Arizona Secretary of State - Ken Bennett


 
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TITLE 15. REVENUE

CHAPTER 5. DEPARTMENT OF REVENUE
TRANSACTION PRIVILEGE AND USE TAX SECTION

Authority: A.R.S. § 42-1004

The provisions in these rules became effective August 1, 1976, unless otherwise noted in the Historical Note following the rule.

ARTICLE 1. RETAIL CLASSIFICATION

New Article 1, consisting of Section R15-5-151, adopted effective April 15, 1993 (Supp. 93-2).

Former Article 1, consisting of Sections R15-5-101 through R15-5-104, repealed effective April 13, 1987.

Section

R15-5-101. Sales for Resale or Lease

R15-5-102. Casual Sales

R15-5-103. Sale of Business Enterprises

R15-5-104. Service Businesses

R15-5-105. Services in Connection with Retail Sales

R15-5-106. Finance Charges in Connection with Retail Sales

R15-5-107. Reserved

R15-5-108. Reserved

R15-5-109. Reserved

R15-5-110. Lease-purchase Agreements

R15-5-111. Consignment Sales

R15-5-112. Sales by Auctioneers

R15-5-113. Sales by Trustees, Receivers, and Assignees

R15-5-114. Reserved

R15-5-115. Reserved

R15-5-116. Reserved

R15-5-117. Reserved

R15-5-118. Reserved

R15-5-119. Reserved

R15-5-120. Exempt Sales of Machinery or Equipment

R15-5-121. Sales of Fuel Used in Manufacturing

R15-5-122. Articles Incorporated into a Manufactured Product

R15-5-123. Sale of Tools and Supplies to Businesses

R15-5-124. Reserved

R15-5-125. Reserved

R15-5-126. Manufacturing Labor

R15-5-127. Sales of Fuel

R15-5-128. Electric Power Transmission and Distribution

R15-5-129. Discounts, Refunds, and Coupon Redemption

R15-5-130. Reserved

R15-5-131. Lay-away Sales

R15-5-132. Retail Sales with Trade-ins

R15-5-133. Delivery Charges in Connection with Retail Sales

R15-5-134. Sales of Containers, Bottles, and Labels

R15-5-135. Sales of Restaurant Accessories

R15-5-136. Returnable Containers

R15-5-137. Warranty or Service Provisions and Tangible Personal Property Used in Conjunction with Warranty or Service Provisions

R15-5-138. Warranty or Service Contracts and Tangible Personal Property Used in Conjunction with Warranty or Service Contracts

R15-5-139. Reserved

R15-5-140. Reserved

R15-5-141. Reserved

R15-5-142. Reserved

R15-5-143. Reserved

R15-5-144. Reserved

R15-5-145. Reserved

R15-5-146. Reserved

R15-5-147. Reserved

R15-5-148. Reserved

R15-5-149. Reserved

R15-5-150. Sale of Photography

R15-5-151. Artists

R15-5-152. Tangible Personal Property Used in Soil Remediation Activities

R15-5-153. Four-inch Pipes or Valves

R15-5-154. Computer Hardware and Software

R15-5-155. Reserved

R15-5-156. Sales of Prescription Drugs and Prosthetic Appliances

R15-5-157. Membership Fees

R15-5-158. Postage Stamps

R15-5-159. Reserved

R15-5-160. Reserved

R15-5-161. Reserved

R15-5-162. Reserved

R15-5-163. Reserved

R15-5-164. Reserved

R15-5-165. Reserved

R15-5-166. Reserved

R15-5-167. Reserved

R15-5-168. Reserved

R15-5-169. Reserved

R15-5-170. Interstate and Foreign Transactions

R15-5-171. Sales to a Common Carrier

R15-5-172. Sales by Florists

R15-5-173. Sales of Property Subsequently Taken Out-of-state

R15-5-174. Sales to Non-U.S. Citizens

R15-5-175. Sales to Nonresidents Temporarily Within this State

R15-5-176. Expired

R15-5-177. Reserved

R15-5-178. Reserved

R15-5-179. Reserved

R15-5-180. Sales by Businesses in Federal Areas

R15-5-181. Governmental Organizations

R15-5-182. Nonprofit Organizations

R15-5-183. Exempt Sales to Health Organizations

ARTICLE 2. INTRODUCTION

Section

R15-5-201. Repealed

R15-5-202. Renumbered

R15-5-203. Repealed

R15-5-204. Renumbered

R15-5-205. Repealed

R15-5-206. Repealed

R15-5-207. Repealed

R15-5-208. Repealed

R15-5-209. Repealed

R15-5-210. Repealed

R15-5-211. Repealed

R15-5-212. Renumbered

ARTICLE 3. REPEALED

ARTICLE 4. AMUSEMENT CLASSIFICATION

Section

R15-5-401. Repealed

R15-5-402. Repealed

R15-5-403. Amusement Devices

R15-5-404. Other Income

R15-5-405. Repealed

R15-5-406. Health or Fitness Establishments and Private Recreational Establishments

R15-5-407. Repealed

R15-5-408. Repealed

R15-5-409. Repealed

ARTICLE 5. REPEALED

ARTICLE 6. PRIME CONTRACTING CLASSIFICATION

Section

R15-5-601. Taxpayer Bonds for Contractors

R15-5-602. Expired

R15-5-603. Repealed

R15-5-604. Expired

R15-5-605. Expired

R15-5-606. Expired

R15-5-607. Expired

R15-5-608. Expired

R15-5-609. Repealed

R15-5-610. Repealed

R15-5-611. Repealed

R15-5-612. Expired

R15-5-613. Expired

R15-5-614. Expired

R15-5-615. Expired

R15-5-616. Expired

R15-5-617. Repealed

R15-5-618. Repealed

R15-5-619. Repealed

R15-5-620. Repealed

R15-5-621. Repealed

R15-5-622. Repealed

R15-5-623. Repealed

R15-5-624. Repealed

R15-5-625. Repealed

R15-5-626. Repealed

R15-5-627. Repealed

R15-5-628. Expired

R15-5-629. Expired

ARTICLE 7. REPEALED

ARTICLE 8. REPEALED

ARTICLE 9. MINING CLASSIFICATION

Section

R15-5-901. Definitions

R15-5-902. General

R15-5-903. Renumbered

R15-5-904. Manufacturing or Processing Service Charges

R15-5-905. Products Shipped Out of Arizona

R15-5-906. Repealed

R15-5-907. Repealed

R15-5-908. Actual Freight Paid

R15-5-909. Repealed

ARTICLE 10. TRANSACTION PRIVILEGE TAX -- TRANSIENT LODGING CLASSIFICATION

Section

R15-5-1001. Application of the Definition of Transient for Purposes of Taxation under the Transient Lodging Classification

R15-5-1002. Activities in Addition to Providing Lodging

R15-5-1003. Providing Lodging to Government Agencies

ARTICLE 11. TRANSACTION PRIVILEGE TAX - JOB PRINTING CLASSIFICATION

Section

R15-5-1101. Definitions

R15-5-1102. Printer’s Sale of Printing

R15-5-1103. Repealed

R15-5-1104. Repealed

R15-5-1105. Repealed

R15-5-1106. Sale of Materials to a Printer

R15-5-1107. Repealed

R15-5-1108. Repealed

R15-5-1109. Repealed

R15-5-1110. Repealed

R15-5-1111. Miscellaneous Costs of a Printer Are Not Deductions

R15-5-1112. Sale of Image Developing

ARTICLE 12. REPEALED

ARTICLE 13. SALES TAX -- PUBLISHING CLASSIFICATION

Section

R15-5-1301. Repealed

R15-5-1302. General

R15-5-1303. Definitions

R15-5-1304. Printing costs

R15-5-1305. Out-of-state distribution

R15-5-1306. Repealed

ARTICLE 14. TRANSPORTING CLASSIFICATION

Section

R15-5-1401. Repealed

R15-5-1402. Repealed

R15-5-1403. Repealed

R15-5-1404. Excess Baggage Charges

R15-5-1405. Demurrage Charges

R15-5-1406. Repealed

R15-5-1407. Repealed

R15-5-1408. Rental of Aircraft

ARTICLE 15. PERSONAL PROPERTY RENTAL CLASSIFICATION

Section

R15-5-1501. Repealed

R15-5-1502. General

R15-5-1503. Sourcing of Leased Tangible Personal Property

R15-5-1504. Repealed

R15-5-1505. Repealed

R15-5-1506. Rental of Tangible Personal Property to Government Agencies

R15-5-1507. Rental of Tangible Personal Property to Schools, Churches, and Other Nonprofit Organizations

R15-5-1508. Repealed

R15-5-1509. Repealed

R15-5-1510. Repealed

R15-5-1511. Repealed

R15-5-1512. Lease -- Purchase Agreements

R15-5-1513. Repealed

ARTICLE 16. COMMERCIAL LEASE CLASSIFICATION

Section

R15-5-1601. Definitions

R15-5-1602. Casual Leasing Activity

R15-5-1603. Renumbered

R15-5-1604. Gross Income

R15-5-1605. Rental to Government Agencies

R15-5-1606. Nonprofit Organizations

R15-5-1607. Renumbered

R15-5-1608. Commercial property -- storage facilities

R15-5-1609. Commercial property -- licensee agreements

R15-5-1610. Expired

R15-5-1611. Repealed

R15-5-1612. Repealed

R15-5-1613. Repealed

R15-5-1614. Renumbered

R15-5-1615. Renumbered

R15-5-1616. Repealed

R15-5-1617. Repealed

ARTICLE 17. RESTAURANT CLASSIFICATION

Section

R15-5-1701. Repealed

R15-5-1702. Repealed

R15-5-1703. Repealed

R15-5-1704. Providing Food or Drink to Government Agencies

R15-5-1705. Amusement Devices

R15-5-1706. Cover Charges

R15-5-1707. Repealed

R15-5-1708. Gratuities (Tips)

R15-5-1709. Coupon Redemption

ARTICLE 18. SALES TAX -- RETAIL CLASSIFICATION

Section

R15-5-1801. Repealed

R15-5-1802. Repealed

R15-5-1803. Renumbered

R15-5-1804. Renumbered

R15-5-1805. Renumbered

R15-5-1806. Repealed

R15-5-1807. Repealed

R15-5-1808. Renumbered

R15-5-1809. Renumbered

R15-5-1810. Repealed

R15-5-1811. Renumbered

R15-5-1812. Repealed

R15-5-1813. Renumbered

R15-5-1814. Renumbered

R15-5-1815. Renumbered

R15-5-1816. Repealed

R15-5-1817. Renumbered

R15-5-1818. Renumbered

R15-5-1819. Renumbered

R15-5-1820. Renumbered

R15-5-1821. Renumbered

R15-5-1822. Renumbered

R15-5-1823. Repealed

R15-5-1824. Repealed

R15-5-1825. Renumbered

R15-5-1826. Repealed

R15-5-1827. Repealed

R15-5-1828. Repealed

R15-5-1829. Renumbered

R15-5-1830. Renumbered

R15-5-1831. Repealed

R15-5-1832. Repealed

R15-5-1833. Renumbered

R15-5-1834. Renumbered

R15-5-1835. Repealed

R15-5-1836. Renumbered

R15-5-1837. Repealed

R15-5-1838. Repealed

R15-5-1839. Renumbered

R15-5-1840. Renumbered

R15-5-1841. Repealed

R15-5-1842. Repealed

R15-5-1843. Repealed

R15-5-1844. Repealed

R15-5-1845. Repealed

R15-5-1846. Renumbered

R15-5-1847. Repealed

R15-5-1848. Renumbered

R15-5-1849. Renumbered

R15-5-1850. Renumbered

R15-5-1851. Repealed

R15-5-1852. Repealed

R15-5-1853. Renumbered

ARTICLE 18.1. SALES OF FOOD

Section

R15-5-1860. Definitions

R15-5-1861. Repealed

R15-5-1862. Restaurant food sales

R15-5-1863. Repealed

R15-5-1864. Repealed

R15-5-1864.01. Repealed

R15-5-1864.02. Repealed

R15-5-1864.03. Repealed

R15-5-1864.04. Repealed

R15-5-1865. Repealed

R15-5-1866. Repealed

R15-5-1867. Repealed

ARTICLE 19. REPEALED

ARTICLE 20. GENERAL

Section

R15-5-2001. Definitions

R15-5-2002. Liability for Transaction Privilege Tax

R15-5-2003. Repealed

R15-5-2004. Multi-location and Multi-business Taxpayers

R15-5-2005. Repealed

R15-5-2006. Repealed

R15-5-2007. Credit for Accounting and Reporting Expenses

R15-5-2008. Reserved

R15-5-2009. Reserved

R15-5-2010. Transactions Between Affiliated Persons

R15-5-2011. Bad Debts

ARTICLE 21. UTILITIES CLASSIFICATION

Section

R15-5-2101. Repealed

R15-5-2102. Renumbered

R15-5-2103. Repealed

R15-5-2104. Interstate and Foreign Sales

R15-5-2105. Locally Delivered Utilities

R15-5-2106. Compressed and Bottled Liquids

R15-5-2107. Sales to Irrigation Districts

R15-5-2108. Repealed

R15-5-2109. Repealed

R15-5-2110. Security Deposits

ARTICLE 22. TRANSACTION PRIVILEGE TAX -- ADMINISTRATION

Section

R15-5-2201. Display of License

R15-5-2202. Change in Ownership

R15-5-2203. Change of Name or Trade Name

R15-5-2204. Change of Business Location or Mailing Address

R15-5-2205. Surrender of License upon Sale or Termination of Business

R15-5-2206. Cancellation of License

R15-5-2207. Taxpayer Bonds

R15-5-2208. Expired

R15-5-2209. Renumbered

R15-5-2210. Collection of Tax by the Vendor

R15-5-2210.01. Factoring

R15-5-2211. Election of Basis to Report and Pay Taxes

R15-5-2212. Payment of Taxes

R15-5-2213. Alternative Reporting

R15-5-2214. Establishing the Right to a Deduction by Use of a Certificate or Other Documentation

R15-5-2215. Return and Payment of Tax-estimated Tax

R15-5-2216. Repealed

R15-5-2217. Repealed

R15-5-2218. Repealed

R15-5-2219. Renumbered

R15-5-2220. Registration and Licensing

R15-5-2221. Remittal of Use Tax on Purchases from Unlicensed Retailers

R15-5-2222. Record Retention

R15-5-2223. Repealed

R15-5-2224. Repealed

R15-5-2225. Repealed

R15-5-2226. Repealed

R15-5-2227. Repealed

R15-5-2228. Repealed

R15-5-2229. Repealed

R15-5-2230. Repealed

R15-5-2231. Repealed

R15-5-2232. Repealed

R15-5-2233. Repealed

R15-5-2234. Repealed

R15-5-2235. Repealed

R15-5-2236. Repealed

R15-5-2237. Repealed

R15-5-2238. Reserved

R15-5-2239. Reserved

R15-5-2240. Repealed

R15-5-2241. Repealed

R15-5-2242. Repealed

ARTICLE 23. USE TAX

Section

R15-5-2301. Definitions

R15-5-2302. General

R15-5-2303. Repealed

R15-5-2304. Presumption of Taxability of Property Brought into Arizona

R15-5-2305. Expired

R15-5-2306. Repealed

R15-5-2307. Repealed

R15-5-2308. Repealed

R15-5-2309. Exemptions -- Purchases for Resale or Lease

R15-5-2310. Payment of Use Tax by Purchaser

R15-5-2311. Renumbered

R15-5-2312. Casual Sales

R15-5-2313. Lease-purchase Agreements

R15-5-2314. Purchases from Trustees, Receivers, and Assignees

R15-5-2315. Renumbered

R15-5-2316. Repealed

R15-5-2317. Renumbered

R15-5-2318. Repealed

R15-5-2319. Renumbered

R15-5-2320. Exemptions -- Machinery or Equipment

R15-5-2321. Exemptions -- Articles to be Incorporated into a Manufactured Product

R15-5-2322. Renumbered

R15-5-2323. Repealed

R15-5-2324. Repealed

R15-5-2325. Repealed

R15-5-2326. Manufacturing Labor

R15-5-2327. Fuels

R15-5-2328. Electric Power Transmission and Distribution

R15-5-2329. Repealed

R15-5-2330. Tangible Personal Property Used in Conjunction with Warranty or Service Contracts or Provisions

R15-5-2331. Repealed

R15-5-2332. Delivery Charges

R15-5-2333. Reserved

R15-5-2334. Purchases of Restaurant Accessories

R15-5-2335. Reserved

R15-5-2336. Reserved

R15-5-2337. Reserved

R15-5-2338. Reserved

R15-5-2339. Reserved

R15-5-2340. Tangible Personal Property Used in Soil Remediation Activities

R15-5-2341. Four-inch Pipes or Valves

R15-5-2342. Computer Hardware and Software

R15-5-2343. Purchases of Prescription Drugs and Prosthetic Appliances

R15-5-2344. Postage Stamps

R15-5-2345. Reserved

R15-5-2346. Reserved

R15-5-2347. Reserved

R15-5-2348. Reserved

R15-5-2349. Reserved

R15-5-2350. Mail Order Retailers

R15-5-2351. Purchases by Non-U.S. Citizens

R15-5-2352. Expired

R15-5-2353. Property Purchased Outside of the United States

R15-5-2354. Reserved

R15-5-2355. Reserved

R15-5-2356. Reserved

R15-5-2357. Reserved

R15-5-2358. Reserved

R15-5-2359. Reserved

R15-5-2360. Government Purchases

R15-5-2361. Nonprofit Organizations

R15-5-2362. Exempt Purchases by Health Organizations

R15-5-2363. Renumbered

ARTICLE 24. REPEALED

ARTICLE 25. REPEALED

Article 25, consisting of Sections R15-5-2501 through R15-5-2507, repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

ARTICLE 26. REPEALED

Article 26, consisting of Sections R15-5-2601 through R15-5-2603, R15-5-2614, and R15-5-2616, repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

ARTICLE 27. RESERVED

ARTICLE 28. RESERVED

ARTICLE 29. RESERVED

ARTICLE 30. INTERIM RULES

Section

R15-5-3001. Reserved

R15-5-3002. Reserved

R15-5-3003. Reserved

R15-5-3004. Renumbered

R15-5-3005. Renumbered

R15-5-3006. Renumbered

R15-5-3007. Reserved

R15-5-3008. Reserved

R15-5-3009. Reserved

R15-5-3010. Reserved

R15-5-3011. Reserved

R15-5-3012. Reserved

R15-5-3013. Reserved

R15-5-3014. Reserved

R15-5-3015. Reserved

R15-5-3016. Repealed

R15-5-3017. Reserved

R15-5-3018. Renumbered

R15-5-3019. Reserved

R15-5-3020. Reserved

R15-5-3021. Repealed

R15-5-3022. Repealed

R15-5-3023. Renumbered

R15-5-3024. Repealed

R15-5-3025. Renumbered

R15-5-3026. Reserved

R15-5-3027. Reserved

R15-5-3028. Reserved

R15-5-3029. Reserved

R15-5-3030. Reserved

R15-5-3031. Reserved

R15-5-3032. Repealed

R15-5-3033. Reserved

R15-5-3034. Reserved

R15-5-3035. Determination of taxable basis: nuclear fuel

R15-5-3036. Renumbered

ARTICLE 1. RETAIL CLASSIFICATION

R15-5-101. Sales for Resale or Lease

A. Gross receipts from the sale of tangible personal property to be resold by the purchaser in the ordinary course of business are not subject to tax under the retail classification.

