Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 28-101, Arizona Revised Statutes, is amended to read:
28-101. Definitions
In this title, unless the context otherwise requires:
1. "Alcohol" means any substance containing any form of alcohol, including ethanol, methanol, propynol and isopropynol.
2. "Alcohol concentration" if expressed as a percentage means either:
(a) The number of grams of alcohol per one hundred milliliters of blood.
(b) The number of grams of alcohol per two hundred ten liters of breath.
3. "All‑terrain vehicle" means a motor vehicle that satisfies all of the following:
(a) Is designed primarily for recreational nonhighway all‑terrain travel.
(b) Is fifty or fewer inches in width.
(c) Has an unladen weight of eight hundred pounds or less.
(d) Travels on three or more low pressure tires.
(e) Has a seat to be straddled by the operator and handlebars for steering control.
(f) Is operated on a public highway.
4. "Authorized emergency vehicle" means any of the following:
(a) A fire department vehicle.
(b) A police vehicle.
(c) An ambulance or emergency vehicle of a municipal department or public service corporation that is designated or authorized by the department or a local authority.
(d) Any other ambulance, fire truck or rescue vehicle that is authorized by the department in its sole discretion and that meets liability insurance requirements prescribed by the department.
5. "Aviation fuel" means all flammable liquids composed of a mixture of selected hydrocarbons expressly manufactured and blended for the purpose of effectively and efficiently operating an internal combustion engine for use in an aircraft but does not include fuel for jet or turbine powered aircraft.
6. "Bicycle" means a device, including a racing wheelchair, that is propelled by human power and on which a person may ride and that has either:
(a) Two tandem wheels, either of which is more than sixteen inches in diameter.
(b) Three wheels in contact with the ground, any of which is more than sixteen inches in diameter.
7. "Board" means the transportation board.
8. "Bus" means a motor vehicle designed for carrying sixteen or more passengers, including the driver.
9. "Business district" means the territory contiguous to and including a highway if there are buildings in use for business or industrial purposes within any six hundred feet along the highway, including hotels, banks or office buildings, railroad stations and public buildings that occupy at least three hundred feet of frontage on one side or three hundred feet collectively on both sides of the highway.
10. "Combination of vehicles" means a truck or truck tractor and semitrailer and any trailer that it tows but does not include a forklift designed for the purpose of loading or unloading the truck, trailer or semitrailer.
11. "Controlled substance" means a substance so classified under section 102(6) of the controlled substances act (21 United States Code section 802(6)) and includes all substances listed in schedules I through V of 21 Code of Federal Regulations part 1308.
12. "Conviction" means:
(a) An unvacated adjudication of guilt or a determination that a person violated or failed to comply with the law in a court of original jurisdiction or by an authorized administrative tribunal.
(b) An unvacated forfeiture of bail or collateral deposited to secure the person's appearance in court.
(c) A plea of guilty or no contest accepted by the court.
(d) The payment of a fine or court costs.
13. "County highway" means a public road constructed and maintained by a county.
14. "Dealer" means a person who is engaged in the business of buying, selling or exchanging motor vehicles, trailers or semitrailers and who has an established place of business.
15. "Department" means the department of transportation acting directly or through its duly authorized officers and agents.
16. "Director" means the director of the department of transportation.
17. "Drive" means to operate or be in actual physical control of a motor vehicle.
18. "Driver" means a person who drives or is in actual physical control of a vehicle.
19. "Driver license" means a license that is issued by a state to an individual and that authorizes the individual to drive a motor vehicle.
20. "Electric personal assistive mobility device" means a self‑balancing two nontandem wheeled device with an electric propulsion system that limits the maximum speed of the device to fifteen miles per hour or less and that is designed to transport only one person.
21. "Farm tractor" means a motor vehicle designed and used primarily as a farm implement for drawing implements of husbandry.
22. "Foreign vehicle" means a motor vehicle, trailer or semitrailer that is brought into this state other than in the ordinary course of business by or through a manufacturer or dealer and that has not been registered in this state.
23. "Golf cart" means a motor vehicle that has not less than three wheels in contact with the ground, that has an unladen weight of less than one thousand eight hundred pounds, that is designed to be and is operated at not more than twenty‑five miles per hour and that is designed to carry not more than four persons including the driver.
24. "Hazardous material" means a material, and its mixtures or solutions, that the United States department of transportation determines under 49 Code of Federal Regulations is, or any quantity of a material listed as a select agent or toxin under 42 Code of Federal Regulations part 73 that is, capable of posing an unreasonable risk to health, safety and property if transported in commerce and that is required to be placarded or marked as required by the department's safety rules prescribed pursuant to chapter 14 of this title.
25. "Implement of husbandry" means a vehicle designed primarily for agricultural purposes and used exclusively in the conduct of agricultural operations, including an implement or vehicle whether self‑propelled or otherwise that meets all of the following conditions:
(a) Is used exclusively for carrying products of farming from one part of a farm to another part of the same farm or from one farm to another farm.
(b) Is used solely for agricultural purposes including the preparation or harvesting of cotton, alfalfa, grains and other farm crops.
(c) Is only incidentally operated or moved on a highway whether as a trailer or self‑propelled unit.
26. "Limousine" means a motor vehicle providing prearranged ground transportation service for an individual passenger, or a group of passengers, that is arranged in advance or is operated on a regular route or between specified points and includes ground transportation under a contract or agreement for services that includes a fixed rate or time and is provided in a motor vehicle with a seating capacity not exceeding fifteen passengers including the driver.
27. "Livery vehicle" means a motor vehicle that:
(a) Has a seating capacity not exceeding fifteen passengers including the driver.
(b) Provides passenger services for a fare determined by a flat rate or flat hourly rate between geographic zones or within a geographic area.
(c) Is available for hire on an exclusive or shared ride basis.
(d) May do any of the following:
(i) Operate on a regular route or between specified places.
(ii) Offer prearranged ground transportation service as defined in section 28‑141.
(iii) Offer on demand ground transportation service pursuant to a contract with a public airport, licensed business entity or organization.
28. "Local authority" means any county, municipal or other local board or body exercising jurisdiction over highways under the constitution and laws of this state.
29. "Manufacturer" means a person engaged in the business of manufacturing motor vehicles, trailers or semitrailers.
30. "Moped" means a bicycle that is equipped with a helper motor if the vehicle has a maximum piston displacement of fifty cubic centimeters or less, a brake horsepower of one and one‑half or less and a maximum speed of twenty‑five miles per hour or less on a flat surface with less than a one per cent grade.
31. "Motor driven cycle" means a motorcycle, including every motor scooter, with a motor that produces not more than five horsepower.
32. "Motor vehicle":
(a) Means either:
(i) A self‑propelled vehicle.
(ii) For the purposes of the laws relating to the imposition of a tax on motor vehicle fuel, a vehicle that is operated on the highways of this state and that is propelled by the use of motor vehicle fuel.
(b) Does not include a motorized wheelchair, an electric personal assistive mobility device or a motorized skateboard. For the purposes of this subdivision:
(i) "Motorized skateboard" means a self‑propelled device that has a motor, a deck on which a person may ride and at least two tandem wheels in contact with the ground.
(ii) "Motorized wheelchair" means a self‑propelled wheelchair that is used by a person for mobility.
33. "Motor vehicle fuel" includes all products that are commonly or commercially known or sold as gasoline, including casinghead gasoline, natural gasoline and all flammable liquids, and that are composed of a mixture of selected hydrocarbons expressly manufactured and blended for the purpose of effectively and efficiently operating internal combustion engines. Motor vehicle fuel does not include inflammable liquids that are specifically manufactured for racing motor vehicles and that are distributed for and used by racing motor vehicles at a racetrack, use fuel as defined in section 28‑5601, aviation fuel, fuel for jet or turbine powered aircraft or the mixture created at the interface of two different substances being transported through a pipeline, commonly known as transmix.
34. "Motorcycle" means a motor vehicle that has a seat or saddle for the use of the rider and that is designed to travel on not more than three wheels in contact with the ground but excluding a tractor and a moped.
35. "Neighborhood electric vehicle" means a self‑propelled electrically powered motor vehicle to which all of the following apply:
(a) The vehicle is emission free.
(b) The vehicle has at least four wheels in contact with the ground.
(c) The vehicle complies with the definition and standards for low speed vehicles set forth in federal motor vehicle safety standard 500 and 49 Code of Federal Regulations sections 571.3(b) and 571.500, respectively.
36. "Nonresident" means a person who is not a resident of this state as defined in section 28‑2001.
37. "Off‑road recreational motor vehicle" means a motor vehicle that is designed primarily for recreational nonhighway all‑terrain travel and that is not operated on a public highway. Off‑road recreational motor vehicle does not mean a motor vehicle used for construction, building trade, mining or agricultural purposes.
38. "Operator" means a person who drives a motor vehicle on a highway, who is in actual physical control of a motor vehicle on a highway or who is exercising control over or steering a vehicle being towed by a motor vehicle.
39. "Owner" means:
(a) A person who holds the legal title of a vehicle.
(b) If a vehicle is the subject of an agreement for the conditional sale or lease with the right of purchase on performance of the conditions stated in the agreement and with an immediate right of possession vested in the conditional vendee or lessee, the conditional vendee or lessee.
(c) If a mortgagor of a vehicle is entitled to possession of the vehicle, the mortgagor.
40. "Pedestrian" means any person afoot. A person who uses an electric personal assistive mobility device or a manual or motorized wheelchair is considered a pedestrian unless the manual wheelchair qualifies as a bicycle. For the purposes of this paragraph, "motorized wheelchair" means a self‑propelled wheelchair that is used by a person for mobility.
41. "Power sweeper" means an implement, with or without motive power, that is only incidentally operated or moved on a street or highway and that is designed for the removal of debris, dirt, gravel, litter or sand whether by broom, vacuum or regenerative air system from asphaltic concrete or cement concrete surfaces, including parking lots, highways, streets and warehouses, and a vehicle on which the implement is permanently mounted.
42. "Public transit" means the transportation of passengers on scheduled routes by means of a conveyance on an individual passenger fare‑paying basis excluding transportation by a sight‑seeing bus, school bus or taxi or a vehicle not operated on a scheduled route basis.
43. "Reconstructed vehicle" means a vehicle that has been assembled or constructed largely by means of essential parts, new or used, derived from vehicles or makes of vehicles of various names, models and types or that, if originally otherwise constructed, has been materially altered by the removal of essential parts or by the addition or substitution of essential parts, new or used, derived from other vehicles or makes of vehicles. For the purposes of this paragraph, "essential parts" means integral and body parts, the removal, alteration or substitution of which will tend to conceal the identity or substantially alter the appearance of the vehicle.
44. "Residence district" means the territory contiguous to and including a highway not comprising a business district if the property on the highway for a distance of three hundred feet or more is in the main improved with residences or residences and buildings in use for business.
45. "Right‑of‑way" when used within the context of the regulation of the movement of traffic on a highway means the privilege of the immediate use of the highway. Right‑of‑way when used within the context of the real property on which transportation facilities and appurtenances to the facilities are constructed or maintained means the lands or interest in lands within the right‑of‑way boundaries.
46. "School bus" means a motor vehicle that is designed for carrying more than ten passengers and that is either:
(a) Owned by any public or governmental agency or other institution and operated for the transportation of children to or from home or school on a regularly scheduled basis.
(b) Privately owned and operated for compensation for the transportation of children to or from home or school on a regularly scheduled basis.
47. "Semitrailer" means a vehicle that is with or without motive power, other than a pole trailer, that is designed for carrying persons or property and for being drawn by a motor vehicle and that is constructed so that some part of its weight and that of its load rests on or is carried by another vehicle. For the purposes of this paragraph, "pole trailer" has the same meaning prescribed in section 28‑601.
48. "State" means a state of the United States and the District of Columbia.
49. "State highway" means a state route or portion of a state route that is accepted and designated by the board as a state highway and that is maintained by the state.
50. "State route" means a right‑of‑way whether actually used as a highway or not that is designated by the board as a location for the construction of a state highway.
51. "Street" or "highway" means the entire width between the boundary lines of every way if a part of the way is open to the use of the public for purposes of vehicular travel.
52. "Taxi" means a motor vehicle that has a seating capacity not exceeding fifteen passengers, including the driver, that is registered as a taxi in this state or any other state, that provides passenger services and that:
(a) Does not operate on a regular route or between specified places.
(b) Offers local transportation for a fare determined primarily on the basis of the distance traveled.
53. "Trailer" means a vehicle that is with or without motive power, other than a pole trailer, that is designed for carrying persons or property and for being drawn by a motor vehicle and that is constructed so that no part of its weight rests on the towing vehicle. A semitrailer equipped with an auxiliary front axle commonly known as a dolly is deemed to be a trailer. For the purposes of this paragraph, "pole trailer" has the same meaning prescribed in section 28‑601.
54. "Truck" means a motor vehicle designed or used primarily for the carrying of property other than the effects of the driver or passengers and includes a motor vehicle to which has been added a box, a platform or other equipment for such carrying.
55. "Truck tractor" means a motor vehicle that is designed and used primarily for drawing other vehicles and that is not constructed to carry a load other than a part of the weight of the vehicle and load drawn.
56. "Vehicle" means a device in, on or by which a person or property is or may be transported or drawn on a public highway, excluding devices moved by human power or used exclusively on stationary rails or tracks.
57. "Vehicle transporter" means either:
(a) A truck tractor capable of carrying a load and drawing a semitrailer.
(b) A truck tractor with a stinger‑steered fifth wheel capable of carrying a load and drawing a semitrailer or a truck tractor with a dolly mounted fifth wheel that is securely fastened to the truck tractor at two or more points and that is capable of carrying a load and drawing a semitrailer.
Sec. 2. Section 28-401, Arizona Revised Statutes, is amended to read:
28-401. Intergovernmental agreements
A. The department may contract under title 11, chapter 7, article 3 with a state public agency in this state or any other state if the general welfare of this state will be promoted and protected and if not in conflict with any other law.
B. The director shall enter into agreements on behalf of this state with political subdivisions or Indian tribes for the improvement or maintenance of state routes or for the joint improvement or maintenance of state routes.
C. The department may enter into an intergovernmental agreement pursuant to title 11, chapter 7, article 3 with a county with a population of more than two million persons for the construction, design, acquisition and attendant acquisition costs of a county highway bridge to provide direct access to commercial, residential and recreational facilities. The agreement shall:
1. Contain the commitment of the county to pay other monies for the purpose of financing the bridge.
2. State the responsibilities of each party with regard to planning, designing, constructing, owning and maintaining the bridge.
3. Provide that payment for the costs of the bridge shall be made from contributions from the parties to the agreement and other contributors before the use of state transaction privilege tax distributions.
D. The department may enter into an intergovernmental agreement pursuant to title 11, chapter 7, article 3 with a county with a population of more than two million persons for the design, reconstruction and improvement costs of a county highway approaching and traversing a bridge constructed pursuant to subsection C of this section. The agreement shall:
1. Contain the commitment of the county to pay other monies for the purpose of financing the highway improvements.
2. State the responsibilities of each party with regard to planning, designing, constructing, owning and maintaining the highway.
3. Provide that payment for the costs shall be made from contributions from the parties to the agreement and other contributors before the use of state transaction privilege tax distributions.
4. Provide for reimbursement to the state general fund of the amount of highway improvement revenues paid to the highway improvement interest fund or redemption fund under section 28‑7656, subsection B on the voluntary conveyance of a majority ownership interest in a sports entertainment facility as prescribed by section 42‑5032, subsection B.
5. Contain the representation of the county that it has the legally binding assurance of the owner of a sports entertainment facility, as defined in section 42‑5032, subsection E, that the owner will reimburse the county for any and all expense the county may incur incurs under subsection D, paragraph 4 of this section subsection and section 42‑5032, subsection B.
6. Be submitted to the joint legislative budget committee for its review before the execution of the agreement.
E. The department may enter into agreements with Indian tribes to provide a method or formula to refund taxes paid on exempt motor fuel purchases or use pursuant to this title. For the purposes of this subsection, "motor fuel" has the same meaning prescribed in section 28‑5601.
F. E. The department may enter into an intergovernmental agreement pursuant to title 11, chapter 7, article 3 that obligates the department to indemnify and defend a city, town, county, flood control district, irrigation district or agricultural improvement district or any other political subdivision or governmental agency against claims of liability for injuries, losses or damages incurred in any way as a result of the acts or omissions of the department, including acts, errors, omissions or mistakes of any person for which the department may be liable, and arising out of the construction, operation or maintenance of department projects or facilities or use of department projects or facilities. A city, town, county, flood control district, irrigation district or agricultural improvement district or any other political subdivision or governmental agency may enter into an intergovernmental agreement pursuant to title 11, chapter 7, article 3 that obligates such an entity to indemnify and defend the department against claims of liability for injuries, losses or damages incurred in any way as a result of the acts or omissions of such entity, including acts, errors, omissions or mistakes of any person for which the entity may be liable, and arising out of the construction, operation or maintenance of projects or facilities or use of projects or facilities. Any indemnification pursuant to an intergovernmental agreement must be approved by state risk management in the department of administration.
Sec. 3. Section 28-481, Arizona Revised Statutes, is amended to read:
28-481. Definitions
In this article, unless the context otherwise requires:
1. "Assignment" means an action taken by the department designating prime suppliers of motor gasoline to supply unblended gasoline to an eligible blender to alleviate a shortage.
2. "Blender" means a person who blends gasoline with alcohol for resale and who is required to file fuel manufacturers' quarterly reports for motor vehicle gasoline with the United States environmental protection agency pursuant to 42 United States Code sections 7545 and 7601 and 40 Code of Federal Regulations part 79.
