Bill Text: AZ SB1357 | 2012 | Fiftieth Legislature 2nd Regular | Introduced
Bill Title: Tax; retail goods and services
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2012-01-30 - Referred to Senate FIN Committee [SB1357 Detail]
Download: Arizona-2012-SB1357-Introduced.html
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REFERENCE TITLE: tax; retail goods and services |
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State of Arizona Senate Fiftieth Legislature Second Regular Session 2012
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SB 1357 |
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Introduced by Senator Klein
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AN ACT
Repealing title 42, chapter 5, Arizona Revised Statutes; repealing title 43, Arizona Revised Statutes; amending title 42, Arizona Revised Statutes, by adding chapter 4; making an appropriation; relating to taxation.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Repeal
A. Title 42, chapter 5, Arizona Revised Statutes, is repealed.
B. Title 43, Arizona Revised Statutes, is repealed.
Sec. 2. Title 42, Arizona Revised Statutes, is amended by adding chapter 4, to read:
CHAPTER 4
TAX ON RETAIL GOODS AND SERVICES AT THE SOURCE
ARTICLE 1. GENERAL PROVISIONS
42-4001. Purposes
A. A court, the department and the director shall consider the following purposes of this chapter as the primary aid in construction of the provisions of this chapter:
1. to raise revenue needed by state government in a manner consistent with the other purposes of this chapter.
2. To tax all non federal government consumption of goods and services in this State without exception, but only once.
3. To prevent double, multiple or cascading taxation.
4. To simplify the tax law and reduce the administrative costs of, and the costs of compliance with, the tax law.
5. To provide for the administration of the tax law in a manner that respects privacy, due process, individual rights when interacting with the government, the presumption of innocence in criminal proceedings and the presumption of lawful behavior in civil proceedings.
B. As a secondary aid in statutory construction, a court, the DEPARTMENT and the director shall consider:
1. The common law canons of statutory construction.
2. The meaning and construction of concepts and terms used with respect to the transaction privilege tax law and the Arizona income tax act of 1978, as amended and in effect before January 1, 2014, the effective date of this chapter.
3. Any ambiguities in this chapter in favor of reserving powers to the people.
42-4002. Definitions
In this chapter, unless the context otherwise requires:
1. "Affiliated" with respect to business entities, means one of the entities owns at least fifty per cent of:
(a) The voting shares of the other entity, if the other entity is a corporation.
(b) The capital interests of the other entity, if the other entity is not a corporation.
2. "Designated commercial private courier service" means a business entity firm designated as such by the department, on application by the entity, if the entity:
(a) Provides its services to the general public.
(b) Records electronically to its database kept in the regular course of its business the date on which an item was given to such firm for delivery.
(c) Has been operating as a courier service for at least one year.
3. "Education and training" means primary, secondary or postsecondary level education and job-related training courses for which a person incurs costs for tuition, books or laboratory or other class related direct fees. Education and training does not include room, board, sports activities, recreational activities, hobbies, games, arts or crafts or cultural activities.
4. "Explicitly charged fees for financial intermediation services" means:
(a) Brokerage fees.
(b) Explicitly stated banking, loan origination, processing, documentation, credit check fees or other similar fees.
(c) Safe-deposit box fees.
(d) Insurance premiums, to the extent such premiums are not allocable to the investment account of the underlying insurance policy.
(e) Trustees' fees.
(f) Other financial services fees.
5. "Financial intermediation services" means the sum of:
(a) Explicitly charged fees for financial intermediation services.
(b) Implicitly charged fees for financial intermediation services.
6. "Gross payment" means payment for taxable property or services, including the taxes imposed by this chapter.
7. "Implicitly charged fees for financial intermediation services" means the gross imputed amount in relation to any underlying interest-bearing investment, account or debt. For the purposes of this PARAGRAPH, "Gross imputed amount" means:
(a) With respect to any underlying interest-bearing investment or account, the product of:
(i) The excess of the basic interest rate over the rate paid on such investment.
(ii) The amount of the investment or account.
(b) With respect to any underlying interest-bearing debt, the product of:
(i) The excess of the rate paid on the debt over the basic interest rate.
(ii) The amount of the debt.
8. "Intangible property" includes copyrights, trademarks, patents, goodwill, financial instruments, securities, commercial paper, debts, notes and bonds and other property considered to be intangible in common law. Intangible property does not include tangible personal property or rents or leaseholds of any term, real property or rents or leaseholds of any term and computer software.
9. "Net payment" means the total amount charged for taxable property or services, excluding the taxes imposed by this chapter.
10. "Produce, provide, render or sell a taxable property or service" means a taxable property or service purchased by a person engaged in a trade or business for the purpose of employing or using the taxable property or service in producing, providing, rendering or selling other taxable property or services in the ordinary course of that trade or business. Taxable property or services used in a trade or business for the purpose of research, experimentation, testing and development are considered to be used to produce, provide, render or sell taxable property or services. Taxable property or services purchased by an insurer on behalf of an insured are considered to be used to produce, provide, render or sell taxable property or services if the premium for the insurance contract giving rise to the insurer's obligation was subject to tax pursuant to article 7 of this chapter. Education and training are considered to be services used to produce, provide, render or sell taxable property or services.
11. "Registered seller" means a person who is registered pursuant to Section 42-4201.
12. "Service" includes any service performed by an employee for which the employee is paid wages or a salary by a taxable employer, but does not include any service performed by an employee for which the employee is paid wages or a salary:
(a) By an employer in the regular course of the employer's trade or business.