B. Gross receipts from the sale of tangible personal property to be leased by a person in the business of leasing such personal property are not subject to tax under the retail classification.

C. Gross receipts from the sale of tangible personal property to a lessor of real property are subject to tax if:

1. The tangible personal property is incorporated into, or leased in conjunction with, the real property; and

2. The rental of the tangible personal property is not separately stated as part of the real property lease transaction.

D. Gross receipts from the sale of repair or replacement parts for tangible personal property that is to be leased by a person engaged in the business of leasing such tangible personal property are not subject to tax under the retail classification.

Historical Note

Amended effective November 7, 1978 (Supp. 78-6). Renumbered from R15-5-1811 and amended effective August 9, 1993 (Supp. 93-3). Amended by final rulemaking at 12 A.A.R. 4099, effective December 4, 2006 (Supp. 06-4).

R15-5-102. Casual Sales

Gross receipts from a casual sale, as defined in R15-5-2001, are not taxable under the retail classification.

Historical Note

Adopted effective August 9, 1993 (Supp. 93-3).

R15-5-103. Sale of Business Enterprises

Gross receipts from the sale of a business as a going concern are not subject to tax if the sale is for the business as an operating enterprise.

Historical Note

Renumbered from R15-5-1817 and amended effective August 9, 1993 (Supp. 93-3). Amended by final rulemaking at 12 A.A.R. 4099, effective December 4, 2006 (Supp. 06-4).

R15-5-104. Service Businesses

A. Gross receipts from the sale of tangible personal property to a person engaged in a professional or personal service occupation or business are subject to tax if the tangible personal property is used or consumed in the performance of the service or is sold only as an inconsequential element of the nontaxable service provided.

B. Gross receipts from the sale of tangible personal property, by a person engaged in a professional or personal service occupation or business, are not subject to tax if the property is sold only as an inconsequential element of the nontaxable service provided.

C. Sales of tangible personal property are inconsequential elements of the service if:

1. The purchase price of the tangible personal property to the person rendering the services represents less than 15% of the charge, billing, or statement rendered to the purchaser in connection with the transaction;

2. At the time of the sale, the tangible personal property transferred is not in a form that is subject to retail sale; and

3. The charge for the tangible personal property is not separately stated on the invoice.

D. A person engaged in both a retail business and a service business shall keep records of purchases of tangible personal property sufficient to establish whether the property was resold as a taxable retail sale.

Historical Note

Renumbered from R15-5-1805 and amended effective August 9, 1993 (Supp. 93-3). Amended by final rulemaking at 12 A.A.R. 4099, effective December 4, 2006 (Supp. 06-4).

R15-5-105. Services in Connection with Retail Sales

Gross receipts from services rendered in addition to selling tangible personal property at retail are subject to tax unless the charge for service is shown separately on the sales invoice and records.

Historical Note

Renumbered from R15-5-1815 and amended effective August 9, 1993 (Supp. 93-3). Amended by final rulemaking at 12 A.A.R. 4099, effective December 4, 2006 (Supp. 06-4).

R15-5-106. Finance Charges in Connection with Retail Sales

Gross receipts from finance, carrying charges, or interest charges incurred in connection with a retail sale of tangible personal property are not subject to tax if:

1. The charges are separately stated as part of the sales transaction; and

2. The charges result from the sale of such property on credit or under an installment contract.

Historical Note

Adopted effective August 9, 1993 (Supp. 93-3). Amended by final rulemaking at 12 A.A.R. 4099, effective December 4, 2006 (Supp. 06-4).

R15-5-107. Reserved

R15-5-108. Reserved

R15-5-109. Reserved

R15-5-110. Lease-purchase Agreements

A. Gross income derived from the leasing of tangible personal property under a lease-purchase agreement is subject to tax under the personal property rental classification.

B. Payments received after the conversion from a lease to a purchase are subject to tax under the retail classification.

C. Gross receipts from the sale of tangible personal property include conversion charges paid or incurred at the time the lease is converted to a purchase.

Historical Note

Renumbered from R15-5-1809 and amended effective August 9, 1993 (Supp. 93-3). Amended by final rulemaking at 12 A.A.R. 4099, effective December 4, 2006 (Supp. 06-4).

R15-5-111. Consignment Sales

A. The following definitions apply for purposes of this rule:

1. “Consignee” means the party that is in the business of selling tangible personal property belonging to a consignor.

2. “Consignor” means the party with the legal right to contract the services of the consignee to sell tangible personal property on behalf of the consignor.

B. Gross receipts from consignment sales are subject to tax under the retail classification.

C. A consignee shall obtain a transaction privilege tax license before making consignment sales.

Historical Note

Renumbered from R15-5-1808 and amended effective August 9, 1993 (Supp. 93-3). Amended by final rulemaking at 12 A.A.R. 4099, effective December 4, 2006 (Supp. 06-4).

R15-5-112. Sales by Auctioneers

A. Gross receipts from the sales of tangible personal property by an auctioneer are subject to tax under the retail classification.

B. An auctioneer shall obtain a transaction privilege tax license prior to conducting an auction.

Historical Note

Renumbered from R15-5-1834 and amended effective August 9, 1993 (Supp. 93-3).

R15-5-113. Sales by Trustees, Receivers, and Assignees

A. Gross receipts from the sale of tangible personal property by a trustee, receiver, or assignee are subject to tax if the sale of the property in the hands of the owner would be subject to tax.

B. Gross receipts from the sale of tangible personal property by a trustee, receiver, or assignee are not subject to tax if the sale of the property in the hands of the owner would not be subject to tax.

Historical Note

Adopted effective August 9, 1993 (Supp. 93-3). Amended by final rulemaking at 12 A.A.R. 4099, effective December 4, 2006 (Supp. 06-4).

R15-5-114. Reserved

R15-5-115. Reserved

R15-5-116. Reserved

R15-5-117. Reserved

R15-5-118. Reserved

R15-5-119. Reserved

R15-5-120. Exempt Sales of Machinery or Equipment

A. Machinery or equipment used in manufacturing or processing includes machinery or equipment that constitutes the entire primary manufacturing or processing operation from the initial stage where actual processing begins through the completion of the finished end product, processing, finishing, or packaging of articles of commerce. Manufacturing is the performance as a business of an integrated series of operations which place tangible personal property in a form, composition, or character different from that in which it was acquired and transforms it into a different product with a distinctive name, character, or use.

B. Gross receipts from the sale of repair or replacement parts for exempt machinery or equipment are not subject to the tax under the retail classification. Repair or replacement parts are defined as those individual component and constituent items which, together, comprise exempt machinery or equipment.

C. In establishing the exempt sale of machinery or equipment, the seller shall keep adequate documentation, pursuant to statutory requirements and as delineated in R15-5-2214, for the statutorily required period of time.

Historical Note

Amended effective November 7, 1978, unless otherwise noted (Supp. 78-6). Amended paragraphs (9) and (10) effective March 18, 1981 (Supp. 81-2). Renumbered from R15-5-1822 and amended effective August 9, 1993 (Supp. 93-3).

R15-5-121. Sales of Fuel Used in Manufacturing

The sale of fuel used or consumed in a manufacturing process is taxable. The fuel is not considered to be incorporated into the manufactured product.

Historical Note

Renumbered from R15-5-1830 effective August 9, 1993 (Supp. 93-3).

R15-5-122. Articles Incorporated into a Manufactured Product

A. Sales of articles to be incorporated into a fabricated or manufactured product are considered to be sales for resale and, therefore, exempt. For example, the sale of wood to a furniture manufacturer is a sale for resale.

B. In order for the exemption to apply, the materials must actually become a part of the finished product. Supplies which are consumed in the manufacturing process do not qualify.

Historical Note

Renumbered from R15-5-1839 effective August 9, 1993 (Supp. 93-3).

R15-5-123. Sale of Tools and Supplies to Businesses

The sale of tools, supplies, and other articles to be used or consumed by persons in the operation of their businesses, and not for resale, are taxable as retail sales.

Historical Note

Renumbered from R15-5-1849 effective August 9, 1993 (Supp. 93-3).

R15-5-124. Reserved

R15-5-125. Reserved

R15-5-126. Manufacturing Labor

The cost of labor employed in manufacturing, processing, or fabricating tangible personal property shall not be allowed as a deduction from the gross receipts derived from a sale of such property.

Historical Note

Renumbered from R15-5-1848 and amended effective August 9, 1993 (Supp. 93-3).

R15-5-127. Sales of Fuel

A. In this Section, “aviation fuel” and “dyed diesel fuel” have the same meanings as prescribed in A.R.S. §§ 28-101 and 28-5601.

B. Gross receipts from the sale of dyed diesel fuel are subject to transaction privilege tax.

C. Gross receipts from the sale of liquefied petroleum gas or natural gas used to propel a motor vehicle are exempt from transaction privilege tax.

D. Aviation fuel is subject to tax under A.R.S. § 28-8344 only.

E. Gross receipts from the retail sale of jet fuel are subject to the jet fuel excise and use tax under A.R.S. § 42-5352.

Historical Note

Renumbered from R15-5-3004 and amended effective August 9, 1993 (Supp. 93-3). Section amended by final rulemaking at 10 A.A.R. 4480, effective December 4, 2004 (Supp. 04-4).

R15-5-128. Electric Power Transmission and Distribution

A. Gross receipts from the sale of machinery, equipment, or transmission lines for direct use in a transmission system are deductible from the tax base. Gross receipts from the sale of machinery, equipment, or lines for use in a distribution system are taxable.

B. Machinery and equipment used to facilitate the production of voltage up to and including 34,500 volts shall be considered part of a distribution system.

1. Gross receipts from the sale of such equipment are subject to transaction privilege tax.

2. If tangible personal property was purchased as exempt, subsequent nonexempt use shall subject the gross purchase price to use tax according to statutory provisions.

C. Machinery and equipment used to facilitate the production of voltage above 34,500 volts shall be categorized as part of a transmission or distribution system based on the following definitions.

1. “Transmission system” means:

a. All land, conversion structures, and equipment employed at a primary source of supply to change the voltage or frequency of electricity for the purpose of its more efficient or convenient transmission;

b. All land, structures, lines, switching and conversion stations, high tension apparatus and their control and protective equipment between a generating or receiving point and the entrance to a distribution center or wholesale point; and

c. All lines and equipment whose primary purpose is to augment, integrate, or tie together the sources of power supply.

2. “Distribution system” means all land, structures, conversion equipment, lines, line transformers, and other facilities employed between the primary source of supply and of delivery to customers, which are not includible in a transmission system whether or not such land, structures, and facilities are operated as part of a transmission system or as part of a distribution system. Stations which change electricity from transmission to distribution voltage shall be classified as distribution stations.

3. “Primary source of supply” means a generating station or point of receipt in the case of purchased power.

4. Dual-use equipment shall be designated as follows:

a. If poles or towers support both transmission and distribution conductors, the poles, towers, anchors, guys, and rights-of-way shall be classified as a transmission system. The conductors, crossarms, braces, grounds, tiewire, insulators, and other similar tangible personal property shall be classified as transmission or distribution facilities, according to the purpose for which they are used.

b. If underground conduit contains both transmission and distribution conductors, the underground conduit and the right-of-way shall be classified as a distribution system. The conductors shall be classified as transmission or distribution facilities according to the purpose for which they are used.

c. Based on statutory provisions, transformers and control equipment utilized operationally at transmission substation sites are considered to be a part of a transmission system and, therefore, are exempt from transaction privilege and use tax.

D. Machinery, equipment, or transmission lines for direct use in a transmission system are only those which are recorded as being part of a transmission system in accordance with the definitions in subsection (C).

1. Gross receipts from the sale of such equipment are exempt from the tax.

2. If such machinery and equipment is removed from inventory to be used as part of a distribution system, the purchase price is subject to use tax.

Historical Note

Adopted effective August 9, 1993 (Supp. 93-3).

R15-5-129. Discounts, Refunds, and Coupon Redemption

A. Cash discounts allowed the purchaser for timely payment are permissible as deductions from the sale price.

B. Refunds in cash or credit given on returned merchandise are considered to be a reduction of sales.

C. When coupons issued by a manufacturer are redeemed by a retailer the amounts refunded to the purchaser are not permissible as deductions from the selling price of articles sold by the retailer. In these cases, the gross selling price is taxable.

D. Coupons issued by a retailer and later redeemed by the retailer as a discount on the price of merchandise sold by him are considered a reduction of the selling price. In such cases the net selling price is subject to tax.

Historical Note

Renumbered from R15-5-1840 effective August 9, 1993 (Supp. 93-3).

R15-5-130. Reserved

R15-5-131. Lay-away Sales

Gross receipts from lay-away agreements shall be taxable when title or possession transfers to the purchaser or at the time receipts from the transaction are determined to be nonrefundable, whichever occurs first.

Historical Note

Adopted effective August 9, 1993 (Supp. 93-3).

R15-5-132. Retail Sales with Trade-ins

A. When a retailer accepts tangible personal property as a trade-in for part or full payment on the sale of tangible personal property, the dollar amount of the payment represented by the trade-in is deductible from the retailer’s gross receipts from that sale.

B. A trade-in deduction shall be limited to the amount of the retailer’s gross receipts on that sale.

C. When the property traded in is subsequently sold at retail, the gross receipts from the transaction are taxable.

Historical Note

Renumbered from R15-5-1818 and amended effective August 9, 1993 (Supp. 93-3).

R15-5-133. Delivery Charges in Connection with Retail Sales

A. A charge by a retailer for delivery from the retailer’s location to the purchaser’s location, if separately stated on the sales invoice, is not taxable.

B. When the freight cost is incurred any time prior to the time of the retail sale, such cost is part of the gross sale and, therefore, subject to the tax.

Historical Note

Renumbered from R15-5-1820 and amended effective August 9, 1993 (Supp. 93-3).

R15-5-134. Sales of Containers, Bottles, and Labels

A. The sale of containers and bottles is considered a sale for resale only when the purchaser is to transfer the containers with their contents in future sales.

B. In cases where the containers are not subsequently sold as part of the merchandise, such sales are deemed to be taxable retail sales.

C. The sale of labels to a purchaser who affixes them to nonreturnable containers to be resold is considered to be a sale for resale and is not taxable.

D. In cases where the containers are returnable and a new label is to be affixed, each time the container is refilled, the sale of the labels is also considered to be a sale for resale.

E. The sale of analysis tags or other labels to be attached to containers of feed and sold along as part of the article is a sale for resale.

F. However, the sale of items such as price tags, shipping tags, and advertising matter used in connection with the subsequent sale is taxable as a retail sale.

Historical Note

Renumbered from R15-5-1829 and amended effective August 9, 1993 (Supp. 93-3).

R15-5-135. Sales of Restaurant Accessories

A. Gross receipts from the sale of disposable containers, paper napkins, and other similar food accessories to a person engaged in the restaurant business, who, in the regular course of business, transfers these accessories to facilitate the consumption of the food, drink, or condiment provided, are considered gross receipts from sales for resale.

B. Gross receipts from the sale of matchbooks, advertisement fliers, and other similar tangible personal property to a person engaged in the restaurant business, who transfers this property for the convenience, operation, or benefit of the restaurant business, are subject to tax.

Historical Note

Adopted effective August 9, 1993 (Supp. 93-3). Amended by final rulemaking at 13 A.A.R. 679, effective April 7, 2007 (Supp. 07-1).

R15-5-136. Returnable Containers

A. Gross receipts from deposits on sales of returnable containers which contain taxable food shall be taxable.

B. Deposit refunds paid to purchasers on the return of such containers shall be deductible from the retailer’s tax base in the month refunded.

C. Gross receipts from deposits received on returnable containers which contain non-taxable food shall not be taxable. Therefore refunds paid on such deposits shall not reduce the tax base.

Historical Note

Renumbered from R15-5-1833 and amended effective August 9, 1993 (Supp. 93-3).

R15-5-137. Warranty or Service Provisions and Tangible Personal Property Used in Conjunction with Warranty or Service Provisions

A. For purposes of this rule, the following definitions apply:

1. “Covered” means included in the warranty or service provision.

2. “Warranty or service provision” means a manufacturer’s or vendor’s warranty that is sold automatically with tangible personal property and, for no extra charge, applies to any tangible personal property used in the servicing of the provision.

B. An exclusion from gross receipts is not allowed for a warranty or service provision on the sale of tangible personal property if the property cannot be sold without the acceptance of the warranty or service provision.

C. A warranty or service provision is not considered a warranty or service contract under A.R.S. § 42-5061(A).

D. Tangible personal property sold in conjunction with the servicing of a warranty or service provision, but not covered by the provision, is a sale of tangible personal property that is subject to tax under the retail classification unless statutorily exempt.

E. Tangible personal property that is covered under a warranty or service provision and used in the servicing of the provision is not subject to use tax as the transaction privilege tax was paid when the tangible personal property was acquired.

Historical Note

Adopted effective August 9, 1993 (Supp. 93-3). Amended by final rulemaking at 13 A.A.R. 679, effective April 7, 2007 (Supp. 07-1).

R15-5-138. Warranty or Service Contracts and Tangible Personal Property Used in Conjunction with Warranty or Service Contracts

A. For purposes of this rule, the following definition applies:

“Covered” means included in the warranty or service contract for which the warranty or service contract holder does not pay a separate charge for any tangible personal property used in the servicing of the contract.

B. Gross receipts from the sale of warranty or service contracts are not subject to tax when the contracts are sold as a distinct and separate item and the charge for the warranty or service contract is stated separately on a sales invoice.