3. "Oxygenate" means any oxygen‑containing ashless, organic compound, including aliphatic alcohols and aliphatic ethers, that may be used as a fuel or as a gasoline blending component.
4. "Oxygenated fuel" means a motor fuel blend, whether leaded or unleaded, that consists primarily of gasoline and a substantial amount of one or more oxygenates and that has been blended consistent with the provisions of a waiver issued by the United States environmental protection agency pursuant to 42 United States Code section 7545(f).
5. "Prime supplier" means the distributor that makes the first sale of motor gasoline and that is responsible for reporting the distribution of motor vehicle fuel pursuant to section 28‑5618 for ultimate consumption in a vehicle emissions control area.
6. "State set‑aside" or "set‑aside" means, with respect to a given prime supplier, the amount of unblended gasoline that is made available from the total supply of that prime supplier for utilization by the department to resolve unblended fuel shortages.
7. "Unblended gasoline" means gasoline, whether leaded or unleaded, that is of a composition that is legally and chemically suitable for blending with oxygenates in order to produce oxygenated fuel containing the per cent weight of oxygen prescribed by law.
8. "Vehicle emissions control area" has the same meaning prescribed in section 49‑541, except that the area does not include a manufacturer's proving ground that is located in the area. For the purposes of this paragraph, "manufacturer's proving ground" means a facility whose sole purpose is to develop complete advanced vehicles for an automotive manufacturer.
Sec. 4. Section 28-1176, Arizona Revised Statutes, is amended to read:
28-1176. Off‑highway vehicle recreation fund; annual reports; definition
A. An off‑highway vehicle recreation fund is established. The fund consists of:
1. Monies appropriated by the legislature.
2. Monies deposited pursuant to sections section 28-1177 and 28‑5927.
3. Federal grants and private gifts.
B. Monies in the off‑highway vehicle recreation fund are appropriated to the Arizona state parks board solely for the purposes provided in this article. Interest earned on monies in the fund shall be credited to the fund. Monies in the off‑highway vehicle recreation fund are exempt from the provisions of section 35‑190 relating to lapsing of appropriations.
C. The Arizona game and fish department shall spend thirty-five per cent of the monies in the off‑highway vehicle recreation fund for informational and educational programs related to safety, the environment and responsible use with respect to off‑highway vehicle recreation and law enforcement activities relating to this article and for off‑highway vehicle law enforcement pursuant to title 17, chapter 4, article 3, including seven full-time employees to enforce this article and title 17, chapter 4, article 3.
D. The state land department shall spend five per cent of the monies in the off-highway vehicle recreational fund to allow occupants of off‑highway vehicles with user indicia to cross state trust land on existing roads, trails and designated routes. The state land department shall use these monies for costs associated with off-highway vehicle use of lands within its jurisdiction, to mitigate damage to the land, for necessary environmental, historical and cultural clearance or compliance activities and to fund enforcement of off‑highway vehicle laws.
E. The Arizona state parks board shall spend sixty per cent of the monies in the off‑highway vehicle recreation fund for the following purposes:
1. No more than twelve per cent to fund staff support to plan and administer the off‑highway vehicle recreation fund.
2. To establish an off-highway vehicle program based on the priorities established in the off‑highway vehicle recreational plan.
3. To designate, construct, maintain, renovate, repair or connect off‑highway vehicle routes and trails and to designate, manage and acquire land for access roads, off‑highway vehicle recreation facilities and off‑highway vehicle use areas. After expenditures pursuant to paragraph 1 of this subsection, the Arizona state parks board shall not spend more than thirty-five per cent of the remaining monies received pursuant to this subsection for construction of new off-highway vehicle trails.
4. For enforcement of off‑highway vehicle laws.
5. For off-highway vehicle related informational and environmental education programs, information, signage, maps and responsible use programs.
6. For the mitigation of damages to land, revegetation and the prevention and restoration of damages to natural and cultural resources, including the closure of existing access roads, off-highway vehicle use areas and off-highway vehicle routes and trails.
7. For necessary environmental, historical and cultural clearance or compliance activities.
F. The allocation of the monies in subsection E, paragraphs 3 through 7 of this section and the percentages allocated to each of the purposes prescribed in subsection E, paragraphs 3 through 7 of this section shall be based on an off‑highway vehicle recreational plan.
G. Monies in the off-highway vehicle recreation fund shall not be used to construct new off-highway vehicle trails or routes on environmentally or culturally sensitive land unless the appropriate land management agency determines that certain new trail construction would benefit or protect cultural or sensitive sites. For the purposes of this subsection, "environmentally or culturally sensitive land" means areas of lands that are either:
1. Administratively or legislatively designated by the federal government as any of the following:
(a) A national monument.
(b) An area of critical environmental concern.
(c) A conservation area.
(d) An inventoried roadless area.
2. Determined by the applicable land management agency to contain significant natural or cultural resources or values.
H. The Arizona state parks board shall examine applications for eligible projects and determine the amount of funding, if any, for each project. In determining the amount of monies for eligible projects, the Arizona state parks board shall give preference to applications for projects with mitigation efforts and for projects that encompass a large number of purposes described in subsection E, paragraphs 3 through 7 of this section.
I. Beginning September 1, 2011, and on or before September 1 of each subsequent year, each agency that receives monies from the off-highway vehicle recreation fund shall submit an off‑highway vehicle report to the president of the senate, the speaker of the house of representatives, the chairperson of the senate natural resources and rural affairs committee, or its successor committee, and the chairperson of the house of representatives natural resources and public safety committee, or its successor committee. The report shall be made available to the public. The report shall include information on all of the following if applicable:
1. The amount of monies spent or encumbered in the fund during the preceding fiscal year for the purposes of off-highway vehicle law enforcement activities.
2. The amount of monies spent from the off-highway vehicle recreation fund during the preceding fiscal year for employee services.
3. The number of full-time employees employed in the preceding fiscal year in connection with off-highway vehicle law enforcement activities.
4. The amount of monies spent from the off-highway vehicle recreation fund during the preceding fiscal year for information and education.
5. The number and specific location of verbal warnings, written warnings and citations given or issued during the preceding fiscal year.
6. A specific and detailed accounting for all monies spent in accordance with this section for construction of new off-highway vehicle trails, mitigation of damages to lands, revegetation, the prevention and restoration of damages to natural and cultural resources, signage, maps and necessary environmental, historical and cultural clearance or compliance activities.
J. For the purposes of this section, "off-highway vehicle recreational plan" means a plan that is maintained by the Arizona state parks board pursuant to section 41‑511.04.
Sec. 5. Section 28-2232, Arizona Revised Statutes, is amended to read:
28-2232. International proportional registration authority; rules
A. Except as otherwise provided in this article, the registration of fleet vehicles on a proportional basis without reference to or application of section 28‑2051, 28‑2052, 28‑2321, 28‑2322, 28‑2323 or 28‑2324 or other statutes of this state relating to vehicle registration is authorized.
B. Sections 28‑2161, and 28‑2162 and 28‑5724 and article 16 of this chapter apply to vehicles proportionally registered pursuant to this article.
C. This article does not require a vehicle to be proportionally registered if the vehicle is otherwise registered in this state for the operation in which the vehicle is engaged under section 28‑2003, 28‑2324, 28‑2325 or 28‑5433 or any other law prescribing vehicle registration fees.
D. The director shall adopt rules necessary to administer and enforce this article.
Sec. 6. Section 28-5474, Arizona Revised Statutes, is amended to read:
28-5474. Axle fees; commercial vehicles; border crossing; definition
A. The director may adopt rules establishing a fee based on the number of axles attached to a foreign vehicle or a foreign vehicle combination that is imposed on nonresidents operating or causing the operation of a foreign vehicle or foreign vehicle combination that enters this state by crossing the border between this state and the republic of Mexico in the furtherance of a commercial enterprise.
B. If the director establishes a fee by rule pursuant to this section, the fee shall apply to a nonresident operating or causing the operation of a foreign vehicle or foreign vehicle combination and who is required to register the foreign vehicle or foreign vehicle combination pursuant to section 28‑2321 or who is responsible for payment of any fees required by sections section 28‑2324, 28‑2325, 28‑5739, 28‑5763 28‑5863 or 28‑5864.
C. The director shall deposit, pursuant to sections 35‑146 and 35‑147, fees collected by rules established pursuant to this section in the safety enforcement and transportation infrastructure fund established by section 28‑6547.
D. For the purposes of this section, "foreign vehicle" or "foreign vehicle combination" means a truck or truck tractor and semitrailer and any trailer that it tows that is registered in a foreign country or jurisdiction of a foreign country and enters this state by crossing the border between this state and the republic of Mexico in the furtherance of a commercial enterprise.
Sec. 7. Heading change
The article heading of title 28, chapter 16, article 1, Arizona Revised Statutes, is changed from "MOTOR FUEL TAXES" to "AVIATION FUEL TAX COLLECTION".
Sec. 8. Section 28-5601, Arizona Revised Statutes, is amended to read:
28-5601. Definitions
In this article and articles 2 and article 5 of this chapter, unless the context otherwise requires:
1. "Blending":
(a) Means the mixing of one or more products, regardless of the original character of the product blended, if the product obtained by the blending is capable of use or otherwise sold for use in the generation of power for the propulsion of a motor vehicle, an aircraft or watercraft.
(b) Does not include blending that occurs in the process of refining by the original refiner of crude petroleum or the blending of products known as lubricating oil and greases.
2. "Bulk end user" means a person who receives into the person's own storage facilities in transport truck lots motor fuel for the person's own consumption.
3. 2. "Bulk plant" means a motor an aviation fuel storage and distribution facility that is not a terminal and from which motor aviation fuel may be removed at a rack.
4. 3. "Bulk transfer" means any transfer of motor aviation fuel from one location to another by pipeline tender or marine delivery within the bulk transfer terminal system.
5. 4. "Bulk transfer terminal system" means the motor aviation fuel distribution system consisting of refineries, pipelines, marine vessels and terminals. Motor Aviation fuel in a refinery, pipeline, vessel or terminal is in the bulk transfer terminal system. Motor Aviation fuel in the fuel supply tank of any engine, or in any tank car, rail car, trailer, truck or other equipment suitable for ground transportation, is not in the bulk transfer terminal system.
6. 5. "Consumer" means the end purchaser of motor vehicle fuel for use on the highways in this state, the end purchaser of motor vehicle fuel for use in watercraft on waterways of this state or the end purchaser of aviation fuel for use in aircraft.
7. 6. "Destination state" means the state, territory or foreign country to which motor aviation fuel is directed for delivery into a storage facility, a receptacle, a container or a type of transportation equipment for the purpose of resale or use.
8. 7. "Distributor" means a person who acquires motor aviation fuel from a supplier or another distributor for subsequent sale or use and who may blend or import into or export from this state motor aviation fuel in the original package or container or otherwise but excluding a person who imports motor aviation fuel in the fuel tank of a motor vehicle or an aircraft.
9. "Dyed diesel fuel" means diesel fuel that is dyed pursuant to United States internal revenue service regulations or requirements, including any invisible marker requirements.
10. 8. "Fuel tank" means a receptacle on a motor vehicle, watercraft or an aircraft from which fuel is supplied for the propulsion of the motor vehicle, watercraft or aircraft, excluding a cargo tank but including a separate compartment of a cargo tank used as a fuel tank and an auxiliary tank or receptacle of any kind from which fuel is supplied for the propulsion of the motor vehicle, watercraft or aircraft, whether or not the tank or receptacle is directly connected to the fuel supply line of the motor vehicle, watercraft or aircraft.
11. "Highway" means any way or place in this state of whatever nature that is maintained by public monies and that is open to the use of the public for purposes of vehicular travel, including a highway under construction.
12. "In this state" means any way or place within the exterior limits of the state of Arizona that is maintained by public monies, including any such way or place that is owned by or ceded to the United States of America.
13. "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 Indian tribes by treaty, law or executive order and that are currently recognized as Indian reservations by the United States department of the interior.
14. 9. "Indian tribe" means any organized nation, tribe, band or community recognized as an Indian tribe by the United States department of the interior.
15. "Interstate user" means a person registering a use class motor vehicle under chapter 7, article 7 or 8 of this title or section 28‑2321 or 28‑2324.
16. 10. "Invoiced gallons" means the gallons actually billed on an invoice in payment to a supplier.
17. "Light class motor vehicle" means a motor vehicle that uses use fuel on the highways in this state but excludes a road tractor, truck tractor, truck or passenger carrying vehicle having a declared gross vehicle weight of more than twenty‑six thousand pounds or having more than two axles.
18. "Motor fuel" means motor vehicle fuel, use fuel and aviation fuel.
19. "Motor vehicle" means a self‑propelled vehicle required to be licensed or subject to licensing for operation on a highway.
20. 11. "Permissive supplier" means an out‑of‑state supplier that elects, but is not required, to have a supplier's license pursuant to this article.
21. 12. "Person" means an individual, firm, partnership, joint venture, association, corporation, estate, trust, business trust, receiver or syndicate, this state, any county, city, town, district or other subdivision of this state, an Indian tribe, or any other group or combination acting as a unit.
22. 13. "Position holder":
(a) Means the person who holds the inventory position in motor aviation fuel in a terminal, as reflected on the records of the terminal operator. For the purposes of this subdivision, "a person who holds the inventory position in motor aviation fuel" means a person who has a contract with the terminal operator for the use of storage facilities and terminaling services for fuel at the terminal.
(b) Includes a terminal operator who owns fuel in the terminal.
23. "Public monies" means those monies that are received by this state and that are derived all or in part from tax revenues or other funding sources.
24. 14. "Qualified terminal" means a terminal that is designated as a qualified terminal pursuant to the United States internal revenue code, regulation and practices and that has been assigned a terminal control number by the United States internal revenue service.
25. 15. "Rack" means a mechanism for delivering motor aviation fuel from a refinery, a terminal or a bulk plant into a railroad tank car, a transport truck or other means of transfer that is outside the bulk transfer terminal system.
26. 16. "Refiner" means any person who owns, operates or otherwise controls a refinery within the United States.
27. 17. "Refinery" means a facility that is used to produce motor aviation fuel from crude oil, unfinished oils, natural gas liquids, transmix or other hydrocarbons or by blending and from which motor aviation fuel may be removed by pipeline, by vessel or at a rack.
28. "Road tractor" means a motor vehicle that is designed and used for drawing other vehicles and that is not constructed to carry either a load independently or any part of the weight of a vehicle or load so drawn.
29. 18. "Sell" includes a transfer of title or possession, exchange or barter in any manner or by any means.
30. 19. "Supplier":
(a) Means a person who is registered pursuant to section 4101 of the United States internal revenue code for transactions in motor aviation fuels in the bulk transfer terminal distribution system and who is one of the following:
(i) The position holder in a terminal or refinery in this state.
(ii) A person who imports motor aviation fuel into this state from a foreign country.
(iii) A person who acquires motor aviation fuel from a terminal or refinery in this state from a position holder pursuant to a two party exchange.
(iv) The position holder in a terminal or refinery outside this state with respect to motor aviation fuel that that person imports into this state on the account of that person.
(b) Includes a permissive supplier unless specifically provided otherwise. Supplier does not include a terminal operator merely because the terminal operator handles motor aviation fuel consigned to the terminal operator within a terminal.
31. 20. "Terminal" means a storage and distribution facility for motor aviation fuel, which is supplied by pipeline or marine vessel, that is registered as a qualified terminal by the United States internal revenue service and from which motor aviation fuel may be removed at a rack.
32. "Terminal bulk transfer" includes the following:
(a) A marine barge movement of motor fuel from a refinery or terminal to a terminal.
(b) Pipeline movements of motor fuel from a refinery or terminal to a terminal.
33. 21. "Terminal operator" means any person who owns, operates or otherwise controls a terminal and who does not use a substantial portion of the motor aviation fuel that is transferred through or stored in the terminal for the person's own use or consumption or in the manufacture of products other than motor aviation fuel. A terminal operator may own the motor aviation fuel that is transferred through or stored in the terminal.
34. 22. "Transmix" means the buffer or interface between two different products in a pipeline shipment or a mix of two different products within a refinery or terminal that results in an off‑grade mixture that is not usable or salable as motor fuel.
35. 23. "Two party exchange" means a transaction:
(a) In which motor aviation fuel is transferred from one licensed supplier or licensed permissive supplier to another licensed supplier or licensed permissive supplier.
(b) That includes a transfer from the person that holds the original inventory position for motor aviation fuel in the terminal as reflected on the records of the terminal operator.
(c) That is simultaneous with removal from the terminal by the receiving exchange party.
(d) In which the terminal operator in the terminal operator's books and records treats the receiving exchange party as the supplier that removes the product across a terminal rack for purposes of reporting the events to the department.
36. "Use" includes the placing of fuel into any receptacle on a motor vehicle from which fuel is supplied for the propulsion of the vehicle unless the operator of the vehicle establishes to the satisfaction of the director that the fuel was consumed for a purpose other than to propel a motor vehicle on a highway in this state and, with respect to fuel brought into this state in any such receptacle on a use class motor vehicle, the consumption of the fuel in this state. A person who places fuel in a receptacle on a use class motor vehicle of another is not deemed to have used the fuel.
37. "Use class motor vehicle" means a motor vehicle that uses use fuel on a highway in this state and that is a road tractor, truck tractor, truck or passenger carrying vehicle having a declared gross vehicle weight of more than twenty‑six thousand pounds or having more than two axles.
38. "Use fuel" includes all gases and liquids used or suitable for use to propel motor vehicles, except fuels that are subject to the motor vehicle fuel tax imposed by this article.
