculated at the new rate.  In many cases, contractors, because of the terms agreed to in the contract, cannot charge the customer for the additional sales tax.

 

H.B. 2499, retroactive to June 1, 2001, exempts, from the 0.6 percent TPT increase passed by the voters in the 2000 general election, contracts and written bids entered into by prime contractors on or before November 7, 2000, unless the contract or written bid allows the contractor to collect the amount of the tax increase from the purchaser. 

 

According to Joint Legislative Budget Committee staff estimates, the fiscal impact of H.B. 2499 cannot be determined.  However, there will be a cost to Proposition 301 revenues as the bill represents a tax exemption.

 

Provisions

 

1.      Exempts, from the 0.6 percent TPT increase passed by the voters in the 2000 general election (A.R.S. §42-2010, subsection G), any gross proceeds or income derived from a contract entered into or a written bid on or before November 7, 2000, unless the contract or written bid allows the contractor to recover the amount of the tax increase from the purchaser.  Requires a three-fourths vote of each legislative chamber.

 

2.      Contains a retroactivity date of June 1, 2001.

 

Amendments Adopted by Committee

 

1.      Deletes provisions, exempting from any future increases in TPT, contracts and written bids entered into by prime contractors before the effective date of the applicable legislation or date of the election enacting the increase.

 

2.      Removes the requirement for contractors claiming exemptions from TPT increases to provide qualification documents to the Department of Revenue.

 

3.      Deletes the conditional enactment clause.

 

House Action                                                               Senate Action

 

CED                2/11/02            DPA    7-2-0-1                        COM               4/10/02            DP       5-0-1-0

APPROP         3/25/02            DPA    12-1-0-3          FIN                  4/15/02            DPA    4-3-1-0

3rd Read           4/1/02              DPA    45-7-8-0

 

 

Prepared by Senate Staff

April 17, 2002