Bill Text: AZ SB1515 | 2019 | Fifty-fourth Legislature 1st Regular | Introduced
Bill Title: Digital goods and services; taxation
Spectrum: Partisan Bill (Democrat 11-0)
Status: (Introduced - Dead) 2019-02-07 - Senate read second time [SB1515 Detail]
Download: Arizona-2019-SB1515-Introduced.html
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REFERENCE TITLE: digital goods and services; taxation |
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State of Arizona Senate Fifty-fourth Legislature First Regular Session 2019
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SB 1515 |
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Introduced by Senators Quezada: Alston, Bradley, Contreras, Dalessandro, Gonzales, Mendez, Navarrete, Otondo, Peshlakai, Steele
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AN ACT
Amending sections 42-5001, 42-5040, 42-5151 and 44-1263, 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 42-5001, Arizona Revised Statutes, is amended to read:
42-5001. Definitions
In this article and article 2 of this chapter, unless the context otherwise requires:
1. "Business" includes all activities or acts, personal or corporate, that are engaged in or caused to be engaged in with the object of gain, benefit or advantage, either directly or indirectly, but does not include either:
(a) Casual activities or sales.
(b) The transfer of electricity from a solar photovoltaic generation system to an electric utility distribution system.
2. "Computer software" means a set of prewritten or custom coded instructions designed to cause a computer or automatic data processing equipment to perform a task. Computer software includes only those sets of coded instructions intended for use by an end user and specifically excludes retained rights in software and master copies of software.
3. "Digital audiovisual works" means a series of related digital images that, when shown in succession, convey an impression of motion, together with any accompanying sounds.
4. "Digital audio works" means digital works that result from the fixation of a series of musical, spoken or other sounds, including ringtones.
5. "Digital books" means digital works that are generally recognized in the ordinary and usual sense as books.
6. "Digital goods" means any combination of digital sounds, images, data, facts or information, including digital audiovisual works, digital audio works and digital books that are transferred electronically or accessed remotely. Digital goods do not include:
(a) Telecommunications services under section 42-5064.
(b) Ancillary services as defined in section 42‑5063.
(c) Computer software.
(d) The internet and internet access as defined in section 42-5064.
2. 7. "Distribution base" means the portion of the revenues derived from the tax levied by this article and articles 5 and 8 of this chapter designated for distribution to counties, municipalities and other purposes according to section 42‑5029, subsection D.
3. 8. "Engaging", when used with reference to engaging or continuing in business, includes the exercise of corporate or franchise powers.
4. 9. "Gross income" means the gross receipts of a taxpayer derived from trade, business, commerce or sales and the value proceeding or accruing from the sale of tangible personal property or service, or both, and without any deduction on account of losses.
5. 10. "Gross proceeds of sales" means the value proceeding or accruing from the sale of tangible personal property without any deduction on account of the cost of property sold, expense of any kind or losses, but cash discounts allowed and taken on sales are not included as gross income.
6. 11. "Gross income" and "gross proceeds of sales" do not include goods, wares or merchandise, or value thereof, returned by customers if the sale price is refunded either in cash or by credit, nor or the value of merchandise traded in on the purchase of new merchandise when the trade‑in allowance is deducted from the sales price of the new merchandise before completion of the sale.
7. 12. "Gross receipts" means the total amount of the sale, lease or rental price, as the case may be, of the retail sales of retailers, including any services that are a part of the sales, valued in money, whether received in money or otherwise, including all receipts, cash, credits and property of every kind or nature, and any amount for which credit is allowed by the seller to the purchaser without any deduction from the amount on account of the cost of the property sold, materials used, labor or service performed, interest paid, losses or any other expense. Gross receipts do not include cash discounts allowed and taken nor or the sale price of property returned by customers if the full sale price is refunded either in cash or by credit.
8. 13. "Person" or "company" includes an individual, firm, partnership, joint venture, association, corporation, estate or trust, this state, any county, city, town, district, other than a school district, or other political subdivision and any other group or combination acting as a unit, and the plural as well as the singular number.
9. 14. "Qualifying community health center":
(a) Means an entity that is recognized as nonprofit under section 501(c)(3) of the United States internal revenue code, that is a community‑based, primary care clinic that has a community‑based board of directors and that is either:
(i) The sole provider of primary care in the community.
(ii) A nonhospital affiliated clinic that is located in a federally designated medically underserved area in this state.
(b) Includes clinics that are being constructed as qualifying community health centers.
10. 15. "Qualifying health care organization" means an entity that is recognized as nonprofit under section 501(c) of the United States internal revenue code and that uses, saves or invests at least eighty per cent percent of all monies that it receives from all sources each year only for health and medical related educational and charitable services, as documented by annual financial audits prepared by an independent certified public accountant, performed according to generally accepted auditing standards and filed annually with the department. Monies that are used, saved or invested to lease, purchase or construct a facility for health and medical related education and charitable services are included in the eighty per cent percent requirement.
