Bill Text: AZ HB2674 | 2016 | Fifty-second Legislature 2nd Regular | Chaptered
Bill Title: TPT exemption; amateur races
Spectrum: Partisan Bill (Republican 5-0)
Status: (Passed) 2016-05-19 - Chapter 373 [HB2674 Detail]
Download: Arizona-2016-HB2674-Chaptered.html
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Senate Engrossed House Bill |
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State of Arizona House of Representatives Fifty-second Legislature Second Regular Session 2016
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CHAPTER 373
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HOUSE BILL 2674 |
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AN ACT
Amending sections 42-5073 and 42‑6004, Arizona Revised Statutes; relating to transaction privilege and excise tax classification.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 42-5073, Arizona Revised Statutes, is amended to read:
42-5073. Amusement classification
A. The amusement classification is comprised of the business of operating or conducting theaters, movies, operas, shows of any type or nature, exhibitions, concerts, carnivals, circuses, amusement parks, menageries, fairs, races, contests, games, billiard or pool parlors, bowling alleys, public dances, dance halls, boxing and wrestling matches, skating rinks, tennis courts, except as provided in subsection B of this section, video games, pinball machines, sports events or any other business charging admission or user fees for exhibition, amusement or entertainment, including the operation or sponsorship of events by a tourism and sports authority under title 5, chapter 8. For the purposes of this section, admission or user fees include, but are not limited to, any revenues derived from any form of contractual agreement for rights to or use of premium or special seating facilities or arrangements. The amusement classification does not include:
1. Activities or projects of bona fide religious or educational institutions.
2. Private or group instructional activities. For the purposes of this paragraph, "private or group instructional activities" includes, but is not limited to, performing arts, martial arts, gymnastics and aerobic instruction.
3. The operation or sponsorship of events by the Arizona exposition and state fair board or county fair commissions.
4. A musical, dramatic or dance group or a botanical garden, museum or zoo that is qualified as a nonprofit charitable organization under section 501(c)(3) of the United States internal revenue code and if no part of its net income inures to the benefit of any private shareholder or individual.
5. Exhibition events in this state sponsored, conducted or operated by a nonprofit organization that is exempt from taxation under section 501(c)(3), 501(c)(4) or 501(c)(6) of the internal revenue code if the organization is associated with major league baseball teams or a national touring professional golfing association and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.
6. Operating or sponsoring rodeos that feature primarily farm and ranch animals in this state and that are sponsored, conducted or operated by a nonprofit organization that is exempt from taxation under section 501(c)(3), 501(c)(4), 501(c)(6), 501(c)(7) or 501(c)(8) of the internal revenue code and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.
7. Sales of admissions to intercollegiate football contests if the contests are both:
(a) Operated by a nonprofit organization that is exempt from taxation under section 501(c)(3) of the internal revenue code and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.
(b) Not held in a multipurpose facility that is owned or operated by the tourism and sports authority pursuant to title 5, chapter 8.
8. Activities and events of, or fees and assessments received by, a homeowners organization from persons who are members of the organization or accompanied guests of members. For the purposes of this paragraph, "homeowners organization" means a mandatory membership organization comprised of owners of residential property within a specified residential real estate subdivision development or similar area and established to own property for the benefit of its members where both of the following apply:
(a) No part of the organization's net earnings inures to the benefit of any private shareholder or individual.
(b) The primary purpose of the organization is to provide for the acquisition, construction, management, maintenance or care of organization property.
9. Activities and events of, or fees received by, a nonprofit organization that is exempt from taxation under section 501(c)(6) of the internal revenue code if the organization produces, organizes or promotes cultural or civic related festivals or events and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.
10. Arranging an amusement activity as a service to a person's customers if that person is not otherwise engaged in the business of operating or conducting an amusement personally or through others. This exception does not apply to businesses that operate or conduct amusements pursuant to customer orders and send the billings and receive the payments associated with that activity, including when the amusement is performed by third party third-party independent contractors. For the purposes of this paragraph, "arranging" includes billing for or collecting amusement charges from a person's customers on behalf of the persons providing the amusement.