39. "User" includes a person who, within the meaning of the term use as defined in this section, uses fuel in a use class motor vehicle.
40. "Vendor" includes a person who sells use fuel in this state and who places the fuel or causes the fuel to be placed into any receptacle on a motor vehicle from which receptacle fuel is supplied for the propulsion, including a service station dealer, a broker and a user who sells use fuel to others.
Sec. 9. Section 28-5603, Arizona Revised Statutes, is amended to read:
28-5603. Aviation fuel testing
A. The director may take samples of any liquid believed to be motor aviation fuel and may make or cause to be made an analysis of the liquid.
B. The chemistry department or other qualified department of the university of Arizona shall:
1. Analyze samples on request of the director.
2. Promptly furnish to the director a full report of the analysis without cost.
Sec. 10. Section 28-5604, Arizona Revised Statutes, is amended to read:
28-5604. Reward for detecting violations
The department may set up in its budget for the fiscal year an item from which a person, other than a state officer or employee, who directs the attention of the director to a person who has failed to file the required reports and has failed to pay taxes imposed by this article or section 28‑8344 may be paid an amount that in the discretion of the department is deemed proper but that does not exceed ten per cent of the amount of the tax, penalty and interest ultimately collected from the person as a result of the information.
Sec. 11. Repeal
Section 28-5605, Arizona Revised Statutes, is repealed.
Sec. 12. Section 28-5606, Arizona Revised Statutes, is amended to read:
28-5606. Imposition of aviation fuel taxes
A. In addition to all other taxes provided by law, a tax of eighteen cents per gallon is imposed on motor vehicle fuel possessed, used or consumed in this state.
B. To partially compensate this state for the use of its highways:
1. A use fuel tax is imposed on use fuel used in the propulsion of a light class motor vehicle on a highway in this state at the same rate per gallon as the motor vehicle fuel tax prescribed in subsection A of this section, except that there is no use fuel tax on alternative fuels.
2. A use fuel tax is imposed on use fuel used in the propulsion of a use class motor vehicle on a highway in this state at the rate of twenty‑six cents for each gallon, except that there is no use fuel tax on alternative fuels and use class vehicles that are exempt pursuant to section 28‑5432 from the weight fee prescribed in section 28‑5433 are subject to the use fuel tax imposed by paragraph 1 of this subsection.
3. Beginning from and after August 31, 2005 through December 31, 2010, a use fuel tax is imposed on use fuel used in the propulsion of a motor vehicle transporting forest products in compliance with the requirements of section 41-1516 on a highway in this state at the rate of thirteen cents for each gallon, except that there is no use fuel tax on alternative fuels.
C. A. The motor vehicle fuel and use fuel taxes imposed pursuant to this section and the aviation fuel taxes imposed pursuant to section 28‑8344 are conclusively presumed to be direct taxes on the consumer or user but shall be collected and remitted to the department by suppliers for the purpose of convenience and facility only. Motor vehicle fuel, use fuel and Aviation fuel taxes that are collected and paid to the department by a supplier are considered to be advance payments, shall be added to the price of motor vehicle fuel, use fuel or aviation fuel and shall be recovered from the consumer or user.
D. B. Motor vehicle fuel and use fuel taxes imposed pursuant to this section on the use of motor vehicle fuel and use fuel and The aviation fuel taxes imposed pursuant to section 28‑8344 on the use of aviation fuel, other than by bulk transfer, arise at the time the motor vehicle, use or aviation fuel either:
1. Is imported into this state and is measured by invoiced gallons received outside this state at a refinery, terminal or bulk plant for delivery to a destination in this state.
2. Is removed, as measured by invoiced gallons, from the bulk transfer terminal system or from a qualified terminal in this state.
3. Is removed, as measured by invoiced gallons, from the bulk transfer terminal system or from a qualified terminal or refinery outside this state for delivery to a destination in this state as represented on the shipping papers if a supplier imports the motor vehicle, use or aviation fuel for the account of the supplier or the supplier has made a tax precollection election pursuant to section 28‑5636.
E. C. If motor aviation fuel is removed from the bulk transfer terminal system or from a qualified terminal or is imported into this state, the original removal, transfer or importation of the motor aviation fuel is subject to the collection of the tax. If this motor aviation fuel is transported to another qualified terminal or reenters the bulk transfer terminal system, the subsequent sale of the motor aviation fuel on which tax has been collected is not subject to collection of an additional tax if proper documentation is retained to support the transaction.
Sec. 13. Section 28-5607, Arizona Revised Statutes, is amended to read:
28-5607. Aviation fuel imported by other than licensed supplier; payment of tax; fee; import limitation
A. A person who is not licensed as a supplier and who imports motor aviation fuel from a point outside this state to a point in this state shall pay both:
1. The tax at a department facility approved by the director before importing the fuel.
2. A twenty‑five dollar administrative processing fee.
B. A person who is not licensed as a supplier and who causes motor aviation fuel on which taxes have not been collected to be transported from a point outside this state to a point in this state shall pay to the director the following:
1. The tax required by section 28‑5606 or 28‑8344.
2. A penalty equal to the tax required by section 28‑5606 or 28‑8344.
3. Interest of one per cent per month or portion of a month on the tax.
C. A person who is not licensed as a supplier may not import more than sixteen thousand gallons of motor aviation fuel per calendar year.
Sec. 14. Section 28-5608, Arizona Revised Statutes, is amended to read:
28-5608. Aviation fuel imported in fuel tanks; violation; classification
A. An owner or operator of a motor vehicle, watercraft or AN aircraft who imports motor AVIATION fuel into this state in the fuel tank or tanks of a motor vehicle, watercraft or THE aircraft in a quantity exceeding the capacity of the fuel tank or tanks of that vehicle, watercraft or aircraft according to the manufacturer's stock specifications shall pay to the director the tax required of suppliers on the excess motor AVIATION fuel.
B. A person who violates this section is guilty of a class 2 misdemeanor.
Sec. 15. Section 28-5609, Arizona Revised Statutes, is amended to read:
28-5609. Railroad common carrier exemption; exception; report
A. Except for section 28‑5607, subsection B, sections 28‑5602, 28‑5603, 28‑5608, 28‑5610, 28‑5611, 28‑5612, 28‑5622, 28‑5624 and 28‑5923 and this section, this article does not apply to railroad common carriers that are not engaged in the business of a supplier for pecuniary gain.
B. A railroad common carrier:
1. If it imports motor AVIATION fuel, shall make a verified report to the director on forms prescribed and furnished by the director, on or before the twenty‑seventh day of the next succeeding month, showing the amount of fuel it has imported.
2. If it sells, otherwise disposes of or uses any fuel it has imported in a motor vehicle operated on the highways in this state or in a watercraft or an aircraft, shall make a verified report to the director on forms prescribed and furnished by the director, on or before the twenty‑seventh day of the next succeeding month, showing either:
(a) The name of the person or persons to whom the fuel was sold or otherwise disposed of.
(b) If used by it in a motor vehicle operated on the highways in this state or in a watercraft or an aircraft, a description of the vehicle, watercraft or aircraft in which the fuel was used.
3. Shall pay to the director at the time the report is made the tax required of suppliers by this article.
4. Shall furnish to the director other information concerning motor AVIATION fuel imported by it as the director requires.
5. May be required to file a bond with the director in an amount fixed by the director to ensure compliance with this section.
Sec. 16. Section 28-5610, Arizona Revised Statutes, is amended to read:
28-5610. Exemptions
A. The following are exempt from motor vehicle fuel and use fuel taxes imposed by section 28‑5606 and aviation fuel taxes imposed by section 28‑8344:
1. Motor aVIATION fuel for which proof of export is available in the form of a terminal‑issued destination state shipping paper or bill of lading and that is either:
(a) Exported by a supplier who is licensed in the destination state.
(b) Sold by a supplier to a distributor for immediate export.
2. Motor aVIATION fuel that was acquired by a distributor, as to which the tax imposed by this article or section 28‑8344 has previously been paid or accrued and that was subsequently exported by transport truck by or on behalf of the distributor in a diversion across state boundaries properly reported to the department. If diverted by a distributor, the distributor shall perfect the exemption by filing a refund application with the department within six months after the diversion.
3. Motor vehicle fuel or use fuel that is sold within an Indian reservation to an enrolled member of the Indian tribe who is living on the Indian reservation established for the benefit of that Indian tribe and that is used by the enrolled member for the enrolled member's own benefit. This exemption does not apply to sales within an Indian reservation by an Indian or Indian tribe to non‑Indian consumers or to Indian consumers who are not members of the Indian tribe for which the Indian reservation was established or to use fuel used to operate motor vehicles for a commercial purpose outside of the reservation on highways in this state. For the purposes of this paragraph, "Indian" means an individual who is registered on the tribal rolls of the Indian tribe for whose benefit the Indian reservation was created.
4. Motor vehicle fuel or use fuel used solely and exclusively as fuel to operate a motor vehicle on highways in this state if the motor vehicle is leased to or owned by and is being operated for the sole benefit of an Indian tribe for governmental purposes only.
5. 3. Motor aVIATION fuel that is moving in interstate or foreign commerce and that is not destined or diverted to a point in this state.
6. 4. Motor vehicle or Aviation fuel that is sold to the United States or an instrumentality or agency of the United States.
7. Taxable use fuel that has been accidentally contaminated so as to be unsalable as highway fuel as proved by proper documentation.
8. Dyed diesel fuel, including fuel used by either of the following:
(a) A farm tractor or implement of husbandry designed primarily for or used in agricultural operations and only incidentally operated or moved on a highway.
(b) A road roller or vehicle that is all of the following:
(i) Designed and used primarily for grading, paving, earthmoving or other construction work on a highway.
(ii) Not designed or used primarily for transportation of persons or property.
(iii) Incidentally operated or moved over the highway.
B. A use class vehicle shall pay the use fuel tax for light class motor vehicles prescribed by section 28-5606, subsection B, paragraph 1 if the vehicle is a truck and satisfies all of the following:
1. Is at least twenty-five years old.
2. Has been issued a historic vehicle license plate pursuant to section 28-2484.
3. Is not used as a commercial vehicle.
C. Notwithstanding subsection A, paragraph 8 of this section, the following are not exempt from use fuel taxes imposed by section 28‑5606:
1. A vehicle that was originally designed for the transportation of persons or property and to which machinery is attached or on which machinery or other property may be transported.
2. A dump truck.
3. A truck mounted transit mixer.
4. A truck or trailer mounted crane.
5. A truck or trailer mounted shovel.
D. B. Except as provided in subsection E of this section, A person who claims an exemption pursuant to this section shall perfect the exemption by claiming a refund pursuant to section 28‑5612.
E. Subject to sections 28‑5645 through 28‑5649, dyed diesel fuel is exempt from use fuel taxes at the time of sale.
Sec. 17. Repeal
Section 28-5611, Arizona Revised Statutes, is repealed.
Sec. 18. Section 28-5612, Arizona Revised Statutes, is amended to read:
28-5612. Refund procedure; violation
A. A person who is seeking a refund and who is not licensed as a supplier, interstate user, restricted distributor or use fuel vendor shall:
1. File an application with the director within six months after the date of sale.
2. Submit proof satisfactory to the director of the following:
(a) The purpose for which the fuel was used.
(b) The tax paid purchase.
3. Make an application in a form prescribed by the department that requests the following information:
(a) Name and address of the claimant.
(b) Period covered by the claim showing dates.
(c) Location of equipment, if applicable.
(d) Gallons on which a refund is claimed.
(e) Amount of the refund claimed.
(f) Other information required by the director.
B. The claim shall not be under oath but shall contain or be accompanied by a written declaration that it is made under penalties of perjury and, if it is for motor vehicle fuel, that it complies in all respects with section 28‑5611 relating to refunds.
C. The original invoice or a duplicate that is satisfactory to the director and that includes the following information shall accompany the application:
1. The date of purchase.
2. The seller's name and address.
3. The number of gallons purchased.
4. The type of fuel purchased.
5. The price per gallon of the fuel.
6. Other information required by the director.
D. If a person files a claim for a refund pursuant to this section for motor aviation fuel exported, the person shall make satisfactory proof of export to the director and file the claim within three months after the date of export in the form and containing the information required by the director. The original invoice or an acceptable duplicate shall accompany the claim.
E. The director shall accept only one application for refund of motor aviation fuel taxes for any one person within a six month period if the aggregate total of all motor aviation fuel taxes paid and for which a refund is claimed does not equal at least ten dollars.
F. If a person who is exempt from use fuel taxes pursuant to section 28‑5610 submits a claim for a refund pursuant to this section for use fuel taxes, the department shall not pay the refund until the department determines the difference between the amount of the refund and the amount of the use tax that is imposed under title 42, chapter 5, article 4 on the fuel exempt from use fuel taxes if owed by the person. If the department determines that the amount of the refund is greater than the amount owed for the use tax, the department shall deposit the amount owed for the use tax pursuant to subsection M of this section and refund the amount of the difference to the person. If the department determines that the amount of the refund is less than the amount owed for the use tax, the department shall forward any balance due information to the department of revenue for collection.
G. Except as provided in subsection F of this section, if the director does not issue a refund within sixty days after a complete application for refund is filed as prescribed in this article, the director shall pay interest at the rate of eleven per cent per year from the date the complete application for refund is filed until the date on which the refund is made.
H. F. If the director denies a refund, the director shall notify the claimant that the refund is denied. The director's denial is final unless the applicant makes a written request for a hearing as prescribed in section 28‑5924.
I. It is unlawful for a person to knowingly operate a motor vehicle on the highways or a watercraft on the waterways using motor vehicle fuel or use fuel that has been sold to a person making a claim pursuant to this section.
J. G. In addition to other penalties prescribed by law, the director shall not give a person who violates this section a refund on motor aviation fuel purchased during the six months succeeding the date the director advises the person by mail of the director's discovery of the violation.
K. H. A person whose right to a refund is suspended may bring an action in superior court in Maricopa County to set aside the suspension.
L. I. The director may recover excess refunds from the person to whom the refund was made. The director shall assess the claimant the amount of the excess refund and interest. The director shall compute interest at one per cent per month of the amount of excess refund due beginning on the date of refund and until the date the assessment is paid.
M. The department of transportation shall deposit, pursuant to sections 35‑146 and 35‑147, use tax revenues collected pursuant to subsection F of this section in the state general fund by the end of each month and notify the department of revenue of the amount of use tax collected each month.
Sec. 19. Section 28-5613, Arizona Revised Statutes, is amended to read:
28-5613. Licensee refunds
A. A licensee who is seeking a refund shall apply pursuant to section 28‑5612, except that a licensee shall file an application for refund within three years after the date of purchase or invoice of the motor aviation fuel for which a refund is claimed.
B. For the purposes of this section, "licensee" includes a supplier, an interstate user, a restricted distributor or a licensed use fuel vendor.
Sec. 20. Repeal
Sections 28-5614, 28‑5615, 28‑5616 and 28-5617, Arizona Revised Statutes, are repealed.
Sec. 21. Section 28-5618, Arizona Revised Statutes, is amended to read:
28-5618. Report requirements
A. On or before the twenty‑seventh day of each month, a supplier shall file with the director a true and verified statement in a form prescribed by the director showing:
1. The total number of gallons of motor vehicle fuel or aviation fuel, blended, imported, exported or acquired during the preceding calendar month.
2. The number of gallons of motor vehicle fuel or aviation fuel sold or otherwise disposed of by the supplier for use in each of the several counties of this state.
3. The total number of gallons of motor vehicle fuel that is included in this subsection and that is intended for use in aircraft.
4. 3. Other information the director requires.
B. In addition to making the statement required in subsection A and if the supplier received an interstate shipment of motor vehicle fuel during the preceding month, the supplier shall report on or before the twenty‑seventh day of each month to the director in a form prescribed by the director:
1. The quantity and particular description of the fuel received by interstate shipment and delivered intercounty.
2. The name of the consignor and consignee.
3. The date shipped.
4. The date received.
5. How it was shipped.
6. Other information the director requires.
C. B. A supplier may amend a report filed pursuant to this section within three years after the date the original tax report was filed unless the report for the period is final due to an audit.
D. c. If an amended report results in a reduction in taxes paid, the department shall credit the licensee's account unless the licensee files a written request for a refund.
Sec. 22. Section 28-5619, Arizona Revised Statutes, is amended to read:
28-5619. Records required; violation; classification
A. Suppliers and restricted distributors shall maintain and keep records of motor vehicle fuel or aviation fuel received, acquired, used, sold and delivered in this state by the supplier or restricted distributor, the amount of tax paid as part of the purchase price, invoices, bills of lading and other pertinent records and papers required by the director for the reasonable administration of this article at least until the later of the following:
1. Three years after a report is required to be filed pursuant to this article.
2. Three years after a report is filed.
B. Any person, other than a restricted distributor, purchasing motor vehicle fuel taxable under this article or aviation fuel taxable under section 28‑8344 from a supplier for the purpose of resale shall maintain and keep for one year a record of motor vehicle fuel or aviation fuel received, the amount of tax paid to the supplier as part of the purchase price, delivery tickets, invoices, bills of lading and other records the director requires.
C. Each distributor and vendor shall maintain and keep for three years the following:
1. Records of use fuel received, sold or delivered in this state by the distributor or vendor.
2. invoices, bills of lading and other pertinent records and papers required by the director for the reasonable administration of this article.
D. The director may require distributors to file information as to sales or deliveries to vendors or users of use fuel at the times and in the form as the director requires.