C. Tangible personal property sold in conjunction with the servicing of a warranty or service contract, but not covered by the contract, is a sale of tangible personal property that is subject to tax under the retail classification unless statutorily exempt.

D. Tangible personal property that is covered under a warranty or service contract, and used in the servicing of the contract, is subject to use tax unless transaction privilege tax was paid when the tangible personal property was acquired or the tangible personal property is otherwise statutorily exempt.

Historical Note

Adopted effective August 9, 1993 (Supp. 93-3). Amended by final rulemaking at 13 A.A.R. 679, effective April 7, 2007 (Supp. 07-1).

R15-5-139. Reserved

R15-5-140. Reserved

R15-5-141. Reserved

R15-5-142. Reserved

R15-5-143. Reserved

R15-5-144. Reserved

R15-5-145. Reserved

R15-5-146. Reserved

R15-5-147. Reserved

R15-5-148. Reserved

R15-5-149. Reserved

R15-5-150. Sale of Photography

A. In this Section:

1. “Motion picture” has the same meaning as prescribed in A.R.S. § 41-1517.

2. “Motion picture production company” has the same meaning as prescribed in A.R.S. § 41-1517.

3. “Photography” means the process of taking and supplying images to customers, using film, video, or another data storage medium.

4. “Qualified motion picture production company” means a motion picture production company that holds a valid certificate issued pursuant to A.R.S. § 42-5009(H), establishing the company’s qualification for the A.R.S. § 42-5061(B)(23) exemption.

B. Gross income or gross proceeds derived from a sale of photography are subject to tax under this Article, unless, under A.A.C. R15-5-104(C), the sale of such photography is considered an inconsequential element of nontaxable activities that are associated with the sale. Examples of nontaxable activities that are associated with a sale of photography include research; script consulting; director, crew, and equipment charges; preproduction or postproduction charges; location scouting fees; and music charges. Activities that are associated with the sale of photography are nontaxable if one of the following applies:

1. The vendor is engaged in both a professional or personal service occupation or a service business under A.R.S. § 42-5061(A)(1) and the business of selling photography at retail; or

2. The activities are not part of the manufacture, creation, or fabrication of photography and are not otherwise subject to tax under another Article of this Chapter.

C. Gross income or gross proceeds derived from a sale of photography used directly in motion picture production by a qualified motion picture production company are exempt from tax under this Article pursuant to A.R.S. § 42-5061(B)(23).

Historical Note

Renumbered from R15-5-1836 and amended effective August 9, 1993 (Supp. 93-3). Amended by final rulemaking at 11 A.A.R. 5493, effective February 6, 2006 (Supp. 05-4).

R15-5-151. Artists

A. Gross receipts from the sale of paintings, drawings, etchings, sculptures, craftwork, other artwork or reproductions of such items to final consumers shall be taxable under the retail classification if the person is making regular sales of these items.

B. Gross receipts from the sale of paints, canvasses, frames, sculpture ingredients, and other items which will become an integral part of the finished product shall not be taxable if sold to a creating artist who is regularly engaged in the business of creating and selling paintings, drawings, etchings, sculptures, craftwork, other artwork, or reproductions of such items. Sales of brushes, easels, tools, and similar items to be consumed by the creating artist shall be taxable.

C. Gross receipts from the sale by the creating artist of a painting, drawing, etching, sculpture, or a piece of craftwork that is not a reproduction of an original work shall not be taxable if:

1. The sale is a casual sale pursuant to the definition in R15-5-1812; or

2. The sale is of commissioned artwork by an individual artist. For purposes of this rule, “commissioned artwork” is a custom, one-of-a-kind art creation made by the individual artist pursuant to the particular requirements of a specific purchaser.

Historical Note

Adopted effective April 15, 1993 (Supp. 93-2). Section heading amended effective August 9, 1993 (Supp. 93-3).

Editor’s Note: R15-5-1812, referenced in subsection (C)(1) above, was repealed. Please refer to R15-5-2001 for information about casual sales.

R15-5-152. Tangible Personal Property Used in Soil Remediation Activities

The gross receipts from the sale of tangible personal property incorporated or fabricated into any real property, structure, project, development or improvement under a contract specified in A.R.S. § 42-1310.16 (B)(6) are exempt from tax. The gross receipts from the sale of tangible personal property used in soil remediation activities but not incorporated or fabricated into any real property, structure, project, development or improvement are taxable.

Historical Note

Adopted effective December 11, 1998 (Supp. 98-4).

R15-5-153. Four-inch Pipes or Valves

Gross receipts from the sale of pipes, valves, or fire hydrants with an inside diameter of four inches or more are deductible from the tax base if the pipes, valves, or fire hydrants are to be used to transport oil, natural gas, artificial gas, water, or coal slurry.

Historical Note

Adopted effective August 9, 1993 (Supp. 93-3).

R15-5-154. Computer Hardware and Software

A. Gross receipts derived from services rendered in whole or in part in connection with the sale of computer hardware are exempt, including gross receipts derived from charges imposed for professional and technological services such as analysis, design, support engineering services, classroom instruction, and data conversion services.

B. Except as provided in subsection (C), gross receipts derived from the sale of computer software programs are taxable, regardless of the method that a retail business uses to transfer the programs to its customers.

C. Gross receipts derived from charges imposed for the following business activities originate from nontaxable service activities and are therefore not taxable:

1. The original creation of an electronic data processing program for the specific use of an individual customer, or

2. The modification of a prewritten computer software program for the specific use of an individual customer, if the charge for the modification is shown separately on the sales invoice and records.

Historical Note

Renumbered from R15-5-1853 effective August 9, 1993 (Supp. 93-3). Amended by final rulemaking at 11 A.A.R. 2950, effective September 10, 2005 (Supp. 05-3).

R15-5-155. Reserved

R15-5-156. Sales of Prescription Drugs and Prosthetic Appliances

A. In this Section:

1. “Drug” means an article that, according to federal or state law, is:

a. Recognized in the official United States Pharmacopeia, official Homeopathic Pharmacopeia of the United States, official National Formulary, or any supplement to these documents; or

b. Intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in humans or animals; or

c. Not food and is intended to affect the structure or any function of the body of humans or animals; or

d. Intended for use as a component of any article specified in subsections (a), (b), or (c).

2. “Drug on a prescription” means prescription drug.

3. “Food” means an article used for food or drink for humans or animals, chewing gum, or an article used as a component of such an article.

4. “Hearing aid” means any wearable device designed as a remedy or to compensate for defective human hearing, including parts, attachments, accessories, and earmolds.

5. “Legend drug” means a drug that 21 U.S.C. 353(b)(4)(A) requires to bear the symbol “Rx only” before dispensing.

6. “Nonprescription product” means a drug or other article that can be purchased by the final consumer of the drug or article without a prescription, regardless of whether purchased on the advice or recommendation of a member of the medical, dental, or veterinarian profession. Examples include over-the-counter drugs and those dietary supplements, vitamins, minerals, herbs, and other similar supplements that do not qualify as prescription drugs.

7. “Over-the-counter drug” means a drug that is subject to federal labeling requirements in 21 CFR 201.66.

8. “Prescriber” means a member of the medical, dental, or veterinary profession authorized by federal or state law to prescribe a drug.

9. “Prescription” means an order for a drug issued in any form.

10. “Prescription drug” means a legend drug or a drug that, according to federal or state law, can be dispensed only:

a. Upon a written prescription of a prescriber for the drug;

b. Upon an oral prescription by the prescriber for the drug that federal or state law requires be reduced promptly to a form of writing by the prescriber and then filed by a pharmacist or the prescriber; or

c. By refilling a written or oral prescription if refilling is authorized by the prescriber for the drug either in the original prescription or by oral order that is reduced promptly to writing and then filed by a pharmacist or the prescriber.

11. “Prescription eyeglasses” includes frames and other component parts of eyeglasses if purchased for use with prescription lenses.

12. “Prosthetic appliance” means an artificial device that fully or partially replaces a part or function of the human body or increases the acuity of a sense organ.

B. Gross receipts from sales of the following kinds of tangible personal property are not subject to tax:

1. Prescription drugs, including those used in the course of treating patients;

2. Medical oxygen, pursuant to A.R.S. § 42-5061(A)(8);

3. Insulin, insulin syringes, and glucose strips, whether or not prescribed;

4. Prosthetic appliances, prescribed or recommended by a statutorily-authorized individual;

5. Durable medical equipment, pursuant to A.R.S. § 42-5061(A)(13);

6. Prescription eyeglasses and contact lenses; and

7. Hearing aids. Batteries and cords are subject to tax.

C. Gross receipts from the sale of component and repair parts for any tangible personal property that is exempt under either subsection (B) or (F) are not subject to tax.

D. If a written prescription or recommendation is required to purchase tangible personal property, a vendor of the property shall maintain the prescription or recommendation as part of the vendor’s records. The vendor’s records for documenting sales shall provide reasonable detail to allow the Department, upon inspection, to identify property as exempt.

E. Gross receipts from the sale to the final consumer of nonprescription products and those medical supplies or appliances not provided for under subsection (B) are subject to tax.

F. Gross receipts from the sale of nonprescription products or other medical supplies or appliances to doctors, dentists, or veterinarians are subject to tax unless the sale qualifies as a sale for resale and the doctor, dentist, or veterinarian is a retailer in the business of reselling the property.

Historical Note

Renumbered from R15-5-1819 and amended effective August 9, 1993 (Supp. 93-3). Amended by final rulemaking at 11 A.A.R. 2952, effective September 10, 2005 (Supp. 05-3).

R15-5-157. Membership Fees

A. Membership, admission, or other fees charged by a limited-access retail business shall be considered part of the taxable gross income of the business activity.

B. For purposes of this rule, “a limited-access retail business” means a business which does not sell to the general public but which charges a membership fee or a membership due in order to obtain access to the business or to obtain discounts or preferential treatment in the purchase or rental of tangible personal property from or through the business.

C. Gross income shall not include separately billed amounts paid to secure ownership interests or rights in the business which can be transferred or assigned.

Historical Note

Renumbered from R15-5-3036 and amended effective August 9, 1993 (Supp. 93-3).

R15-5-158. Postage Stamps

A. A retailer’s gross receipts from the sale of postage stamps are not included in the tax base under the retail classification if the stamps are sold for the purpose of transporting mail.

B. A retailer’s gross receipts from the sale of postage stamps are included in the tax base under the retail classification if the stamps are sold for any purpose other than transporting mail.

C. The Department shall presume that a postage stamp is sold for a purpose other than transporting mail if the postage stamp is sold for at least 50% more than its face value. A retailer may overcome the presumption; however, the burden of proof will remain on the retailer.

D. A retailer’s gross receipts from the sale of cancelled postage stamps are included in the tax base under the retail classification.

Historical Note

New Section adopted by final rulemaking at 6 A.A.R. 4112, effective October 4, 2000 (Supp. 00-4).

R15-5-159. Reserved

R15-5-160. Reserved

R15-5-161. Reserved

R15-5-162. Reserved

R15-5-163. Reserved

R15-5-164. Reserved

R15-5-165. Reserved

R15-5-166. Reserved

R15-5-167. Reserved

R15-5-168. Reserved

R15-5-169. Reserved

R15-5-170. Interstate and Foreign Transactions

A. Gross receipts from sales of tangible personal property made in interstate or foreign commerce are deductible from the tax base if all of the following apply:

1. The order is received from a location outside of Arizona; and

2. The retailer ships or delivers the tangible personal property to a location outside of Arizona for use outside of Arizona.

B. In meeting the above requirements, if delivery is made by the retailer to a common carrier for transportation to a location outside Arizona, the common carrier is deemed to be the agent of the retailer for purposes of this rule regardless of who is responsible for payment of the freight charges.

C. Suitable records shall be kept to substantiate the deduction for a sale made in interstate commerce. As such, records shall identify the tangible personal property sold and the delivery destination. The following records may be sufficient to substantiate the exemption:

1. Suitable records for substantiating the receipt of an order from out-of-state may include purchase orders, letters, or written memoranda on the receipt of orders placed by telephone.

2. Suitable records for substantiating out-of-state shipments include:

a. Internal delivery orders supported by receipts of expenses incurred in delivering the property and signed on the delivery date by the person who delivers the property;

b. Common carrier’s receipt or bill of lading;

c. Parcel post receipt;

d. Export declaration;

e. Receipt from a licensed broker; or

f. Proof of export or import signed by a customs officer.

Historical Note

Renumbered from R15-5-1814 and amended effective August 9, 1993 (Supp. 93-3).

R15-5-171. Sales to a Common Carrier

Gross receipts from sales made to a common carrier, engaged in interstate business, for delivery by the common carrier to a location outside of Arizona and for use outside of Arizona shall not be taxable if the order is received from a location outside of Arizona and the Arizona retailer prepays the freight charge.

Historical Note

Adopted effective August 9, 1993 (Supp. 93-3).

R15-5-172. Sales by Florists

A. Gross receipts from sales made by florists are taxable. Delivery and relay or transmittal charges, when separately stated, are deductible from the tax base.

B. Orders received by an Arizona florist from an out-of-state customer for delivery within Arizona are taxable. Orders received by an Arizona florist by an out-of-state customer for delivery out-of-state are not taxable.

C. When the florist conducts transactions through a delivery association, the following shall apply:

1. Gross receipts from sales made by an Arizona florist, where the order is subsequently transmitted to another florist for filling and delivery, whether inside or outside of Arizona, are taxable.

2. Gross receipts from sales by Arizona florists who deliver from a transmitted order of another florist, whether the ordering florist is inside or outside of Arizona, are not taxable.

Historical Note

Adopted effective August 9, 1993 (Supp. 93-3).

R15-5-173. Sales of Property Subsequently Taken Out-of- state

Gross receipts from sales of tangible personal property by Arizona vendors made to purchasers who subsequently take the property out-of-state do not qualify as exempt unless otherwise specifically exempted by statute.

Historical Note

Adopted effective August 9, 1993 (Supp. 93-3).

R15-5-174. Sales to Non-U.S. Citizens

Gross receipts from sales to non-U.S. citizens are subject to the tax unless otherwise exempt.

Historical Note

Adopted effective August 9, 1993 (Supp. 93-3).

R15-5-175. Sales to Nonresidents Temporarily Within this State

A. For purposes of this rule, “nonresident” means:

1. An individual who is not a resident for Arizona income tax purposes; or

2. An entity which has no business location or business nexus in Arizona.

B. Gross receipts from the sale of tangible personal property to a nonresident of Arizona who is temporarily within this state are exempt from the tax if:

1. The vendor ships or delivers the tangible personal property out of this state by common carrier, United States mail, or the vendor’s own conveyance; and

2. The tangible personal property is not used in Arizona.

C. To substantiate the exemption for a sale to a nonresident temporarily within the state, the vendor shall obtain a completed exemption certificate or a written statement from such a buyer certifying that the buyer is not a resident of Arizona and that the property purchased is for use outside of Arizona.

1. Such a statement or certificate shall be maintained as part of the records of the vendor for the required statutory period.

2. The vendor may use the exemption certificate prescribed by the Department.

D. Suitable records, as delineated in R15-5-170, shall be kept by the vendor to establish out-of-state shipments.

Historical Note

Adopted effective August 9, 1993 (Supp. 93-3).

R15-5-176. Expired

Historical Note

Adopted effective August 9, 1993 (Supp. 93-3). Section expired under A.R.S. § 41-1056(E) at 7 A.A.R. 2012, effective March 31, 2001 (Supp. 01-2).

R15-5-177. Reserved

R15-5-178. Reserved

R15-5-179. Reserved

R15-5-180. Sales by Businesses in Federal Areas

Gross receipts from sales by businesses not operated by or as an agency of the Federal Government, located on military bases or other federal areas, are subject to tax.

Historical Note

Renumbered from R15-5-1825 and amended effective August 9, 1993 (Supp. 93-3). Amended by final rulemaking at 13 A.A.R. 682, effective April 7, 2007 (Supp. 07-1).

R15-5-181. Governmental Organizations

A. Gross receipts from the sale of tangible personal property to the state or its political subdivisions are taxable unless otherwise exempt. Gross receipts from the sale of tangible personal property to the Federal Government or its departments and agencies are taxable at the rate prescribed by statute, unless otherwise exempt.

B. Gross receipts from the sale of tangible personal property by the state or its political subdivisions, when acting in a proprietary capacity, are taxable unless otherwise exempt.

C. Gross receipts from the sale of tangible personal property by the Federal Government are not taxable.

Historical Note

Renumbered from R15-5-1803 and amended effective August 9, 1993 (Supp. 93-3).

R15-5-182. Nonprofit Organizations

A. Gross receipts from the sale of tangible personal property to nonprofit churches, schools, and other nonprofit organizations are subject to tax unless otherwise exempt.

B. Gross receipts from the sale of tangible personal property by a charitable nonprofit organization, recognized as such for income tax purposes by the Internal Revenue Service, are not subject to tax.

C. For purposes of the statutory exemption and this rule, the Internal Revenue Service recognition of a charitable nonprofit organization is defined in Internal Revenue Code § 501(c)(3).

Historical Note

Renumbered from R15-5-1804 and amended effective August 9, 1993 (Supp. 93-3). Amended by final rulemaking at 13 A.A.R. 682, effective April 7, 2007 (Supp. 07-1).

R15-5-183. Exempt Sales to Health Organizations

A. Gross receipts from the sale of tangible personal property to qualifying hospitals, qualifying health care organizations, rehabilitation programs for mentally or physically handicapped persons, and qualifying community health centers are exempt from tax if such purchases are exempt from tax pursuant to statutory provisions.

B. The Department may, upon review of the written request and any other information requested by the Department to make a proper determination, provide an Exemption Letter to organization meeting the statutory criteria. The Exemption Letter shall be valid for a period of 12 months from the first day of the month following the issue date of the Exemption Letter unless the organization’s tax exempt status changes prior to the end of the 12-month period, or the organization misrepresented or omitted material information in its exemption request.

C. Qualifying hospitals, qualifying health care organizations, rehabilitation programs for mentally or physically handicapped persons, and qualifying community health centers shall annually submit to the Department a written request for an Exemption Letter. The request shall be submitted at least 30 days prior to the first day of the exemption period. For purposes of this rule, “exemption period” means the 12-month period beginning on the first day of the month following the issue date of the Exemption Letter or the 12-month period requested by the organization.

1. Qualifying hospitals shall attach to their annual exemption request a copy of their current license issued by the Department of Health Services.