B. The tax base for the amusement classification is the gross proceeds of sales or gross income derived from the business, except that the following shall be deducted from the tax base:
1. The gross proceeds of sales or gross income derived from memberships, including initiation fees, which that provide for the right to use a health or fitness establishment or a private recreational establishment, or any portion of an establishment, including tennis and other racquet courts at that establishment, for participatory purposes for twenty‑eight days or more and fees charged for use of the health or fitness establishment or private recreational establishment by bona fide accompanied guests of members, except that this paragraph does not include additional fees, other than initiation fees, charged by a health or fitness establishment or a private recreational establishment for purposes other than memberships which provide for the right to use a health or fitness establishment or private recreational establishment, or any portion of an establishment, for participatory purposes for twenty‑eight days or more and accompanied guest use fees.
2. Amounts that are exempt under section 5‑111, subsection H.
3. The gross proceeds of sales or gross income derived from membership fees, including initiation fees, that provide for the right to use a transient lodging recreational establishment, including golf courses and tennis and other racquet courts at that establishment, for participatory purposes for twenty‑eight days or more, except that this paragraph does not include additional fees, other than initiation fees, that are charged by a transient lodging recreational establishment for purposes other than memberships and that provide for the right to use a transient lodging recreational establishment or any portion of the establishment for participatory purposes for twenty‑eight days or more.
4. The gross proceeds of sales or gross income derived from sales to persons engaged in the business of transient lodging classified under section 42‑5070, if all of the following apply:
(a) The persons who are engaged in the transient lodging business sell the amusement to another person for consideration.
(b) The consideration received by the transient lodging business is equal to or greater than the amount to be deducted under this subsection.
(c) The transient lodging business has provided an exemption certificate to the person engaging in business under this section.
5. The gross proceeds of sales or gross income derived from:
(a) Business activity that is properly included in any other business classification under this article and that is taxable to the person engaged in that classification, but the gross proceeds of sales or gross income to be deducted shall not exceed the consideration paid to the person conducting the activity.
(b) Business activity that is arranged by the person who is subject to tax under this section and that is not taxable to the person conducting the activity due to an exclusion, exemption or deduction under this section or section 42‑5062, but the gross proceeds of sales or gross income to be deducted shall not exceed the consideration paid to the person conducting the activity.
(c) Business activity that is arranged by a person who is subject to tax under this section and that is taxable to another person under this section who conducts the activity, but the gross proceeds of sales or gross income to be deducted shall not exceed the consideration paid to the person conducting the activity.
6. The gross proceeds of sales or gross income derived from entry fees paid by participants for events that either:
(a) Until March 1, 2017, consist of a run, walk, swim or bicycle ride or a similar event, or any combination of these events.
(b) Are operated or conducted by nonprofit organizations that are exempt from taxation under section 501(c)(3) of the internal revenue code and of which no part of the organization's net earnings inures to the benefit of any private shareholder or individual, if the event consists of a run, walk, swim or bicycle ride or a similar event, or any combination of these events.
C. For the purposes of subsection B of this section:
1. "Health or fitness establishment" means a facility whose primary purpose is to provide facilities, equipment, instruction or education to promote the health and fitness of its members and at least eighty per cent percent of the monthly gross revenue of the facility is received through accounts of memberships and accompanied guest use fees which provide for the right to use the facility, or any portion of the facility, under the terms of the membership agreement for participatory purposes for twenty‑eight days or more.
2. "Private recreational establishment" means a facility whose primary purpose is to provide recreational facilities, such as tennis, golf and swimming, for its members and where at least eighty per cent percent of the monthly gross revenue of the facility is received through accounts of memberships and accompanied guest use fees which provide for the right to use the facility, or any portion of the facility, for participatory purposes for twenty‑eight days or more.
3. "Transient lodging recreational establishment" means a facility whose primary purpose is to provide facilities for transient lodging, that is subject to taxation under this chapter and that also provides recreational facilities, such as tennis, golf and swimming, for members for a period of twenty‑eight days or more.
