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ARIZONA STATE SENATE

Forty-ninth Legislature, Sixth Special Session

 

FACT SHEET FOR S.C.R. 1001

 

temporary sales tax; repeal

 

Purpose

 

           Subject to voter approval, constitutionally imposes a temporary state Transaction Privilege Tax (TPT) and use tax for three years.

 

Background

 

            Arizona’s transaction privilege and use taxes are imposed on the privilege of transacting business in the state.  The state tax rates range from 2.5 percent to 5.6 percent depending on the type of business, with most rates at 5.6 percent.

 

            Currently, the transaction privilege tax base is divided into two parts, the distribution base and the non-shared portion.  The distribution base is divided among the incorporated municipalities (25 percent), counties (40.51 percent) and the state general fund (34.49 percent).  The nonshared portion is deposited into the state General Fund (GF).  There are no restrictions on how local governments use their shared revenues from this source.

 

            The use tax is imposed on the purchase price of tangible personal property that is bought out of state and brought into Arizona for use.  The tax is imposed when a transaction privilege tax equal to or greater than the Arizona rate was not paid.  The revenues from the use tax are all deposited into the GF.

 

            This proposal asks voters to approve a one percent transaction privilege and use tax to be in effect for three years.  The revenues will not be shared with local government and will be earmarked for state expenditures for education, health and human services and public safety.

 

            There is no anticipated impact to the GF in FY 2010. The Joint Legislative Budget Committee estimates that there will be an increase in TPT and use tax revenue in FY 2011 of approximately $900 million to $1 billion.

 

Provisions

 

1.      Proposes an amendment to the Arizona Constitution that provides for a one percent temporary transaction privilege tax to be imposed on the taxable base of each respective transaction privilege tax classification that has a state rate of five percent or more and a one percent tax on the tax base of the use tax.

 

2.      Limits the tax, if approved, to three years.

 

3.      Specifies that the tax is levied for the purpose of raising state revenues for the support of primary and secondary education, health and human services and public safety.

 

4.      Stipulates that the net revenues from the tax will be separately accounted for in the GF and appropriated as follows:

a)      Two-thirds for public primary and secondary education.

b)      One-third for health and human services and public safety purposes.

 

5.      Stipulates that the tax, if approved, will be levied and collected beginning on June 1, 2010 and that the tax will expire on May 31, 2013.

 

6.      Specifies that the tax is a separate tax from the current transaction privilege tax and use tax.

 

7.      Specifies that revenues from the tax will not be distributed to counties, municipalities or other government entities.

 

8.      Specifies that the tax is subject to the same exemptions, deductions or other tax reduction features as currently provided for by law for each tax classification.

 

9.      Specifies that the administration and enforcement of the tax will be in the same manner as current transaction privilege and use taxes.

 

10.  Specifies that when the tax expires, any unpaid tax liability incurred while the tax was in effect is still an obligation of the taxpayer that is due and payable.

 

11.  Requires the Secretary of State to submit the proposition to the voters at a special election to be held on May 18, 2010.

 

12.  Repeals this constitutional section on June 1, 2013.

 

Prepared by Senate Research

February 1, 2010

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