ARIZONA STATE SENATE
Forty-seventh Legislature, Second Regular Session
FACT SHEET FOR S.B. 1217
uniform local sales tax base
Purpose
Establishes a uniform local transaction privilege tax base modeled on the state tax base and establishes additional classifications that cities may tax.
Background
In the late 1980s, the Model City Tax Code (MCTC) and Municipal Tax Code Commission were created to provide greater uniformity in city transaction privilege tax (TPT) ordinances. The MCTC replaced the individual TPT ordinances for each city that adopted the code and today all cities and towns operate under the MCTC. Although the MCTC provides greater uniformity in the legal language used by each city in its tax ordinances, differences between the cities’ tax bases exists due to local options available under the code and because of variations to the code adopted by the different cities. The Municipal Tax Code Commission was established to review (and most recently approve) differences adopted by the different cities and towns.
Under current law, the Department of Revenue (DOR) is allowed to collect and administer any TPT or use tax imposed by any city that enters into an intergovernmental agreement with DOR to provide for a uniform method of administration, collection, audit and licensing for TPT. Currently, all but 12 cities have intergovernmental agreements with DOR for this purpose. The other 12 cities (referred to as nonprogram cities) collect, administer and audit their own TPT.
The fiscal impact is unknown.
Provisions
1. Repeals statutory provisions relating to the MCTC.
2. Repeals the Municipal Tax Code Commission.
3. Establishes new statutory guidelines governing the ability of cities to levy and collect TPT as follows:
a) authorizes cities and towns to only tax those businesses allowed specifically in statute (either in the state TPT statutes or the municipal excise tax statutes) and that tax base for those businesses will be computed as provided in statute.
b) prohibits cities and towns from levying taxes on sales, services or the privilege of doing business except for as provided in statute.
c) clarifies that providing the authority for cities to tax is not mandating the cities to tax any business nor does it prohibit the cities from providing additional exemption than what is provided from the state.
d) allows cities to levy use taxes with certain conditions.
e) allows DOR to adopt rules regarding municipality taxation in order to ensure uniformity in application of taxes among the different municipalities.
4. Authorizes cities to tax the same business classifications as the state and establishes an additional nine classifications that cities may tax as follows:
a) Municipal Residential Lease Classification: consists of the business of leasing or renting for consideration dwelling units, lodging facilities or trailer or mobile home spaces intended to serve as the principal or permanent place of residence for the lessee or renter with the exemptions noted in the bill.
b) Municipal Commercial License: consists of the business of licensing for consideration the use or occupancy of real property with the exemptions noted in the bill.
c) Municipal Developer Classification: consists of the business of acting as a developer with exemptions to the tax base noted in the bill.
d) Municipal Land Sale Classification: consists of the portion of the business of a developer involving the sale of land that the developer has caused to be improved with exemptions to the classification noted in the bill.
e) Municipal Food Sale Classification: consists of the business of selling food at retail. The exemptions include sales taxed under the restaurant classification, food provided to restaurant employees during work hours and food and accessory tangible personal property provided to a school district that is prepared and served during school hours at the public school.
f) Municipal Cable Television Classification: consists of the business of providing intrastate telecommunication services by a cable television system.
g) Municipal Local Advertising Classification: consists of the business of local advertising by billboards, direct mail, radio, television or any other means with the exemptions provided in the bill.
h) Municipal Motor Vehicle Rental Classification: consists of the business of leasing, licensing for use or renting passenger vehicles for less than 30 days.
i) Municipal Wastewater Removal Classification: consists of the business of providing wastewater removal services from premises, locations or facilities located in a municipality.
5. Requires all cities and towns to enter into an intergovernmental agreement with DOR to collect, administer and audit their TPT.
6. Requires that the TPT license issued by DOR to list all cities and towns in which the taxpayer transacts business, and specifies that the taxpayer is not required to obtain a separate city or town license to transact business in those cities and towns.
7. Requires the taxpayer to include all state, county, city and town taxes with a return submitted to DOR and requires the State Treasurer to disburse all local taxes to the respective counties, cities and towns.
8. Stipulates that an audit performed by DOR serves as an audit for the state, counties, cities and towns. A city and town may audit a taxpayer that has not been audited by DOR in the preceding two years.
9. Provides technical and conforming changes.
10. Becomes effective on January 1, 2007.
Prepared by Senate Research
February 15, 2006
SL/jas