2. Qualifying health care organizations shall attach to their exemption request letter the statutorily required annual financial audit and a copy of their Internal Revenue Code 501(c) recognition unless the Department has previously received a copy of this recognition.

3. Rehabilitation programs for mentally or physically handicapped persons shall attach to their exemption request a copy of their Internal Revenue Code 501(c)(3) recognition unless the Department has previously received a copy of this recognition.

4. Qualifying community health centers shall attach to their exemption request documentation supporting the statutory criteria and a copy of their Internal Revenue Code 501(c)(3) recognition unless the Department has previously received a copy of this recognition.

Historical Note

Renumbered from R15-5-1821 and amended effective August 9, 1993 (Supp. 93-3). Amended effective April 21, 1995 (Supp. 95-2).

ARTICLE 2. INTRODUCTION

R15-5-201. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-202. Renumbered

Historical Note

Section R15-5-202 renumbered to R15-5-2001 effective October 14, 1993 (Supp. 93-4).

R15-5-203. Repealed

Historical Note

Repealed effective October 14, 1993 (Supp. 93-4).

R15-5-204. Renumbered

Historical Note

Section R15-5-204 renumbered to R15-5-2002 effective October 14, 1993 (Supp. 93-4).

R15-5-205. Repealed

Historical Note

Repealed effective August 13, 1987 (Supp. 87-3).

R15-5-206. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-207. Repealed

Historical Note

Repealed effective July 23, 1985 (Supp. 85-4).

R15-5-208. Repealed

Historical Note

Repealed effective July 23, 1985 (Supp. 85-4).

R15-5-209. Repealed

Historical Note

Amended effective November 7, 1978 (Supp. 78-6). Amended effective March 18, 1981 (Supp. 81-2). Renumbered as Section R15-5-3023 effective August 26, 1987 (Supp. 87-3). Renumbered and amended in error; Section R15-5-209 is reprinted herewith as it was amended effective March 18, 1981 (Supp. 88-3). Repealed effective October 14, 1993 (Supp. 93-4).

R15-5-210. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-211. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-212. Renumbered

Historical Note

Emergency rule adopted effective April 10, 1990, pursuant to A.R.S. § 41-1026, valid for only 90 days; emergency rule readopted with changes effective June 18, 1990, pursuant to A.R.S. § 41-1026, valid for only 90 days (Supp. 90-2). Emergency rule readopted with changes effective September 19, 1990, pursuant to A.R.S. § 41-1026, valid for only 90 days (Supp. 90-3). Permanent rule adopted with changes effective December 14, 1990 (Supp. 90-4). Renumbered to Section R15-5-2215 effective October 14, 1993 (Supp. 93-4).

ARTICLE 3. REPEALED

R15-5-301. Repealed

Historical Note

Repealed effective August 13, 1987 (Supp. 87-3).

R15-5-302. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-303. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-304. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-305. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-306. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-307. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

ARTICLE 4. AMUSEMENT CLASSIFICATION

R15-5-401. Repealed

Historical Note

Repealed effective August 13, 1987 (Supp. 87-3).

R15-5-402. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-403. Amusement Devices

Gross proceeds of sales or gross income from the operation of coin-operated and other devices that provide amusement are included in the tax base under the amusement classification. Examples include: devices that play prerecorded music, electronic games, pinball games, and billiard tables.

1. The tax base from the business of operating amusement devices is the gross amount received from the amusement devices without deduction for commissions paid, rental cost for the equipment, or other expenses.

2. The individual having direct control of the funds generated by the amusement devices shall pay the tax to the Department.

Historical Note

Amended effective September 22, 1997 (Supp. 97-3). Amended by final rulemaking at 13 A.A.R. 682, effective April 7, 2007 (Supp. 07-1).

R15-5-404. Other Income

Gross receipts from the sale of programs, souvenirs, or any other items of tangible personal property are included in the tax base under the retail classification.

Historical Note

Amended effective April 21, 1995 (Supp. 95-2). Amended effective September 22, 1997 (Supp. 97-3).

R15-5-405. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-406. Health or Fitness Establishments and Private Recreational Establishments

A. The operator of a “health or fitness establishment” or a “private recreational establishment,” as defined in A.R.S. § 42-5073(C), shall exclude from the tax base under the amusement classification all gross proceeds of sales or gross income from membership fees and initiation fees charged for the use of the establishment, or any portion of the establishment, for 28 days or more, and fees charged for the use of the establishment by bona fide accompanied guests of members. Any other fees for the use of a health or fitness establishment or a private recreational establishment, or any portion of the establishment, are included in the tax base of the amusement classification.

B. Gross proceeds of sales or gross income derived from other businesses that are located on the premises of a health, fitness, or recreational business shall not be considered when determining whether a health, fitness, or recreational business is a “health or fitness establishment” or a “private recreational establishment” if the other businesses are separate and independent from the health, fitness, or recreational business. Whether the other businesses are separate and independent depends upon the facts in each case. The Department considers several factors in making this determination including but not limited to the following:

1. Whether the business is open to both members and nonmembers;

2. Whether the primary purpose of the business is closely related to the primary purpose of the health, fitness, or recreational business;

3. Whether the business could exist without the health, fitness, or recreational business; and

4. Whether the business shares assets or employees with the health, fitness, or recreational business.

Historical Note

Amended effective September 22, 1997 (Supp. 97-3). Amended by final rulemaking at 13 A.A.R. 682, effective April 7, 2007 (Supp. 07-1).

R15-5-407. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-408. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-409. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

ARTICLE 5. REPEALED

R15-5-501. Repealed

Historical Note

Repealed effective July 23, 1985 (Supp. 85-4).

R15-5-502. Repealed

Historical Note

Repealed effective January 16, 1997 (Supp. 97-1).

R15-5-503. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-504. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-505. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-506. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

ARTICLE 6. PRIME CONTRACTING CLASSIFICATION

R15-5-601. Taxpayer Bonds for Contractors

A. For the purpose of this rule:

1. The principal place of business shall be Arizona if the licensee has continuously operated a facility with at least one full-time employee in Arizona for 12 consecutive months preceding the determination.

2. A surety bond shall include a bond issued by a company authorized to execute and write bonds in Arizona as a surety or composed of securities or cash which are deposited with the Department of Revenue.

B. The businesses subject to these bonds are grouped in accordance with the standard industry classifications by average business activity. The business classes and bond amounts are as follows:

1. Two thousand dollars for:

a. General contractors of residential buildings other than single family;

b. Operative builders;

c. Plumbing, air conditioning, and heating, except electric;

d. Painting, paper hanging;

e. Decorating;

f. Electrical work;

g. Masonry stonework and other stonework;

h. Plastering, drywall, acoustical and insulation work;

i. Terrazzo, tile, marble and mosaic work;

j. Carpentry;

k. Floor laying and other floor work;

l. Roofing and sheet metal work;

m. Concrete work;

n. Water well drilling;

o. Structural steel erection;

p. Glass and glazing work;

q. Excavating and foundation work;

r. Wrecking and demolition work;

s. Installation and erection of building equipment;

t. Special trade contractors; and

u. Manufacturers of mobile homes.

2. Seven thousand dollars for:

a. General contractors of single family housing;

b. Water, sewer, pipeline, communication and power- line construction.

3. Seventeen thousand dollars for:

a. General contractors of industrial buildings and warehouses;

b. General contractors nonresidential buildings other than single family;

c. Highways and street construction except elevated highways.

4. Twenty-two thousand dollars for heavy construction.

5. One-hundred two thousand dollars for bridge, tunnel and elevated highway construction.

C. Except as provided in subsection (D) of this rule, any applicant whose principal place of business is outside Arizona or who has conducted business in Arizona for less than one year shall post a bond before the transaction privilege tax license shall be issued.

D. Any taxpayer subject to bonding requirements may submit a written request to the Director of the Department of Revenue for an exemption from the bond. The exemption request shall provide at least one of the following:

1. Any taxpayer who has been actively engaged in business for at least two years immediately preceding the exemption request may submit statements from an authorized state employee from each state in which the business has been licensed in the last two years verifying that the taxpayer has, for at least two years immediately preceding the date of the statement, made timely payment of all sales taxes and other transaction privilege taxes incurred.

2. Two-year reporting history as described above in subsection (D)(1) and an explanation of good cause for late or insufficient payment of the tax;

3. Documentation which verifies that no potential for Arizona tax liability exists;

4. Bond for a previously issued Arizona transaction privilege license that adequately covers the licensee’s expected transaction privilege tax liability for Arizona for both the previously issued license and for this license.

E. The bond shall not expire prior to two years after the transaction privilege license is issued. Upon lapse or forfeiture of any bond by any licensee, the licensee shall deposit with the Department another bond within five business days of the licensee’s receipt of written notification by the Department.

F. Any licensee, who has had a bond posted for at least two years and fulfills any exception listed in subsection (D), or whose principal place of business becomes Arizona, may request a written waiver and that the bond be returned.

Historical Note

Former Section R15-5-601 repealed effective August 13, 1987 (Supp. 87-3). New Section R15-5-601 renumbered from R15-10-202 (Supp. 94-1).

R15-5-602. Expired

Historical Note

Amended effective November 7, 1978, unless otherwise noted (Supp. 78-6). Correction, subsection (C), paragraph (2) as filed effective November 7, 1978, unless otherwise noted (Supp. 82-1). Section expired under A.R.S. 41-1056(E) at 17 A.A.R. 2692, effective September 28, 2011 (Supp. 11-4).

R15-5-603. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-604. Expired

Historical Note

Section expired under A.R.S. 41-1056(E) at 17 A.A.R. 2692, effective September 28, 2011 (Supp. 11-4).

R15-5-605. Expired

Historical Note

Section expired under A.R.S. 41-1056(E) at 17 A.A.R. 2692, effective September 28, 2011 (Supp. 11-4).

R15-5-606. Expired

Historical Note

Amended effective December 11, 1998 (Supp. 98-4). Section expired under A.R.S. 41-1056(E) at 17 A.A.R. 2692, effective September 28, 2011 (Supp. 11-4).

R15-5-607. Expired

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2). Amended effective December 11, 1998 (Supp. 98-4). Section expired under A.R.S. § 41-1056(E) at 12 A.A.R. 4742, effective September 30, 2006 (Supp. 06-4).

R15-5-608. Expired

Historical Note

Amended effective November 7, 1978 (Supp. 78-6). Amended by adding subsections (D) and (E) effective March 18, 1981 (Supp. 81-2). Section expired under A.R.S. 41-1056(E) at 17 A.A.R. 2692, effective September 28, 2011 (Supp. 11-4).

R15-5-609. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-610. Repealed

Historical Note

Former Section 15-5-610 repealed, new Section R15-5-610 adopted effective March 18, 1981 (Supp. 81-2). Repealed effective January 16, 1997 (Supp. 97-1).

R15-5-611. Repealed

Historical Note

Repealed effective March 18, 1981 (Supp. 81-2).

R15-5-612. Expired

Historical Note

Amended effective November 7, 1978 (Supp. 78-6). Section expired under A.R.S. 41-1056(E) at 17 A.A.R. 2692, effective September 28, 2011 (Supp. 11-4).

R15-5-613. Expired

Historical Note

Amended effective November 7, 1978 (Supp. 78-6). Section expired under A.R.S. 41-1056(E) at 17 A.A.R. 2692, effective September 28, 2011 (Supp. 11-4).

R15-5-614. Expired

Historical Note

Amended effective November 7, 1978 (Supp. 78-6). Section expired under A.R.S. 41-1056(E) at 17 A.A.R. 2692, effective September 28, 2011 (Supp. 11-4).

R15-5-615. Expired

Historical Note

Section expired under A.R.S. 41-1056(E) at 17 A.A.R. 2692, effective September 28, 2011 (Supp. 11-4).

R15-5-616. Expired

Historical Note
Amended effective June 18, 1987 (Supp. 87-2). Historical Note

Amended effective November 7, 1978 (Supp. 78-6). Section expired under A.R.S. 41-1056(E) at 17 A.A.R. 2692, effective September 28, 2011 (Supp. 11-4).

R15-5-617. Repealed

Historical Note

Section repealed by final rulemaking at 10 A.A.R. 5200, effective February 5, 2005 (Supp. 04-4).

R15-5-618. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-619. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-620. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-621. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-622. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-623. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-624. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-625. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-626. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-627. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-628. Expired

Historical Note

Adopted effective November 7, 1978 (Supp. 78-6). Section expired under A.R.S. 41-1056(E) at 17 A.A.R. 2692, effective September 28, 2011 (Supp. 11-4).

R15-5-629. Expired

Historical Note

Adopted effective November 7, 1978, unless otherwise noted (Supp. 78-6). Section expired under A.R.S. 41-1056(E) at 17 A.A.R. 2692, effective September 28, 2011 (Supp. 11-4).

ARTICLE 7. REPEALED

R15-5-701. Repealed

Historical Note

Repealed effective August 13, 1987 (Supp. 87-3).

R15-5-702. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-703. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-704. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

ARTICLE 8. REPEALED

R15-5-801. Repealed

Historical Note

Repealed effective August 13, 1987 (Supp. 87-3).

R15-5-802. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-803. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-804. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

ARTICLE 9. MINING CLASSIFICATION

R15-5-901. Definitions

In addition to the definitions provided in A.R.S. § 42-5001, the following definitions apply to this Article:

1. “Mining” means operations involving the extraction of nonmetalliferous mineral products from beneath or at the surface of the earth for commercial use and includes underground, surface, and open-pit operations.

2. “Nonmetalliferous mineral product” has the same meaning as prescribed in A.R.S. § 42-5072.

Historical Note

Amended effective November 7, 1978 (Supp. 78-6). Repealed effective August 13, 1987 (Supp. 87-3). New Section R15-5-901 renumbered from R15-5-903 and amended by final rulemaking at 6 A.A.R. 2952, effective July 18, 2000 (Supp. 00-3).

R15-5-902. General

A. A person engaged in the business of mining is subject to tax under the mining classification on the gross proceeds of sales or gross income received from the sale of a nonmetalliferous mineral product to a purchaser that resells the product in the ordinary course of business.

B. A person engaged in the business of mining is not subject to tax under the mining classification on the gross proceeds of sales or gross income received from the sale of a nonmetalliferous mineral product to a person engaged in business classified under the prime contracting classification if the nonmetalliferous mineral product is to be incorporated into a structure or project as part of the business.

C. A person engaged in the business of mining is subject to tax under the retail classification on the gross income received from the sale of a nonmetalliferous mineral product to a final consumer.

D. A person engaged in the business of mining shall not deduct from the tax base amounts paid as royalties.

Historical Note

Amended by final rulemaking at 6 A.A.R. 2952, effective July 18, 2000 (Supp. 00-3).

R15-5-903. Renumbered

Historical Note

Section R15-5-903 renumbered to R15-5-901 by final rulemaking at 6 A.A.R. 2952, effective July 18, 2000 (Supp. 00-3).

R15-5-904. Manufacturing or Processing Service Charges

A. A person engaged in the business of mining is subject to tax on the gross proceeds of sales or gross income from refining petroleum products, producing a combination of nonmetalliferous mineral products, as well as other manufacturing or processing service charges derived from contracts with the owner of the products.

B. A person who mines and processes nonmetalliferous mineral products is subject to tax on the gross proceeds of sales or gross income from the sale of the first marketable product. For example, a person who mines clay and processes the material into bricks is taxable on the gross proceeds of sales or gross income from the sale of the bricks.

Historical Note

Amended by final rulemaking at 6 A.A.R. 2952, effective July 18, 2000 (Supp. 00-3).

R15-5-905. Products Shipped Out of Arizona

A. A person engaged in the business of mining that ships a nonmetalliferous mineral product out-of-state without making a sale in Arizona shall include in the tax base the market value of the nonmetalliferous mineral product before it enters interstate commerce.

B. Unless otherwise provided in subsection (D), the taxpayer shall calculate the market value of a nonmetalliferous mineral product shipped out-of-state in the following manner:

1. Establish the total selling price of the product outside Arizona.

2. Deduct, from the total selling price, costs incurred out-of-state that increase the value of the product. These costs include:

a. The cost of actual freight paid, as provided in R15-5-908, to the point of sale outside Arizona;

b. The refining or processing cost incurred before the first sale; and

c. The cost of sales commissions, paid or accrued, in connection with the sale.

C. The market value of the product shipped out-of-state shall not include the cost of processing if the processor has paid the Arizona transaction privilege tax on the gross proceeds of sales or gross income derived from the processing. (See R15-5-904.)

D. A taxpayer may compute the market value of a nonmetalliferous mineral product shipped out-of-state in any manner that accurately reflects the value of the nonmetalliferous mineral product at the point it enters interstate commerce if the taxpayer gives prior written notification to the Department and the Department approves the computation method.

Historical Note

Amended effective March 18, 1981 (Supp. 81-2). Amended effective June 18, 1987 (Supp. 87-2). Amended by final rulemaking at 6 A.A.R. 2952, effective July 18, 2000 (Supp. 00-3).

R15-5-906. Repealed

Historical Note

Section repealed by final rulemaking at 6 A.A.R. 2952, effective July 18, 2000 (Supp. 00-3).

R15-5-907. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-908. Actual Freight Paid

A. A person engaged in the business of mining may deduct from the tax base under the mining classification actual freight costs incurred in connection with the sale that are included in the sales price if the actual freight costs incurred are separately stated in the billing to its customer.

B. A person engaged in the business of mining that does not separately state the actual freight costs incurred in the billing to the customer may still deduct the actual freight costs paid to a third party, provided the person keeps books and records to show separately the actual freight paid to the third party.

C. A taxpayer shall not deduct the cost incurred by the taxpayer before a sale for freight from the mining or production location to the sales location.

Historical Note

Section repealed; new Section adopted by final rulemaking at 6 A.A.R. 2952, effective July 18, 2000 (Supp. 00-3).

R15-5-909. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

ARTICLE 10. TRANSACTION PRIVILEGE TAX -- TRANSIENT LODGING CLASSIFICATION

R15-5-1001. Application of the Definition of Transient for Purposes of Taxation under the Transient Lodging Classification

A. Effective January 1, 1979, the leasing or renting of dwelling units and lodging facilities to a person shall not be taxable under the transient lodging classification if the lodging is obtained for a continuous block of time for 30 or more consecutive days except as provided under A.R.S. § 42-1310.10(B). For purposes of this rule, “person” has the same meaning as under A.R.S. § 42-1301.

B. Gross receipts from providing lodging obtained for a continuous block of time for 30 or more consecutive days shall not be taxable under the transient lodging classification from the first day of occupancy.