E. D. A person who violates this section is guilty of a class 1 misdemeanor.
Sec. 23. Section 28-5620, Arizona Revised Statutes, is amended to read:
28-5620. Records and equipment inspections; hearings; costs
A. The director or a deputy, employee or agent authorized by the director may examine during usual business hours records, books, papers, storage tanks and any other equipment of a person pertaining to motor aviation fuel imported, received, sold, shipped, delivered or used to either:
1. Verify the truth and accuracy of a statement, report, return or claim.
2. Ascertain whether the tax imposed by this article or section 28‑8344 has been paid.
3. Determine the financial responsibility of the supplier for the payment of the taxes imposed by this article or section 28‑8344.
4. Determine the validity of a refund.
B. In the enforcement of this article, the director may hold hearings, take testimony of persons, issue subpoenas for the purpose of taking testimony, compel attendance of witnesses and conduct investigations the director deems necessary.
C. The director may prescribe forms for required reports or claims for refund or forms of record to be used by suppliers, distributors, restricted distributors, vendors or refund claimants.
D. Records required by this article may be maintained in this state. If the records are maintained outside this state and on request of the director, the records shall be made available at a location in this state designated by the director. If the records are maintained outside this state and will not be made available at the location designated by the director, the director may require the person to whom a records request has been made to pay in advance costs reimbursable for subsistence and travel expenses for the director or an agent of the director to conduct the examination of the records.
Sec. 24. Section 28-5622, Arizona Revised Statutes, is amended to read:
28-5622. Tax estimate
If a person neglects or refuses to make and file a report as required by this article, or files an incorrect or fraudulent report, the director shall determine from information obtainable in the director's office or elsewhere the number of gallons of motor aviation fuel with respect to which the person has incurred liability under this article or section 28‑8344.
Sec. 25. Repeal
Section 28-5623, Arizona Revised Statutes, is repealed.
Sec. 26. Section 28-5624, Arizona Revised Statutes, is amended to read:
28-5624. Transportation of aviation fuel by motor vehicle; documentation; violation; penalties
A. An operator of a motor vehicle transporting motor aviation fuel on a highway in this state shall carry documentation to accompany the shipment at all times while the shipment is being transported on the highways in this state. The director may inspect the documentation at any time.
B. The documentation shall include:
1. The date of shipment of the fuel.
2. The quantity and particular description of the fuel.
3. The names of the consignor and consignee.
4. The destination state of the fuel shipment.
5. Other information as the director requires.
C. An operator of a motor vehicle transporting motor aviation fuel in this state who fails to carry documentation at the time and in the manner required pursuant to subsection A of this section shall pay to the director a penalty of one hundred dollars for each shipment not accompanied by the required documentation in addition to payment of the tax required by section 28‑5606 or the tax prescribed in section 28‑8344. An operator of a motor vehicle transporting motor aviation fuel may apply for abatement of the penalty pursuant to section 28‑5934.
Sec. 27. Repeal
Section 28-5625, Arizona Revised Statutes, is repealed.
Sec. 28. Section 28-5626, Arizona Revised Statutes, is amended to read:
28-5626. Suppliers; licenses required
A. Except as provided in section 28‑5607, a person who acts as a distributor and who possesses motor aviation fuel on which fuel taxes have not been accrued or collected by a supplier shall be licensed as a supplier.
B. It is unlawful for a person to engage in business in this state as a supplier, unless the person has a license issued by the director to engage in that business.
C. A person who sells use fuel for delivery directly into a vehicle fuel tank shall also be licensed as a vendor and shall maintain separate business records.
Sec. 29. Section 28-5633, Arizona Revised Statutes, is amended to read:
28-5633. License cancellation
A. The director may immediately cancel the license of a supplier and shall notify the supplier in writing of the cancellation by certified mail, mailed to the last known address of the supplier appearing in the files of the department, if the supplier either:
1. Files a false report of data or information required by this article.
2. Fails, refuses or neglects to file a monthly report or any other report required by this article.
3. Fails, refuses or neglects to pay the full amount of the tax required by this article or section 28‑8344.
B. The director may cancel a license that is issued to any supplier and that becomes effective sixty days after the date of receipt of the written request of the supplier for the cancellation. The director shall not cancel a license on request of a supplier unless the supplier pays, before the date of the cancellation, all taxes payable under this article or section 28‑8344 and all penalties and fines accruing by reason of the supplier's failure to make accurate reports as required by this article or to pay the taxes or penalties.
C. The director may cancel the license of a supplier on investigation and sixty days' notice mailed to the last known address of the supplier if the director determines that the person to whom the license has been issued is no longer engaged in the business of a supplier and has not been engaged in the business of a supplier for six months before the cancellation.
Sec. 30. Section 28-5634, Arizona Revised Statutes, is amended to read:
28-5634. Bond cancellation
If the license of a supplier is cancelled by the director pursuant to section 28‑5633 and if the supplier has paid all taxes due and payable by the supplier as required by this article or section 28‑8344 on the receipt, sale or use of motor vehicle fuel or aviation fuel and has paid all interest and penalties accruing by reason of the supplier's failure to make accurate reports or to pay the tax and interest and penalties, the director shall cancel and surrender the bond filed by the supplier.
Sec. 31. Section 28-5635, Arizona Revised Statutes, is amended to read:
28-5635. Discontinuance, sale or transfer of business; violation; classification
A. When a supplier ceases to engage in business as a supplier in this state and discontinues, sells or transfers the business:
1. The supplier shall notify the director in writing at least ten days before the discontinuance, sale or transfer takes effect. The notice shall give:
(a) The date of discontinuance, sale or transfer of the business.
(b) The name and address of the purchaser or transferee of the business.
2. All taxes, penalties and interest not then due and payable under this article or section 28‑8344 are due and payable concurrently with the discontinuance, sale or transfer. Concurrent with the discontinuance, sale or transfer, the supplier shall:
(a) Make a report.
(b) Pay all taxes, interest and penalties.
(c) Surrender to the director the license issued to the supplier by the director.
B. Unless the notice is given to the director, the purchaser or transferee is liable to this state for the amount of all taxes, penalties and interest accrued under this article or section 28‑8344 against the supplier who is selling or transferring the supplier's business on the date of the sale or transfer but only to the extent of the value of the property and business that is acquired from the supplier.
C. A person who violates this section is guilty of a class 1 misdemeanor.
Sec. 32. Section 28-5636, Arizona Revised Statutes, is amended to read:
28-5636. Supplier blanket election
A. A licensed supplier may and a licensed permissive supplier shall make a blanket election with the department to treat all removals from all of its out‑of‑state terminals with a destination in this state as shown on the terminal‑issued shipping paper or bill of lading as if the removals were removed across the rack by the supplier from a terminal in this state for all purposes.
B. The election provided by this section shall be made by filing a notice of election with the department.
C. The department shall release a list of electing suppliers under this section on request by any person.
D. The absence of an election by a supplier under this section in no way relieves the supplier of responsibility for remitting the tax imposed by this article on the removal from an out‑of‑state terminal for import into this state by the supplier.
E. D. Any supplier that makes the election provided by this section shall precollect the tax imposed pursuant to this article or the tax imposed pursuant to section 28‑8344 on all removals from a qualified terminal on its account as a position holder, or as a person receiving motor vehicle or aviation fuel from a position holder pursuant to a two party exchange agreement without regard to the license status of the person acquiring the motor vehicle or aviation fuel from the supplier, the point or terms of sale or the character of delivery.
F. E. Each supplier who elects to precollect tax under this section agrees to waive any defense that the state lacks jurisdiction to require collection on all out‑of‑state sales by the supplier as to which the supplier had knowledge that the shipments were destined for this state and agrees that this state imposes the requirement pursuant to this subsection under its general police powers to regulate the movement of motor vehicle or aviation fuel.
G. F. Each supplier who elects to precollect tax pursuant to this section is not subject to any civil penalties or interest imposed pursuant to this article for any corrections resulting from a diversion of the motor vehicle or aviation fuel from the original destination as represented by the purchaser or the agent of the purchaser.
Sec. 33. Section 28-5637, Arizona Revised Statutes, is amended to read:
28-5637. Collection of aviation fuel tax from purchaser; deferred remittance election
A. Each supplier who sells motor aviation fuel shall precollect from and remit on behalf of the purchaser the motor vehicle fuel or use fuel tax imposed pursuant to this article or the aviation fuel tax imposed pursuant to section 28‑8344.
B. At the election of an eligible purchaser, the supplier shall not require a payment of the motor aviation fuel tax on transport truck loads from the purchaser sooner than five business days before the date on which the tax is required to be remitted by the supplier under section 28‑5925 or on other terms agreed to by the eligible purchaser and the supplier. This subsection does not apply if the supplier requires the purchaser to pay cash or a cash equivalent for motor aviation fuel purchases.
C. The election shall be evidenced by a written statement from the department as to the purchaser eligibility status as determined pursuant to section 28‑5638 and is subject to a condition that the remittances by the eligible purchaser of all amounts of tax due the supplier shall be paid by electronic funds transfer on or before five days preceding the date of the remittance by the supplier to the department.
D. The election by the eligible purchaser under this section may be terminated by the supplier if the eligible purchaser does not make timely payments to the supplier as required by this section.
Sec. 34. Section 28-5638, Arizona Revised Statutes, is amended to read:
28-5638. Deferred remittance election eligibility
A. Each purchaser that desires to make an election under section 28‑5637 shall present evidence to the department that either:
1. The applicant was a licensed distributor in good standing before January 1, 1998.
2. The applicant meets the financial responsibility and bonding requirements imposed by this article. The bond shall conform to the specific requirements of this section.
B. The department may require a purchaser that pays the tax to a supplier to file with the department a surety bond that is payable to this state and on which the purchaser is the obligor, or other financial security, in an amount satisfactory to the department. The department may require that the bond indemnify the department against uncollectible tax credits claimed by the supplier under section 28‑5639.
C. The department may rescind a purchaser's eligibility and election to defer motor vehicle or aviation fuel tax remittances after a hearing and on a showing of good cause, including failure to make a timely tax deferred payment of tax to a supplier under section 28‑5637, by sending written notice to all suppliers or publishing notice of the revocation pursuant to rules. The department may require further assurance of the financial responsibility of the purchaser, may increase the bond requirement for that purchaser or may take any other action that the department may require to ensure remittance of the motor vehicle or aviation fuel tax.
Sec. 35. Section 28-5639, Arizona Revised Statutes, is amended to read:
28-5639. Uncollectible tax credit
A. In computing the amount of motor aviation fuel tax due, the supplier is entitled to a credit against the tax payable in the amount of tax paid by the supplier that has become uncollectible from an eligible purchaser.
B. The supplier shall provide notice to the department of a failure to collect the tax within thirty days after the earliest date on which the supplier was entitled to collect the tax from the eligible purchaser under section 28‑5637.
C. The department shall adopt rules establishing the evidence a supplier must provide to receive the credit.
D. The credit shall be claimed on the first return after the expiration of the thirty day period if the payment remains unpaid as of the filing date of that return or the credit is disallowed.
E. The claim for credit shall identify the defaulting eligible purchaser and any tax liability that remains unpaid.
F. If an eligible purchaser fails to make a timely payment of the amount of tax due, the credit of the supplier is limited to the amount due from the purchaser, plus any tax that accrues from that purchaser for a period of thirty days after the date of failure to pay.
G. An additional credit shall not be allowed to a supplier under this section until the department authorizes the purchaser under section 28‑5638 to make a new election.
Sec. 36. Repeal
Section 28-5640, Arizona Revised Statutes, is repealed.
Sec. 37. Section 28-5644, Arizona Revised Statutes, is amended to read:
28-5644. Terminal operator; joint and several liability
A. A terminal operator is jointly and severally liable for the motor vehicle fuel or use fuel tax imposed pursuant to this article or the aviation fuel tax imposed pursuant to section 28‑8344 if both of the following apply:
1. The position holder with respect to the motor vehicle, use or aviation fuel is a person other than the terminal operator.
2. The terminal operator does not meet the conditions prescribed in subsection B of this section.
B. The terminal operator is not liable for the motor vehicle fuel or use fuel tax imposed pursuant to this article or the aviation fuel tax imposed pursuant to section 28‑8344 if at the time of removal both of the following apply:
1. The terminal operator has an unexpired notification certificate from the position holder as required by the United States internal revenue service.
2. The terminal operator has no reason to believe that any information in the certificate is false.
Sec. 38. Repeal
Sections 28-5645, 28-5646, 28-5647, 28-5648 and 28-5649, Arizona Revised Statutes, are repealed.
Sec. 39. Repeal
Title 28, chapter 16, article 2, Arizona Revised Statutes, is repealed.
Sec. 40. Section 28-5925, Arizona Revised Statutes, is amended to read:
28-5925. Payment; distribution
A. The supplier, as shown in the records of the terminal operator, who removes the taxable gallons shall precollect and remit on behalf of consumers and users to the department the taxes that are imposed by sections 28‑5605 and section 28‑8344 and that are measured by the invoiced gallons of motor aviation fuel removed by a licensed supplier from a terminal or refinery in this state other than a bulk transfer.
B. The supplier and each reseller shall list the amount of tax as a separate line item on all invoices or billings or as a separate billing.
C. The motor aviation fuel tax that is accrued in any calendar month shall be paid on or before the twenty‑seventh day of the next succeeding calendar month to the director.
D. A supplier shall remit any late taxes remitted to the supplier by an eligible purchaser and shall notify the department in a timely manner of any late remittances if that supplier has previously given notice to the department of an uncollectible tax amount pursuant to section 28‑5639, subsection B.
E. On payment, the director shall promptly:
1. Distribute the amount of money collected as a tax on sales of motor vehicle fuel used in propelling watercraft pursuant to section 28‑5926 beginning with the month following the conclusion of the survey conducted pursuant to section 28‑5926.
2. deposit, pursuant to sections 35‑146 and 35‑147, all remaining monies in the Arizona highway user revenue fund or the state aviation fund as determined from the reports filed pursuant to section 28‑5618.
F. The director shall deduct all exemptions and refunds before depositing the monies.
Sec. 41. Repeal
Sections 28-5926 and 28‑5927, Arizona Revised Statutes, are repealed.
Sec. 42. Section 28-6001, Arizona Revised Statutes, is amended to read:
28-6001. Underground storage tank tax; payments
A. A person who is responsible for collecting the motor vehicle fuel tax imposed by section 28‑5606 or the aviation fuel tax imposed by section 28‑8344 shall make periodic payments of the underground storage tank tax imposed by title 49, chapter 6, article 2 to the director of the department of transportation.
B. A person who is responsible for collecting the use fuel tax imposed by section 28‑5606 on diesel, including dyed diesel as defined in section 28‑5601, shall register with the department of transportation on a form prescribed by the department of transportation and shall make periodic payments of the underground storage tank tax imposed by title 49, chapter 6, article 2 to the director. For purposes of this subsection, "diesel" means any liquid that is commonly or commercially known, offered for sale or used as a fuel in diesel engines.
Sec. 43. Section 28-6006, Arizona Revised Statutes, is amended to read:
28-6006. Administration same as for aviation fuel tax
A. Section 28‑5607, subsection B, sections 28‑5602, 28‑5603, 28‑5619, 28‑5620, 28‑5621 and 28‑5622 and article 5 of this chapter apply to the persons from whom the underground storage tank tax is collected pursuant to section 28‑6001 so that the underground storage tank tax is administered in the same manner as motor aviation fuel taxes.
B. Penalties, late filing fees and interest collected by the department of transportation shall be remitted to the director of the department of environmental quality in the same manner as the tax collected pursuant to this article.
Sec. 44. Section 28-6501, Arizona Revised Statutes, is amended to read:
28-6501. Definition of highway user revenues
In this article, unless the context otherwise requires or except as otherwise provided by statute, "highway user revenues" means all monies received in this state from licenses, taxes, penalties, interest and fees authorized by the following:
1. Chapters 2, 7, 8 and 15 of this title, except for:
(a) The special plate
administration fees prescribed in sections 28‑2404, 28‑2412 through
28‑2432 and 28‑2514.
(b) The donations prescribed
in sections 28‑2404, 28‑2412 through 28‑2415, 28‑2417
through 28‑2432, 28‑2453, 28‑2454 and 28‑2455.
2. Section 28-1177.
3. Chapters 10 and 11 of this title.
4. Chapter 16, articles 1, 2 and article 4 of this title, except as provided in sections 28‑5926 and 28‑5927.
Sec. 45. Section 28-6540, Arizona Revised Statutes, is amended to read:
28-6540. Arizona highway user revenue fund distribution; state highway fund; county, city and town proportions
Each month the state treasurer shall distribute all revenues credited to the Arizona highway user revenue fund pursuant to the proportions prescribed in section 28‑6538, subsection A as follows:
1. Revenues allocated to the counties shall be further distributed to each individual county, the distribution to which was not restricted pursuant to section 28‑6543, subsection A, as follows:
(a) Seventy‑two per cent based on the proportion that all reported sales of motor vehicle fuel subject to sections 28‑5619 and 28‑5620 and the estimated consumption of use fuel in the county bear to the total sales of motor vehicle fuel and the estimated consumption of use fuel throughout this state during the preceding calendar month.
(b) Twenty‑eight per cent based on the proportion that the population of the unincorporated area of each county bears to the population of the unincorporated areas of all counties in this state.
2. Revenues allocated to the incorporated cities and towns pursuant to section 28‑6538, subsection A, paragraph 3 shall be distributed on the basis of the following apportionments:
(a) One‑half shall be apportioned to each city or town, the distribution to which was not restricted pursuant to section 28‑6543, subsection A, on the basis that the population of each bears to the population of all cities and towns in this state.