(b) By an employer that is a qualified not-for-profit organization.
(c) By an employer that is a government enterprise.
(d) By taxable employers to employees directly providing education and training.
(e) By the federal government and its agencies.
13. "Taxable employer":
(a) Includes:
(i) A household employing domestic servants.
(ii) Any government, except as provided by subdivision (b), item (ii) of this paragraph and except for government enterprises.
(b) Does not include:
(i) An employer that is engaged in a trade or business, a qualified not-for-profit organization, a government enterprise or an educational or training institution.
(ii) The federal government and its agencies, until such time as federal law allows state taxation of the federal government.
14. "Taxable property or service" means:
(a) Any property, including leaseholds of any term or rents with respect to the property, except for intangible property and used property.
(b) Any service, including any financial intermediation services.
15. "Tax inclusive fair market value" means the fair market value of taxable property or services plus the tax imposed by this chapter.
16. "Used property" means either:
(a) Property on which the tax imposed by Section 42-4051 has been collected and for which no credit has been allowed under Section 42-4101, 42‑4102 or 42-4103.
(b) Property that was held other than for a business purpose on December 31, 2012.
17. "Wages" and "salary" mean all compensation paid for employment service, including cash compensation, employee benefits, disability insurance, wage replacement insurance payments, unemployment compensation insurance, workers' compensation insurance and the fair market value of any other consideration paid by an employer to an employee in consideration for employment services rendered.
ARTICLE 2. LEVY AND COLLECTION OF TAX
42-4051. Levy, rate and liability for tax
A. A tax is imposed on the use or consumption of taxable property or services in this State.
B. The rate of tax is _____ per cent of the net payments for the taxable property or service.
C. The person using or consuming taxable property or services in this State is liable for the tax imposed by this section, except that a person using or consuming a taxable property or service in this State is not liable for the tax imposed by this section if the person pays the tax to a person selling the taxable property or service and receives from the person a purchaser's receipt within the meaning of Section 42-4054.
D. The department is RESPONSIBLE for collecting the tax and enforcing the provisions of this chapter.
42-4052. Exemptions
No tax is imposed under this chapter on:
1. Any taxable property or service:
(a) Purchased for a business purpose in a trade or business. For the purposes of this subdivision, "Purchased for a business purpose in a trade or business" means purchased by a person engaged in a trade or business and used in that trade or business either:
(i) for resale.
(ii) to produce, provide, render or sell taxable property or services.
(iii) In furtherance of other bona fide business purposes.
(b) Purchased for export from this State for use or consumption outside this State.
(c) Purchased for an investment purpose and held exclusively for an investment purpose. For the purposes of this subdivision, "Purchased for an investment purpose" means property purchased exclusively for purposes of appreciation or the production of income but not requiring more than minor personal efforts.
2. A government enterprise as described and defined in Section 42‑4254.
42-4053. Responsibility for collection and payment of tax
A. Except as otherwise provided in this section, the tax imposed by this chapter shall be collected and remitted by the seller of taxable property or services, including financial intermediation services.
B. In the case of taxable property or services purchased outside this State and imported into the State for use or consumption in the State, the purchaser shall remit the tax imposed by this chapter.
C. In the case of wages or salary paid by a taxable employer for taxable services, the employer shall remit the tax imposed by this chapter.
D. Property or services purchased for a business purpose in a trade or business or for export that were sold untaxed pursuant to Section 42-4052, paragraph 1, subdivision (a) or (b) but that were subsequently converted to personal use is considered to be purchased at the time of conversion and is subject to the tax imposed by this chapter at the fair market value of the converted property as of the date of conversion. The tax is due as if the property had been sold at the fair market value during the month of conversion. The person using or consuming the converted property is liable for and shall remit the tax.
E. If gross payment for taxable property or services is made in other than money, the person responsible for collecting and remitting the tax shall remit the tax to the department in money as if gross payment had been made in money at the tax inclusive fair market value of the taxable property or services purchased.
42-4054. Separate listing of tax on each purchase
A. For each purchase of taxable property or services for which a tax is imposed by this chapter, the seller shall:
1. Charge the tax separately from the net payment.
2. Provide to the purchaser a receipt for each transaction that includes:
(a) The price for the property or services exclusive of tax.
(b) The amount of tax paid.
(c) The price for the property or services inclusive of tax.
(d) The tax rate divided by the price for the property or services price exclusive of tax.
(e) The date that the property or service was sold.
(f) The name of the seller.
(g) The seller's registration number provided by the department.
B. The requirements of subsection A of this section do not apply to sales through vending machines that dispense, in exchange for coins or currency, taxable property where no single item exceeds ten dollars per unit in price.
C. The requirements of subsection A of this section in the case of sales of financial intermediation services apply when the tax is imposed. Receipts shall be issued when the tax is imposed as provided by Section 42‑4302.
ARTICLE 3. CREDITS AND REFUNDS
42-4101. List of allowable credits
A. Each taxpayer is allowed a credit with respect to the taxes imposed by this chapter for each month in an amount equal to the sum of:
1. The taxpayer's business use conversion credit pursuant to Section 42-4102 for the month.
2. The taxpayer's intermediate and export sales credit pursuant to Section 42-4103 for the month.
3. The administration credit pursuant to Section 42-4104 for the month.
4. The bad debt credit pursuant to Section 42-4105 for the month.
5. The insurance proceeds credit pursuant to Section 42-4106 for the month.
6. Any other credits that may be allowed by law.
7. Any amount paid in excess of the amount due.
B. Only one credit allowed by subsection A of this section may be taken with respect to any particular gross payment.
42-4102. Business use conversion credit
A. the business use conversion credit for any month is the amount determined under subsection B of this section with respect to taxable property and services on which tax was imposed under this chapter and actually paid and which commenced to be ninety-five per cent or more used during the month for business purposes.