D. Until December 31, 1988, the revenues from hayrides and other animal‑drawn amusement rides, from horseback riding and riding instruction and from recreational tours using motor vehicles designed to operate on and off public highways are exempt from the tax imposed by this section. Beginning January 1, 1989, the gross proceeds or gross income from hayrides and other animal‑drawn amusement rides, from horseback riding and from recreational tours using motor vehicles designed to operate on and off public highways are subject to taxation under this section. Tax liabilities, penalties and interest paid for taxable periods before January 1, 1989 shall not be refunded unless the taxpayer requesting the refund provides proof satisfactory to the department that the taxes will be returned to the customer.
E. If a person is engaged in the business of offering both exhibition, amusement or entertainment and private or group instructional activities, the person's books shall be kept to show separately the gross income from exhibition, amusement or entertainment and the gross income from instructional activities. If the books do not provide this separate accounting, the tax is imposed on the person's total gross income from the business.
F. The department shall separately account for revenues collected under the amusement classification for the purposes of section 42-5029, subsection D, paragraph 4, subdivision (b).
G. For the purposes of section 42‑5032.01, the department shall separately account for revenues collected under the amusement classification from sales of admissions to:
1. Events that are held in a multipurpose facility that is owned or operated by the tourism and sports authority pursuant to title 5, chapter 8, including intercollegiate football contests that are operated by a nonprofit organization that is exempt from taxation under section 501(c)(3) of the internal revenue code.
2. Professional football contests that are held in a stadium located on the campus of an institution under the jurisdiction of the Arizona board of regents.
Sec. 2. Section 42-6004, Arizona Revised Statutes, is amended to read:
42-6004. Exemption from municipal tax; definitions
A. A city, town or special taxing district shall not levy a transaction privilege, sales, use or other similar tax on:
1. Exhibition events in this state sponsored, conducted or operated by a nonprofit organization that is exempt from taxation under section 501(c)(3), 501(c)(4) or 501(c)(6) of the internal revenue code if the organization is associated with a major league baseball team or a national touring professional golfing association and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.
2. Interstate telecommunications services, which include that portion of telecommunications services, such as subscriber line service, allocable by federal law to interstate telecommunications service.
3. Sales of warranty or service contracts.
4. Sales of motor vehicles to nonresidents of this state for use outside this state if the motor vehicle dealer ships or delivers the motor vehicle to a destination outside this state.
5. Interest on finance contracts.
6. Dealer documentation fees on the sales of motor vehicles.
7. Sales of food or other items purchased with United States department of agriculture food stamp coupons issued under the food stamp act of 1977 (P.L. 95‑113; 91 Stat. 958) or food instruments issued under section 17 of the child nutrition act (P.L. 95‑627; 92 Stat. 3603; P.L. 99‑661, section 4302; 42 United States Code section 1786) but may impose such a tax on other sales of food. If a city, town or special taxing district exempts sales of food from its tax or imposes a different transaction privilege rate on the gross proceeds of sales or gross income from sales of food and nonfood items, it shall use the definition of food prescribed by rule adopted by the department pursuant to section 42‑5106.
8. Orthodontic devices dispensed by a dental professional who is licensed under title 32, chapter 11 to a patient as part of the practice of dentistry.
9. Sales of internet access services to the person's subscribers and customers. For the purposes of this paragraph:
(a) "Internet" means the computer and telecommunications facilities that comprise the interconnected worldwide network of networks that employ the transmission control protocol or internet protocol, or any predecessor or successor protocol, to communicate information of all kinds by wire or radio.
(b) "Internet access" means a service that enables users to access content, information, electronic mail or other services over the internet. Internet access does not include telecommunication services provided by a common carrier.
10. The gross proceeds of sales or gross income retained by the Arizona exposition and state fair board from ride ticket sales at the annual Arizona state fair.
11. Through August 31,
2014, sales of Arizona centennial medallions by the historical advisory
commission.
12. 11. Leasing real
property between affiliated companies, businesses, persons or reciprocal
insurers. For the purposes of this paragraph:
(a) "Affiliated companies, businesses, persons or reciprocal insurers" means the lessor holds a controlling interest in the lessee, the lessee holds a controlling interest in the lessor, affiliated persons hold a controlling interest in both the lessor and the lessee, or an unrelated person holds a controlling interest in both the lessor and lessee.
(b) "Affiliated persons" means members of the individual's family or persons who have ownership or control of a business entity.