(b) Subject to section 28‑6543, subsection A, the remaining one‑half shall be apportioned first on the basis of the county origin of all reported sales of motor vehicle fuels in this state subject to sections 28‑5619 and 28‑5620, which amount shall be further apportioned among the several incorporated cities and towns in each county in the proportion that the population of each city or town bears to the total population of all cities and towns in the county.
3. Revenues allocated to incorporated cities with a population of three hundred thousand or more persons shall be apportioned among the cities, the distribution to which was not restricted pursuant to section 28‑6543, subsection A, for the acquisition of rights‑of‑way or construction of streets or highways based on population.
Sec. 46. Section 28-6547, Arizona Revised Statutes, is amended to read:
28-6547. Safety enforcement and transportation infrastructure fund; exemption from lapsing
A. The safety enforcement and transportation infrastructure fund is established. The fund consists of monies deposited pursuant to sections 28‑2321, 28‑2324, 28‑2325, 28‑5474, 28‑5739, 28‑5863 and 28‑5864. The department shall administer the fund.
B. Subject to legislative appropriation, monies in the fund shall be spent on the following:
1. Enforcement of vehicle safety requirements by the department of public safety and the department of transportation within twenty‑five miles of the border between Arizona and Mexico.
2. Costs related to the procurement of electronic equipment, automated systems or improvements to existing electronic equipment or automated systems for relieving vehicle congestion at ports of entry on the border between this state and Mexico.
3. Construction, maintenance and upgrades of transportation facilities, including roads, streets and highways, approved by the board within twenty‑five miles of the border between Arizona and Mexico.
4. As approved by the board, construction and maintenance of transportation facilities in the CANAMEX high priority corridor as defined in section 332 of the national highway system designation act of 1995 (P.L. 104‑59; 109 Stat. 596‑597).
5. Activities of the department that include the collection of transportation and trade data in the United States and Mexico for the purposes of constructing transportation facilities, improving public safety, improving truck processing time and relieving congestion at ports of entry on the border between Arizona and Mexico. The department may enter into an agreement with the Arizona-Mexico commission and provide funding to the commission for the purposes contained in this paragraph.
6. A commitment or investment necessary for the department or another agency of this state to obtain federal monies that are designated for expenditure pursuant to this section.
C. If the department of transportation determines that activities proposed by the Arizona department of homeland security may improve traffic safety in this state, the department of transportation may enter into an agreement with, and provide, subject to legislative appropriation, fund monies to the Arizona department of homeland security for the purposes contained in this subsection.
D. If the department determines that activities proposed by the Arizona international development authority for planning, development and construction of transportation facilities on the border between Arizona and Mexico may improve traffic safety in this state, the department may enter into an agreement with, and provide, subject to legislative appropriation, fund monies to the Arizona international development authority for the purposes contained in this subsection.
E. On notice from the department, the state treasurer shall invest and divest monies in the fund as provided by section 35‑313, and monies earned from investment shall be credited to the fund.
F. Monies in the fund are exempt from the provisions of section 35‑190 relating to lapsing of appropriations.
Sec. 47. Section 42-5061, Arizona Revised Statutes, is amended to read:
42-5061. Retail classification; definitions
A. The retail classification is comprised of the business of selling tangible personal property at retail. The tax base for the retail classification is the gross proceeds of sales or gross income derived from the business. The tax imposed on the retail classification does not apply to the gross proceeds of sales or gross income from:
1. Professional or personal service occupations or businesses which involve sales or transfers of tangible personal property only as inconsequential elements.
2. Services rendered in addition to selling tangible personal property at retail.
3. Sales of warranty or service contracts. The storage, use or consumption of tangible personal property provided under the conditions of such contracts is subject to tax under section 42‑5156.
4. Sales of tangible personal property by any nonprofit organization organized and operated exclusively for charitable purposes and recognized by the United States internal revenue service under section 501(c)(3) of the internal revenue code.
5. Sales to persons engaged in business classified under the restaurant classification of articles used by human beings for food, drink or condiment, whether simple, mixed or compounded.
6. Business activity which is properly included in any other business classification which is taxable under this article 2 of this chapter.
7. The sale of stocks and bonds.
8. Drugs and medical oxygen, including delivery hose, mask or tent, regulator and tank, on the prescription of a member of the medical, dental or veterinarian profession who is licensed by law to administer such substances.
9. Prosthetic appliances as defined in section 23‑501 prescribed or recommended by a health professional licensed pursuant to title 32, chapter 7, 8, 11, 13, 14, 15, 16, 17 or 29.
10. Insulin, insulin syringes and glucose test strips.
11. Prescription eyeglasses or contact lenses.
12. Hearing aids as defined in section 36‑1901.
13. Durable medical equipment which has a centers for medicare and medicaid services common procedure code, is designated reimbursable by medicare, is prescribed by a person who is licensed under title 32, chapter 7, 8, 13, 14, 15, 17 or 29, can withstand repeated use, is primarily and customarily used to serve a medical purpose, is generally not useful to a person in the absence of illness or injury and is appropriate for use in the home.
14. Sales to nonresidents of this state for use outside this state if the vendor ships or delivers the tangible personal property out of this state.
15. Food, as provided in and subject to the conditions of article 3 of this chapter and section 42‑5074.
16. 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).
17. Textbooks by any bookstore that are required by any state university or community college.
18. Food and drink to a person who is engaged in business which is classified under the restaurant classification and which provides such food and drink without monetary charge to its employees for their own consumption on the premises during the employees' hours of employment.
19. Articles of food, drink or condiment and accessory tangible personal property to a school district if such articles and accessory tangible personal property are to be prepared and served to persons for consumption on the premises of a public school within the district during school hours.
20. Lottery tickets or shares pursuant to title 5, chapter 5, article 1.
21. The sale of precious metal bullion and monetized bullion to the ultimate consumer, but the sale of coins or other forms of money for manufacture into jewelry or works of art is subject to the tax. For the purposes of this paragraph:
(a) "Monetized bullion" means coins and other forms of money which are manufactured from gold, silver or other metals and which have been or are used as a medium of exchange in this or another state, the United States or a foreign nation.
(b) "Precious metal bullion" means precious metal, including gold, silver, platinum, rhodium and palladium, which has been smelted or refined so that its value depends on its contents and not on its form.
22. Motor vehicle fuel and use fuel which are subject to a tax imposed under title 28, chapter 16, article 1, sales of use fuel to a holder of a valid single trip use fuel tax permit issued under section 28‑5739, Sales of aviation fuel which are that is subject to the tax imposed under section 28‑8344, and sales of jet fuel which are that is subject to the tax imposed under article 8 of this chapter and sales of other fuel that is used for the propulsion of motor vehicles and watercraft.
23. Tangible personal property sold to a person engaged in the business of leasing or renting such property under the personal property rental classification if such property is to be leased or rented by such person.
24. Tangible personal property sold in interstate or foreign commerce if prohibited from being so taxed by the Constitution of the United States or the constitution of this state.
25. Tangible personal property sold to:
(a) A qualifying hospital as defined in section 42‑5001.
(b) A qualifying health care organization as defined in section 42‑5001 if the tangible personal property is used by the organization solely to provide health and medical related educational and charitable services.
(c) A qualifying health care organization as defined in section 42‑5001 if the organization is dedicated to providing educational, therapeutic, rehabilitative and family medical education training for blind, visually impaired and multihandicapped children from the time of birth to age twenty‑one.
(d) A qualifying community health center as defined in section 42‑5001.
(e) A nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code and that regularly serves meals to the needy and indigent on a continuing basis at no cost.
(f) For taxable periods beginning from and after June 30, 2001, a nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code and that provides residential apartment housing for low income persons over sixty‑two years of age in a facility that qualifies for a federal housing subsidy, if the tangible personal property is used by the organization solely to provide residential apartment housing for low income persons over sixty‑two years of age in a facility that qualifies for a federal housing subsidy.
26. Magazines or other periodicals or other publications by this state to encourage tourist travel.
27. Tangible personal property sold to a person that is subject to tax under this article by reason of being engaged in business classified under the prime contracting classification under section 42‑5075, or to a subcontractor working under the control of a prime contractor that is subject to tax under article 1 of this chapter, if the property so sold is any of the following:
(a) Incorporated or fabricated by the person into any real property, structure, project, development or improvement as part of the business.
(b) Used in environmental response or remediation activities under section 42‑5075, subsection B, paragraph 6.
(c) Incorporated or fabricated by the person into any lake facility development in a commercial enhancement reuse district under conditions prescribed for the deduction allowed by section 42‑5075, subsection B, paragraph 8.
28. The sale of a motor vehicle to:
(a) A nonresident of this state if the purchaser's state of residence does not allow a corresponding use tax exemption to the tax imposed by article 1 of this chapter and if the nonresident has secured a special ninety day nonresident registration permit for the vehicle as prescribed by sections 28‑2154 and 28‑2154.01.
(b) An enrolled member of an Indian tribe who resides on the Indian reservation established for that tribe.
29. Tangible personal property purchased in this state by a nonprofit charitable organization that has qualified under section 501(c)(3) of the United States internal revenue code and that engages in and uses such property exclusively in programs for mentally or physically handicapped persons if the programs are exclusively for training, job placement, rehabilitation or testing.
30. Sales of tangible personal property 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.
31. Sales of commodities, as defined by title 7 United States Code section 2, that are consigned for resale in a warehouse in this state in or from which the commodity is deliverable on a contract for future delivery subject to the rules of a commodity market regulated by the United States commodity futures trading commission.
32. Sales of tangible personal property 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 if the organization sponsors or operates a rodeo featuring primarily farm and ranch animals and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.
33. Sales of seeds, seedlings, roots, bulbs, cuttings and other propagative material to persons who use those items to commercially produce agricultural, horticultural, viticultural or floricultural crops in this state.
34. Machinery, equipment, technology or related supplies that are only useful to assist a person who is physically disabled as defined in section 46‑191, has a developmental disability as defined in section 36‑551 or has a head injury as defined in section 41‑3201 to be more independent and functional.
35. Sales of tangible personal property that is shipped or delivered directly to a destination outside the United States for use in that foreign country.
36. Sales of natural gas or liquefied petroleum gas used to propel a motor vehicle.
37. Paper machine clothing, such as forming fabrics and dryer felts, sold to a paper manufacturer and directly used or consumed in paper manufacturing.
38. Coal, petroleum, coke, natural gas, virgin fuel oil and electricity sold to a qualified environmental technology manufacturer, producer or processor as defined in section 41‑1514.02 and directly used or consumed in the generation or provision of on-site power or energy solely for environmental technology manufacturing, producing or processing or environmental protection. This paragraph shall apply for fifteen full consecutive calendar or fiscal years from the date the first paper manufacturing machine is placed in service. In the case of an environmental technology manufacturer, producer or processor who does not manufacture paper, the time period shall begin with the date the first manufacturing, processing or production equipment is placed in service.
39. Sales of liquid, solid or gaseous chemicals used in manufacturing, processing, fabricating, mining, refining, metallurgical operations, research and development and, beginning on January 1, 1999, printing, if using or consuming the chemicals, alone or as part of an integrated system of chemicals, involves direct contact with the materials from which the product is produced for the purpose of causing or permitting a chemical or physical change to occur in the materials as part of the production process. This paragraph does not include chemicals that are used or consumed in activities such as packaging, storage or transportation but does not affect any deduction for such chemicals that is otherwise provided by this section. For the purposes of this paragraph, "printing" means a commercial printing operation and includes job printing, engraving, embossing, copying and bookbinding.
40. Through December 31, 1994, personal property liquidation transactions, conducted by a personal property liquidator. From and after December 31, 1994, personal property liquidation transactions shall be taxable under this section provided that nothing in this subsection shall be construed to authorize the taxation of casual activities or transactions under this chapter. For the purposes of this paragraph:
(a) "Personal property liquidation transaction" means a sale of personal property made by a personal property liquidator acting solely on behalf of the owner of the personal property sold at the dwelling of the owner or upon the death of any owner, on behalf of the surviving spouse, if any, any devisee or heir or the personal representative of the estate of the deceased, if one has been appointed.
(b) "Personal property liquidator" means a person who is retained to conduct a sale in a personal property liquidation transaction.
41. Sales of food, drink and condiment for consumption within the premises of any prison, jail or other institution under the jurisdiction of the state department of corrections, the department of public safety, the department of juvenile corrections or a county sheriff.
42. A motor vehicle and any repair and replacement parts and tangible personal property becoming a part of such motor vehicle sold 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 or renting such property.
43. Livestock and poultry feed, salts, vitamins and other additives for livestock or poultry consumption that are sold to persons who are engaged in producing livestock, poultry, or livestock or poultry products or who are engaged in feeding livestock or poultry commercially. For the purposes of this paragraph, "poultry" includes ratites.
44. Sales of implants used as growth promotants and injectable medicines, not already exempt under paragraph 8 of this subsection, for livestock or poultry owned by or in possession of persons who are engaged in producing livestock, poultry, or livestock or poultry products or who are engaged in feeding livestock or poultry commercially. For the purposes of this paragraph, "poultry" includes ratites.
45. Sales of motor vehicles at auction to nonresidents of this state for use outside this state if the vehicles are shipped or delivered out of this state, regardless of where title to the motor vehicles passes or its free on board point.
46. Tangible personal property sold to a person engaged in business and subject to tax under the transient lodging classification if the tangible personal property is a personal hygiene item or articles used by human beings for food, drink or condiment, except alcoholic beverages, which are furnished without additional charge to and intended to be consumed by the transient during the transient's occupancy.
47. Sales of alternative fuel, as defined in section 1‑215, to a used oil fuel burner who has received a permit to burn used oil or used oil fuel under section 49‑426 or 49‑480.
48. Sales of materials that are purchased by or for publicly funded libraries including school district libraries, charter school libraries, community college libraries, state university libraries or federal, state, county or municipal libraries for use by the public as follows:
(a) Printed or photographic materials, beginning August 7, 1985.
(b) Electronic or digital media materials, beginning July 17, 1994.
49. Tangible personal property sold to a commercial airline and consisting of food, beverages and condiments and accessories used for serving the food and beverages, if those items are to be provided without additional charge to passengers for consumption in flight. For the purposes of this paragraph, "commercial airline" means a person holding a federal certificate of public convenience and necessity or foreign air carrier permit for air transportation to transport persons, property or United States mail in intrastate, interstate or foreign commerce.
50. Sales of alternative fuel vehicles if the vehicle was manufactured as a diesel fuel vehicle and converted to operate on alternative fuel and equipment that is installed in a conventional diesel fuel motor vehicle to convert the vehicle to operate on an alternative fuel, as defined in section 1‑215.
51. Sales of any spirituous, vinous or malt liquor by a person that is licensed in this state as a wholesaler by the department of liquor licenses and control pursuant to title 4, chapter 2, article 1.
52. Sales of tangible personal property to be incorporated or installed as part of environmental response or remediation activities under section 42‑5075, subsection B, paragraph 6.
53. Sales of tangible personal property 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.
54. Through August 31, 2014, sales of Arizona centennial medallions by the historical advisory commission.
55. Application services that are designed to assess or test student learning or to promote curriculum design or enhancement purchased by or for any school district, charter school, community college or state university. For the purposes of this paragraph:
(a) "Application services" means software applications provided remotely using hypertext transfer protocol or another network protocol.
(b) "Curriculum design or enhancement" means planning, implementing or reporting on courses of study, lessons, assignments or other learning activities.
B. In addition to the deductions from the tax base prescribed by subsection A of this section, the gross proceeds of sales or gross income derived from sales of the following categories of tangible personal property shall be deducted from the tax base:
1. Machinery, or equipment, used directly in manufacturing, processing, fabricating, job printing, refining or metallurgical operations. The terms "manufacturing", "processing", "fabricating", "job printing", "refining" and "metallurgical" as used in this paragraph refer to and include those operations commonly understood within their ordinary meaning. "Metallurgical operations" includes leaching, milling, precipitating, smelting and refining.
2. Mining machinery, or equipment, used directly in the process of extracting ores or minerals from the earth for commercial purposes, including equipment required to prepare the materials for extraction and handling, loading or transporting such extracted material to the surface. "Mining" includes underground, surface and open pit operations for extracting ores and minerals.
3. Tangible personal property sold to persons engaged in business classified under the telecommunications classification and consisting of central office switching equipment, switchboards, private branch exchange equipment, microwave radio equipment and carrier equipment including optical fiber, coaxial cable and other transmission media which are components of carrier systems.
4. Machinery, equipment or transmission lines used directly in producing or transmitting electrical power, but not including distribution. Transformers and control equipment used at transmission substation sites constitute equipment used in producing or transmitting electrical power.
5. Neat animals, horses, asses, sheep, ratites, swine or goats used or to be used as breeding or production stock, including sales of breedings or ownership shares in such animals used for breeding or production.
6. Pipes or valves four inches in diameter or larger used to transport oil, natural gas, artificial gas, water or coal slurry, including compressor units, regulators, machinery and equipment, fittings, seals and any other part that is used in operating the pipes or valves.
7. Aircraft, navigational and communication instruments and other accessories and related equipment sold to:
(a) A person holding a federal certificate of public convenience and necessity, a supplemental air carrier certificate under federal aviation regulations (14 Code of Federal Regulations part 121) or a foreign air carrier permit for air transportation for use as or in conjunction with or becoming a part of aircraft to be used to transport persons, property or United States mail in intrastate, interstate or foreign commerce.
(b) Any foreign government for use by such government outside of this state.