B. The amount of the credit with respect to any taxable property or service is the lesser of:
1. The product of the rate imposed by Section 42-4051 and the fair market value of the property or service when its use commences to be ninety‑five per cent or more used for business purposes.
2. The amount of tax paid with respect to the taxable property or service, including the amount, if any, determined pursuant to Section 42‑4255.
42-4103. Intermediate and export sales credit
The intermediate and export sales credit is the amount of any tax paid on the purchase of any taxable property or service purchased for:
1. A business purpose in a trade or business.
2. Export from this State for use or consumption outside the United States.
42-4104. Taxpayer administrative credit
A. A taxpayer who files a timely monthly return, with regard to extensions, in compliance with Section 42-4202 is entitled to a taxpayer administrative credit equal to the greater of:
1. Two hundred dollars.
2. One-fourth of one per cent of the tax remitted.
B. The credit shall not exceed twenty per cent of the tax due to be remitted before the application of any credit or credits allowed by this article.
42-4105. Bad debt loss; taxes reported and paid but proceeds subsequently not collected
A. A taxpayer who has experienced a bad debt, other than unpaid invoices, is entitled to a credit equal to the product of the tax rate imposed by Section 42-4051 and the amount of the bad debt. For the purposes of this subsection, "bad debt" means the portion of a business debt that becomes wholly or partially worthless to the payee.
B. A taxpayer who elects the accrual method pursuant to Section 42‑4203, subsection B and who has, with respect to a transaction invoiced the tax imposed by this chapter, remitted the invoiced tax, actually delivered the taxable property, or performed the taxable services, invoiced and has not been paid one hundred eighty days after the date the invoice was due to be paid is entitled to a credit equal to the amount of tax remitted and unpaid by the purchaser.
C. Any payment made with respect to a transaction subsequent to taking a credit pursuant to this section, that transaction shall be subject to tax in the month the payment was received as if a tax inclusive sale of taxable property and services in the amount of the payment had been made.
D. Partial payments shall be treated as pro rata payments of the underlying obligation and shall be allocated proportionately as follows:
1. For fully taxable payments, between payment for the taxable property and service and tax.
2. For partially taxable payments, among payment for the taxable property and service, tax and any other payment.
E. The credit provided by this section is not allowed with respect to sales made to related parties. For the purposes of this subsection, "related parties" means affiliated firms and family members as described in Section 42‑4152, subsection B.
F. A business debt is not considered to be wholly or partially worthless unless it has been in arrears for at least one hundred eighty days, subject to the following conditions:
1. If a debt is wholly or partially discharged in bankruptcy before one hundred eighty days have elapsed, it is considered to be wholly or partially worthless on the date of discharge.
2. A business debt that has been in arrears for one hundred eighty days or more may be considered to be wholly or partially worthless by the holder, unless a payment schedule has been entered into between the debtor and the lender and payments under the payment schedule are current.
3. For the purposes of this subsection, "business debt" means a bona fide loan or debt made for a business purpose that both parties intended be repaid.
42-4106. Credit for insurance proceeds
A. A taxpayer receiving a payment from an insurer by virtue of an insurance contract is entitled to a credit in an amount determined pursuant to subsection B of this section, less any amount paid to the insured by the insurer pursuant to subsection C of this section, if the entire premium, except that portion allocable to the investment account of the underlying policy, for the insurance contract giving rise to the insurer's obligation to make a payment to the insured was subject to the tax imposed by this chapter and the tax was paid. For the purposes of this subsection, "insurance contract" includes a life insurance contract, a health insurance contract, a property and casualty loss insurance contract, a general liability insurance contract, a marine insurance contract, a fire insurance contract, an accident insurance contract, a disability insurance contract, a long-term care insurance contract and an insurance contract that provides a combination of these types of insurance.
B. The amount of the credit is the product of the rate imposed by Section 42-4051 and the amount of the payment made by the insurer to the insured.
C. The amount of the credit determined pursuant to subsection B of this section shall be paid by the insurer to the insured and the insurer is entitled to the credit in lieu of the insured, except that:
1. The insurer may elect, in a form prescribed by the director, to not pay the credit to the insured but require the insured to apply for the credit.
2. In the event of an election, the insurer shall provide to the director and the insured the name and tax identification number of the insurer and of the insured and indicate the proper amount of the credit.
D. If taxable property or services purchased by an insurer on behalf of an insured are purchased free of tax by virtue of Section 42-4002, paragraph 10, then the credit provided by this section is not allowed with respect to that purchase.
42-4107. Payment of refunds
A. A registered seller who files a monthly tax return with an overpayment may apply to the department for a refund of the overpayment on a form prescribed by the department. The department shall refund the overpayment to the registered seller within sixty days after receiving the application. In the absence of an application, the registered seller may carry the overpayment forward, without interest.
B. A taxpayer, other than a registered seller, who has an overpayment for any month may apply to the department for a refund of the overpayment on a form prescribed by the department, the department shall refund the overpayment to the taxpayer within sixty days after receiving the application.