1. Lodging obtained for 30 or more consecutive days in increments of time for a period of less than 30 consecutive days rather than for a continuous block of time shall be taxable under the transient lodging classification except as provided under A.R.S. § 42-1310.10(B).

2. A lodger may originally acquire lodging on an incremental basis for a period of less than 30 consecutive days and subsequently change to a continuous block of time for 30 or more consecutive days; however, the lodging originally obtained on an incremental basis of less than 30 consecutive days shall remain subject to tax regardless of any subsequent action on the part of the lodger.

C. If lodging is obtained on a continuous basis for 30 or more consecutive days but the person obtaining the lodging leaves before the 30-day period ends and only pays for a period of 29 days or less, the exclusion shall not apply. The gross receipts from providing lodging for 29 days or less shall be subject to tax under the transient lodging classification.

D. The following situations are indicative of the application of the provisions in this rule:

1. A person rents a motel room on a weekly basis for 10 consecutive weeks. The total rental period is greater than 30 consecutive days; however, the method of renting by the week meets the definition of “transient.” Gross receipts from renting lodging space on such a basis are subject to tax under the transient lodging classification.

2. A motion picture company contracts with a hotel to rent a block of 15 rooms for a three-month period during which filming will occur in the area. During that three-month period, a variety of crew members and actors will occupy the rooms. Any one room may have a different occupant during the three-month time period as filming progresses and different actors or crew members are involved in the production of the film. The rental by the motion picture company for the three-month period is not subject to tax under the transient lodging classification since the motion picture company contracted with the hotel to rent for a three-month period and, therefore, does not meet the definition of a transient.

3. An individual reserves a room in a rooming house for two weeks. The individual decides to stay another two weeks. The total number of days’ stay is now at 28 days. Once again, the individual extends the stay by two weeks. Each time period is less than 30 days. Even though the total period of time is over 29 days, after the third extension of two weeks, the individual continues to be a transient for purposes of taxation under the transient lodging classification. If the individual had rented the room for 30 days or more after the first two weeks, gross receipts from the additional time would not be subject to tax. However, the first two-week block of time would remain taxable since that time period falls under the definition of transient.

4. An individual is not sure how long he will be staying at a hotel so, upon registration, gets the room for 35 days. After 21 days the individual decides to leave and pays only for the 21-day stay. Gross receipts are subject to tax under the transient lodging classification. If the individual had a contractual agreement in which, regardless of length of occupancy, he was required to pay for the entire 35 days, the gross receipts from such a transaction would not be taxable.

Historical Note

Repealed effective August 13, 1987 (Supp. 87-3). New Section R15-5-1001 renumbered from R15-5-1614 (Supp. 94-2). Amended effective April 21, 1995 (Supp. 95-2).

R15-5-1002. Activities in Addition to Providing Lodging

A. If a transient lodging facility is engaged in the business of providing lodging and engages in the business of providing meals, the gross receipts from lodging shall be separately stated and reported from the gross receipts from restaurant activities.

B. Gross receipts from the providing of meals or room service shall be subject to tax under the restaurant classification.

C. Gross receipts from the sale of tangible personal property by transient lodging facilities such as from magazine stands, gift shops, or in-room food or beverage bars shall be subject to tax under the retail classification.

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2). New Section R15-5-1002 renumbered from R15-5-1615 (Supp. 94-2). Amended effective April 21, 1995 (Supp. 95-2).

R15-5-1003. Providing Lodging to Government Agencies

Gross receipts from providing transient lodging to the United States Government, the state or its political subdivisions, or any other government agency or its employees shall be taxable under the transient lodging classification unless otherwise exempt.

Historical Note

Adopted effective April 21, 1995 (Supp. 95-2).

ARTICLE 11. TRANSACTION PRIVILEGE TAX - JOB PRINTING CLASSIFICATION

R15-5-1101. Definitions

For purposes of this Article, the following definitions apply:

1. “Image developing” means the copying or reproducing by a printer of an image by any means from film, paper, video, or another data storage medium to photographic print paper or another storage medium that can visually display the image.

2. “Job printing” means the copying or reproducing by a printer of documents or data directly or indirectly provided by the printer’s customer, including by another person at the customer’s direction, for the ultimate purpose of producing a physical or electronic copy of the document or data. The document or data can be textual or pictorial, and may be received by the printer in physical or electronic form. Examples of methods of job printing include dye sublimation, electrostatic printing, flexography, gravure, inkjet printing, laser printing, lithography, offset printing, optical scanning, photocopying, photofinishing, reprographic printing, screen printing, thermography, xerography, and similar means of duplication.

3. “Photography” means the process of taking and supplying images to customers, using film, video, or another data storage medium.

4. “Printer” means a person that copies or reproduces textual or pictorial material by any means, process, or method of job printing, engraving, embossing, or copying, but that does not distribute the copied or reproduced material on the person’s own behalf.

5. “Printing” means a finished product in physical or electronic form produced by a printer through job printing, engraving, embossing, or copying and that is held for sale by the printer.

6. “Qualifying health care organization” has the same meaning as prescribed in A.R.S. § 42-5001(10).

7. “Qualifying hospital” has the same meaning as prescribed in A.R.S. § 42-5001(11).

Historical Note

Repealed effective August 13, 1987 (Supp. 87-3). New Section made by final rulemaking at 11 A.A.R. 5493, effective February 6, 2006 (Supp. 05-4).

R15-5-1102. Printer’s Sale of Printing

A. Except as otherwise provided in subsection (F) or other applicable A.R.S. § 42-5066(B) exemptions, gross income or gross proceeds derived from all of a printer’s costs or expenses of filling a customer’s printing order are subject to tax under this Article. Examples of costs or expenses include charges for set-up, die cutting, embossing, folding, and binding operations.

B. Gross income or gross proceeds derived from an Arizona printer’s sale of printing within Arizona are subject to tax even when the printer conducts the job printing, engraving, embossing, or copying activity outside the state, unless the printing is shipped or delivered outside the state for use outside the state.

C. If a printer ships or delivers printing to be used outside the state to a common carrier for transportation to a location outside the state, the common carrier is deemed to be the agent of the printer for purposes of determining whether the printing has been shipped or delivered outside the state, regardless of who is responsible for payment of the freight charges.

D. A printer may substantiate a shipment or delivery of printing outside the state by one of the following records:

1. An internal delivery order that is supported by receipts for expenses incurred in delivery of printing and signed on the delivery date by the person who delivers the printing;

2. A common carrier’s receipt or bill of lading;

3. A parcel post receipt;

4. An export declaration;

5. A receipt from a licensed broker; or

6. Proof of export or import, signed by a customs officer.

E. Except as provided in subsection (F) or other applicable A.R.S. § 42-5066(B) exemptions, gross income or gross proceeds derived from an Arizona printer’s charges for the distribution of printing are generally subject to tax under this Article. In the absence of documentation listed in subsection (D), it remains the taxpayer’s burden to substantiate that the gross income or gross proceeds derived from a sale of printing are not taxable because the printing is shipped or delivered outside the state for use outside the state, pursuant to A.R.S. § 42-5066(B)(2). A printer substantiates that printing is shipped or delivered outside the state for use outside the state if the printer shows that the address or number to which the printer distributes the printing does not identify or is incapable of identifying an in-state location.

F. Pursuant to A.R.S. § 42-5066(B)(4), a printer may deduct its gross income or gross proceeds derived from charges for postage and freight if the printer separately states the charges on a customer’s invoice and in the printer’s records, except that the amount deducted shall not exceed the amount paid by the printer to the United States Postal Service or a commercial delivery service. A printer may not deduct its gross income or gross proceeds derived from charges for delivery of the printing using the printer’s own conveyance.

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2). New Section made by final rulemaking at 11 A.A.R. 5493, effective February 6, 2006 (Supp. 05-4). Amended by final rulemaking at 13 A.A.R. 470, effective February 6, 2007 (Supp. 07-1).

R15-5-1103. Repealed

Historical Note

Section repealed by final rulemaking at 11 A.A.R. 5493, effective February 6, 2006 (Supp. 05-4).

R15-5-1104. Repealed

Historical Note

Section repealed by final rulemaking at 11 A.A.R. 5493, effective February 6, 2006 (Supp. 05-4).

R15-5-1105. Repealed

Historical Note

Section repealed by final rulemaking at 11 A.A.R. 5493, effective February 6, 2006 (Supp. 05-4).

R15-5-1106. Sale of Materials to a Printer

Sales to a printer of materials that do not become an ingredient or component part of a printing fall under the retail classification (see Article 1 of this Chapter) and are subject to tax unless otherwise exempt under A.R.S. § 42-5061. Examples of such materials include color process plates, electrotypes, film processing chemicals, printing plates, and wood mounts. In contrast, sales by the printer of any such materials that are job printed, engraved, embossed, or copied by the printer for the printer’s customer constitute sales of printing and fall under this Article. An example is a printer’s sale to a customer of a printing plate upon which the printer has performed job printing, engraving, embossing, or copying activity for the customer.

Historical Note

Amended by final rulemaking at 11 A.A.R. 5493, effective February 6, 2006 (Supp. 05-4).

R15-5-1107. Repealed

Historical Note

Amended effective November 7, 1978 (Supp. 78-6). Section repealed by final rulemaking at 11 A.A.R. 5493, effective February 6, 2006 (Supp. 05-4).

R15-5-1108. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1109. Repealed

Historical Note

Former Section R15-5-1109 repealed, new Section R15-5-1109 adopted effective March 18, 1981 (Supp. 81-2). Amended effective June 25, 1993 (Supp. 93-2). Section repealed by final rulemaking at 11 A.A.R. 5493, effective February 6, 2006 (Supp. 05-4).

R15-5-1110. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1111. Miscellaneous Costs of a Printer Are Not Deductions

A. A printer shall not deduct the cost of subletting job printing, engraving, embossing, or copying activities.

B. A printer shall not deduct the cost of labor or materials employed in the job printing, engraving, embossing, or copying activity of another person.

Historical Note

Amended by final rulemaking at 11 A.A.R. 5493, effective February 6, 2006 (Supp. 05-4).

R15-5-1112. Sale of Image Developing

A. Gross income or gross proceeds derived from a sale of image developing in which the image developing is not part of a sale of photography are subject to tax under this Article.

B. Gross income or gross proceeds derived from a sale of image developing to a business that resells the image developing are nontaxable under this Article.

C. Gross income or gross proceeds derived from a sale of image developing either to a qualifying health care organization that uses the image developing solely to provide health and medical related educational and charitable services or to a qualifying hospital are nontaxable under this Article. An example is image developing of x-ray film or photographs.

Historical Note

Section repealed; new Section made by final rulemaking at 11 A.A.R. 5493, effective February 6, 2006
(Supp. 05-4).

ARTICLE 12. REPEALED

R15-5-1201. Repealed

Historical Note

Repealed effective August 13, 1987 (Supp. 87-3).

R15-5-1202. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

ARTICLE 13. SALES TAX -- PUBLISHING CLASSIFICATION

R15-5-1301. Repealed

Historical Note

Repealed effective August 13, 1987 (Supp. 87-3).

R15-5-1302. General

A. The gross income derived from the business of publishing within the state is taxable under this classification. Gross income includes revenue from subscriptions, notices, and local advertising.

B. Subscription income includes all circulation revenue. In determining the taxable base, however, there shall be excluded from such revenue those actual amounts retained by or credited to carriers and other vendors as compensation for delivery or sale of newspapers.

1. Carriers are defined as those persons who deliver newspapers to individual subscribers. Such deliveries are confined to a specific area or route.

2. Other vendors are defined as those persons who deliver newspapers to retailers such as news stands, convenience markets, drug stores and to coin-operated vending machines located in or near commercial establishments such as office buildings, hotels, motels, grocery and department stores.

C. Income of publishers from sales of newspapers, whether directly or through other vendors, to news stands, convenience markets, drug stores or other retailers are taxable under this classification. The sales of newspapers by such retailers to consumers are taxable as retail sales. (See R15-5-1802(C))

Historical Note

Amended effective March 18, 1981 (Supp. 81-2).

R15-5-1303. Definitions

A. A “publisher” is one who manufactures and distributes a publication from a point within this state.

B. The term “publication” includes books, newspapers, magazines, music, periodicals, and any other literary work.

C. Effective 9/12/75, the term “publication” shall specifically exclude books. Sales of books directly to a final consumer, however, are taxable under the retail classification (see Article 18).

R15-5-1304. Printing costs

The cost of printing a publication, including the subletting of printing to another person, is not deductible from the gross income.

R15-5-1305. Out-of-state distribution

Income from publications, other than books, mailed or distributed from a point within this state to a point outside the state is subject to the tax under this classification.

R15-5-1306. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

ARTICLE 14. TRANSPORTING CLASSIFICATION

R15-5-1401. Repealed

Historical Note

Repealed effective August 13, 1987 (Supp. 87-3).

R15-5-1402. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1403. Repealed

Historical Note

Repealed effective January 16, 1997 (Supp. 97-1).

R15-5-1404. Excess Baggage Charges

A. Gross proceeds of sales or gross income from charges for excess baggage shipped from one point to another point in this state is included in the tax base under the transporting classification except as provided in subsection (B).

B. Gross proceeds of sales or gross income from charges for excess baggage shipped by motor vehicle from one point to another point in this state is not included in the tax base under the transporting classification if a light motor vehicle fee imposed under A.R.S. § 28-5492 or a motor carrier fee imposed under A.R.S. § 28-5852 is paid to the Department of Transportation on the vehicle used in the transporting.

Historical Note

Amended by final rulemaking at 6 A.A.R. 2594, effective June 12, 2000 (Supp. 00-2).

R15-5-1405. Demurrage Charges

Gross proceeds of sales or gross income from demurrage charges is included in the tax base under the transporting classification unless the transporting to which it relates is excluded from the transporting classification.

Historical Note

Amended by final rulemaking at 6 A.A.R. 2594, effective June 12, 2000 (Supp. 00-2).

R15-5-1406. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1407. Repealed

Historical Note

Repealed effective January 16, 1997 (Supp. 97-1).

R15-5-1408. Rental of Aircraft

A. Gross proceeds of sales or gross income from transporting by aircraft freight or property from one point to another point in this state is included in the tax base under the transporting classification.

B. A charge for the use of an aircraft when a pilot is not provided is rent. Gross proceeds of sales or gross income from the rental or leasing of aircraft is included in the tax base under the personal property rental classification unless a specific deduction or exclusion applies.

Historical Note

Amended by final rulemaking at 6 A.A.R. 2594, effective June 12, 2000 (Supp. 00-2).

ARTICLE 15. PERSONAL PROPERTY RENTAL CLASSIFICATION

R15-5-1501. Repealed

Historical Note

Repealed effective August 13, 1987 (Supp. 87-3).

R15-5-1502. General

A. Gross income derived from the rental of tangible personal property is included in the tax base under the personal property rental classification unless a specific statutory exemption, exclusion, or deduction applies. Examples of tangible personal property include: televisions, cars, trucks, lawnmowers, floor polishers, tuxedos, uniforms, furniture, towels, and linens.

B. In this Article, the terms “lease,” “rental,” and “leasing” are used synonymously.

C. Gross income from the lease of tangible personal property to a lessee who subleases the property is not taxable under the personal property rental classification if the lessee is engaged in the business of leasing the property under the personal property rental classification.

D. Gross income from the rental of tangible personal property includes charges for installation, labor, insurance, maintenance, repairs, pick-up, delivery, assembly, set-up, personal property taxes, and penalty fees even if these charges are billed as separate items, unless a specific statutory exemption, exclusion, or deduction applies.

Historical Note

Amended subsection (D) and added subsection (E) effective March 18, 1981 (Supp. 81-2). Amended by final rulemaking at 6 A.A.R. 3091, effective July 18, 2000 (Supp. 00-3).

R15-5-1503. Sourcing of Leased Tangible Personal Property

A. In this Section:

1. “Business location” means the business address that appears on a lessor’s privilege license, but if the lessor does not have a business address in Arizona, business location means the lessee’s residential or primary business street address.

2. “Source” means to determine the location of leasing or renting activity for tax purposes.

B. The personal property rental classification applies to a person who is engaging or continuing in the business of leasing or renting tangible personal property in Arizona for a consideration. Gross receipts from leasing or renting tangible personal property in Arizona are taxable under this classification.

C. The Department shall source gross receipts from leasing or renting tangible personal property to the business location. Thus, gross receipts of a lessor without a business address in Arizona, derived from leasing or renting tangible personal property, are sourced to the lessee’s residential or primary business street address and are taxable when the property is shipped, delivered, or otherwise brought into the state for use in Arizona.

D. Gross receipts from leasing or renting tangible personal property are not taxable if the property is shipped or delivered outside of the state and intended, at the inception of the lease, for use exclusively outside of the state.

E. Gross receipts from leasing or renting tangible personal property are not taxable if the property is removed from the state and used exclusively outside of the state. Intermittent use of tangible personal property outside of the state does not constitute removal of the property from the state for use exclusively outside of the state, and therefore does not change the business location of the property or liability for the tax. For example, use of a business’s leased tangible personal property by its employees at different locations on business trips and service calls does not change liability for the tax.

F. The burden of proof for establishing the applicability of subsection (D) or (E) is on the lessor.

G. For leasing or renting activity related to a motor vehicle, the Department shall examine whether the motor vehicle is licensed, registered, or primarily used in Arizona.

H. A taxpayer shall not take a deduction or credit for taxes paid in another state on a lease or rental of tangible personal property.

Historical Note

Amended by final rulemaking at 10 A.A.R. 3071, effective September 11, 2004 (Supp. 04-3).

R15-5-1504. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1505. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1506. Rental of Tangible Personal Property to Government Agencies

A lessor’s gross income from the rental of tangible personal property to the United States Government, the state of Arizona, or other governmental subdivisions is taxable under the personal property rental classification unless a specific statutory exemption, exclusion, or deduction applies.

Historical Note

Amended by final rulemaking at 6 A.A.R. 3091, effective July 18, 2000 (Supp. 00-3).

R15-5-1507. Rental of Tangible Personal Property to Schools, Churches, and Other Nonprofit Organizations

A lessor’s gross income from the rental of tangible personal property to a school, church, or other nonprofit organization is taxable under the personal property rental classification unless a specific statutory exemption, exclusion, or deduction applies.

Historical Note

Amended by final rulemaking at 6 A.A.R. 3091, effective July 18, 2000 (Supp. 00-3).

