REFERENCE TITLE: TPT; prime contracting; exemptions; certificates

State of Arizona House of Representatives Fifty-fifth Legislature First Regular Session 2021

HB 2211

Introduced by Representatives Cobb: Bolick, Toma

 

AN ACT

 

amending sections 42   5008.01, 42   5009 and 42   5075, Arizona Revised Statutes; relating to transaction privilege and use tax.

 

 

(TEXT OF BILL BEGINS ON NEXT PAGE)

 

Be it enacted by the Legislature of the State of Arizona:

Section  1.    Section 42-5008.01, Arizona Revised Statutes, is amended to read:

START_STATUTE42-5008.01.    Liability for amounts equal to retail transaction privilege tax due

A.    A person that is either a prime contractor subject to tax under section 42   5075 or a subcontractor working under the control of such a prime contractor, that purchases tangible personal property, the purchase price of which was excluded from the tax base under the retail classification under section 42   5061, subsection A, paragraph 27 or was excluded from the use tax under section 42   5159, subsection A, paragraph 13, subdivision (g) at the time of purchase, and that incorporates or fabricates the tangible personal property into a project described in section 42   5075, subsection O is liable for an amount equal to any tax that a seller would have been required to pay under section 42   5061 and this article as follows:

1.    The amount of liability shall be calculated and reported based on the location of the project and the taxes imposed under this chapter and chapter 6 of this title.

2.    All deductions, exemptions and exclusions for the cost of tangible personal property provided in section 42   5075 apply to the tangible personal property incorporated or fabricated into the project.

3.    This subsection does not apply to tangible personal property that is incorporated or fabricated into any project under a contract that would otherwise be excluded from the tax base under section 42   5075, without regard to section 42   5075, subsection O.

4.    The amount of liability shall be reported within the reporting period that includes the month in which the person incorporates or fabricates the tangible personal property into the project.

5.    The person is not liable for the amount if the contractor who hired the person executes and provides to the person a certificate stating that the contractor providing the certificate is liable for any amount due under this subsection.   The department shall prescribe the form of the certificate.   If the person has reason to believe that the information contained on the certificate is erroneous or incomplete, the department may disregard the certificate.   The contractor providing the certificate is liable for the amount that otherwise would be due from the person under this subsection.    A certificate provided to a person pursuant to this paragraph is valid for a period of not more than one year.    After the certificate expires, the contractor may execute and provide to the person a new certificate.

B.    A person that purchased tangible personal property, the purchase price of which was excluded from the tax base under section 42   5061, subsection A, paragraph 27 or was excluded from the use tax under section 42   5159, subsection A, paragraph 13, subdivision (g) at the time of purchase, that subsequently cancels its transaction privilege tax license and that uses, consumes, sells or discards the tangible personal property is liable for an amount of tax determined under this subsection.   For the purposes of this subsection:

1.    If the tangible personal property is incorporated or fabricated into a project described in section 42   5075, subsection O, or otherwise used or consumed by the person, the amount of liability shall be calculated and reported based on the person's purchase price of the tangible personal property, the location of the project, use or consumption and the taxes imposed under this chapter and chapter 6 of this title.

2.    If the tangible personal property is sold in a manner that is not subject to tax under this chapter or is discarded, the amount shall be calculated and reported based on the payment received by the person, the location of the person's principal place of business in this state and the taxes imposed under this chapter and chapter 6 of this title.

3.    The person is not liable under this subsection for any amount if the person discards the tangible personal property and does not receive payment of any kind.

4.    The amount of liability shall be reported on or before the business day preceding the last business day of the month following the month in which the person uses the tangible personal property in a manner described in paragraph 1 or 2 of this subsection.   No amount is due under this subsection at any time that the person stores the tangible personal property without using it in a manner described in paragraph 1 or 2 of this subsection.

5.    All deductions, exemptions and exclusions for the cost of tangible personal property provided in section 42   5075 apply to the tangible personal property incorporated or fabricated into a project described in section 42   5075, subsection O.

6.    This subsection does not apply to tangible personal property that is incorporated or fabricated into any project under a contract that would otherwise be excluded from the tax base under section 42   5075, without regard to section 42   5075, subsection O.

7.    The person is not liable for the amount if the contractor who hired the person executes and provides to the person a certificate stating that the contractor providing the certificate is liable for any amount due under this subsection for tangible personal property incorporated or fabricated into a project described in section 42   5075, subsection O.   The department shall prescribe the form of the certificate.   If the person has reason to believe that the information contained on the certificate is erroneous or incomplete, the department may disregard the certificate.   The contractor providing the certificate is liable for the amount that otherwise would be due from the person under this subsection.    A certificate provided to a person pursuant to this paragraph is valid for a period of not more than one year. After the certificate expires, the contractor may execute and provide to the person a new certificate.

C.    A person that fails to report or pay any amount due under subsection A or B of this section is liable for interest in a manner consistent with section 42   1123 and penalties in a manner consistent with section 42   1125.

D.    If a person has paid an amount described in this section on tangible personal property that the person reasonably believed to be described in section 42   5075, subsection O and a final determination is made that section 42   5075, subsection O does not apply, the person is entitled to an offset for the amount paid under this section against the amount of tax liability assessed under this chapter and chapter 6 of this title. END_STATUTE

Sec.  2.    Section 42-5009, Arizona Revised Statutes, is amended to read:

START_STATUTE42-5009.    Certificates establishing deductions; liability for making false certificate

A.    A person who conducts any business classified under article 2 of this chapter may establish entitlement to the allowable deductions from the tax base of that business by both:

1.    Marking the invoice for the transaction to indicate that the gross proceeds of sales or gross income derived from the transaction was deducted from the tax base.