C. No interest accrues on any overpayment due from the department under this section for any month if the department pays the overpayment within sixty days after receiving the application for refund. Overpayments due but not paid within sixty days bear interest from the date of application. Interest shall be paid as provided by section 42-1123.
D. A sixty-day period described in this section shall be suspended with respect to all or part of a purported overpayment only during any period when there is in effect a temporary or preliminary injunction or other ruling from a federal or state court that there is reasonable cause to believe that the overpayment may not actually be due, or a permanent injunction or other final ruling from a federal or state court that orders the department not to refund the overpayment.
ARTICLE 4. QUALIFIED FAMILY TAX REBATES
42-4151. Family tax rebate
Each qualified family is eligible to receive a tax rebate each month in an amount equal to the product of the rate of tax imposed by section 42-4051 and the monthly poverty level.
42-4152. Qualified family; determination
A. For the purposes of this article, a qualified family consists of one or more family members sharing a common residence. All family members sharing a common residence are considered as part of the same single qualified family.
B. To determine the size of a qualified family for the purposes of this article, family members consist of:
1. An individual.
2. The individual's spouse.
3. All lineal ancestors and descendants of the individual and the individual's spouse.
4. All legally adopted children of the individual and the individual's spouse.
5. All children under legal guardianship of the individual and the individual's spouse.
C. To be counted as a family member for the purposes of determining the size of a qualified family, a person must:
1. Have a bona fide Social Security number.
2. Be a lawful resident of the United States.
D. A family member listed under subsection B of this section who is a registered student during at least five months in a calendar year while living away from the common residence of the qualified family but who receives over fifty per cent of financial support during the calendar year from members of the qualified family may be included as part of that qualified family for the purposes of this article.
E. If a child's parents are divorced or legally separated, the child for purposes of this article shall be included as part of the family of the custodial parent. In the case of joint custody, the custodial parent for purposes of this article is the parent that has custody of the child for more than one-half of the calendar year. A parent who is entitled to be treated as the custodial parent pursuant to this subsection may release this claim in writing to the other parent.
F. A person shall not be considered part of more than one qualified family.
G. An individual is not eligible under this article to be included as a member of a qualified family if both of the following conditions apply:
1. The individual is incarcerated in a local, state or federal jail, prison, mental hospital or other institution on the family determination date assigned pursuant to section 42-4153.
2. The individual is scheduled to be incarcerated for at least six months in the twelve-month period following the effective date of the applicable annual registration of the qualified family.
H. In the absence of the filing of a revised registration as provided by section 42-4153, subsection G, the common residence of the qualified family, marital status and number of persons in a qualified family on the family determination date govern determinations required to be made for the purposes of this article for the following twelve calendar months.
42-4153. Registration of qualified family
A. In order to receive tax rebates pursuant to this article, a qualified family must register annually with the department in a form prescribed by the director. Registration is not mandatory for any qualified family, except for the purpose of receiving a tax rebate under this article. The registration form must be signed by all members of the qualified family that have attained eighteen years of age as of the date of filing. The registration form shall include:
1. The name of each family member who shared the qualified family's common residence on the family determination date.
2. The Social Security number of each family member who shared the qualified family's common residence on the family determination date.
3. The family member or family members to whom the tax rebate should be paid.
4. A certification that all listed family members are lawful residents of the United States.
5. A certification that all family members sharing the common residence are listed on the registration form.
6. A certification that no family members were incarcerated on the family determination date.
7. The residence address of the qualified family.
B. Annual registrations take effect for the month beginning ninety days after the family determination date.
C. A qualified family that fails to register pursuant to this section within thirty days after the family determination date shall cease receiving the monthly tax rebate in the month beginning ninety days after the family determination date. If a qualified family failed to make a timely registration, but subsequently registers, the family is entitled to up to six months of lapsed rebate payments without interest.
D. A revised registration pursuant to subsection G of this section is effective for the first month beginning sixty days after the revised registration is filed. The existing registration remains in effect until the effective date of the revised registration.
E. An annual or revised registration is considered to be filed when:
1. Deposited in the United States mail, postage paid, to the address of the department.
2. Delivered and accepted at the offices of the department.
3. Provided to a designated commercial private courier service for delivery within two days to the department at the address of the department.
F. At least thirty days before the family determination date, the department shall mail to the address shown on the most recent annual or revised registration form, or change of address notice filed pursuant to subsection H of this section, a proposed annual registration form that may be simply signed by the appropriate family members if family circumstances have not changed.
G. A qualified family may file a revised registration form to reflect a change in family circumstances. Revised registrations are not mandatory, except for the purpose of receiving a tax rebate under this article. The revised registration form must be signed by all members of the qualified family that have attained eighteen years of age as of the date of filing. A revised registration form shall provide:
1. The name of each family member who shared the qualified family's common residence on the filing date of the revised registration.
2. The Social Security number of each family member who shared the qualified family's common residence on the filing date of the revised registration.
3. The family member or family members to whom the tax rebate should be paid.
4. A certification that all listed family members are lawful residents of the United States.
5. A certification that all family members sharing the common residence are listed.
6. A certification that no family members were incarcerated on the filing date of the revised registration.
7. The address of the qualified family.
H. A change of address for a qualified family may be filed with the department at any time and shall not constitute a revised registration.
I. The director shall assign a family determination date for the purposes of determining qualified family size and other information necessary for the administration of this article. The director shall adopt rules for assigning family determination dates. In the absence of any rules, the family determination date for all families is July 1. The director may assign family determination dates for administrative convenience. Permissible means of assigning family determination dates include a method based on the birthdates of family members.