(c) Persons who are not residents of this state and who will not use such property in this state other than in removing such property from this state. This subdivision also applies to corporations that are not incorporated in this state, regardless of maintaining a place of business in this state, if the principal corporate office is located outside this state and the property will not be used in this state other than in removing the property from this state.
8. Machinery, tools, equipment and related supplies used or consumed directly in repairing, remodeling or maintaining aircraft, aircraft engines or aircraft component parts by or on behalf of a certificated or licensed carrier of persons or property.
9. Railroad rolling stock, rails, ties and signal control equipment used directly to transport persons or property.
10. Machinery or equipment used directly to drill for oil or gas or used directly in the process of extracting oil or gas from the earth for commercial purposes.
11. Buses or other urban mass transit vehicles which are used directly to transport persons or property for hire or pursuant to a governmentally adopted and controlled urban mass transportation program and which are sold to bus companies holding a federal certificate of convenience and necessity or operated by any city, town or other governmental entity or by any person contracting with such governmental entity as part of a governmentally adopted and controlled program to provide urban mass transportation.
12. Groundwater measuring devices required under section 45‑604.
13. New machinery and equipment consisting of tractors, tractor‑drawn implements, self‑powered implements, machinery and equipment necessary for extracting milk, and machinery and equipment necessary for cooling milk and livestock, and drip irrigation lines not already exempt under paragraph 6 of this subsection and that are used for commercial production of agricultural, horticultural, viticultural and floricultural crops and products in this state. For the purposes of this paragraph:
(a) "New machinery and equipment" means machinery and equipment which have never been sold at retail except pursuant to leases or rentals which do not total two years or more.
(b) "Self‑powered implements" includes machinery and equipment that are electric‑powered.
14. Machinery or equipment used in research and development. For the purposes of this paragraph, "research and development" means basic and applied research in the sciences and engineering, and designing, developing or testing prototypes, processes or new products, including research and development of computer software that is embedded in or an integral part of the prototype or new product or that is required for machinery or equipment otherwise exempt under this section to function effectively. Research and development do not include manufacturing quality control, routine consumer product testing, market research, sales promotion, sales service, research in social sciences or psychology, computer software research that is not included in the definition of research and development, or other nontechnological activities or technical services.
15. Machinery and equipment that are purchased by or on behalf of the owners of a soundstage complex and primarily used for motion picture, multimedia or interactive video production in the complex. This paragraph applies only if the initial construction of the soundstage complex begins after June 30, 1996 and before January 1, 2002 and the machinery and equipment are purchased before the expiration of five years after the start of initial construction. For the purposes of this paragraph:
(a) "Motion picture, multimedia or interactive video production" includes products for theatrical and television release, educational presentations, electronic retailing, documentaries, music videos, industrial films, CD‑ROM, video game production, commercial advertising and television episode production and other genres that are introduced through developing technology.
(b) "Soundstage complex" means a facility of multiple stages including production offices, construction shops and related areas, prop and costume shops, storage areas, parking for production vehicles and areas that are leased to businesses that complement the production needs and orientation of the overall facility.
16. Tangible personal property that is used by either of the following to receive, store, convert, produce, generate, decode, encode, control or transmit telecommunications information:
(a) Any direct broadcast satellite television or data transmission service that operates pursuant to 47 Code of Federal Regulations part 25.
(b) Any satellite television or data transmission facility, if both of the following conditions are met:
(i) Over two‑thirds of the transmissions, measured in megabytes, transmitted by the facility during the test period were transmitted to or on behalf of one or more direct broadcast satellite television or data transmission services that operate pursuant to 47 Code of Federal Regulations part 25.
(ii) Over two‑thirds of the transmissions, measured in megabytes, transmitted by or on behalf of those direct broadcast television or data transmission services during the test period were transmitted by the facility to or on behalf of those services.
For the purposes of subdivision (b) of this paragraph, "test period" means the three hundred sixty‑five day period beginning on the later of the date on which the tangible personal property is purchased or the date on which the direct broadcast satellite television or data transmission service first transmits information to its customers.
17. Clean rooms that are used for manufacturing, processing, fabrication or research and development, as defined in paragraph 14 of this subsection, of semiconductor products. For the purposes of this paragraph, "clean room" means all property that comprises or creates an environment where humidity, temperature, particulate matter and contamination are precisely controlled within specified parameters, without regard to whether the property is actually contained within that environment or whether any of the property is affixed to or incorporated into real property. Clean room:
(a) Includes the integrated systems, fixtures, piping, movable partitions, lighting and all property that is necessary or adapted to reduce contamination or to control airflow, temperature, humidity, chemical purity or other environmental conditions or manufacturing tolerances, as well as the production machinery and equipment operating in conjunction with the clean room environment.
(b) Does not include the building or other permanent, nonremovable component of the building that houses the clean room environment.
18. Machinery and equipment used directly in the feeding of poultry, the environmental control of housing for poultry, the movement of eggs within a production and packaging facility or the sorting or cooling of eggs. This exemption does not apply to vehicles used for transporting eggs.
19. Machinery or equipment, including related structural components, that is employed in connection with manufacturing, processing, fabricating, job printing, refining, mining, natural gas pipelines, metallurgical operations, telecommunications, producing or transmitting electricity or research and development and that is used directly to meet or exceed rules or regulations adopted by the federal energy regulatory commission, the United States environmental protection agency, the United States nuclear regulatory commission, the Arizona department of environmental quality or a political subdivision of this state to prevent, monitor, control or reduce land, water or air pollution.
20. Machinery and equipment that are sold to a person engaged in the commercial production of livestock, livestock products or agricultural, horticultural, viticultural or floricultural crops or products in this state and that are used directly and primarily to prevent, monitor, control or reduce air, water or land pollution.
21. Machinery or equipment that enables a television station to originate and broadcast or to receive and broadcast digital television signals and that was purchased to facilitate compliance with the telecommunications act of 1996 (P.L. 104‑104; 110 Stat. 56; 47 United States Code section 336) and the federal communications commission order issued April 21, 1997 (47 Code of Federal Regulations part 73). This paragraph does not exempt any of the following:
(a) Repair or replacement parts purchased for the machinery or equipment described in this paragraph.
(b) Machinery or equipment purchased to replace machinery or equipment for which an exemption was previously claimed and taken under this paragraph.
(c) Any machinery or equipment purchased after the television station has ceased analog broadcasting, or purchased after November 1, 2009, whichever occurs first.
22. Qualifying equipment that is purchased from and after June 30, 2004 through June 30, 2014 by a qualified business under section 41‑1516 for harvesting or the initial processing of qualifying forest products removed from qualifying projects as defined in section 41‑1516. To qualify for this deduction, the qualified business at the time of purchase must present its certification approved by the department.
23. Machinery, equipment and other tangible personal property used directly in motion picture production by a motion picture production company. To qualify for this deduction, at the time of purchase, the motion picture production company must present to the retailer its certificate that is issued pursuant to section 42‑5009, subsection H and that establishes its qualification for the deduction.
C. The deductions provided by subsection B of this section do not include sales of:
1. Expendable materials. For the purposes of this paragraph, expendable materials do not include any of the categories of tangible personal property specified in subsection B of this section regardless of the cost or useful life of that property.
2. Janitorial equipment and hand tools.
3. Office equipment, furniture and supplies.
4. Tangible personal property used in selling or distributing activities, other than the telecommunications transmissions described in subsection B, paragraph 16 of this section.
5. Motor vehicles required to be licensed by this state, except buses or other urban mass transit vehicles specifically exempted pursuant to subsection B, paragraph 11 of this section, without regard to the use of such motor vehicles.
6. Shops, buildings, docks, depots and all other materials of whatever kind or character not specifically included as exempt.
7. Motors and pumps used in drip irrigation systems.
D. In addition to the deductions from the tax base prescribed by subsection A of this section, there shall be deducted from the tax base the gross proceeds of sales or gross income derived from sales of machinery, equipment, materials and other tangible personal property used directly and predominantly to construct a qualified environmental technology manufacturing, producing or processing facility as described in section 41‑1514.02. This subsection applies for ten full consecutive calendar or fiscal years after the start of initial construction.
E. In computing the tax base, gross proceeds of sales or gross income from retail sales of heavy trucks and trailers does not include any amount attributable to federal excise taxes imposed by 26 United States Code section 4051.
F. In computing the tax base, gross proceeds of sales or gross income from the sale of use fuel, as defined in section 28‑5601, does not include any amount attributable to federal excise taxes imposed by 26 United States Code section 4091.
G. If a person is engaged in an occupation or business to which subsection A of this section applies, the person's books shall be kept so as to show separately the gross proceeds of sales of tangible personal property and the gross income from sales of services, and if not so kept the tax shall be imposed on the total of the person's gross proceeds of sales of tangible personal property and gross income from services.
H. If a person is engaged in the business of selling tangible personal property at both wholesale and retail, the tax under this section applies only to the gross proceeds of the sales made other than at wholesale if the person's books are kept so as to show separately the gross proceeds of sales of each class, and if the books are not so kept, the tax under this section applies to the gross proceeds of every sale so made.
I. A person who engages in manufacturing, baling, crating, boxing, barreling, canning, bottling, sacking, preserving, processing or otherwise preparing for sale or commercial use any livestock, agricultural or horticultural product or any other product, article, substance or commodity and who sells the product of such business at retail in this state is deemed, as to such sales, to be engaged in business classified under the retail classification. This subsection does not apply to businesses classified under the:
1. Transporting classification.
2. Utilities classification.
3. Telecommunications classification.
4. Pipeline classification.
5. Private car line classification.
6. Publication classification.
7. Job printing classification.
8. Prime contracting classification.
9. Owner builder sales classification.
10. Restaurant classification.
J. The gross proceeds of sales or gross income derived from the following shall be deducted from the tax base for the retail classification:
1. Sales made directly to the United States government or its departments or agencies by a manufacturer, modifier, assembler or repairer.
2. Sales made directly to a manufacturer, modifier, assembler or repairer if such sales are of any ingredient or component part of products sold directly to the United States government or its departments or agencies by the manufacturer, modifier, assembler or repairer.
3. Overhead materials or other tangible personal property that is used in performing a contract between the United States government and a manufacturer, modifier, assembler or repairer, including property used in performing a subcontract with a government contractor who is a manufacturer, modifier, assembler or repairer, to which title passes to the government under the terms of the contract or subcontract.
4. Sales of overhead materials or other tangible personal property to a manufacturer, modifier, assembler or repairer if the gross proceeds of sales or gross income derived from the property by the manufacturer, modifier, assembler or repairer will be exempt under paragraph 3 of this subsection.
K. There shall be deducted from the tax base fifty per cent of the gross proceeds or gross income from any sale of tangible personal property made directly to the United States government or its departments or agencies, which is not deducted under subsection J of this section.
L. The department shall require every person claiming a deduction provided by subsection J or K of this section to file on forms prescribed by the department at such times as the department directs a sworn statement disclosing the name of the purchaser and the exact amount of sales on which the exclusion or deduction is claimed.
M. In computing the tax base, gross proceeds of sales or gross income does not include:
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.
N. There shall be deducted from the tax base the amount received from sales of solar energy devices. The retailer shall register with the department as a solar energy retailer. By registering, the retailer acknowledges that it will make its books and records relating to sales of solar energy devices available to the department for examination.
O. In computing the tax base in the case of the sale or transfer of wireless telecommunications equipment as an inducement to a customer to enter into or continue a contract for telecommunications services that are taxable under section 42‑5064, gross proceeds of sales or gross income does not include any sales commissions or other compensation received by the retailer as a result of the customer entering into or continuing a contract for the telecommunications services.
P. For the purposes of this section, a sale of wireless telecommunications equipment to a person who holds the equipment for sale or transfer to a customer as an inducement to enter into or continue a contract for telecommunications services that are taxable under section 42‑5064 is considered to be a sale for resale in the regular course of business.
Q. Retail sales of prepaid calling cards or prepaid authorization numbers for telecommunications services, including sales of reauthorization of a prepaid card or authorization number, are subject to tax under this section.
R. For the purposes of this section, the diversion of gas from a pipeline by a person engaged in the business of:
1. Operating a natural or artificial gas pipeline, for the sole purpose of fueling compressor equipment to pressurize the pipeline, is not a sale of the gas to the operator of the pipeline.
2. Converting natural gas into liquefied natural gas, for the sole purpose of fueling compressor equipment used in the conversion process, is not a sale of gas to the operator of the compressor equipment.
S. If a seller is entitled to a deduction pursuant to subsection B, paragraph 16, subdivision (b) of this section, the department may require the purchaser to establish that the requirements of subsection B, paragraph 16, subdivision (b) of this section have been satisfied. If the purchaser cannot establish that the requirements of subsection B, paragraph 16, subdivision (b) of this section have been satisfied, the purchaser is liable in an amount equal to any tax, penalty and interest which the seller would have been required to pay under article 1 of this chapter if the seller had not made a deduction pursuant to subsection B, paragraph 16, subdivision (b) of this section. Payment of the amount under this subsection exempts the purchaser from liability for any tax imposed under article 4 of this chapter and related to the tangible personal property purchased. The amount shall be treated as transaction privilege tax to the purchaser and as tax revenues collected from the seller to designate the distribution base pursuant to section 42‑5029.
T. For the purposes of section 42‑5032.01, the department shall separately account for revenues collected under the retail classification from businesses selling tangible personal property at retail:
1. On the premises of a multipurpose facility that is owned, leased or operated by the tourism and sports authority pursuant to title 5, chapter 8.
2. At 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.
U. In computing the tax base for the sale of a motor vehicle to a nonresident of this state, if the purchaser's state of residence allows a corresponding use tax exemption to the tax imposed by article 1 of this chapter and the rate of the tax in the purchaser's state of residence is lower than the rate prescribed in article 1 of this chapter or if the purchaser's state of residence does not impose an excise tax, and the nonresident has secured a special ninety day nonresident registration permit for the vehicle as prescribed by sections 28‑2154 and 28‑2154.01, there shall be deducted from the tax base a portion of the gross proceeds or gross income from the sale so that the amount of transaction privilege tax that is paid in this state is equal to the excise tax that is imposed by the purchaser's state of residence on the nonexempt sale or use of the motor vehicle.
V. For the purposes of this section:
1. "Aircraft" includes:
(a) An airplane flight simulator that is approved by the federal aviation administration for use as a phase II or higher flight simulator under appendix H, 14 Code of Federal Regulations part 121.
(b) Tangible personal property that is permanently affixed or attached as a component part of an aircraft that is owned or operated by a certificated or licensed carrier of persons or property.
2. "Other accessories and related equipment" includes aircraft accessories and equipment such as ground service equipment that physically contact aircraft at some point during the overall carrier operation.
3. "Selling at retail" means a sale for any purpose other than for resale in the regular course of business in the form of tangible personal property, but transfer of possession, lease and rental as used in the definition of sale mean only such transactions as are found on investigation to be in lieu of sales as defined without the words lease or rental.
W. For the purposes of subsection J of this section:
1. "Assembler" means a person who unites or combines products, wares or articles of manufacture so as to produce a change in form or substance without changing or altering the component parts.
2. "Manufacturer" means a person who is principally engaged in the fabrication, production or manufacture of products, wares or articles for use from raw or prepared materials, imparting to those materials new forms, qualities, properties and combinations.
3. "Modifier" means a person who reworks, changes or adds to products, wares or articles of manufacture.
4. "Overhead materials" means tangible personal property, the gross proceeds of sales or gross income derived from which would otherwise be included in the retail classification, and which are used or consumed in the performance of a contract, the cost of which is charged to an overhead expense account and allocated to various contracts based upon generally accepted accounting principles and consistent with government contract accounting standards.
5. "Repairer" means a person who restores or renews products, wares or articles of manufacture.
6. "Subcontract" means an agreement between a contractor and any person who is not an employee of the contractor for furnishing of supplies or services that, in whole or in part, are necessary to the performance of one or more government contracts, or under which any portion of the contractor's obligation under one or more government contracts is performed, undertaken or assumed and that includes provisions causing title to overhead materials or other tangible personal property used in the performance of the subcontract to pass to the government or that includes provisions incorporating such title passing clauses in a government contract into the subcontract.
Sec. 48. Section 42-5071, Arizona Revised Statutes, is amended to read:
42-5071. Personal property rental classification
A. The personal property rental classification is comprised of the business of leasing or renting tangible personal property for a consideration. The tax does not apply to:
1. Leasing or renting films, tapes or slides used by theaters or movies, which are engaged in business under the amusement classification, or used by television stations or radio stations.
2. Activities engaged in by the Arizona exposition and state fair board or county fair commissions in connection with events sponsored by such entities.
3. Leasing or renting tangible personal property by a parent corporation to a subsidiary corporation or by a subsidiary corporation to another subsidiary of the same parent corporation if taxes were paid under this chapter on the gross proceeds or gross income accruing from the initial sale of the tangible personal property. For the purposes of this paragraph, "subsidiary" means a corporation of which at least eighty per cent of the voting shares are owned by the parent corporation.
4. Operating coin operated washing, drying and dry cleaning machines or coin operated car washing machines at establishments for the use of such machines.
5. Leasing or renting tangible personal property for incorporation into or comprising any part of a qualified environmental technology facility as described in section 41‑1514.02. This paragraph shall apply for ten full consecutive calendar or fiscal years following the initial lease or rental by each qualified environmental technology manufacturer, producer or processor.
6. Leasing or renting aircraft, flight simulators or similar training equipment to students or staff by nonprofit, accredited educational institutions that offer associate or baccalaureate degrees in aviation or aerospace related fields.
7. Leasing or renting photographs, transparencies or other creative works used by this state on internet web sites, in magazines or in other publications that encourage tourism.