R15-5-1508. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1509. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1510. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1511. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1512. Lease -- Purchase Agreements

A. A lessor’s gross income from the leasing of tangible personal property that includes an option to purchase the tangible personal property is taxable under the personal property rental classification until the lessee exercises the purchase option.

B. Gross income received after the lessee exercises the purchase option is taxable under the retail classification.

Historical Note

Amended by final rulemaking at 6 A.A.R. 3091, effective July 18, 2000 (Supp. 00-3).

R15-5-1513. Repealed

Historical Note

Adopted effective November 7, 1978 (Supp. 78-6). Section repealed by final rulemaking at 6 A.A.R. 3091, effective July 18, 2000 (Supp. 00-3).

ARTICLE 16. COMMERCIAL LEASE CLASSIFICATION

R15-5-1601. Definitions

The following definitions apply for purposes of the rules in this Article, unless the context requires otherwise or unless otherwise defined.

1. “Agricultural property” means land or structures which are used for the purposes of growing crops or raising animals including agronomy, horticulture, viticulture, or animal husbandry.

2. “Economic unit of agricultural property” means agricultural property which is rented to the same lessee under one lease or rental agreement but may include more than one parcel or location which is functionally integrated.

3. “Real property used for commercial purposes” means land or structures, including parking lots but not including agricultural property or land or structures used for residential purposes.

4. “Rental” means renting or leasing

5. “Unit” means a single real property location rented or leased to a single tenant under one lease or rental agreement.

Historical Note

Repealed effective August 13, 1987 (Supp. 87-3). New Section R15-5-1601 renumbered from R15-5-1603 and amended effective April 21, 1995 (Supp. 95-2).

R15-5-1602. Casual Leasing Activity

A. For purposes of taxation under the commercial lease classification, there shall be no general exclusion for a casual rental of real property unless delineated under A.R.S. § 42-5059 except as provided in subsection (B) of this rule.

B. For periods ending on or before July 31, 1988, the rental of one unit or real property shall have been deemed to be a casual activity and not subject to transaction privilege tax if:

1. A lessor had income from another source which was unrelated to the income from the rental of real property and such income was of a significant amount so as to indicate that the rental activity was not the sole or main support of the lessor and

2. The scope and degree of the rental activity clearly indicated that the rental activity was an investment activity rather than income from a business.

C. For periods beginning on or after August 1, 1988, gross income from the rental of one or more units of real property used for commercial purposes shall be deemed to be a business activity and shall be taxable under the commercial lease classification.

D. For periods prior to July 17, 1993, gross income from the rental of one economic unit of agricultural property shall not be taxable if the following conditions exist:

1. A lessor had income from another source which was unrelated to the income from the rental of one economic unit of agricultural property and such income was of a significant amount so as to indicate that the rental activity was not the sole or main support of the lessor and

2. The scope and degree of the rental activity clearly indicated that the rental activity was an investment activity rather than income from a business.

E. For periods from and after July 17, 1993, gross income from the rental of agricultural property shall not be subject to tax if the conditions of A.R.S. § 42-5069(C)(12) are met.

F. The following situations are indicative of the application of the general provisions of the commercial lease classification:

1. A three-story office building is lease in its entirety to a large law firm. The building is one unit of property. Prior to August 1, 1988, the lessor of the office building was not considered to be engaged in business under the commercial lease classification if the conditions of subsection (A) existed. Commencing on or after August 1, 1988, the single rental of commercial real property is subject to tax under the commercial lease classification.

2. Individual spaces in a small medical building are rented to three different members of the medical profession on separate leases. The property consists of three units. Regardless of the time period in which the rental occurred, the lessor in this situation has always been engaged in business under the commercial lease classification.

3. A partnership is formed to hold one unit of real property for purposes of leasing. Income received from this activity is taxable since the partnership was formed for business purposes.

4. Two hundred acres of farmland are leased to one tenant. The acreage is one economic unit of agricultural property. The lessor is employed as an engineer and leases the property as an investment. Regardless of the time period in which the lease occurred, the lessor of the property is not engaged in business under the commercial lease classification.

5. Two hundred acres of agricultural property are leased to five unrelated parties on separate leases. The property consists of five economic units of agricultural property. Regardless of the time period in which the leases occurred, the lessor is engaged in business under the commercial lease classification. Five separate lease agreements are not a casual activity and the lessor does not fall within any of the current exemptions under A.R.S. § 42-5069(C)(12).

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2). New Section R15-5-1602 renumbered from R15-5-1607 and amended effective April 21, 1995 (Supp. 95-2). R15-5-1602(A), (E) and (F)(5) corrected to reflect updated citation references to Arizona Revised Statutes (Supp. 06-4).

R15-5-1603. Renumbered

Historical Note

Amended effective November 7, 1978, unless otherwise noted (Supp. 78-6). Section R15-5-1603 renumbered to R15-5-1601 effective April 21, 1995 (Supp. 95-2).

R15-5-1604. Gross Income

A. Gross income under the commercial lease classification shall include all amounts paid to or on behalf of the lessor including but not limited to the following items:

1. Rent;

2. Property tax paid by the lessee either as reimbursement to the lessor or paid directly to the county assessor on the lessor’s behalf;

3. Insurance paid by the lessee either as reimbursement to the lessor or directly on the lessor’s behalf;

4. Common area maintenance charges paid by the lessee;

5. Payments by the lessee for the promotion of the facility or of the lessee;

6. Flat fees paid by the lessee for telephone and reception services, clerical services, library services, reproduction services or facsimile services when such services are contracted for as part of the lease or are obligatory under the lease:

7. Utility connect/disconnect charges;

8. Improvements to the leased property made on behalf of the lessor; or

9. Reimbursement for utility service in excess of the actual amount charged by the utility company.

B. Refundable deposits shall not be subject to tax at the time of receipt if such deposits are separate from gross receipts from commercial leasing and are maintained on the books and records of the lessor as a liability and not as income.

1. Any portion of a refundable deposit which is retained by the lessor as a forfeited deposit shall be included in gross receipts subject to tax.

2. Any portion of a refundable deposit which is not claimed by the tenant at the time the tenant departs shall be presumed to be abandoned property if not claimed within five years from the date of departure pursuant to A.R.S. Title 44, Chapter 3 and shall be reported and delivered as unclaimed property to the Department after the five-year period of time has elapsed.

3. If amounts reported as income are claimed as refundable deposits, the burden of proof shall be on the taxpayer to show that the income reported is not gross receipts subject to tax.

C. Nonrefundable charges, such as cleaning charges, shall be included in gross income at the time of receipt.

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2). Adopted effective April 21, 1995 (Supp. 95-2).

R15-5-1605. Rental to Government Agencies

A. Gross receipts from the rental of real property to the United States Government, state of Arizona, or any other government agency shall be taxable under the commercial lease classification unless otherwise exempt.

B. For periods beginning May 24, 1990, and ending on March 31, 1993, the gross receipts from the rental of a single unit of real property to the United States Government shall not be subject to tax if the lessor did not have any other commercial lease income and either of the following conditions existed;

1. The real property was listed on the National Register of Historic Places; or

2. The real property was leased to the United States Postal Service for use as a postal facility.

Historical Head

Amended effective April 21, 1995 (Supp. 95-2).

R15-5-1606. Nonprofit Organizations

A. Nonprofit organizations shall be subject to tax under the commercial lease classification for gross receipts from the rental of real property unless otherwise exempt.

B. Leases of real property to nonprofit organizations shall be subject to tax under the commercial lease classification unless otherwise exempt.

Historical Head

Amended effective April 21, 1995 (Supp. 95-2).

R15-5-1607. Renumbered

Historical Note

Amended effective November 1, 1976 (Supp. 76-5). Amended effective November 7, 1978 (Supp. 78-6). Section R15-5-1607 renumbered to R15-5-1602 effective April 21, 1995 (Supp. 95-2).

R15-5-1608. Commercial property -- storage facilities

Income from the rental of storage facilities is taxable, provided the lessee retains the right of direct access to the stored goods. Conversely, the storage of property by a warehouse, when the warehouse proprietor maintains full control over the specific location of the stored goods within the building, is not taxable. Such storage is deemed to be a service rather than rental of real property.

R15-5-1609. Commercial property -- licensee agreements

When a department store enters into an agreement with a licensee to provide space within the store which does not give the licensee exclusive right to any specific area within the store, the income from such an agreement is not subject to tax. The transaction is deemed to be a licensee agreement rather than the subleasing of real property.

R15-5-1610. Expired

Historical Note

Amended effective April 21, 1995 (Supp. 95-2). Section expired under A.R.S. § 41-1056(E) at 12 A.A.R. 4742, effective September 30, 2006 (Supp. 06-4).

R15-5-1611. Repealed

Historical Note

Repealed effective January 16, 1997 (Supp. 97-1).

R15-5-1612. Repealed

Historical Note

Repealed effective January 16, 1997 (Supp. 97-1).

R15-5-1613. Repealed

Historical Note

Amended effective November 1, 1976 (Supp. 76-5). Repealed effective April 21, 1995 (Supp. 95-2).

R15-5-1614. Renumbered

Historical Note

Amended effective November 7, 1978, unless otherwise noted (Supp. 78-6). Renumbered to R15-5-1001 (Supp. 94-2).

R15-5-1615. Renumbered

Historical Note

Amended effective November 7, 1978 (Supp. 78-6). Renumbered to R15-5-1002 (Supp. 94-2).

R15-5-1616. Repealed

Historical Note

Repealed effective April 21, 1995 (Supp. 95-2).

R15-5-1617. Repealed

Historical Note

Repealed effective April 21, 1995 (Supp. 95-2).

ARTICLE 17. RESTAURANT CLASSIFICATION

R15-5-1701. Repealed

Historical Note

Repealed effective August 13, 1987 (Supp. 87-3).

R15-5-1702. Repealed

Historical Note

Amended effective November 7, 1978 (Supp. 78-6). Repealed April 21, 1995 (Supp. 95-2).

R15-5-1703. Repealed

Historical Note

Repealed effective March 18, 1981 (Supp. 81-2).

R15-5-1704. Providing Food or Drink to Government Agencies

A restaurant’s gross proceeds of sales or gross income from sales of food or drink to the United States Government, the state or its political subdivisions, or any other government agency, or its employees is included in the tax base under the restaurant classification unless exempt as a sale to a qualifying hospital under A.R.S. § 42-5074(B)(7) or as a sale for consumption within the premises of a 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 under A.R.S. § 42-5074(B)(9).

Historical Note

Amended effective December 16, 1997 (Supp. 97-4). R15-5-1704 corrected to reflect updated citation references to Arizona Revised Statutes (Supp. 06-4).

R15-5-1705. Amusement Devices

A restaurant’s gross proceeds of sales or gross income from the operation of amusement devices is included in the tax base under the amusement classification (see Article 4).

Historical Note

Amended effective December 16, 1997 (Supp. 97-4).

R15-5-1706. Cover Charges

A restaurant’s gross proceeds of sales or gross income from a cover charge or other minimum charge is included in the tax base under the restaurant classification.

Historical Note

Amended effective December 16, 1997 (Supp. 97-4).

R15-5-1707. Repealed

Historical Note

Repealed effective January 16, 1997 (Supp. 97-1).

R15-5-1708. Gratuities (Tips)

A. A restaurant’s gross receipts from gratuities that are separately stated on the check or bill are not included in the restaurant’s tax base if:

1. The exact amount charged on a check for gratuities is segregated on the seller’s records for the account of the employees actually providing the services; and

2. The amounts so segregated are distributed directly to the employees providing the services for which the charges were made.

B. If a restaurant cannot specifically segregate the charges for gratuities or if any portion of the amounts charged for gratuities is not distributed to the employees involved, the total gross receipts from the gratuities are included in the tax base under the restaurant classification.

Historical Note

Amended effective December 16, 1997 (Supp. 97-4).

R15-5-1709. Coupon Redemption

A restaurant that accepts coupons is subject to transaction privilege tax on the full sales price of the food or beverage before the coupon value is deducted if the restaurant receives advertising, services, or products in exchange for providing the discounts.

Historical Note

Adopted effective November 7, 1978 (Supp. 78-6). Amended effective December 16, 1997 (Supp. 97-4).

ARTICLE 18. SALES TAX -- RETAIL CLASSIFICATION

R15-5-1801. Repealed

Historical Note

Repealed effective July 23, 1985 (Supp. 85-4).

R15-5-1802. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1803. Renumbered

Historical Note

Renumbered to R15-5-181 effective August 9, 1993 (Supp. 93-3).

R15-5-1804. Renumbered

Historical Note

Renumbered to R15-5-182 effective August 9, 1993 (Supp. 93-3).

R15-5-1805. Renumbered

Historical Note

Renumbered to R15-5-104 effective August 9, 1993 (Supp. 93-3).

R15-5-1806. Repealed

Historical Note

Amended effective November 7, 1978 (Supp. 78-6). Repealed effective August 9, 1993 (Supp. 93-3).

R15-5-1807. Repealed

Historical Note

Repealed effective August 9, 1993 (Supp. 93-3).

R15-5-1808. Renumbered

Historical Note

Renumbered to R15-5-111 effective August 9, 1993 (Supp. 93-3).

R15-5-1809. Renumbered

Historical Note

Renumbered to R15-5-110 effective August 9, 1993 (Supp. 93-3).

R15-5-1810. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1811. Renumbered

Historical Note

Amended effective November 7, 1978 (Supp. 78-6). Renumbered to R15-5-101 effective August 9, 1993 (Supp. 93-3).

R15-5-1812. Repealed

Historical Note

Repealed effective August 9, 1993 (Supp. 93-3).

Editor’s Note: The information about casual sales that formerly was contained in R15-5-1812, and which is referenced in subsection R15-5-151(C)(1), now appears in R15-5-2001.

R15-5-1813. Renumbered

Historical Note

Renumbered to R15-5-2011 effective October 14, 1993 (Supp. 93-4).

R15-5-1814. Renumbered

Historical Note

Amended subsections (A) and (B) effective March 18, 1981 (Supp. 81-2). Renumbered to R15-5-170 effective August 9, 1993 (Supp. 93-3).

R15-5-1815. Renumbered

Historical Note

Renumbered to R15-5-105 effective August 9, 1993 (Supp. 93-3).

R15-5-1816. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1817. Renumbered

Historical Note

Renumbered to R15-5-103 effective August 9, 1993 (Supp. 93-3).

R15-5-1818. Renumbered

Historical Note

Renumbered to R15-5-132 effective August 9, 1993 (Supp. 93-3).

R15-5-1819. Renumbered

Historical Note

Amended effective November 7, 1978, unless otherwise noted (Supp. 78-6). Amended subsection (B), paragraph (1) effective March 18, 1981 (Supp. 81-2). Renumbered to R15-5-156 effective August 9, 1993 (Supp. 93-3).

R15-5-1820. Renumbered

Historical Note

Renumbered to R15-5-133 effective August 9, 1993 (Supp. 93-3).

R15-5-1821. Renumbered

Historical Note

Amended effective November 7, 1978, unless otherwise noted (Supp. 78-6). Amended subsection (B) effective March 18, 1981 (Supp. 81-2). Renumbered to R15-5-183 effective August 9, 1993 (Supp. 93-3).

R15-5-1822. Renumbered

Historical Note

Amended effective November 7, 1978, unless otherwise noted (Supp. 78-6). Amended paragraphs (9) and (10) effective March 18, 1981 (Supp. 81-2). Renumbered to R15-5-120 effective August 9, 1993 (Supp. 93-3).

R15-5-1823. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1824. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1825. Renumbered

Historical Note

Renumbered to R15-5-180 effective August 9, 1993 (Supp. 93-3).

R15-5-1826. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1827. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1828. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1829. Renumbered

Historical Note

Renumbered to R15-5-134 effective August 9, 1993 (Supp. 93-3).

R15-5-1830. Renumbered

Historical Note

Renumbered to R15-5-121 effective August 9, 1993 (Supp. 93-3).

R15-5-1831. Repealed

Historical Note

Repealed effective August 9, 1993 (Supp. 93-3).

R15-5-1832. Repealed

Historical Note

Former Section R15-5-1832 repealed, new Section R15-5-1832 adopted effective September 3, 1978 (Supp. 78-6). Repealed effective August 9, 1993 (Supp. 93-3).

R15-5-1833. Renumbered

Historical Note

Former Section R15-5-1833 repealed, new Section R15-5-1833 adopted effective March 18, 1981 (Supp. 81-2). Renumbered to R15-5-136 effective August 9, 1993 (Supp. 93-3).

R15-5-1834. Renumbered

Historical Note

Renumbered to R15-5-112 effective August 9, 1993 (Supp. 93-3).

R15-5-1835. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1836. Renumbered

Historical Note

Renumbered to R15-5-150 effective August 9, 1993 (Supp. 93-3).

R15-5-1837. Repealed

Historical Note

Repealed effective April 15, 1993 (Supp. 93-2).

R15-5-1838. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1839. Renumbered

Historical Note

Renumbered to R15-5-129 effective August 9, 1993 (Supp. 93-3).

R15-5-1840. Renumbered

Historical Note

Renumbered to R15-5-122 effective August 9, 1993 (Supp. 93-3).

R15-5-1841. Repealed

Historical Note

Repealed effective August 9, 1993 (Supp. 93-3).

R15-5-1842. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1843. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1844. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1845. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1846. Renumbered

Historical Note

Renumbered to R15-5-3004 effective July 23, 1985 (Supp. 85-4).

R15-5-1847. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1848. Renumbered

Historical Note

Renumbered to R15-5-126 effective August 9, 1993 (Supp. 93-3).

R15-5-1849. Renumbered

Historical Note

Renumbered to R15-5-123 effective August 9, 1993 (Supp. 93-3).

R15-5-1850. Renumbered

Historical Note

Former Section R15-5-1850 repealed, new Section R15-5-1850 adopted effective June 18, 1987 (Supp. 87-2). Section R15-5-1850 renumbered to R15-5-2010 effective October 14, 1993 (Supp. 93-4).

R15-5-1851. Repealed

Historical Note

Repealed effective August 9, 1993 (Supp. 93-3).

R15-5-1852. Repealed

Historical Note

Repealed effective August 9, 1993 (Supp. 93-3).

R15-5-1853. Renumbered

Historical Note

Adopted effective November 7, 1978 (Supp. 78-6). Amended effective June 16, 1987 (Supp. 87-2). Renumbered to R15-5-154 effective August 9, 1993
(Supp. 93-3).