42-4154. Determination of monthly poverty level
For the purposes of computing the tax rebate under section 42-4151:
1. The monthly poverty level for any month is one-twelfth of the annual poverty level.
2. The annual poverty level is the sum of:
(a) The annual poverty guideline for a particular family size as determined by the United States Department of Health and Human Services under sections 652 and 673(2) of the Omnibus Budget Reconciliation Act of 1981 (P.L. 97-35, 95 Stat. 357-933).
(b) In the case of families that include a married couple, the annual marriage penalty elimination amount.
3. The annual marriage penalty elimination amount is the difference between:
(a) An amount that is two times the annual poverty guideline for a family of one as determined by the United States Department of Health and Human Services under sections 652 and 673(2) of the Omnibus Budget Reconciliation Act of 1981.
(b) The annual poverty guideline for a family of two as determined by the United States Department of Health and Human Services under sections 652 and 673(2) of the Omnibus Budget Reconciliation Act of 1981.
42-4155. Payment of monthly tax rebates
A. The department shall pay a monthly tax rebate to registered qualified families in an amount determined pursuant to Section 42-4151.
B. The payment shall be made to the person designated by the qualifying family in the annual or revised registration form for each qualified family in effect with respect to the month for which payment is being made. Payments may only be made to persons eighteen years of age or older. If more than one person is designated on a registration form to receive the rebate, the payment shall be divided evenly between or among the designated persons.
C. Rebate payments shall be made on or before the first business day of the month for which the rebate is being provided. Rebate payments may be in the form of physical checks, smartcards that carry cash balances in their memory for use in making purchases or by direct electronic deposit. Payment is complete when a check or other form of payment is deposited in the mail or when an electronic payment is complete.
ARTICLE 5. ADMINISTRATION AND ENFORCEMENT
42-4201. Registration of sellers
A. A person who is liable for collecting and remitting taxes pursuant to Section 42-4053 and who is engaged in a trade or business shall register as a seller with the department.
B. Affiliated firms ARE considered to be one person for purposes of this section. On giving notice to the director in a form prescribed by the director, affiliated firms may elect to treat individual firms as separate persons for purposes of this section.
C. Each person registered pursuant to subsection A of this section or Section 42-4252, subsection B:
1. Shall designate, in a manner prescribed by the director, a responsible individual whom the department may contact regarding tax matters.
2. Must provide, in a manner prescribed by the director, notice of a change in the identity of the responsible individual within thirty days after the change.
D. Any person that is required to register under subsection A of this section or Section 42-4252, subsection B who fails to register is prohibited from selling taxable property or services or engaging in gaming services, respectively. The attorney general may bring an action on behalf of the department seeking a temporary restraining order, an injunction or such other order as may be appropriate to enforce this subsection.
42-4202. Remitting tax and filing tax returns
A. The tax imposed by this chapter for any calendar month is due and shall be paid to the department on or before the twentieth day of the succeeding month.
B. On or before the twentieth day of each month, each person who is liable to remit the tax imposed by this chapter pursuant to Section 42-4053 shall submit to the department a return relating to the previous calendar month in a form prescribed by the director.
C. A return filed pursuant to this section is considered to be filed when it is:
1. Deposited in the United States mail, postage prepaid, addressed to the department.
2. Delivered and accepted at the offices of the department.
3. Provided to a designated commercial private courier service for delivery within two days to the department at the address of the department.
4. Delivered by other means permitted by the director.
D. On application, the director shall automatically grant an extension of not more than thirty days to file returns under this section. On application and for reasonable cause, The director shall liberally grant extensions of thirty to sixty days to file returns under this section. On application and to avoid hardship, the director may grant Extensions greater than sixty days to file returns under this section. Notwithstanding any provision of this subsection, no extension may be granted with respect to the time for paying or remitting the taxes due.
E. Regarding taxable property and services, the return shall include:
1. The amount of net payments for the calendar month.
2. The amount of tax collected in connection with the payments.
3. The amount and type of any credit claimed.
4. Other information reasonably required by the director or the department for the administration, collection and remittance of the taxes imposed by this chapter.
F. Regarding taxable gaming services, the return shall include:
1. The gross receipts, total gaming payoffs and gaming specific taxes referred to in Section 42-4252.
2. Other information reasonably required by the director or the department for the administration, collection and remittance of the taxes imposed by this chapter.
42-4203. Cash or accrual accounting
A. Registered sellers, gaming sponsors and other persons shall file returns under this chapter using the cash method of accounting, unless an election to use the accrual method of accounting is made pursuant to subsection B of this section.
B. Registered sellers, gaming sponsors and other persons may elect, in a manner prescribed by the director, with respect to a calendar year to remit taxes and file returns under this chapter with respect to the month where a sale was invoiced and accrued. Once elected, use of the accrual method is permanent, unless the director provides otherwise by rule.
42-4204. Burden of producing documents and records; burden of persuasion
A. IN ALL DISPUTES CONCERNING TAXES IMPOSED BY THIS CHAPTER, THE PERSON ENGAGED IN A DISPUTE WITH THE DEPARTMENT OR WITH THE DIRECTOR HAS THE BURDEN OF PRODUCTION OF DOCUMENTS AND RECORDS, BUT THE DEPARTMENT OR THE DIRECTOR HAS THE BURDEN OF PERSUASION.