B. The tax base for the personal property rental classification is the gross proceeds of sales or gross income derived from the business, but the gross proceeds of sales or gross income derived from the following shall be deducted from the tax base:
1. Reimbursements by the lessee to the lessor of a motor vehicle for payments by the lessor of the applicable fees and taxes imposed by sections 28‑2003, 28‑2352, 28‑2402, 28‑2481 and 28‑5801, title 28, chapter 15, article 2 and article IX, section 11, Constitution of Arizona, to the extent such amounts are separately identified as such fees and taxes and are billed to the lessee.
2. Leases or rentals of tangible personal property which, if it had been purchased instead of leased or rented by the lessee, would have been exempt under:
(a) Section 42‑5061, subsection A, paragraph 8, 9, 12, 13, 25, 29, 50 or 55.
(b) Section 42‑5061, subsection B, except that a lease or rental of new machinery or equipment is not exempt pursuant to:
(i) Section 42‑5061, subsection B, paragraph 13 if the lease is for less than two years.
(ii) Section 42-5061, subsection B, paragraph 22 if the lease is for less than five years.
(c) Section 42‑5061, subsection J, paragraph 1.
(d) Section 42‑5061, subsection N.
3. Motor vehicle fuel and use fuel that are subject to a tax imposed under title 28, chapter 16, article 1, sales of use fuel to a holder of a valid single trip use fuel tax permit issued under section 28‑5739 and Sales of aviation fuel that are is subject to the tax imposed under section 28‑8344 and other fuel that is used for the propulsion of motor vehicles and watercraft.
4. Leasing or renting a motor vehicle subject to and upon which the fee has been paid under title 28, chapter 16, article 4.
5. Amounts received by a motor vehicle dealer for the first month of a lease payment if the lease and the lease payment for the first month of the lease are transferred to a third party leasing company.
C. Sales of tangible personal property to be leased or rented to a person engaged in a business classified under the personal property rental classification are deemed to be resale sales.
D. In computing the tax base, the gross proceeds of sales or gross income from the lease or rental of a motor vehicle does not include any amount attributable to the car rental surcharge under section 28‑5810 or 48‑4234.
E. Until December 31, 1988, leasing or renting animals for recreational purposes is exempt from the tax imposed by this section. Beginning January 1, 1989, the gross proceeds or gross income from leasing or renting animals for recreational purposes is 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 monies paid as taxes will be returned to the customer. END_STATUTE
Sec. 49. Section 42-5151, Arizona Revised Statutes, is amended to read:
42-5151. Definitions
In this article, unless the context otherwise requires:
1. "Ancillary services" means those services so designated in federal energy regulatory commission order 888 adopted in 1996 that include the services necessary to support the transmission of electricity from resources to loads while maintaining reliable operation of the transmission system according to good utility practice.
2. "Electric distribution service" means distributing electricity to retail electric customers through the use of electric distribution facilities.
3. "Electric generation service" means providing electricity for sale to retail electric customers but excluding electric distribution or transmission services.
4. "Electric transmission service" means transmitting electricity to retail electric customers or to electric distribution facilities so classified by the federal energy regulatory commission or, to the extent permitted by law, so classified by the Arizona corporation commission.
5. "Electric utility services" means the business of providing electric ancillary services, electric distribution services, electric generation services, electric transmission services and other services related to providing electricity.
6. "Electricity" means electric energy, electric capacity or electric capacity and energy.
7. "Electricity supplier" means a person, whether acting in a principal, agent or other capacity, that offers to sell electricity to a retail electric customer in this state.
8. "Natural gas" means natural or artificial gas, and includes methane and propane gas, the natural gas commodity, natural gas pipeline capacity or natural gas commodity and pipeline capacity.
9. "Natural gas utility services" means the business of selling natural gas or providing natural gas transportation services or other services related to providing natural gas.
10. "Notice" means written notice served personally or by certified mail and addressed to the last known address of the person to whom such notice is given.
11. "Other services" includes metering, meter reading services, billing and collecting services.
12. "Person" means an individual, firm, partnership, joint venture, association, corporation, estate, trust, receiver or syndicate, this state or a county, city, municipality, district or other political subdivision or agency thereof.
13. "Purchase" means any transfer, exchange or barter, conditional or otherwise, in any manner or by any means, of tangible personal property for a consideration, including transactions by which the possession of property is transferred but the seller retains the title as security for payment.
14. "Purchase price" or "sales price" means the total amount for which tangible personal property is sold, including any services that are a part of the sale, valued in money, whether paid in money or otherwise, and any amount for which credit is given to the purchaser by the seller without any deduction on account of the cost of the property sold, materials used, labor or services performed, interest charged, losses or other expenses, but does not include:
(a) Discounts allowed and taken.
(b) Charges for labor or services in installing, remodeling or repairing.
(c) Freight costs billed to and collected from a purchaser by a retailer for tangible personal property which, on the order of the retailer, is shipped directly from a manufacturer or wholesaler to the purchaser.
(d) Amounts attributable to federal excise taxes imposed by 26 United States Code section 4001, 4051 or 4081 on sales of heavy trucks and trailers and automobiles or on sales of use fuel, as defined in section 28‑5601.
(e) The value of merchandise that is traded in on the purchase of new or pre‑owned merchandise when the trade‑in allowance is deducted from the sales price of the new or pre‑owned merchandise before the completion of the sale.
15. "Retail electric customer" means a person who purchases electricity for that person's own use, including use in that person's trade or business, and not for resale, redistribution or retransmission.
16. "Retail natural gas customer" means a person who purchases natural gas for that person's own use, including use in that person's trade or business, and not for resale, redistribution or retransmission.
17. "Retailer" includes:
(a) Every person engaged in the business of making sales of tangible personal property for storage, use or other consumption or in the business of making sales at auction of tangible personal property owned by that person or others for storage, use or other consumption. If in the opinion of the department it is necessary for the efficient administration of this article to regard any salesmen, representatives, peddlers or canvassers as the agents of the dealers, distributors, supervisors or employers under whom they operate or from whom they obtain the tangible personal property sold by them, regardless of whether they are making sales on their own behalf or on behalf of such dealers, distributors, supervisors or employers, the department may so regard them and may regard the dealers, distributors, supervisors or employers as retailers for purposes of this article.
(b) A person who solicits orders for tangible personal property by mail if the solicitations are substantial and recurring or if the retailer benefits from any banking, financing, debt collection, telecommunication, television shopping system, cable, optic, microwave or other communication system or marketing activities occurring in this state or benefits from the location in this state of authorized installation, servicing or repair facilities.
18. "Solar daylighting" means a device that is specifically designed to capture and redirect the visible portion of the solar beam, while controlling the infrared portion, for use in illuminating interior building spaces in lieu of artificial lighting.
19. "Solar energy device" means a system or series of mechanisms designed primarily to provide heating, to provide cooling, to produce electrical power, to produce mechanical power, to provide solar daylighting or to provide any combination of the foregoing by means of collecting and transferring solar generated energy into such uses by either active or passive means, including wind generator systems that produce electricity. Solar energy systems may also have the capability of storing solar energy for future use. Passive systems shall clearly be designed as a solar energy device, such as a trombe wall, and not merely as a part of a normal structure, such as a window.
20. "Storage" means keeping or retaining tangible personal property purchased from a retailer for any purpose except sale in the regular course of business or subsequent use solely outside this state.
21. "Taxpayer" means any retailer or person storing, using or consuming tangible personal property the storage, use or consumption of which is subject to the tax imposed by this article when such tax was not paid to a retailer.
22. "Use or consumption" means the exercise of any right or power over tangible personal property incidental to owning the property except holding for sale or selling the property in the regular course of business.
23. "Utility business" means a person that is engaged in the business of providing electric utility services to retail electric customers or natural gas utility services to retail natural gas customers.
Sec. 50. Section 42-5159, Arizona Revised Statutes, is amended to read:
42-5159. Exemptions
A. The tax levied by this article does not apply to the storage, use or consumption in this state of the following described tangible personal property:
1. Tangible personal property sold in this state, the gross receipts from the sale of which are included in the measure of the tax imposed by articles 1 and 2 of this chapter.
2. Tangible personal property the sale or use of which has already been subjected to an excise tax at a rate equal to or exceeding the tax imposed by this article under the laws of another state of the United States. If the excise tax imposed by the other state is at a rate less than the tax imposed by this article, the tax imposed by this article is reduced by the amount of the tax already imposed by the other state.
3. Tangible personal property, the storage, use or consumption of which the constitution or laws of the United States prohibit this state from taxing or to the extent that the rate or imposition of tax is unconstitutional under the laws of the United States.
4. Tangible personal property which directly enters into and becomes an ingredient or component part of any manufactured, fabricated or processed article, substance or commodity for sale in the regular course of business.
5. Motor vehicle fuel and use fuel, the sales, distribution or use of which in this state is subject to the tax imposed under title 28, chapter 16, article 1, use fuel which is sold to or used by a person holding a valid single trip use fuel tax permit issued under section 28‑5739, Aviation fuel, the sales, distribution or use of which in this state is subject to the tax imposed under section 28‑8344, and jet fuel, the sales, distribution or use of which in this state is subject to the tax imposed under article 8 of this chapter, and other fuel that is used for the propulsion of motor vehicles and watercraft.
6. Tangible personal property brought into this state by an individual who was a nonresident at the time the property was purchased for storage, use or consumption by the individual if the first actual use or consumption of the property was outside this state, unless the property is used in conducting a business in this state.
7. Purchases of implants used as growth promotants and injectable medicines, not already exempt under paragraph 16 of this subsection, for livestock and poultry owned by, or in possession of, persons who are engaged in producing livestock, poultry, or livestock or poultry products, or who are engaged in feeding livestock or poultry commercially. For the purposes of this paragraph, "poultry" includes ratites.
8. Livestock, poultry, supplies, feed, salts, vitamins and other additives for use or consumption in the businesses of farming, ranching and feeding livestock or poultry, not including fertilizers, herbicides and insecticides. For the purposes of this paragraph, "poultry" includes ratites.
9. Seeds, seedlings, roots, bulbs, cuttings and other propagative material for use in commercially producing agricultural, horticultural, viticultural or floricultural crops in this state.
10. Tangible personal property not exceeding two hundred dollars in any one month purchased by an individual at retail outside the continental limits of the United States for the individual's own personal use and enjoyment.
11. Advertising supplements which are intended for sale with newspapers published in this state and which have already been subjected to an excise tax under the laws of another state in the United States which equals or exceeds the tax imposed by this article.
12. Materials that are purchased by or for publicly funded libraries including school district libraries, charter school libraries, community college libraries, state university libraries or federal, state, county or municipal libraries for use by the public as follows:
(a) Printed or photographic materials, beginning August 7, 1985.
(b) Electronic or digital media materials, beginning July 17, 1994.
13. Tangible personal property purchased by:
(a) A hospital organized and operated exclusively for charitable purposes, no part of the net earnings of which inures to the benefit of any private shareholder or individual.
(b) A hospital operated by this state or a political subdivision of this state.
(c) A licensed nursing care institution or a licensed residential care institution or a residential care facility operated in conjunction with a licensed nursing care institution or a licensed kidney dialysis center, which provides medical services, nursing services or health related services and is not used or held for profit.
(d) A qualifying health care organization, as defined in section 42‑5001, if the tangible personal property is used by the organization solely to provide health and medical related educational and charitable services.
(e) A qualifying health care organization as defined in section 42‑5001 if the organization is dedicated to providing educational, therapeutic, rehabilitative and family medical education training for blind, visually impaired and multihandicapped children from the time of birth to age twenty‑one.
(f) A nonprofit charitable organization that has qualified under section 501(c)(3) of the United States internal revenue code and that engages in and uses such property exclusively in programs for mentally or physically handicapped persons if the programs are exclusively for training, job placement, rehabilitation or testing.
(g) A person that is subject to tax under article 1 of this chapter by reason of being engaged in business classified under the prime contracting classification under section 42‑5075, or a subcontractor working under the control of a prime contractor, if the tangible personal property is any of the following:
(i) Incorporated or fabricated by the contractor into a structure, project, development or improvement in fulfillment of a contract.
(ii) Used in environmental response or remediation activities under section 42‑5075, subsection B, paragraph 6.
(iii) Incorporated or fabricated by the person into any lake facility development in a commercial enhancement reuse district under conditions prescribed for the deduction allowed by section 42‑5075, subsection B, paragraph 8.
(h) A nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code if the property is purchased from the parent or an affiliate organization that is located outside this state.
(i) A qualifying community health center as defined in section 42‑5001.
(j) A nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code and that regularly serves meals to the needy and indigent on a continuing basis at no cost.
(k) A person engaged in business under the transient lodging classification if the property is a personal hygiene item or articles used by human beings for food, drink or condiment, except alcoholic beverages, which are furnished without additional charge to and intended to be consumed by the transient during the transient's occupancy.
(l) For taxable periods beginning from and after June 30, 2001, a nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code and that provides residential apartment housing for low income persons over sixty‑two years of age in a facility that qualifies for a federal housing subsidy, if the tangible personal property is used by the organization solely to provide residential apartment housing for low income persons over sixty‑two years of age in a facility that qualifies for a federal housing subsidy.
14. Commodities, as defined by title 7 United States Code section 2, that are consigned for resale in a warehouse in this state in or from which the commodity is deliverable on a contract for future delivery subject to the rules of a commodity market regulated by the United States commodity futures trading commission.
15. Tangible personal property sold by:
(a) Any nonprofit organization organized and operated exclusively for charitable purposes and recognized by the United States internal revenue service under section 501(c)(3) of the internal revenue code.
(b) A nonprofit organization that is exempt from taxation under section 501(c)(3) 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.
(c) 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 if the organization sponsors or operates a rodeo featuring primarily farm and ranch animals and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.
16. Drugs and medical oxygen, including delivery hose, mask or tent, regulator and tank, on the prescription of a member of the medical, dental or veterinarian profession who is licensed by law to administer such substances.
17. Prosthetic appliances, as defined in section 23‑501, prescribed or recommended by a person who is licensed, registered or otherwise professionally credentialed as a physician, dentist, podiatrist, chiropractor, naturopath, homeopath, nurse or optometrist.
18. Prescription eyeglasses and contact lenses.
19. Insulin, insulin syringes and glucose test strips.
20. Hearing aids as defined in section 36‑1901.
21. Durable medical equipment which has a centers for medicare and medicaid services common procedure code, is designated reimbursable by medicare, is prescribed by a person who is licensed under title 32, chapter 7, 13, 17 or 29, can withstand repeated use, is primarily and customarily used to serve a medical purpose, is generally not useful to a person in the absence of illness or injury and is appropriate for use in the home.
22. Food, as provided in and subject to the conditions of article 3 of this chapter and section 42‑5074.
23. 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).
24. Food and drink provided without monetary charge by a taxpayer which is subject to section 42‑5074 to its employees for their own consumption on the premises during the employees' hours of employment.
25. Tangible personal property that is used or consumed in a business subject to section 42‑5074 for human food, drink or condiment, whether simple, mixed or compounded.
26. Food, drink or condiment and accessory tangible personal property that are acquired for use by or provided to a school district or charter school if they are to be either served or prepared and served to persons for consumption on the premises of a public school in a school district during school hours.
27. Lottery tickets or shares purchased pursuant to title 5, chapter 5, article 1.
28. Textbooks, sold by a bookstore, that are required by any state university or community college.
29. Magazines, other periodicals or other publications produced by this state to encourage tourist travel.
30. Paper machine clothing, such as forming fabrics and dryer felts, purchased by a paper manufacturer and directly used or consumed in paper manufacturing.
31. Coal, petroleum, coke, natural gas, virgin fuel oil and electricity purchased by a qualified environmental technology manufacturer, producer or processor as defined in section 41‑1514.02 and directly used or consumed in the generation or provision of on‑site power or energy solely for environmental technology manufacturing, producing or processing or environmental protection. This paragraph shall apply for fifteen full consecutive calendar or fiscal years from the date the first paper manufacturing machine is placed in service. In the case of an environmental technology manufacturer, producer or processor who does not manufacture paper, the time period shall begin with the date the first manufacturing, processing or production equipment is placed in service.
32. Motor vehicles that are removed from inventory by a motor vehicle dealer as defined in section 28‑4301 and that are provided to:
(a) Charitable or educational institutions that are exempt from taxation under section 501(c)(3) of the internal revenue code.
(b) Public educational institutions.
(c) State universities or affiliated organizations of a state university if no part of the organization's net earnings inures to the benefit of any private shareholder or individual.
33. Natural gas or liquefied petroleum gas used to propel a motor vehicle.
34. Machinery, equipment, technology or related supplies that are only useful to assist a person who is physically disabled as defined in section 46‑191, has a developmental disability as defined in section 36‑551 or has a head injury as defined in section 41‑3201 to be more independent and functional.
35. Liquid, solid or gaseous chemicals used in manufacturing, processing, fabricating, mining, refining, metallurgical operations, research and development and, beginning on January 1, 1999, printing, if using or consuming the chemicals, alone or as part of an integrated system of chemicals, involves direct contact with the materials from which the product is produced for the purpose of causing or permitting a chemical or physical change to occur in the materials as part of the production process. This paragraph does not include chemicals that are used or consumed in activities such as packaging, storage or transportation but does not affect any exemption for such chemicals that is otherwise provided by this section. For the purposes of this paragraph, "printing" means a commercial printing operation and includes job printing, engraving, embossing, copying and bookbinding.
36. Food, drink and condiment purchased for consumption within the premises of any prison, jail or other institution under the jurisdiction of the state department of corrections, the department of public safety, the department of juvenile corrections or a county sheriff.