ARTICLE 18.1. SALES OF FOOD

R15-5-1860. Definitions

For the purpose of these rules, unless the context requires otherwise, the following definitions will apply:

1. “Accessory food items” means coffee, tea, cocoa, carbonated and uncarbonated drinks, candy, condiments and spices, and other non-staple foods.

2. “Attendant” means a person, generally the employee of the retailer, who waits on the customers, or tends to their needs.

3. “Automatic retailer” means a coin operated mechanical device or system which sells tangible personal property. Such device or system must itself vend or sell the items, i.e., a device or system which delivers the subject of the sale, or by automatic action physically delivers the thing sold. Vending machines are considered automatic retailers.

4. “Caterer” means a person engaged in the business of serving meals, food and drinks on the premises used by his customer, but does not include employees hired by the hour of day.

5. “Delicatessen” means a business which sells specialty food items, such as prepared cold meats, perishable food and grocery items kept under refrigeration.

6. “Facilities for the consumption of food” means appropriate furniture, tableware, or parking areas for sitting both in or on the premises of the business, either in or out of a motor vehicle.

7. “Food”

a. Under A.R.S. § 42-1387, the Department is required to promulgate rules defining food as those items that may be purchased from an eligible grocery business with food coupons, but in no event may such definition of food include food for consumption on the premises, alcoholic beverages or tobacco. Even though alcoholic beverages and food for consumption on the premises may be intended for human consumption, such items are not considered food by the statutory provisions. In these rules, items that are considered food by the Statutes, and therefore tax exempt if sold by a qualified retailer, shall be referred to as “tax exempt foods.” Other items that may be intended for human consumption but are excluded from the definition of food by the Statute, and are therefore subject to the Sales Tax, shall be referred to herein as “taxable foods.”

b. “Food” means: Items intended for human consumption. Food is deemed to be intended for human consumption when its intended or ordinary use is as a food for human consumption or is an ingredient used in preparing food for human consumption. For example, even though animal food may be used by some humans, its ordinary or intended use is not for human consumption. Also, even though vitamins and other medication may be ingested, its intended or ordinary use is as a health aid or therapeutic agent or a deficiency corrector and is not intended for use as food. Following is a numeration of items which the Department does not consider food for human consumption:

i. Pet food and supplies

ii. Cosmetics and grooming items

iii. Tobacco products

iv. Soaps and paper products and household supplies

v. Dietary supplements such as vitamins or protein supplements

vi. Medicines

vii. Fertilizer

8. “Food for consumption on the premises”

a. “Food for consumption on the premises” means the following:

i. Hot prepared food, including products, items or ingredients of food which are prepared and sold or are intended to be sold in a heated condition. This also includes a combination of hot and cold food items or ingredients if a single price is charged by the retailer.

ii. Hot or cold sandwiches including frozen sandwiches.

iii. Food served by an attendant to be eaten at tables, chairs, benches, booths, stools, counters and within parking areas (for in-car consumption).

iv. Food served with trays, glasses, dishes or other tableware. Food which is generally selected by the customer from available displays and then taken by the customer to a checkout stand for payment is not considered to be served by the retailer.

v. Beverages sold in cups, glasses or open containers. Beverages shall include items such as milk shakes and ice cream floats.

vi. Food sold by caterers.

vii. Food sold within the premises of theaters, exhibitions, fairs, amusement parks, bowling alleys, athletic events, and other shows or contests and any businesses which charge admission, entrance or cover fees for exhibition, amusement, entertainment or instruction. While food for consumption on the premises includes any food sold within the premises of certain businesses, including businesses that charge admission, entrance or cover fees for exhibition, amusement, entertainment or instruction, food for consumption on premises does not include sales of tax exempt food by a qualified retailer within the premises of a full time educational institution that charges tuition for a full course of studies.

b. Any item enumerated in subparagraph (a) which is sold on a take-out or to-go basis is still considered to be food for consumption on the premises and therefore taxable.

9. “Food intended for home consumption” means food, other than food for consumption on the premises, which is usually intended to be consumed at home. Unless the taxpayer can establish to the contrary, food delivered by a retailer to an office or other business establishment shall not be considered food intended for home consumption.

10. “Home” means a natural person’s usual or habitual dwelling place, including rest homes, nursing homes, jails and other such institutions.

11. “Premises” means the total space and facilities, including buildings, grounds and parking lot that are made available for use by the retailer for the purpose of consuming food sold by such retailer.

12. “Qualified retailer”

a. A qualified retailer or qualified retail business is one that may be eligible to sell tax exempt food without including the sale of tax exempt food items in its taxable base. A retailer other than a qualified retailer must pay a tax measured by the sale of otherwise exempt food even though the sale of such items would be exempt if sold by a qualified retailer.

b. Qualified retailers are:

i. An eligible grocery business, which includes retailers who are eligible to participate in the United States Department of Agriculture Food Stamp Program, whether such retailer actually participates in the food stamp program. If a retailer is eligible to participate in the food stamp program, but does not participate in such program, such retailer may only be an eligible grocery business if the retailer first makes application to the Department to sell food tax exempt. Examples of retailers that might be considered eligible grocery businesses include:

(1) Grocery stores;

(2) Convenience stores;

(3) Butcher shops;

(4) Bakeries;

(5) Dairy stores;

(6) Cheese stores;

(7) Farmer’s markets.

ii. Retailers whose primary business is not the sale of food, but who sell food in a manner similar to grocery stores. This category includes stores such as department stores, drug stores, and gas stations.

iii. Retailers who sell food and who do not provide any facilities for consumption of food on the premises. This category may include certain health food stores, and certain outlets retailing soda and other similar beverages in bottles or cans, but not cups.

iv. Delicatessen business, if such retailer conducts his business so that the sale of tax exempt foods and other taxable items may be separately accounted for, through, for example, the use of two (2) cash registers, or a cash register with at least two (2) tax computing keys which are used to record taxable and tax exempt sales.

v. A retailer who is a street or sidewalk vendor who uses a pushcart, mobile facility, motor vehicle, or other such conveyance. Such retailers include:

(1) Snackmobile;

(2) Chuck wagon;

(3) Mobile hot dog stands.

vi. Vending machines and other automatic retailers.

13. “Staple food” means those food items intended for home preparation and consumption, which includes meat, poultry, fish, bread and bread stuffs, cereals, vegetables, fruits, fruit and vegetable juices, and dairy products.

14. “Taxable foods” are items which may be intended for human consumption, but are still subject to the Sales Tax when sold. Examples of taxable foods would be alcoholic beverages, and food for consumption on the premises.

15. Tax-exempt foods

a. “Tax exempt foods” are generally those items of food intended for home consumption which, if purchased from an eligible grocery business, would be eligible as of January 1, 1979, to be purchased with food coupons issued by the United States Department of Agriculture.

b. Tax-exempt food shall also include any new items of food intended for human consumption which would have been eligible for purchase with food coupons issued by the United States Department of Agriculture if such items would have existed for sale on January 1, 1979.

c. The following are examples of items which the Department will consider as tax exempt food:

bread and flour products

vegetables and vegetable products

candy and confectionery

sugar, sugar products and substitutes

cereal and cereal products

butter, oleomargarine, shortening and cooking oils

cocoa and cocoa products

coffee and coffee substitutes

milk and milk products

eggs and egg products

tea

meat and meat products

spices, condiments, extracts and food colorings

fish and fish products

frozen foods

soft drinks and soda (including bottles on which a deposit is required to be paid)

fruit and fruit products

packaged ice cream products

dietary substitutes

ice cubes and bottled water including carbonated and mineral water

purchases of seed and plants for use in gardens to produce food items for personal consumption

16. “Two tax computing keys” shall mean the mechanical or electronic function in a cash register which can separately record and accumulate taxable and nontaxable items without having the items presorted.

Historical Note

Adopted as an emergency effective June 30, 1980, pursuant to A.R.S. § 41-1003, valid for only 90 days (Supp. 80-3). Former emergency adoption now amended and adopted effective October 15, 1980 (Supp. 80-5).

R15-5-1861. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1862. Restaurant food sales

A. Restaurants are generally not qualified retailers, and therefore cannot sell food tax free, but are taxable upon all of their gross income or gross proceeds of sale.

B. If a qualified retailer also operates a restaurant, the gross income or gross receipts of a sale from the two (2) activities must be kept separate. The gross receipts or gross income from the operation of the restaurant shall always be taxable, as will the income from all sales of taxable food and nonfood items. Except for items which may be exempt under some other provision, only tax-exempt foods sold by a qualified retailer not in connection with its restaurant operation shall be exempt.

C. To the extent that a delicatessen may sell taxable food, such as hot or cold sandwiches, such delicatessen will be required to report under this classification. Since a delicatessen business may constitute a qualified retailer, such business may still be eligible to sell tax exempt food, if such sales are separately accounted for.

Historical Note

Adopted as an emergency effective June 30, 1980, pursuant to A.R.S. § 41-1003, valid for only 90 days (Supp. 80-3). Former emergency adoption now amended and adopted effective October 15, 1980 (Supp. 80-5).

R15-5-1863. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1864. Repealed

Historical Note

Repealed effective October 17, 1986 (Supp. 86-5).

R15-5-1864.01. Repealed

Historical Note

Repealed effective October 17, 1986 (Supp. 86-5).

R15-5-1864.02. Repealed

Historical Note

Repealed effective October 17, 1986 (Supp. 86-5).

R15-5-1864.03. Repealed

Historical Note

Repealed effective October 17, 1986 (Supp. 86-5).

R15-5-1864.04. Repealed

Historical Note

Repealed effective October 17, 1986 (Supp. 86-5).

R15-5-1865. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1866. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1867. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

ARTICLE 19. REPEALED

R15-5-1901. Repealed

Historical Note

Repealed effective August 13, 1987 (Supp. 87-3).

R15-5-1902. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1903. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1904. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1905. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-1906. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

ARTICLE 20. GENERAL

R15-5-2001. Definitions

The following definitions apply for the purposes of the rules in this Chapter, unless the context requires otherwise or unless otherwise defined. An individual rule may contain definitions which are specific to the context of that rule.

1. “Casual sale” means an occasional transaction of an isolated nature made by a person who is not engaged in the business of selling, within or without the state, the same type or character of property as that which was sold.

2. “Department” means the Arizona Department of Revenue.

3. “Gross income” means all receipts of a trade or business from sales or services. It includes the total consideration received or constructively received. The value of all services which are part of the sale is considered part of the gross income, unless statutorily excluded.

4. “Gross receipts” means gross receipts as defined in A.R.S. § 42-5001.

5. “Real property” means land and anything permanently affixed to land.

6. “Taxpayer” means any person required by law to file returns or to pay transaction privilege tax, use tax, rental occupancy tax, or excise taxes to the Department.

7. “Vendor” means any person engaged in a business which is subject to Arizona tax.

Historical Note

Repealed effective August 13, 1987 (Supp. 87-3). New Section R15-5-2001 renumbered from R15-5-202 and amended effective October 14, 1993 (Supp. 93-4). R15-5-2001(4) corrected to reflect an updated citation reference to Arizona Revised Statutes (Supp. 06-4).

R15-5-2002. Liability for Transaction Privilege Tax

The transaction privilege tax is imposed directly on the person engaging in a taxable business within Arizona. The vendor shall be liable for the tax, regardless of whether or not the vendor passes on the economic burden of the tax to the customer.

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2). New Section R15-5-2002 renumbered from R15-5-204 and amended effective October 14, 1993 (Supp. 93-4).

R15-5-2003. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-2004. Multi-location and Multi-business Taxpayers

A. A taxpayer with multiple licenses for separate businesses shall maintain separate records for each licensed business.

B. A tax is levied upon the privilege of engaging in specified businesses within Arizona. Class codes for reporting gross receipts subject to tax have been determined by the Department based on statutory provisions. Each business classification is independent of the others even when transacted under one license. A person who engages in more than one type of business under each license shall maintain books and records so that the gross proceeds of sales or gross income of each taxable business classification is shown separately.

C. Failure to maintain appropriate books and records shall result in the imposition of the tax at the highest tax rate on gross proceeds of sales or gross income applicable to a classification under which the taxpayer is doing business.

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2). New Section R15-5-2004 renumbered from R15-5-2215 and amended effective October 14, 1993 (Supp. 93-4).

R15-5-2005. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-2006. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-2007. Credit for Accounting and Reporting Expenses

A. For purposes of this rule, the following definitions apply:

1. “Reporting period” means a calendar month unless another period is authorized pursuant to A.R.S. § 42-1322.

2. “Statutory delinquency date” means the date by which a payment of tax is considered delinquent pursuant to A.R.S. § 42-1322.

3. “Tax return” means the Transaction Privilege, Use, and Severance Tax Return (TPT-1).

4. “Taxable business” means a business which is subject to either transaction privilege or severance tax.

5. “Taxpayer” means taxpayer as defined in A.R.S. § 42-1322.04(C), including an entity which is exempt from state income tax. The following are considered a single taxpayer:

a. Members of an Arizona affiliated group filing a consolidated corporate income tax return under A.R.S. § 43-947;

b. Corporations in a unitary business filing a combined corporate income tax return under A.A.C. R15-2-1131(E);

c. Married taxpayers operating separate sole proprietorships and filing a joint income tax return under A.A.C. R15-2-1131(E); or

d. Partnerships, S Corporations, trusts, or estates conducting multiple businesses, filing a single income tax return.

B. A taxpayer shall compute the credit, using the full amount of tax as required to be reported on the tax return, including any excess tax collected. The Department shall not allow a credit against taxes other than the state transaction privilege tax and the severance tax.

C. Except as provided in subsection (D), the Department shall not allow a credit if the taxpayer fails to pay the tax due before the statutory delinquency date. Failure to pay the tax due includes the following circumstances:

1. The taxpayer makes an underpayment of tax due, including any estimated tax due, or,

2. The taxpayer’s check is dishonored.

D. In the case of taxpayer computational error, the Department shall allow the credit based on the amounts originally filed, if the computational error resulted in the overpayment or underpayment of the tax actually due:

1. In the case of an overpayment, the Department shall allow the credit on the actual amount of tax due for the reporting period.

2. In the case of an underpayment, the Department shall allow the credit on the amount of the tax paid prior to the statutory delinquency date.

E. To receive the credit for each reporting period, the taxpayer shall claim the credit on the tax return. If the taxpayer understates the amount of the credit on the tax return, the Department shall allow the amount of credit which the taxpayer has claimed. The taxpayer may file an amended return to claim any unclaimed portion of the credit if the taxpayer timely paid the tax upon which the credit is based. If the taxpayer overstates the amount of the credit, the Department shall allow the amount of credit actually permitted for the reporting period.

F. A taxpayer is entitled to one credit, regardless of the number of licenses, businesses, or locations the taxpayer may have. Taxpayers with multiple licenses for separate businesses or separate locations shall elect the manner in which to allocate the credit among their licenses within the $10,000 annual limitation. The election shall be made on a form 51-T. The taxpayer shall file the election on or before January 15 of the first year for which an election is being made or within 30 days prior to beginning operations if the taxpayer is a new business entity. The taxpayer is required to file an election one time; however, a new election may be filed under the following circumstances:

1. If a taxpayer does not claim the entire $10,000 credit during the calendar year, the taxpayer may amend the election at the end of the calendar year to reallocate the unclaimed portion of the credit for that particular year. This amended election shall be filed on or before January 31 of the following year. To claim the reallocated credit, the taxpayer shall file an amended tax return for each reporting period in which a sufficient tax was due and timely paid. For example: an individual owns three separate businesses with different transaction privilege tax licenses. At the beginning of the year, the individual allocates the $10,000 credit as follows: $3,000 to Company A; $2,000 to Company B; and $5,000 to Company C. At the end of the year, Companies A and B have claimed the credit up to their allocated amounts. However, Company C has only claimed $1,000 of its allocated credit. Company A timely paid a sufficient amount of tax during the months of August and September to qualify for an additional $4,000 credit. The individual may amend the election to reallocate the unclaimed credit to Company A. To claim the $4,000 credit, the individual must file an amended tax return for Company A for the months of August and September.

2. If a taxpayer acquires, sells, or terminates a taxable business during the calendar year, the taxpayer may amend the election at that time to reallocate the credit. The taxpayer shall only reallocate the portion of the credit which has not been claimed by the date on which the taxpayer acquires, sells, or terminates the business. The taxpayer shall ensure that the election relates to the acquired, sold, or terminated business and is made on a prospective basis only. The taxpayer shall notify the Department of the reallocation 30 days prior to the due date of the tax return for the reporting period to which the reallocation applies. For example: Corporation A is the common parent of Corporations B and C and elects to file a consolidated corporate state income tax return. Each of the three corporations conducts a taxable business activity. Since the three corporations file state income tax as one entity, Corporation A is required to allocate the $10,000 credit among the three corporations. At the beginning of the year, Corporation A elects to allocate the entire $10,000 credit to Corporation B. On July 1, Corporation A acquires Corporation D which also conducts a taxable business activity. Corporation A may amend its election at this time to take into account Corporation D. Corporation A may reallocate the portion of the credit not already claimed by Corporation B to Corporation D.

G. Where a taxpayer is allocating the $10,000 credit, the following rules apply:

1. The Department shall allow a unitary business, filing a combined corporate state income tax return, or an Arizona affiliated group, filing a consolidated corporate state income tax return, one $10,000 credit. The unitary business or affiliated group may allocate the credit among its members. If the unitary business or affiliated group fails to allocate the $10,000 credit, the Department shall allocate the credit to the corporation in whose name the unitary business or affiliated group files its state income tax return regardless of whether the corporation conducts a taxable business.

a. If a corporation joins an Arizona affiliated group or unitary business during the calendar year, the Department shall classify the corporation as a separate taxpayer for the period before it joins the affiliated group or unitary business. The Department shall classify the corporation as the same taxpayer, an affiliated group, or unitary business for the period after it joins the affiliated group or unitary business. An affiliated group or unitary business may allocate the $10,000 credit, even if a member corporation claimed the credit before it joined the affiliated group or unitary business.

b. If a corporation leaves an affiliated group or unitary business during the calendar year, the Department shall classify the corporation as the same taxpayer, an affiliated group, or unitary business for the period before it leaves the affiliated group or unitary business. The Department shall not classify the corporation as the same taxpayer for the period after it leaves the affiliated group or unitary business. The corporation, as a separate taxpayer or part of a separate taxpayer, may allocate the $10,000 credit, even if the corporation claimed the credit before it left an affiliated group or unitary business.