2.    Obtaining a certificate executed by the purchaser indicating the name and address of the purchaser, the precise nature of the business of the purchaser, the purpose for which the purchase was made, the necessary facts to establish the appropriate deduction and the tax license number of the purchaser to the extent the deduction depends on the purchaser conducting business classified under article 2 of this chapter and a certification that the person executing the certificate is authorized to do so on behalf of the purchaser.    The certificate may be disregarded if the seller has reason to believe that the information contained in the certificate is not accurate or complete.

B.    A person who does not comply with subsection A of this section may establish entitlement to the deduction by presenting facts necessary to support the entitlement, but the burden of proof is on that person.

C.    The department may prescribe a form for the certificate described in subsection A of this section.   Under such rules as it may prescribe, the department may also describe transactions with respect to which a person is not entitled to rely solely on the information contained in the certificate provided for in subsection A of this section but must instead obtain such additional information as required by the rules in order to be entitled to the deduction.

D.    If a seller is entitled to a deduction by complying with subsection A of this section, the department may require the purchaser that caused the execution of the certificate to establish the accuracy and completeness of the information required to be contained in the certificate that would entitle the seller to the deduction.    If the purchaser cannot establish the accuracy and completeness of the information, the purchaser is liable in an amount equal to any tax, penalty and interest that the seller would have been required to pay under this article if the seller had not complied with subsection A 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.    The amount shall be treated as tax revenues collected from the seller in order to designate the distribution base for purposes of section 42   5029.

E.    If a seller is entitled to a deduction by complying with subsection  B of this section, the department may require the purchaser to establish the accuracy and completeness of the information provided to the seller that entitled the seller to the deduction.   If the purchaser cannot establish the accuracy and completeness of the information, the purchaser is liable in an amount equal to any tax, penalty and interest that the seller would have been required to pay under this article if the seller had not complied with subsection 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.   The amount shall be treated as tax revenues collected from the seller in order to designate the distribution base for purposes of section 42   5029.

F.    The department may prescribe a form for a certificate used to establish entitlement to the deductions described in section 42   5061, subsection  A, paragraph 46 and section 42   5063, subsection B, paragraph 3. Under rules the department may prescribe, the department may also require additional information for the seller to be entitled to the deduction.    If a seller is entitled to the deductions described in section 42   5061, subsection  A, paragraph 46 and section 42   5063, subsection B, paragraph 3, the department may require the purchaser who executed the certificate to establish the accuracy and completeness of the information contained in the certificate that would entitle the seller to the deduction.    If the purchaser cannot establish the accuracy and completeness of the information, the purchaser is liable in an amount equal to any tax, penalty and interest that the seller would have been required to pay under this article.    Payment of the amount under this subsection exempts the purchaser from liability for any tax imposed under article 4 of this chapter.    The amount shall be treated as tax revenues collected from the seller in order to designate the distribution base for purposes of section 42   5029.

G.    If a seller claims a deduction under section 42   5061, subsection  A, paragraph 25 and establishes entitlement to the deduction with an exemption letter that the purchaser received from the department and the exemption letter was based on a contingent event, the department may require the purchaser that received the exemption letter to establish the satisfaction of the contingent event within a reasonable time.    If the purchaser cannot establish the satisfaction of the event, the purchaser is liable in an amount equal to any tax, penalty and interest that the seller would have been required to pay under this article if the seller had not been furnished the exemption letter.    Payment of the amount under this subsection exempts the purchaser from liability for any tax imposed under article 4 of this chapter.    The amount shall be treated as tax revenues collected from the seller in order to designate the distribution base for purposes of section 42   5029.    For the purposes of this subsection, "reasonable time" means a time limitation that the department determines and that does not exceed the time limitations pursuant to section 42   1104.

H.    The department shall prescribe forms for certificates used to establish the satisfaction of the criteria necessary to qualify the sale of a motor vehicle for the deductions described in section 42   5061, subsection A, paragraph 14, paragraph 28, subdivision (a) and paragraph 44 and subsection  U.    Except as provided in subsection J of this section, to establish entitlement to these deductions, a motor vehicle dealer shall retain:

1.    A valid certificate as prescribed by this subsection completed by the purchaser and obtained prior to the issuance of the nonresident registration permit authorized by section 28   2154.

2.    A copy of the nonresident registration permit authorized by section 28   2154.

3.    A legible copy of a current valid driver license issued to the purchaser by another state or foreign country that indicates an address outside of this state.    For the sale of a motor vehicle to a nonresident entity, the entity's representative must have a current valid driver license issued by the same jurisdiction as that in which the entity is located.

4.    For the purposes of the deduction provided by section 42   5061, subsection A, paragraph 14, a certificate documenting the delivery of the motor vehicle to an out   of   state location.

I.    Notwithstanding subsection A, paragraph 2 of this section, if a motor vehicle dealer has established entitlement to a deduction by complying with subsection H of this section, the department may require the purchaser who executed the certificate to establish the accuracy and completeness of the information contained in the certificate that entitled the motor vehicl