11. 16. "Qualifying health sciences educational institution" means an entity that is recognized as nonprofit under section 501(c) of the United States internal revenue code and that solely provides graduate and postgraduate education in the health sciences. For the purposes of this paragraph, "health sciences" includes medicine, nursing, physician's assistant studies, pharmacy, physical therapy, occupational therapy, biomedical sciences, podiatry, clinical psychology, cardiovascular science, nurse anesthesia, dentistry, optometry and veterinary medicine.
12. 17. "Qualifying hospital" means any of the following:
(a) A licensed hospital which that is 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 licensed nursing care institution or a licensed residential care institution or a residential care facility that is 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.
(c) A hospital, nursing care institution or residential care institution which that is operated by the federal government, this state or a political subdivision of this state.
(d) A facility that is under construction and that on completion will be a facility under subdivision (a), (b) or (c) of this paragraph.
13. 18. "Retailer" includes every person that is engaged in the business classified under the retail classification pursuant to section 42‑5061 and, when in the opinion of the department it is necessary for the efficient administration of this article, includes dealers, distributors, supervisors, employers and 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, whether in making sales on their own behalf or on behalf of the dealers, distributors, supervisors or employers.
14. 19. "Sale" means any transfer of title or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means whatever, including consignment transactions and auctions, of tangible personal property or other activities taxable under this chapter, for a consideration, and includes:
(a) Any transaction by which the possession of property is transferred but the seller retains the title as security for the payment of the price.
(b) Fabricating tangible personal property for consumers who furnish either directly or indirectly the materials used in the fabrication work.
(c) Furnishing, preparing or serving for a consideration any tangible personal property consumed on the premises of the person furnishing, preparing or serving the tangible personal property.
15. 20. "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.
16. 21. "Solar energy device" means a system or series of mechanisms that are 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 either by 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.
17. 22. "Tangible personal property" means personal property which that may be seen, weighed, measured, felt or touched or that is in any other manner perceptible to the senses. Tangible personal property includes prewritten computer software and digital goods.
18. 23. "Tax year" or "taxable year" means either the calendar year or the taxpayer's fiscal year, if permission is obtained from the department to use a fiscal year as the tax period instead of the calendar year.
19. 24. "Taxpayer" means any person who is liable for any tax which that is imposed by this article.
20. 25. "Wholesaler" or "jobber" means any person who sells tangible personal property for resale and not for consumption by the purchaser.
Sec. 2. Section 42-5040, Arizona Revised Statutes, is amended to read:
42-5040. Sourcing of certain transactions involving tangible personal property; definitions
A. Except as provided in section 42‑5075, retail sales of tangible personal property shall be sourced as follows:
1. To the seller's business location if the seller receives the order at a business location in this state.
2. Except as provided in section 42‑5008.01, to the purchaser's location in this state if the seller receives the order at a business location outside this state.
B. For the purposes of this section, an order is received when all of the information necessary to accept the order has been received by or on behalf of the seller, regardless of where the order is accepted or approved. The place of business or residence of the purchaser does not determine where the order is received.
C. The gross receipts from leasing or renting tangible personal property shall be sourced as follows:
1. To the lessor's business location if the lessor has a business location in this state.
2. To the lessee's address if the lessor does not have a business location in this state. The gross receipts are taxable when the property is shipped, delivered or otherwise brought into this state for use in this state.
D. The gross receipts from leasing digital goods shall be apportioned to the location of the user of the digital goods. A lessor engaged in leasing digital goods both in and outside this state shall apportion the gross receipts from a single lease by multiplying the gross receipts from the total lease by a lease factor that is a fraction, the numerator of which is the total receipts of the taxpayer from using digital goods, digital codes and digital automated services in this state during the lease period and the denominator of which is the total receipts of the taxpayer derived from the lease in all locations during the lease period.
D. E. For the purposes of this section:
1. "Lessee's address" means the residential address of an individual lessee and the primary business address of any other lessee.
2. "Lessor's business location" means the business address that appears on the lessor's transaction privilege tax license.
Sec. 3. 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. "Computer software" means a set of prewritten or custom coded instructions designed to cause a computer or automatic data processing equipment to perform a task. Computer software includes only those sets of coded instructions intended for use by an end user and specifically excludes retained rights in software and master copies of software.
3. "Digital audiovisual works" means a series of related digital images that, when shown in succession, convey an impression of motion, together with any accompanying sounds.
4. "Digital audio works" means digital works that result from the fixation of a series of musical, spoken, or other sounds, including ringtones.
5. "Digital books" means digital works that are generally recognized in the ordinary and usual sense as books.
