ARIZONA HOUSE OF REPRESENTATIVES

Fifty-fourth Legislature

Second Regular Session

Senate: FIN DPA 8-0-2-0 | 3rd Read: 30-0-0-0

SB 1140: TPT; exemptions; Indian tribes

Sponsor:  Senator Mesnard, LD 17

Committee on Ways & Means

Overview

Exempts specified sales and contracting activities to and by Indian tribes, tribally owned businesses, tribal entities and affiliated Indians from state and municipal transactional property tax (TPT).

History

TPT is currently levied by the state of Arizona for the privilege of conducting business in the state under 16 separate business classifications. TPT is imposed on the gross receipts of taxable businesses. All gross receipts are subject to tax under one of the TPT business classifications, unless explicitly excluded by statute. Exemptions and deductions under one TPT business classification typically may not be used under another such classification. TPT represents Arizona's largest revenue source, accounting for 45 percent of ongoing state General Fund revenues in FY 2019 (JLBC 2019 Tax Handbook).

The Arizona Department of Revenue (DOR) issued Arizona Transaction Privilege Tax Ruling 95-11 in April 1995 relating to imposing TPT on activities performed on Indian reservations in Arizona. An affiliated Indian or an affiliated Indian vendor engaged in business activities on the reservation are not subject to TPT. Non-Indian or non-affiliated Indian retailers engaged in business activities located on the reservation are not subject to TPT, if the activity is performed for an affiliated Indian. The activity is subject to TPT if it is performed for a non-Indian or non-affiliated Indian. Business activities performed for an affiliated Indian by retailers located off the reservation are subject to TPT. Sales of tangible personal property to an affiliated Indian are not subject to TPT if the solicitation, delivery and payment of the goods take place on the Indian reservation (TPR 95-11).

The sale of a motor vehicle to an enrolled member of an Indian tribe who resides on the Indian reservation established for that tribe is exempt from TPT (A.R.S. § 42-5061).

Provisions

1.    ☐ Prop 105 (45 votes) ☐ Prop 108 (40 votes) ☐ Emergency (40 votes) ☐ Fiscal Note Exempts, from TPT and affiliated excise taxes, the gross proceeds of sales or gross income derived from:

a)    Business activities performed by an Indian tribe, a tribally owned business, a tribal entity or an affiliated Indian if the business activity takes place on an Indian reservation;

b)    Business activities performed by non-affiliated Indians or non-Indian vendors on an Indian reservation for an Indian tribe, a tribal entity or an affiliated Indian;

c)    Contracting activities performed on an Indian reservation by an Indian tribe, a tribally owned business, a tribal entity or an affiliated Indian;

d)    Contracting activities performed for an Indian tribe, a tribally owned business, a tribal entity or an affiliated Indian on an Indian reservation by a non-affiliated Indian or non-Indian contractor;

e)    Retail sales of tangible personal property to an Indian tribe, a tribally owned business, a tribal entity or an affiliated Indian if the sale of tangible personal property takes place on an Indian reservation; and

f)     The sale of a motor vehicle to an enrolled member of an Indian tribe who resides on an Indian reservation established for that tribe. (Sec. 4)

2.    Defines affiliated Indian, Indian reservation and Indian tribe. (Sec. 4)

3.    Deems a sale as having taken place on an Indian reservation if the tangible personal property is ordered from and delivered on an Indian reservation. (Sec. 4)

4.    Requires non-affiliated Indians and non-Indian vendors to maintain sufficient documentation of their taxable and non-taxable gross proceeds and gross income, under any method of recording that properly reflects the proceeds or income, to enable ADOR to determine which transactions are subject to TPT.

5.    Specifies that any gross proceeds and gross income that cannot be identified as non-taxable using the documentation maintained by non-affiliated Indians and non-Indian vendors is considered taxable. (Sec. 4)

6.    Contains technical changes. (Sec. 1, 2 and 3)

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10.                    SB 1140

11.  Initials VP/BBG     Page 0 Ways & Means

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