(c) "Controlling interest" means direct or indirect ownership of at least eighty percent of the voting shares of a corporation or of the interests in a company, business or person other than a corporation.
(d) "Members of the individual's family" means the individual's spouse and brothers and sisters, whether by whole or half blood, including adopted persons, ancestors and lineal descendants.
(e) "Reciprocal insurer" has the same meaning prescribed in section 20‑762.
13. 12. The gross
proceeds of sales or gross income derived from a contract for the installation,
assembly, repair or maintenance of machinery, equipment or other tangible
personal property that is described in section 42‑5061, subsection B and
that has independent functional utility, pursuant to the following provisions:
(a) The deduction provided in this paragraph includes the gross proceeds of sales or gross income derived from all of the following:
(i) Any activity performed on machinery, equipment or other tangible personal property with independent functional utility.
(ii) Any activity performed on any tangible personal property relating to machinery, equipment or other tangible personal property with independent functional utility in furtherance of any of the purposes provided for under subdivision (d) of this paragraph.
(iii) Any activity that is related to the activities described in items (i) and (ii) of this subdivision, including inspecting the installation of or testing the machinery, equipment or other tangible personal property.
(b) The deduction provided in this paragraph does not include gross proceeds of sales or gross income from the portion of any contracting activity that consists of the development of, or modification to, real property in order to facilitate the installation, assembly, repair, maintenance or removal of machinery, equipment or other tangible personal property described in section 42‑5061, subsection B.
(c) The deduction provided in this paragraph shall be determined without regard to the size or useful life of the machinery, equipment or other tangible personal property.
(d) For the purposes of this paragraph, "independent functional utility" means that the machinery, equipment or other tangible personal property can independently perform its function without attachment to real property, other than attachment for any of the following purposes:
(i) Assembling the machinery, equipment or other tangible personal property.
(ii) Connecting items of machinery, equipment or other tangible personal property to each other.
(iii) Connecting the machinery, equipment or other tangible personal property, whether as an individual item or as a system of items, to water, power, gas, communication or other services.
(iv) Stabilizing or protecting the machinery, equipment or other tangible personal property during operation by bolting, burying or performing other dissimilar nonpermanent connections to either real property or real property improvements.
14. 13. The leasing
or renting of certified ignition interlock devices installed pursuant to the
requirements prescribed by section 28‑1461. For the purposes of this
paragraph, "certified ignition interlock device" has the same meaning
prescribed in section 28‑1301.
15. 14. Computer data
center equipment purchased by the owner, operator or qualified colocation
tenant of the computer data center or an authorized agent of the owner,
operator or qualified colocation tenant during the qualification period for use
in a computer data center that is certified by the Arizona commerce authority
under section 41‑1519. To qualify for this deduction, at the time of
purchase, the owner, operator or qualified colocation tenant must present to
the retailer its certificate that is issued pursuant to section 41‑1519
and that establishes its qualification for the deduction. For the
purposes of this paragraph, "computer data center", "computer
data center equipment", "qualification period" and
"qualified colocation tenant" have the same meanings prescribed in
section 41‑1519.
16. 15. The gross
proceeds of sales or gross income derived from a contract with the owner of
real property or improvements to real property for the maintenance, repair,
replacement or alteration of existing property, except as specified in this
paragraph. The gross proceeds of sales or gross income derived from a
de minimis amount of modification activity does not subject the contract
or any part of the contract to tax. For the purposes of this paragraph:
(a) Each contract is independent of another
contract, except that any change order that directly relates to the scope of
work of the original contract shall be treated the same as the original
contract under this chapter paragraph, regardless of the
amount of modification activities included in the change order. If a change
order does not directly relate to the scope of work of the original contract,
the change order shall be treated as a new contract, with the tax treatment of
any subsequent change order to follow the tax treatment of the contract to
which the scope of work of the subsequent change order directly relates.
(b) Any term not defined in this paragraph that is defined in section 42‑5075 has the same meaning prescribed in section 42‑5075.