B. In all disputes concerning an exemption claimed by a purchaser, if the seller has on file an intermediate sale or export sale certificate from the purchaser and did not have reasonable cause to believe that the certificate was improperly provided by the purchaser with respect to the purchase, then the burden of production of documents and records relating to that exemption rests with the purchaser and not with the seller.
42-4205. Payment of professional fees in disputes concerning tax
In all disputes concerning taxes imposed by this chapter, the person engaged in a dispute with the department or with the director is entitled to reasonable attorney fees, accountant fees and other reasonable professional fees incurred in direct relation to the dispute, unless the department or the director establishes that its position was substantially justified.
42-4206. Records retention
A. A person who is liable to collect or remit taxes pursuant to this chapter shall keep records sufficient to determine the amounts reported, collected and remitted for a period of six years after the latter of the filing of the report for which the records formed the basis or when the report was due to be filed. These records shall include:
1. A record of all receipts provided pursuant to Section 42-4054.
2. Complete records of intermediate and export sales, including purchasers' intermediate and export sales certificates and tax numbers.
3. Documentation of net payments.
B. Any purchaser who purchased taxable property or services, but did not pay tax by reason of asserting an intermediate and export sales exemption, shall keep records sufficient to determine whether the exemption was valid for a period of seven years after the purchase of the taxable property or services.
ARTICLE 6. SPECIAL RULES
42-4251. Hobby sales; taxable
A. The provisions of section 42-4052, 42-4102 or 42-4103 do not apply with respect to any taxable property or service purchased for use in an activity if that activity is not engaged in for profit.
B. If an activity has received gross payments for the sale of taxable property or services that exceed the sum of taxable property and services purchased, wages and salary paid and taxes of any type paid, in two or more of the most recent three calendar years during which it operated, the business activity is conclusively presumed to be engaged in for profit.
C. This section does not apply to qualified not-for-profit organizations.
42-4252. Gaming activities; taxable; definition
A. A tax is imposed on the taxable gaming services of a gaming sponsor. The gaming sponsor is liable for paying and remitting the tax to the department on or before the fifteenth day of each month with respect to the taxable gaming SERVICES during the preceding calendar month. The tax imposed by this section is in lieu of the tax levied by section 42-4051.
B. Any person selling one or more chances is a gaming sponsor and must register with the department, in a form prescribed by the director, as a gaming sponsor.
C. For the purposes of this section, a gaming sponsor's taxable gaming SERVICES is calculated as the difference between:
1. The gross receipts of the gaming sponsor from the sale of chances.
2. the sum of:
(a) Total gaming payoffs by the gaming sponsor on chances.
(b) Gaming specific taxes, other than the tax imposed by this section, imposed by federal, state and local governments and paid by the gaming sponsor.
D. For the purposes of this section, "chance" means a lottery ticket, a raffle TICKET, chips or other tokens, a bet or bets placed, a wager or wagers placed or any similar device where the purchase of the right gives rise to an obligation by the gamins sponsor to pay on the occurrence of a random or unpredictable event or an event over which neither the gaming sponsor or the person purchasing the right has control over the outcome.
42-4253. Purchases by governments
A. Purchases by state governments and their political subdivisions of taxable property and services are subject to the tax imposed by this chapter.
B. Purchases by the federal government of taxable property and services are not subject to the tax imposed by this chapter, until such time as federal law is amended to allow taxation of purchases by the federal government and its agencies.
42-4254. Sales by government enterprises; definition
A. A government enterprise is considered to be a trade or business for the purposes of this chapter.
B. Nothing in this chapter shall be construed to exempt any state or local government or political subdivision owning or operating a government enterprise from collecting and remitting taxes imposed by this chapter on any sale of taxable property or services. Government enterprises shall comply with all duties imposed by this chapter, and are liable for penalties and subject to enforcement actions, in the same manner as private persons that are not government enterprises.
C. Except as provided in subsection D of this section, government enterprises are not subject to tax on its purchases that would not be subject to tax pursuant to Section 42-4052 if the government enterprise were a private enterprise.
D. Government enterprises may not use the exemption afforded by Section 42-4052 to serve as a conduit for tax-free purchases by governmental units that would otherwise be subject to taxation on purchases pursuant to Section 42-4253. Transfers of taxable property or services, that were purchased pursuant to an exemption from tax under this chapter, from a government enterprise to a non-exempt governmental unit are taxable.
E. Government enterprises must maintain books and records that are adequate to fully document sales of taxable property and services and to demonstrate that the government enterprise has fully complied with the requirements of this chapter. The director may prescribe by rule the nature and extent of the required books and records.
F. A transfer of monies to a government enterprise by a governmental unit, which is not a government enterprise, without full consideration constitute a taxable government purchase within the meaning of Section 42‑4253 to the extent that the transfer of monies exceeds the fair market value of the consideration.
G. For the purposes of this section, "government enterprise" means any division, department or other agency or component unit of a state or local government or political subdivision or any entity owned or operated by a state or local government or political subdivision that receives gross payments from private persons from the sale of taxable property and services and has revenues from selling taxable property or services that exceed two thousand five hundred dollars.
42-4255. Mixed use property or service; definition
A. A mixed use property or service shall be subject to tax notwithstanding Section 42-4052, unless the property or service is used more than ninety-five per cent for purposes that would give rise to an exemption pursuant to Section 42-4052 during each calendar year, or portion of a year, it is owned.