37. A motor vehicle and any repair and replacement parts and tangible personal property becoming a part of such motor vehicle sold 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 or renting such property.
38. Tangible personal property which is or directly enters into and becomes an ingredient or component part of cards used as prescription plan identification cards.
39. Overhead materials or other tangible personal property that is used in performing a contract between the United States government and a manufacturer, modifier, assembler or repairer, including property used in performing a subcontract with a government contractor who is a manufacturer, modifier, assembler or repairer, to which title passes to the government under the terms of the contract or subcontract. For the purposes of this paragraph:
(a) "Overhead materials" means tangible personal property, the gross proceeds of sales or gross income derived from which would otherwise be included in the retail classification, and which are used or consumed in the performance of a contract, the cost of which is charged to an overhead expense account and allocated to various contracts based upon generally accepted accounting principles and consistent with government contract accounting standards.
(b) "Subcontract" means an agreement between a contractor and any person who is not an employee of the contractor for furnishing of supplies or services that, in whole or in part, are necessary to the performance of one or more government contracts, or under which any portion of the contractor's obligation under one or more government contracts is performed, undertaken or assumed, and that includes provisions causing title to overhead materials or other tangible personal property used in the performance of the subcontract to pass to the government or that includes provisions incorporating such title passing clauses in a government contract into the subcontract.
40. Through December 31, 1994, tangible personal property sold pursuant to a personal property liquidation transaction, as defined in section 42‑5061. From and after December 31, 1994, tangible personal property sold pursuant to a personal property liquidation transaction, as defined in section 42‑5061, if the gross proceeds of the sales were included in the measure of the tax imposed by article 1 of this chapter or if the personal property liquidation was a casual activity or transaction.
41. Wireless telecommunications equipment that is held for sale or transfer to a customer as an inducement to enter into or continue a contract for telecommunications services that are taxable under section 42‑5064.
42. Alternative fuel, as defined in section 1‑215, purchased by a used oil fuel burner who has received a permit to burn used oil or used oil fuel under section 49‑426 or 49‑480.
43. Tangible personal property purchased by a commercial airline and consisting of food, beverages and condiments and accessories used for serving the food and beverages, if those items are to be provided without additional charge to passengers for consumption in flight. For the purposes of this paragraph, "commercial airline" means a person holding a federal certificate of public convenience and necessity or foreign air carrier permit for air transportation to transport persons, property or United States mail in intrastate, interstate or foreign commerce.
44. Alternative fuel vehicles if the vehicle was manufactured as a diesel fuel vehicle and converted to operate on alternative fuel and equipment that is installed in a conventional diesel fuel motor vehicle to convert the vehicle to operate on an alternative fuel, as defined in section 1‑215.
45. Gas diverted from a pipeline, by a person engaged in the business of:
(a) Operating a natural or artificial gas pipeline, and used or consumed for the sole purpose of fueling compressor equipment that pressurizes the pipeline.
(b) Converting natural gas into liquefied natural gas, and used or consumed for the sole purpose of fueling compressor equipment used in the conversion process.
46. Tangible personal property that is excluded, exempt or deductible from transaction privilege tax pursuant to section 42‑5063.
47. Tangible personal property purchased to be incorporated or installed as part of environmental response or remediation activities under section 42‑5075, subsection B, paragraph 6.
48. Tangible personal property sold 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.
49. Prepared food, drink or condiment donated by a restaurant as classified in section 42-5074, subsection A to a nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code and that regularly serves meals to the needy and indigent on a continuing basis at no cost.
50. Application services that are designed to assess or test student learning or to promote curriculum design or enhancement purchased by or for any school district, charter school, community college or state university. For the purposes of this paragraph:
(a) "Application services" means software applications provided remotely using hypertext transfer protocol or another network protocol.
(b) "Curriculum design or enhancement" means planning, implementing or reporting on courses of study, lessons, assignments or other learning activities.
B. In addition to the exemptions allowed by subsection A of this section, the following categories of tangible personal property are also exempt:
1. Machinery, or equipment, used directly in manufacturing, processing, fabricating, job printing, refining or metallurgical operations. The terms "manufacturing", "processing", "fabricating", "job printing", "refining" and "metallurgical" as used in this paragraph refer to and include those operations commonly understood within their ordinary meaning. "Metallurgical operations" includes leaching, milling, precipitating, smelting and refining.
2. Machinery, or equipment, used directly in the process of extracting ores or minerals from the earth for commercial purposes, including equipment required to prepare the materials for extraction and handling, loading or transporting such extracted material to the surface. "Mining" includes underground, surface and open pit operations for extracting ores and minerals.
3. Tangible personal property sold to persons engaged in business classified under the telecommunications classification under section 42‑5064 and consisting of central office switching equipment, switchboards, private branch exchange equipment, microwave radio equipment and carrier equipment including optical fiber, coaxial cable and other transmission media which are components of carrier systems.
4. Machinery, equipment or transmission lines used directly in producing or transmitting electrical power, but not including distribution. Transformers and control equipment used at transmission substation sites constitute equipment used in producing or transmitting electrical power.
5. Neat animals, horses, asses, sheep, ratites, swine or goats used or to be used as breeding or production stock, including sales of breedings or ownership shares in such animals used for breeding or production.
6. Pipes or valves four inches in diameter or larger used to transport oil, natural gas, artificial gas, water or coal slurry, including compressor units, regulators, machinery and equipment, fittings, seals and any other part that is used in operating the pipes or valves.
7. Aircraft, navigational and communication instruments and other accessories and related equipment sold to:
(a) A person holding a federal certificate of public convenience and necessity, a supplemental air carrier certificate under federal aviation regulations (14 Code of Federal Regulations part 121) or a foreign air carrier permit for air transportation for use as or in conjunction with or becoming a part of aircraft to be used to transport persons, property or United States mail in intrastate, interstate or foreign commerce.
(b) Any foreign government for use by such government outside of this state, or sold to persons who are not residents of this state and who will not use such property in this state other than in removing such property from this state.
8. Machinery, tools, equipment and related supplies used or consumed directly in repairing, remodeling or maintaining aircraft, aircraft engines or aircraft component parts by or on behalf of a certificated or licensed carrier of persons or property.
9. Rolling stock, rails, ties and signal control equipment used directly to transport persons or property.
10. Machinery or equipment used directly to drill for oil or gas or used directly in the process of extracting oil or gas from the earth for commercial purposes.
11. Buses or other urban mass transit vehicles which are used directly to transport persons or property for hire or pursuant to a governmentally adopted and controlled urban mass transportation program and which are sold to bus companies holding a federal certificate of convenience and necessity or operated by any city, town or other governmental entity or by any person contracting with such governmental entity as part of a governmentally adopted and controlled program to provide urban mass transportation.
12. Groundwater measuring devices required under section 45‑604.
13. New machinery and equipment consisting of tractors, tractor‑drawn implements, self‑powered implements, machinery and equipment necessary for extracting milk, and machinery and equipment necessary for cooling milk and livestock, and drip irrigation lines not already exempt under paragraph 6 of this subsection and that are used for commercial production of agricultural, horticultural, viticultural and floricultural crops and products in this state. For the purposes of this paragraph:
(a) "New machinery and equipment" means machinery or equipment which has never been sold at retail except pursuant to leases or rentals which do not total two years or more.
(b) "Self‑powered implements" includes machinery and equipment that are electric‑powered.
14. Machinery or equipment used in research and development. For the purposes of this paragraph, "research and development" means basic and applied research in the sciences and engineering, and designing, developing or testing prototypes, processes or new products, including research and development of computer software that is embedded in or an integral part of the prototype or new product or that is required for machinery or equipment otherwise exempt under this section to function effectively. Research and development do not include manufacturing quality control, routine consumer product testing, market research, sales promotion, sales service, research in social sciences or psychology, computer software research that is not included in the definition of research and development, or other nontechnological activities or technical services.
15. Machinery and equipment that are purchased by or on behalf of the owners of a soundstage complex and primarily used for motion picture, multimedia or interactive video production in the complex. This paragraph applies only if the initial construction of the soundstage complex begins after June 30, 1996 and before January 1, 2002 and the machinery and equipment are purchased before the expiration of five years after the start of initial construction. For the purposes of this paragraph:
(a) "Motion picture, multimedia or interactive video production" includes products for theatrical and television release, educational presentations, electronic retailing, documentaries, music videos, industrial films, CD‑ROM, video game production, commercial advertising and television episode production and other genres that are introduced through developing technology.
(b) "Soundstage complex" means a facility of multiple stages including production offices, construction shops and related areas, prop and costume shops, storage areas, parking for production vehicles and areas that are leased to businesses that complement the production needs and orientation of the overall facility.
16. Tangible personal property that is used by either of the following to receive, store, convert, produce, generate, decode, encode, control or transmit telecommunications information:
(a) Any direct broadcast satellite television or data transmission service that operates pursuant to 47 Code of Federal Regulations part 25.
(b) Any satellite television or data transmission facility, if both of the following conditions are met:
(i) Over two‑thirds of the transmissions, measured in megabytes, transmitted by the facility during the test period were transmitted to or on behalf of one or more direct broadcast satellite television or data transmission services that operate pursuant to 47 Code of Federal Regulations part 25.
(ii) Over two‑thirds of the transmissions, measured in megabytes, transmitted by or on behalf of those direct broadcast television or data transmission services during the test period were transmitted by the facility to or on behalf of those services.
For the purposes of subdivision (b) of this paragraph, "test period" means the three hundred sixty‑five day period beginning on the later of the date on which the tangible personal property is purchased or the date on which the direct broadcast satellite television or data transmission service first transmits information to its customers.
17. Clean rooms that are used for manufacturing, processing, fabrication or research and development, as defined in paragraph 14 of this subsection, of semiconductor products. For the purposes of this paragraph, "clean room" means all property that comprises or creates an environment where humidity, temperature, particulate matter and contamination are precisely controlled within specified parameters, without regard to whether the property is actually contained within that environment or whether any of the property is affixed to or incorporated into real property. Clean room:
(a) Includes the integrated systems, fixtures, piping, movable partitions, lighting and all property that is necessary or adapted to reduce contamination or to control airflow, temperature, humidity, chemical purity or other environmental conditions or manufacturing tolerances, as well as the production machinery and equipment operating in conjunction with the clean room environment.
(b) Does not include the building or other permanent, nonremovable component of the building that houses the clean room environment.
18. Machinery and equipment that are used directly in the feeding of poultry, the environmental control of housing for poultry, the movement of eggs within a production and packaging facility or the sorting or cooling of eggs. This exemption does not apply to vehicles used for transporting eggs.
19. Machinery or equipment, including related structural components, that is employed in connection with manufacturing, processing, fabricating, job printing, refining, mining, natural gas pipelines, metallurgical operations, telecommunications, producing or transmitting electricity or research and development and that is used directly to meet or exceed rules or regulations adopted by the federal energy regulatory commission, the United States environmental protection agency, the United States nuclear regulatory commission, the Arizona department of environmental quality or a political subdivision of this state to prevent, monitor, control or reduce land, water or air pollution.
20. Machinery and equipment that are used in the commercial production of livestock, livestock products or agricultural, horticultural, viticultural or floricultural crops or products in this state and that are used directly and primarily to prevent, monitor, control or reduce air, water or land pollution.
21. Machinery or equipment that enables a television station to originate and broadcast or to receive and broadcast digital television signals and that was purchased to facilitate compliance with the telecommunications act of 1996 (P.L. 104‑104; 110 Stat. 56; 47 United States Code section 336) and the federal communications commission order issued April 21, 1997 (47 Code of Federal Regulations part 73). This paragraph does not exempt any of the following:
(a) Repair or replacement parts purchased for the machinery or equipment described in this paragraph.
(b) Machinery or equipment purchased to replace machinery or equipment for which an exemption was previously claimed and taken under this paragraph.
(c) Any machinery or equipment purchased after the television station has ceased analog broadcasting, or purchased after November 1, 2009, whichever occurs first.
22. Qualifying equipment that is purchased from and after June 30, 2004 through June 30, 2014 by a qualified business under section 41‑1516 for harvesting or the initial processing of qualifying forest products removed from qualifying projects as defined in section 41‑1516. To qualify for this exemption, the qualified business must obtain and present its certification from the department of commerce at the time of purchase.
23. Machinery, equipment and other tangible personal property used directly in motion picture production by a motion picture production company. To qualify for this exemption, at the time of purchase, the motion picture production company must present to the retailer its certificate that is issued pursuant to section 42-5009, subsection H and that establishes its qualification for the exemption.
C. The exemptions provided by subsection B of this section do not include:
1. Expendable materials. For the purposes of this paragraph, expendable materials do not include any of the categories of tangible personal property specified in subsection B of this section regardless of the cost or useful life of that property.
2. Janitorial equipment and hand tools.
3. Office equipment, furniture and supplies.
4. Tangible personal property used in selling or distributing activities, other than the telecommunications transmissions described in subsection B, paragraph 16 of this section.
5. Motor vehicles required to be licensed by this state, except buses or other urban mass transit vehicles specifically exempted pursuant to subsection B, paragraph 11 of this section, without regard to the use of such motor vehicles.
6. Shops, buildings, docks, depots and all other materials of whatever kind or character not specifically included as exempt.
7. Motors and pumps used in drip irrigation systems.
D. The following shall be deducted in computing the purchase price of electricity by a retail electric customer from a utility business:
1. Revenues received from sales of ancillary services, electric distribution services, electric generation services, electric transmission services and other services related to providing electricity to a retail electric customer who is located outside this state for use outside this state if the electricity is delivered to a point of sale outside this state.
2. Revenues received from providing electricity, including ancillary services, electric distribution services, electric generation services, electric transmission services and other services related to providing electricity with respect to which the transaction privilege tax imposed under section 42‑5063 has been paid.
E. The tax levied by this article does not apply to:
1. The storage, use or consumption in Arizona of machinery, equipment, materials or other tangible personal property if used directly and predominantly to construct a qualified environmental technology manufacturing, producing or processing facility, as described in section 41‑1514.02. This paragraph applies for ten full consecutive calendar or fiscal years after the start of initial construction.
2. The purchase of electricity by a qualified environmental technology manufacturer, producer or processor as defined in section 41‑1514.02 that is used directly in environmental technology manufacturing, producing or processing. This paragraph shall apply for fifteen full consecutive calendar or fiscal years from the date the first paper manufacturing machine is placed in service. In the case of an environmental technology manufacturer, producer or processor who does not manufacture paper, the time period shall begin with the date the first manufacturing, processing or production equipment is placed in service.
3. The purchase of solar energy devices from a retailer that is registered with the department as a solar energy retailer or a solar energy contractor.
F. The following shall be deducted in computing the purchase price of electricity by a retail electric customer from a utility business:
1. Fees charged by a municipally owned utility to persons constructing residential, commercial or industrial developments or connecting residential, commercial or industrial developments to a municipal utility system or systems if the fees are segregated and used only for capital expansion, system enlargement or debt service of the utility system or systems.
2. Reimbursement or contribution compensation to any person or persons owning a utility system for property and equipment installed to provide utility access to, on or across the land of an actual utility consumer if the property and equipment become the property of the utility. This deduction shall not exceed the value of such property and equipment.
G. For the purposes of subsection B of this section:
1. "Aircraft" includes:
(a) An airplane flight simulator that is approved by the federal aviation administration for use as a phase II or higher flight simulator under appendix H, 14 Code of Federal Regulations part 121.
(b) Tangible personal property that is permanently affixed or attached as a component part of an aircraft that is owned or operated by a certificated or licensed carrier of persons or property.
2. "Other accessories and related equipment" includes aircraft accessories and equipment such as ground service equipment that physically contact aircraft at some point during the overall carrier operation.
H. For the purposes of subsection D of this section, "ancillary services", "electric distribution service", "electric generation service", "electric transmission service" and "other services" have the same meanings prescribed in section 42‑5063.
Sec. 51. Title 42, chapter 6, article 1, Arizona Revised Statutes, is amended by adding section 42-6011, to read:
42-6011. Municipal excise tax; motor fuel
A. In addition to taxes authorized by the model city tax code, a city or town may levy a tax on the business of selling at retail fuel that is used for the propulsion of motor vehicles and watercraft, measured and levied as a percentage of the gross proceeds of sales or gross income from the business.
B. Pursuant to article IX, section 14, Constitution of Arizona, a city or town that levies a tax pursuant to this section must dedicate the net revenues from the tax exclusively for highway and street purposes including:
1. Costs of rights-of-way acquisitions and related expenses.
2. Construction, reconstruction, maintenance, repair and roadside development of city or town roads, streets and bridges.
3. Payment of principal and interest on highway and street bonds.
Sec. 52. Title 42, chapter 6, article 3, Arizona Revised Statutes, is amended by adding section 42-6103.01, to read:
42-6103.01. County excise tax; motor fuel
A. In addition to any other tax authorized by this article, any county, on a majority vote of the board of supervisors, may levy and, if levied, the department shall collect a county tax on the business of selling at retail fuel that is used for the propulsion of motor vehicles and watercraft, measured and levied as a percentage of the gross proceeds of sales or gross income from the business.
B. At the end of each month the state treasurer shall transmit the net revenues collected pursuant to this section to the treasurer of the county levying the tax.
C. Pursuant to article IX, section 14, Constitution of Arizona, a county that levies a tax pursuant to this section must dedicate the net revenues from the tax exclusively for highway and street purposes including:
1. Costs of rights-of-way acquisitions and related expenses.
2. Construction, reconstruction, maintenance, repair and roadside development of county roads, streets and bridges.
3. Payment of principal and interest on highway and street bonds.