(c) This paragraph does not apply to a contract that primarily involves surface or subsurface improvements to land and that is subject to title 28, chapter 19, 20 or 22 or title 34, chapter 2 or 6 even if the contract also includes vertical improvements. If a city or town imposes a tax on contracts that are subject to procurement processes under those provisions, the city or town shall include in the request for proposals a notice to bidders when those projects are subject to the tax. This subdivision does not apply to contracts with:
(i) Community facilities districts, fire districts, county television improvement districts, community park maintenance districts, cotton pest control districts, hospital districts, pest abatement districts, health service districts, agricultural improvement districts, county free library districts, county jail districts, county stadium districts, special health care districts, public health services districts, theme park districts, regional attraction districts or revitalization districts.
(ii) Any special taxing district not specified in item (i) of this subdivision if the district does not substantially engage in the modification, maintenance, repair, replacement or alteration of surface or subsurface improvements to land.
17. 16. Monitoring
services relating to an alarm system as defined in section 32‑101.
18. 17. Tangible
personal property, job printing or publications sold to or purchased by, or
tangible personal property leased, rented or licensed for use to or by, a
qualifying health sciences educational institution as defined in section 42‑5001.
19. 18. The transfer
of title or possession of coal back and forth between an owner or operator of a
power plant and a person who is responsible for refining coal if both of the
following apply:
(a) The transfer of title or possession of the coal is for the purpose of refining the coal.
(b) The title or possession of the coal is transferred back to the owner or operator of the power plant after completion of the coal refining process. For the purposes of this subdivision, "coal refining process" means the application of a coal additive system that aids the reduction of power plant emissions during the combustion of coal and the treatment of flue gas.
20. 19. The gross
proceeds of sales or gross income from sales of low or reduced cost articles of
food or drink to eligible elderly or homeless persons or persons with a
disability by a business subject to tax under section 42‑5074 that
contracts with the department of economic security and that is approved by the
food and nutrition service of the United States department of agriculture
pursuant to the supplemental nutrition assistance program established by the
food and nutrition act of 2008 (P.L. 110-246; 122 Stat. 1651; 7 United States
Code sections 2011 through 2036a), if the purchases are made with the benefits
issued pursuant to the supplemental nutrition assistance program.
21. 20. Tangible
personal property incorporated or fabricated into a project described in
paragraph 16 15 of this subsection, that is located within
the exterior boundaries of an Indian reservation for which the owner, as
defined in section 42‑5075, of the project is an Indian tribe or an
affiliated Indian. For the purposes of this paragraph:
(a) "Affiliated Indian" means an individual native American Indian who is duly registered on the tribal rolls of the Indian tribe for whose benefit the Indian reservation was established.
(b) "Indian reservation" means all lands that are within the limits of areas set aside by the United States for the exclusive use and occupancy of an Indian tribe by treaty, law or executive order and that are recognized as Indian reservations by the United States department of the interior.
(c) "Indian tribe" means any organized nation, tribe, band or community that is recognized as an Indian tribe by the United States department of the interior and includes any entity formed under the laws of that Indian tribe.
22. 21. The charges
for the leasing or renting of space to make attachments to utility poles as
follows:
(a) By a person that is engaged in the business of providing or furnishing electrical services or telecommunication services or that is a cable operator.
(b) To a person that is engaged in the business of providing or furnishing electrical services or telecommunication services or that is a cable operator.
22. Until March 1, 2017, the gross proceeds of sales or gross income derived from entry fees paid by participants for events that consist of a run, walk, swim or bicycle ride or a similar event, or any combination of these events.
23. The gross proceeds of sales or gross income derived from entry fees paid by participants for events that are operated or conducted by nonprofit organizations that are exempt from taxation under section 501(c)(3) of the internal revenue code and of which no part of the organization's net earnings inures to the benefit of any private shareholder or individual, if the event consists of a run, walk, swim or bicycle ride or a similar event, or any combination of these events.
B. A city, town or other taxing jurisdiction shall not levy a transaction privilege, sales, use, franchise or other similar tax or fee, however denominated, on natural gas or liquefied petroleum gas used to propel a motor vehicle.
C. A city, town or other taxing jurisdiction shall not levy a transaction privilege, sales, gross receipts, use, franchise or other similar tax or fee, however denominated, on gross proceeds of sales or gross income derived from any of the following:
1. A motor carrier's use on the public highways in this state if the motor carrier is subject to a fee prescribed in title 28, chapter 16, article 4.
