Assigned to FIN                                                                                                   FOR CAUCUS & FLOOR ACTION

ARIZONA STATE SENATE

Forty-seventh Legislature, Second Regular Session

AMENDED

FACT SHEET FOR S.B. 1002

tax exemption; utilities; residential customers

Purpose

            Exempts the gross proceeds of sales or gross income of a utility derived from residential retail customers from transaction privilege tax and exempts liquefied petroleum gas used for residential energy purposes from use tax.

Background

            The transaction privilege tax (TPT) is Arizona’s version of a sales tax.  The TPT consists of many different tax categories, the largest of which is the retail classification that comprises half of total sales tax revenues.  Other large categories include contracting, utilities, and restaurant and bars.  The TPT is the state’s single largest revenue source, representing approximately 49 percent of state General Fund revenues in FY 2004-2005.  The utilities classification includes services such as electric, gas and water.

            According to the Joint Legislative Budget Committee, the utilities classification accounted for eight percent of the total sales tax collected in FY 2004-2005.  The total TPT collected in FY 2004-2005 was $4,646,997,090.

            States such as Kansas, Texas, Colorado, Minnesota, Louisiana and Iowa provide a utility sales tax exemption for residential customers.  Iowa eliminated its sales tax on residential utilities over a period of four years.

            According to Department of Revenue estimates, S.B. 1002 will have a fiscal impact of $144 million to the state General Fund. 

Provisions

1. Exempts the gross proceeds of sales or gross income derived by a utility from residential retail customers from TPT.

2. Exempts liquefied petroleum gas used for residential energy purposes from use tax.

3. Makes technical changes.

4. Defines liquefied petroleum gas

5. Becomes effective on January 1, 2007.

Amendments Adopted by Committee

1. Exempts liquefied petroleum gas used for residential energy purposes from use tax.

2. Adds an effective date of January 1, 2007.

Senate Action

DPA                2/9/06     DPA     9-0-0

Prepared by Senate Research

February 10, 2006

SL/HG/ac