Assigned to FIN                                                                                                   FOR CAUCUS & FLOOR ACTION

ARIZONA STATE SENATE

Forty-seventh Legislature, Second Regular Session

AMENDED

FACT SHEET FOR S.B. 1152

sales tax holiday; educational supplies

Purpose

            Establishes an annual transaction privilege tax holiday for the purchase of school supplies and allows a qualified teacher to offset individual income tax by an amount of unreimbursed school supplies and materials.

Background

            The sales tax holiday was first instituted in New York in 1997, which provided a temporary sales tax exemption on certain items for a specific period of time. The holiday typically occurs in August, during the traditional back-to-school shopping period, and generally applies to merchandise connected with the new school year, particularly clothing, footwear and computer equipment.  Eleven states and the District of Columbia, have enacted sales tax holidays: Connecticut, Florida, Georgia, Iowa, Massachusetts, Missouri, New York, North Carolina, South Carolina, Texas and New Mexico.  Most states provide limits on the price of eligible merchandise; typically, $100 to $300 per clothing item sold and $1,500 to $4,000 for computer equipment. Any item priced under the ceiling can be purchased tax-free for the duration of the holiday.

            Fiscal impact information has been requested from the Department of Revenue.

Provisions

1. Exempts school art supplies, school clothes, school computer and computer supplies, school instructional materials and school supplies that are purchased annually between August 1 and August 7 from the state and municipal transaction privilege and use tax.

2. Allows a city, town or special taxing district to levy a transaction privilege tax on the exempt items during the first seven days of August if either: 1) the governing body adopts, by a two-thirds majority, an ordinance approving the tax levy or 2) the local electorate approves an initiative or referendum approving the tax levy.

3. Allows a qualified teacher to offset individual income tax by an amount of unreimbursed educational supplies and materials up to $250 per year.

4. Allows a qualified teacher to reduce Arizona individual income tax liability by the amount spent by the qualified teacher on educational supplies and materials greater than the claimed offset.

5. Prohibits a qualified teacher from electing an itemized deduction of unreimbursed educational supplies if the qualified teacher claimed an offset or subtraction from Arizona adjusted gross income.

6. Requires the Joint Legislative Income Tax Credit Review Committee to review this tax offset in 2011.

7. Contains a purpose and a legislative intent clause.

8. Defines terms.

9. Rectifies a dual enacted statute relating to the Joint Legislative Income Tax Credit Review Committee.

10. Becomes effective on January 1, 2007.

Amendments Adopted by Committee

1. Adds computers and school clothes to the items exempt from transaction privilege tax.

2. Adds a delayed effective date.

Senate Action

FIN                 1/19/06     DPA     9-0-0-0

Prepared by Senate Research

January 19, 2006

SL/jas