B. A person who is registered as a seller pursuant to Section 42-4201 is entitled to a monthly business use conversion credit equal to the product of:
1. The mixed use property or service amount for the applicable month. The mixed use property or service amount for each month, or fraction of a month, in which the property was owned is:
(a) One-three-hundred-sixtieth of the net payments for real property for three hundred sixty months or until the property is sold.
(b) One-eighty-fourth of the net payments for tangible personal property, other than vehicles, for eighty-four months or until the property is sold.
(c) One-sixtieth of the net payments for vehicles for sixty months or until the property is sold.
(d) For other types of taxable property or services, a reasonable amount or as provided by rules adopted by the department.
2. The business use ratio for the applicable month. For the purposes of this paragraph, "Business use ratio" means the ratio of business use to total use for a particular calendar month, or portion of a month if the property was owned for only part of a calendar month. For vehicles, the business use ratio means the ratio of business purpose miles to total miles in any calendar month. For real property, business use ratio means the ratio of floor space used primarily for business purposes to total floor space in any calendar month. For tangible personal property other than vehicles, business use ratio means the ratio of total time used for business purposes to total time used in any calendar month. For other property or services, business use ratio shall be calculated using a reasonable method. Reasonable records must be maintained to support a person's business use of the mixed use property or service.
3. The rate of tax imposed by section 42-4051.
C. A person who is entitled to a credit pursuant to subsection B of this section arising out of the ownership or use of mixed use property or service must account for the mixed use on a calendar-year basis and may file for the credit with respect to mixed use property in any month following the calendar year giving rise to the credit.
D. For the purposes of this section, "Mixed use property or service" means a taxable property or service used for both taxable use or consumption and for a purpose that would not be subject to tax pursuant to Section 42‑4052.
42-4256. Nonprofit organizations; dues, contributions, payments and sales; definition
A. Dues, contributions and similar payments to qualified nonprofit organizations are not considered gross payments for taxable property or services for the purposes of this chapter.
B. If a qualified nonprofit organization provides taxable property or services in connection with contributions, dues or similar payments to the organization, it shall treat the provision of the taxable property or services as a sale that is subject to tax pursuant to this chapter at the fair market value of the taxable property or services.
C. Taxable property and services purchased by a qualified nonprofit organization are eligible for the exemptions provided in Section 42-4052.
D. On application in a form prescribed by the director, the department shall provide qualification certificates to qualified nonprofit organizations.
E. For the purposes of this section, "qualified nonprofit organization" means an organization in which no part of the net earnings of which inures to the benefit of any private shareholder or individual and organized and operated exclusively as one of the following:
1. For religious, charitable, scientific, testing for public safety, literary or educational purposes.
2. As a civic league or social welfare organization.
3. As a labor, agricultural or horticultural organization.
4. As a chamber of commerce, business league or trade association.
5. As a fraternal beneficiary society, order or association.
42-4257. Tax treatment of miscellaneous components of transactions; trademarks or copyrights; imported goods; casual or isolated sales; financial services; prizes, gifts and rewards; employee discounts
A. Notwithstanding the definition of taxable property or service contained in Section 42-4002, a sale of a copyright or trademark is considered to be the use or consumption of taxable services if the substance of the sale of the copyright or trademark constituted the sale of the services that produced the copyrighted material or the trademark.
B. Up to four hundred dollars of net payments per calendar year is exempt from the tax imposed by this chapter if the payments were made by a person not in connection with a trade or business at any time during that calendar year before making the net payments and made to purchase any taxable property or service that was imported into the United States by the person for use or consumption by the person in the United States.
C. Up to one thousand two hundred dollars per calendar year of net payments are exempt from the tax imposed by this chapter if received by a person not in connection with a trade or business during that calendar year before the receipt of the net payments and in connection with a casual or isolated sale.
D. Up to ten thousand dollars per calendar year of net payments received by a person from the sale of financial intermediation services are exempt from the tax imposed by this chapter. The exemption provided by this subsection is in addition to other exemptions afforded by this chapter.
E. The director shall calculate during January of each year the inflation adjusted amounts that will be the de minimis limits established in subsections B, C and D of this section for the current calendar year. The director shall use the CPI-U Consumer Price Index as established by the Bureau of Labor Statistics of the United States Department of Labor for the latest twelve-month period available, or its successor index, as the basis for calculating the inflation adjusted amounts.
F. If a registered person provides taxable property or services to a person either as a gift, prize, reward or as remuneration for employment, and the taxable property or services were not previously subject to tax pursuant to this chapter, the provision of the taxable property or services by the registered person is considered to be the conversion of the property or services to personal use and subject to tax as provided by Section 42-4053, subsection D at the tax exclusive fair market value of the property or services.
G. The substance of a transaction prevails over its form if the transaction has no bona fide economic purpose and is designed to evade taxes imposed by this chapter.
H. If an employee discount amount exceeds twenty per cent of the price that taxable property or services would have been sold to the general public, the sale of the taxable property or services by the employer is considered to be the conversion of the property or services to personal use and tax is imposed on the taxable employee discount amount. The taxable employee discount amount is the employee discount amount minus twenty per cent of the amount for which the taxable property or services would have been sold to the general public. For the purposes of this subsection:
1. "Employee discount" means an employer's offer of taxable property or services for sale to its employees or their family members for less than the offer of the same taxable property or services to the general public.
2. The employee discount amount is the amount by which taxable property or services are sold pursuant to an employee discount below the amount for which the taxable property or services would have been sold to the general public.