6. "Digital goods" means any combination of digital sounds, images, data, facts or information, including digital audiovisual works, digital audio works and digital books that are transferred electronically or accessed remotely. Digital goods do not include:
(a) Telecommunications services under section 42-5064.
(b) Ancillary services as defined in section 42‑5063.
(c) Computer software.
(d) The internet and internet access as defined in section 42-5064.
2. 7. "Electric distribution service" means distributing electricity to retail electric customers through the use of electric distribution facilities.
3. 8. "Electric generation service" means providing electricity for sale to retail electric customers but excluding electric distribution or transmission services.
6. 9. "Electricity" means electric energy, electric capacity or electric capacity and energy.
7. 10. "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.
4. 11. "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. 12. "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.
8. 13. "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. 14. "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. 15. "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. 16. "Other services" includes metering, meter reading services, billing and collecting services.
12. 17. "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. 18. "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. 19. "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 that, 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. 20. "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.
17. 21. "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.
16. 22. "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.
18. 23. "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. 24. "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. 25. "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. For the purposes of this paragraph, sale in the regular course of business does not include the transfer of title or possession of coal back and forth between an owner or operator of a power plant and a person who is responsible for refining coal if both of the following apply:
(a) The transfer of title or possession of the coal is for the purpose of refining the coal.
(b) The title or possession of the coal is transferred back to the owner or operator of the power plant after completion of the coal refining process. For the purposes of this subdivision, "coal refining process" means the application of a coal additive system that aids the reduction of power plant emissions during the combustion of coal and the treatment of flue gas.
26. "Tangible personal property" means personal property that can be seen, weighed, measured, felt or touched or that is in any other manner perceptible to the senses. Tangible personal property includes prewritten computer software and digital goods.
21. 27. "Taxpayer" means any retailer or person storing, using or consuming tangible personal property of which the storage, use or consumption of which is subject to the tax imposed by this article when such if the tax was not paid to a retailer.
22. 28. "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. For the purposes of this paragraph, selling the property in the regular course of business does not include the transfer of title or possession of coal back and forth between an owner or operator of a power plant and a person who is responsible for refining coal if both of the following apply:
(a) The transfer of title or possession of the coal is for the purpose of refining the coal.
(b) The title or possession of the coal is transferred back to the owner or operator of the power plant after completion of the coal refining process. For the purposes of this subdivision, "coal refining process" means the application of a coal additive system that aids the reduction of power plant emissions during the combustion of coal and the treatment of flue gas.
23. 29. "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. 4. Section 44-1263, Arizona Revised Statutes, is amended to read:
44-1263. Inability to conform motor vehicle to express warranty; replacement of vehicle or refund of monies; affirmative defenses; tax refund
A. If the manufacturer, its agents or its authorized dealers are unable to conform the motor vehicle to any applicable express warranty by repairing or correcting any defect or condition which that substantially impairs the use and value of the motor vehicle to the consumer after a reasonable number of attempts, the manufacturer shall replace the motor vehicle with a new motor vehicle or accept return of the motor vehicle from the consumer and refund to the consumer the full purchase price, including all collateral charges, less minus a reasonable allowance for the consumer's use of the vehicle. The manufacturer shall make refunds to the consumer and lienholder, if any, as their interests appear. A reasonable allowance for use is that amount directly attributable to use by the consumer before his the consumer's first written report of the nonconformity to the manufacturer, agent or dealer and during any subsequent period when the vehicle is not out of service by reason of repair.
B. It is an affirmative defense to any claim under this article that either:
1. An alleged nonconformity does not substantially impair the use and market value of the motor vehicle.
2. A nonconformity is the result of abuse, neglect or unauthorized modifications or alterations of the motor vehicle.
C. In the case of taxes paid pursuant to title 42, chapter 5, if the manufacturer:
1. Accepts return of a motor vehicle from a consumer without replacing the motor vehicle, the manufacturer shall refund the amount of tax attributed to the sale of the vehicle to that consumer.
2. Replaces a motor vehicle with a new motor vehicle of lesser value, the manufacturer shall refund the difference between the original amount of tax attributed to the sale of that vehicle and the amount of tax attributed to the sale of the replacement vehicle, excluding the value of the motor vehicle being replaced.
3. Replaces a motor vehicle with a new motor vehicle of greater value, the manufacturer shall calculate the gross proceeds of sales pursuant to section 42‑5001, paragraph 6 11.
D. Pursuant to section 42‑1118, subsection F, the manufacturer may apply to the department of revenue for a refund for the amount of tax that the manufacturer properly refunds to the consumer.
Sec. 5. Intent
The purpose of this act is to clarify statutory intent and to ratify historical administrative interpretation. This act does not provide for any substantive change in the law.