2. Leasing, renting or licensing a motor vehicle subject to and on which the fee has been paid under title 28, chapter 16, article 4.
3. The sale of a motor vehicle and any repair and replacement parts and tangible personal property becoming a part of such motor vehicle to a motor carrier who is subject to a fee prescribed in title 28, chapter 16, article 4 and who is engaged in the business of leasing, renting or licensing such property.
4. Incarcerating or detaining in a privately operated prison, jail or detention facility prisoners who are under the jurisdiction of the United States, this state or any other state or a political subdivision of this state or of any other state.
5. Transporting for hire persons, freight or property by light motor vehicles subject to a fee under title 28, chapter 15, article 4.
6. Any amount attributable to development fees that are incurred in relation to the construction, development or improvement of real property and paid by the taxpayer as defined in the model city tax code or by a contractor providing services to the taxpayer. For the purposes of this paragraph:
(a) The attributable amount shall not exceed the value of the development fees actually imposed.
(b) The attributable amount is equal to the total amount of development fees paid by the taxpayer or by a contractor providing services to the taxpayer and the total development fees credited in exchange for the construction of, contribution to or dedication of real property for providing public infrastructure, public safety or other public services necessary to the development. The real property must be the subject of the development fees.
(c) "Development fees" means fees imposed to offset capital costs of providing public infrastructure, public safety or other public services to a development and authorized pursuant to section 9‑463.05, section 11‑1102 or title 48 regardless of the jurisdiction to which the fees are paid.
D. A city, town or other taxing jurisdiction shall not levy a transaction privilege, sales, use, franchise or other similar tax or fee, however denominated, in excess of one-tenth of one percent of the value of the entire product mined, smelted, extracted, refined, produced or prepared for sale, profit or commercial use, on persons engaged in the business of mineral processing, except to the extent that the tax is computed on the gross proceeds or gross income from sales at retail.
E. In computing the tax base, any city, town or other taxing jurisdiction shall not include in the gross proceeds of sales or gross income:
1. A manufacturer's cash rebate on the sales price of a motor vehicle if the buyer assigns the buyer's right in the rebate to the retailer.
2. The waste tire disposal fee imposed pursuant to section 44‑1302.
F. A city or town shall not levy a use tax on the storage, use or consumption of tangible personal property in the city or town by a school district or charter school.
G. For the purposes of this section:
1. "Cable operator" has the same meaning
prescribed by in section 9‑505.
2. "Electrical services" means transmitting or distributing electricity, electric lights, current or power over lines, wires or cables.
3. "Telecommunication services" means transmitting or relaying sound, visual image, data, information, images or material over lines, wires or cables by radio signal, light beam, telephone, telegraph or any other electromagnetic means.
4. "Utility pole" means any wooden, metal or other pole used for utility purposes and the pole's appurtenances that are attached or authorized for attachment by the person controlling the pole.
Sec. 3. Retroactivity
A. Section 42-5073, subsection A, paragraph 11 and section 42‑6004, subsection A, paragraph 22, Arizona Revised Statutes, as added by this act, are effective retroactively with respect to entry fees paid by participants for an event that took place before the effective date of this act if the operator or conductor of the event did not collect from the participants amounts necessary to pay the transaction privilege tax liability.
B. Any such amount assessed to an operator or sponsor as a tax, interest or a penalty before the effective date of this act is remitted and forgiven.
C. Any lien filed pursuant to title 42, chapter 1, article 4, Arizona Revised Statutes, against the operator's or sponsor's property and rights to property to collect such an amount of tax, interest or penalty or any other amount is abated, and the department of revenue shall do all of the following:
1. Release the property and rights to property from the lien.
2. Withdraw any recorded notice of lien.
3. On the written request of the operator or sponsor, issue a certificate of release of lien to the operator or sponsor against whom the lien was claimed. The certificate constitutes conclusive evidence that the property has been released.
APPROVED BY THE GOVERNOR MAY 19, 2016.
FILED IN THE OFFICE OF THE SECRETARY OF STATE MAY 19, 2016.