ARTICLE 7. FINANCIAL TRANSACTIONS
42-4301. Determination of the seller for the purposes of tax liability for fees for financial intermediation services
For the purposes of Section 42-4053:
1. In the case of explicitly charged fees for financial intermediation services, the seller is the person who receives the gross payments for the charged financial intermediation services.
2. In the case of implicitly charged fees for financial intermediation services with respect to any underlying interest-bearing investment or account, the seller is the person making the interest payments on the interest-bearing investment or account.
3. In the case of implicitly charged fees for financial intermediation services with respect to any interest-bearing debt, the seller is the person receiving the interest payments on the interest-bearing debt.
42-4302. Payment of taxes on financial intermediation services
The tax on financial intermediation services under this article with respect to an underlying investment account or debt shall be imposed and collected with the same frequency that statements are rendered by the financial institution in connection with the investment account or debt, but not less frequently than quarterly.
42-4303. Financing leases; definition
A. Financing leases shall be taxed in the method set forth in this chapter.
B. The department shall adopt rules for disaggregating the principal and interest components of a financing lease. The principal amount shall be determined to the extent possible by examining contemporaneous sales price or prices of property the same or similar as the leased property. If contemporaneous sales prices or property the same or similar as the leased property is not available, the principal and interest components of a financing lease shall be disaggregated using the applicable interest rate plus four per cent.
C. The principal component of the financing lease is subject to tax as if a purchase in the amount of the principal component had been made on the day on which the lease was executed.
D. The financial intermediation services amount with respect to the interest component of the financing lease shall be subject to tax under this chapter.
E. If the principal component and financial intermediation services amount with respect to the interest component of a lease have been taxed pursuant to this chapter, the gross lease or rental payments shall not be subject to additional tax.
F. For the purposes of this section, "financing lease" means any lease under which the lessee has the right to acquire the property for fifty per cent or less of its fair market value at the end of the lease term.
42-4304. Imputed interest rates
A. For the purposes of this chapter, the basic interest rate with respect to a debt instrument, investment, financing lease or account shall be the applicable interest rate as determined in Section 42-1123.
B. For debt instruments, investments or accounts:
1. Of contractually fixed interest, the applicable interest rate of the month of issuance applies.
2. Of variable interest rates that have no referenced interest rate, the applicable interest is the federal short-term interest rate for each month.
3. OF variable interest rates that have a referenced interest rate, the applicable interest is the applicable interest rate for the referenced interest rate for each month.
42-4305. Taxation of foreign financial service providers
A. Financial intermediation services are considered to be used or consumed within this State if the person, or any related party, purchasing the services is a resident of this State.
B. As a condition of lawfully providing financial intermediation SERVICES, any person that provides financial intermediation services to residents of this state must register with the department, including appointing a tax matters person, pursuant to Section 42-4201. The director may require that foreign persons that provide financial intermediation services to state residents obtain a reasonable surety bond and provide the bond to the department.
C. The attorney general, at the director's request, may bring an action seeking a temporary restraining order, an injunction or other order as may be appropriate to enforce this section.
Sec. 3. Taxation of inventory held on effective date
A. Inventory held by a trade or business on the close of business on December 31, 2013 is qualified inventory if it is sold before December 31, 2014 by a registered person and subject to the tax imposed by section 42‑4051, Arizona Revised Statutes, as added by this act.
B. For the purposes of this section, qualified inventory has the cost that it had for federal income tax purposes for the trade or business as of December 31, 2013.
C. The trade or business that held the qualified inventory on the close of business on December 31, 2013 is entitled to a transitional inventory credit equal to the cost of the qualified inventory multiplied by the rate of tax imposed by section 42-4051, Arizona Revised Statutes, as added by this act. The credit shall be taken in the month when the inventory is sold subject to the tax imposed by this act. The credit shall be reported as an intermediate and export sales credit and the person claiming said credit shall attach supporting schedules in the form prescribed by the department of revenue.
D. For the purposes of this section, inventory includes work‑in‑process.
E. Qualified inventory held by a business that sells the qualified inventory subject to the exemption under section 42-4052, Arizona Revised Statutes, as added by this act, is eligible for the transitional inventory credit only if that business, or a business that has successor rights pursuant to subsection F of this section, receives certification in a form satisfactory to the director that the qualified inventory was subsequently sold subject to the tax imposed by this chapter.
F. The business entitled to the transitional inventory credit may sell the right to receive the transitional inventory credit to the purchaser of the qualified inventory that gave rise to the credit entitlement. Any purchaser of the qualified inventory, or property or services into which the qualified inventory has been incorporated, may sell the right to the transitional inventory credit to a subsequent purchaser of the qualified inventory, or property or services into which the qualified inventory has been incorporated.
Sec. 4. Compensatory appropriation to cities, towns and counties for loss of state shared revenues
On January 1, 2014 the following sums are appropriated from the state general fund, and the department of administration shall pay:
1. $________________ to cities and towns, allocated in the manner and amounts prescribed by section 43-206, Arizona Revised Statutes, as repealed by this act.
2. $________________ to counties, cities and towns, allocated in the manner and amounts prescribed by section 42-5029, subsection D, paragraphs 1, 2 and 3, Arizona Revised Statutes, as repealed by this act.
Sec. 5. Conforming legislation
The legislative council staff shall prepare proposed legislation conforming the Arizona Revised Statutes to the provisions of this act for consideration in the fifty-first legislature, first regular session.
Sec. 6. Short title
This act may be cited as the "Arizona fair tax act".
Sec. 7. Effective date
This act is effective from and after December 31, 2013.