2. If a partnership, S corporation, trust, or estate conducts multiple taxable businesses, the Department shall allow the partnership, S corporation, trust, or estate one $10,000 credit. The partnership, S corporation, trust, or estate may allocate the credit among its businesses. The credit shall not be allocated to the partners of a partnership, shareholders of an S corporation, or beneficiaries of a trust or estate.

3. In cases where the taxpayers are married and each spouse conducts a taxable business, the Department shall allow one $10,000 credit per income tax return. If the married taxpayers file separate individual income tax returns, the Department shall allow each spouse one $10,000 credit. If the married taxpayers file a joint income tax return, the Department shall allow one $10,000 credit for the couple.

Historical Note

Renumbered from R15-5-3025 (Supp. 94-2). Amended effective August 13, 1996 (Supp. 96-3).

R15-5-2008. Reserved

R15-5-2009. Reserved

R15-5-2010. Transactions Between Affiliated Persons

A. For purposes of this rule, the following definitions apply:

1. “Actual ownership” means direct ownership and control but does not include ownership by or through affiliated persons.

2. “Affiliated persons” means members of the individual’s family or persons who have ownership or control of a business entity.

3. “Constructive purchase price” means the fair market value or, if the fair market value cannot be determined, the value established by expert appraisal that takes into consideration all factors relevant to the transaction.

4. “Control of a business entity” means direct or indirect ownership or control of more than 50% of the business entity. The following guidelines, as to indirect ownership, shall apply for purposes of determining control of a business entity.

a. A corporation, partnership, estate, or trust shall be considered as being owned proportionately by or for its shareholders, partners, or beneficiaries.

b. An individual shall be considered as owning directly or indirectly that portion which is owned by or for members of the individual’s family.

c. The ownership of stock by a corporation, partnership, estate, or trust shall be considered actual ownership to its shareholders, partners, or beneficiaries for purposes of making another individual a constructive owner.

d. Ownership based on a family relationship shall not be treated as actual ownership by the related party for the purpose of making another individual a constructive owner.

5. “Fair market value” means the gross receipts that the transaction would have brought in the open market at a time and location similar to that of the affiliated party transaction and between a willing purchaser and a willing seller, who are not affiliated and have reasonable knowledge of the relevant facts.

6. “Members of the individual’s family” means the relationship of spouse, brothers, and sisters, whether by whole or half blood and including adopted persons, ancestors, and lineal descendants.

B. The tax shall be computed upon the constructive purchase price when:

1. The transaction is between affiliated persons, and

2. The facts and circumstances indicate that the reported gross receipts from the transaction are not indicative of the fair market value of the transaction.

Historical Note

Renumbered from Section R15-5-1850 and amended effective October 14, 1993 (Supp. 93-4). Corrected typographical error to reflect what was filed with the Office of Secretary of State October 14, 1993; changed “owner” to “owned” in subsection (A)(4)(a) (Supp. 97-1).

R15-5-2011. Bad Debts

A. The deduction of a bad debt shall be allowed from gross receipts if the following conditions apply:

1. The gross receipts from the transaction on which the bad debt deduction is being taken have been reported as taxable;

2. The debt arose from a debtor-creditor relationship based upon a valid and enforceable obligation to pay a fixed or determinable sum of money; and

3. All or part of the debt is worthless.

B. A debt shall be considered worthless if:

1. The surrounding circumstances indicate that the debt is uncollectible; and

2. Legal action to enforce payment has not or, in all probability, would not result in the satisfaction of the debt.

C. The bad debt deduction shall be computed by subtracting the amounts received on the debt from the amount originally reported as taxable. The portion of the amounts received on the debt representing carrying charges, interest, and repossession expenses, which have not been reported as taxable, shall not be allowed as a bad debt deduction.

D. A bad debt deduction shall be taken in the month in which the conditions of subsection (A) apply.

E. A bad debt deduction shall be allowed, pursuant to the provisions in this rule, on conditional or installment sales if:

1. The tax liability is paid on the full sales price of the tangible personal property at the time of the sale; or

2. A contract or other financial obligation is sold to a third party as a sale with recourse and principal payments are made by the vendor to the third party, pursuant to the default of the original payor. Such principal payments may be taken as a bad debt deduction if the tax was paid by the vendor on the original sale of the tangible personal property or on the subsequent sale of the financing contract.

3. For purposes of the bad debt deduction in situations of default on conditional or installment sales, a “sale with recourse” means that a vendor sells a contract or other financial obligation to a third party but retains liability for payment upon default of the original payor.

F. Any recovery of a bad debt subsequent to a bad debt deduction shall be reported as taxable gross receipts when received.

Historical Note

Renumbered from Section R15-5-1813 and amended effective October 14, 1993 (Supp. 93-4). Corrected misspelling in subsection (E)(3) from “retails” to “retains” (Supp. 94-2).

ARTICLE 21. UTILITIES CLASSIFICATION

R15-5-2101. Repealed

Historical Note

Repealed effective August 13, 1987 (Supp. 87-3).

R15-5-2102. Renumbered

Historical Note

Renumbered to R15-5-3024 (Supp. 86-6).

R15-5-2103. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-2104. Interstate and Foreign Sales

A person engaged in business under the utilities classification may deduct from the tax base gross receipts from sales of electricity, gas, or water, delivered through transmission lines or pipelines to a point in another state or country, from a point in this state and used outside this state.

Historical Note

Amended effective October 17, 1997 (Supp. 97-4).

R15-5-2105. Locally Delivered Utilities

A person engaged in business under the utilities classification is subject to tax on the gross receipts from sales of electricity, gas, or water, produced outside this state that is delivered through transmission lines or pipelines to a point in this state, for use in this state unless an exemption applies.

Historical Note

Amended effective October 17, 1997 (Supp. 97-4).

R15-5-2106. Compressed and Bottled Liquids

The gross receipts from sales of bottled gases and bottled water are subject to tax under the retail classification unless otherwise exempt.

Historical Note

Amended effective March 18, 1981 (Supp. 81-2). Amended effective October 17, 1997 (Supp. 97-4).

R15-5-2107. Sales to Irrigation Districts

A person engaged in business under the utilities classification is subject to tax on the gross receipts from producing and furnishing or furnishing electricity or gas to an irrigation district for the purpose of producing water for irrigation of farm lands or of lands subdivided for residential purposes which are entitled to irrigation water unless an exemption applies.

Historical Note

Amended effective October 17, 1997 (Supp. 97-4).

R15-5-2108. Repealed

Historical Note

Repealed effective October 17, 1997 (Supp. 97-4).

R15-5-2109. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-2110. Security Deposits

Gross receipts from customer deposits that are held as security for payment of utility billings are not subject to tax until recognized as income. A deposit that is not applied to a customer’s bill or refunded to a customer when utility services are discontinued shall be presumed to be abandoned property if the customer does not claim it within the period established under A.R.S. Title 44, Chapter 3. Customer deposits that are presumed to be abandoned property under A.R.S. Title 44, Chapter 3, shall be reported and delivered to the Department as unclaimed property. Amounts delivered to the Department as unclaimed property are not included in the tax base. For example:

1. A utility company requires a new customer to deposit $150 before it provides utility service. The customer moves and notifies the utility company to discontinue service. The customer’s final bill is $130. The utility applies the deposit to the final bill and refunds $20 to the customer. The amount applied to the utility bill is recognized as income and subject to tax. The amount refunded to the customer is not recognized by the utility as income and is not subject to tax.

2. A utility company requires a new customer to deposit $150 before it provides utility service. The customer notifies the utility company to discontinue service. The customer’s final bill is $130. The utility applies the deposit to the final bill. The customer does not provide a forwarding address to the utility. Therefore, the utility company is not able to refund the remaining $20 to the customer. The amount applied to the utility bill is recognized as income and subject to tax. The remaining $20 is presumed to be abandoned property if not claimed under A.R.S. Title 44, Chapter 3. The amount presumed to be abandoned property shall be reported and delivered to the Department as unclaimed property under A.R.S. Title 44, Chapter 3. The amount delivered to the Department as unclaimed property is not recognized as income by the utility and is not subject to tax.

Historical Note

Amended effective October 17, 1997 (Supp. 97-4).

ARTICLE 22. TRANSACTION PRIVILEGE TAX - ADMINISTRATION

R15-5-2201. Display of License

A. A person maintaining a public place of business in Arizona shall display the transaction privilege tax license in a location conspicuous to the public.

B. If a person maintains more than one place of business in Arizona, a transaction privilege tax license shall be displayed at each location.

C. For lessors engaged in the business of commercial leasing, a transaction privilege tax license shall be displayed in each location from which the lessor engages in business transactions.

Historical Note

Amended effective November 7, 1978, unless otherwise noted (Supp. 78-6). Amended effective October 15, 1980 (Supp. 80-5). Repealed effective February 22, 1989 (Supp. 89-1). Section R15-5-2201 renumbered from R15-5-2203 and amended effective October 14, 1993
(Supp. 93-4).

R15-5-2202. Change in Ownership

A. A transaction privilege tax or use tax license is issued to a specific person. The license shall not be transferred to the new owner when selling a business. The new owner shall apply to the state for a new license before engaging in business transactions.

B. Court-appointed trustees, receivers, and others in cases of liquidation or operational bankruptcies shall obtain a transaction privilege tax or use tax license.

C. If a licensee has any change in ownership, the licensee shall apply for a new license.

Historical Note

Repealed effective February 22, 1989 (Supp. 89-1). Section R15-5-2202 renumbered from R15-5-2205 and amended effective October 14, 1993 (Supp. 93-4).

R15-5-2203. Change of Name or Trade Name

If a change is made in the name or trade name under which the business is operating and the ownership remains the same, the taxpayer shall apply for a new license.

Historical Note

Section R15-5-2203 renumbered to R15-5-2201, new Section R15-5-2203 renumbered from R15-5-2206 and amended effective October 14, 1993 (Supp. 93-4).

R15-5-2204. Change of Business Location or Mailing Address

A. The taxpayer shall apply for a new transaction privilege tax or use tax license if the physical location of the business changes.

B. The taxpayer shall notify the Department in writing of a change in mailing address.

Historical Note

Amended effective October 15, 1980 (Supp. 80-5). Section R15-5-2204 repealed, new Section R15-5-2204 renumbered from R15-5-2207 and amended effective October 14, 1993 (Supp. 93-4).

R15-5-2205. Surrender of License upon Sale or Termination of Business

If a business is sold or terminated, the taxpayer shall notify the Department in writing of the date of sale or termination and shall surrender the transaction privilege tax or use tax license to the Department.

Historical Note

Amended effective November 7, 1978 (Supp. 78-6). Section R15-5-2205 renumbered to R15-5-2202, new Section R15-5-2205 renumbered from R15-5-2209 effective October 14, 1993 (Supp. 93-4).

R15-5-2206. Cancellation of License

A. The Department may cancel a license if:

1. During any consecutive 12-month period, the licensee reports no taxable transaction; and

2. The licensee is not a subcontractor or wholesaler.

B. The Department shall notify a licensee in writing of its intention to cancel the license. The notice shall explain the action the licensee may take to contest cancellation of the license and when cancellation is final.

C. The Department shall cancel a license 30 days after the notice of intention to cancel is mailed unless, within 30 days, the licensee objects to the cancellation in writing and produces documentation that the licensee is actively engaged in a taxable business. Suitable documentation includes, but is not limited to, the following:

1. Evidence that the licensee holds an inventory of raw or finished tangible personal property for sale or resale;

2. Evidence that the licensee maintains segregated bank accounts for the purpose of transacting business;

3. Bona fide contracts for future sale or resale of tangible personal property;

4. Profit and loss statements for federal or state income tax purposes; or

5. Evidence that the licensee otherwise actually engages in bona fide business activities.

D. Within 30 days of receipt of the licensee’s objections and documentation, the Department shall notify the licensee in writing of its decision to cancel or retain the license. If the decision is to cancel the license, the licensee may request an administrative hearing.

Historical Note

Section R15-5-2206 renumbered to R15-5-2203, new Section R15-5-2206 renumbered from R15-5-3018 effective October 14, 1993 (Supp. 93-4).

R15-5-2207. Taxpayer Bonds

A. The amount of the bond required under A.R.S. § 42-112 shall be the greater of five hundred dollars, or:

1. For licensees reporting monthly, four times the average monthly tax liability;

2. For licensees reporting quarterly, six times the average monthly tax liability; or

3. For licensees reporting annually, fourteen times the average monthly tax liability.

B. For purposes of determining the bond amount, the average monthly tax liability is equal to the average monthly tax due from the licensee for the preceding six consecutive months. If an applicant does not have a six-month payment history, the bond amount shall be a minimum of five hundred dollars.

C. If a licensee provides a surety bond and the bond lapses, the licensee must deposit with the Department cash or other security in an amount equal to the lapsed surety bond within five business days of the licensee’s receipt of written notification by the Department.

D. The bond amount may be increased or decreased as necessary based upon a change in the licensee’s previous filing period, filing compliance record, or payment history. If the bond amount has been increased above the amount computed under subsection (B) of this rule, the licensee may request a hearing pursuant to A.R.S. § 42-112 to show why the order increasing the bond amount is in error.

Historical Note

Former Section R15-5-2207 renumbered to R15-5-2204 effective October 14, 1993 (Supp. 93-4). New Section R15-5-2207 renumbered from R15-10-201 (Supp. 94-1).

R15-5-2208. Expired

Historical Note

Repealed effective October 14, 1993 (Supp. 93-4). New Section made by exempt rulemaking at 16 A.A.R. 1226, effective June 15, 2010; Section number corrected at request of Department, Office File No. M11-118, filed March 31, 2011 (Supp. 10-2). Section expired under A.R.S. § 41-1056(E) at 18 A.A.R. 1652, effective March 31, 2012 (Supp. 12-2).

R15-5-2209. Renumbered

Historical Note

Section R15-5-2209 renumbered to R15-5-2205 effective October 14, 1993 (Supp. 93-4).

R15-5-2210. Collection of Tax by the Vendor

A. The vendor may pass on the economic burden of the transaction privilege tax, either as an unspecified portion of the overall selling price or as a separate and distinct item of charge.

1. If a vendor elects to pass on the economic burden of the tax as a separate and distinct item of charge, the vendor’s tax base shall not include any collected state, county, city, or town taxes.

2. If the vendor does not pass on the tax as a separate and distinct item of charge, the vendor may factor out the tax. See R15-5-2210.01.

3. The amount of tax on a transaction shall be the same whether the tax is stated as a separate and distinct item of charge or the tax is calculated using the factoring method.

4. Calculation of the amount of the tax using the separate and distinct item of charge method shall be as follows:

Price of tangible personal property $100

Multiply the price by the applicable tax rate

$100 times 5% equals the tax as calculated $5

Total cost to the consumer $105

B. All taxes collected shall be remitted to the Department and applicable taxing jurisdictions. If a vendor has collected tax in excess of the tax liability for the reporting period, the excess tax shall also be remitted.

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2). New Section adopted effective October 14, 1993 (Supp. 93-4). Reference correction (Supp. 95-2).

R15-5-2210.01. Factoring

“Factoring” means a method by which the taxpayer may determine the amount of the tax when the tax is collected as an unspecified part of the selling price.

1. The taxpayer may use any factoring method resulting in a tax amount equal to the tax as calculated using the separate and distinct item of charge method.

2. The following factoring method is approved and recommended by the Department.

To calculate the tax under the factoring method, the total cost to the consumer is divided by one plus the cumulative amount of the state and applicable county, city, and town tax rates, stated as a decimal. The result of this calculation is then multiplied by the cumulative tax rate to arrive at the amount of the tax on the sale. The gross receipts subject to tax, plus the cumulative tax on that amount, shall equal the total cost to the consumer.

To factor:

Total cost to the consumer $105

Divide the total cost to the

consumer by 1 plus the tax

rate (1.00 plus .05)

$105 divided by 1.05 equals the

price of tangible personal property $100

Tax as calculated ($100 times 5%) $5

Historical Note

New Section adopted effective October 14, 1993
(Supp. 93-4).

R15-5-2211. Election of Basis to Report and Pay Taxes

A. For purposes of this Section, the following definitions apply:

1. “Accrual method” means that a sale is reported in the reporting period in which the sale occurs regardless of when payment is received.

2. “Cash receipts method” means that a sale is reported in the reporting period in which payment is received.

3. “Method of reporting” means a method to report and pay transaction privilege tax.

4. “Payment” means all consideration received including cash, credit, property, and services.

5. “Reporting period” means a calendar month or as prescribed by A.R.S. § 42-5014.

B. A taxpayer shall elect a method of reporting based on either the accrual or the cash receipts method at the time of making the application for a transaction privilege tax license or use tax registration.

C. A taxpayer shall report allowable exclusions, deductions, and exemptions in a manner consistent with the method of reporting elected under subsection (B).

D. A taxpayer shall provide written notification to the Department prior to changing its method of reporting elected under subsection (B). The Department may audit the books of the taxpayer to adjust any tax liability resulting from the change in the method of reporting.

Historical Note

Repealed effective July 23, 1985 (Supp. 85-4). New Section renumbered from R15-5-2213 and amended effective October 14, 1993 (Supp. 93-4). Amended by final rulemaking at 14 A.A.R. 3616, effective November 8, 2008 (Supp. 08-3).

R15-5-2212. Payment of Taxes

The taxpayer shall separately compute the tax liability for use taxes, city taxes, and the combined state and county taxes using the monthly report form, even though a single payment shall be remitted to the Department.

Historical Note

Repealed effective July 23, 1987 (Supp. 85-4). New Section R15-5-2212 renumbered from Section R15-5-3005 and amended effective October 14, 1993 (Supp. 93-4).

R15-5-2213. Alternative Reporting

A. The Department shall authorize taxpayers to report on an annual or quarterly basis, if the taxpayer has established a filing history that shows that the taxpayer is not currently delinquent and that the taxpayer’s annual tax liability is between $500 and $1250 for quarterly reporting or $500 or less for annual reporting.

B. The Department shall authorize new businesses that reasonably estimate their annual tax liability for the succeeding 12 months will be between $500 and $1,250 to report and remit tax on a quarterly basis.

C. A taxpayer shall increase the reporting frequency to monthly and notify the Department of the change in reporting if the taxpayer’s annual tax liability equals or exceeds or can reasonably be expected to equal or exceed $1,250. The taxpayer shall increase the reporting frequency to quarterly and notify the Department of the change in reporting if the taxpayer’s annual tax liability exceeds or can reasonably be expected to exceed $500, but is or will be less than $1,250. Failure to increase reporting frequency will subject the taxpayer to interest. Failure to increase reporting frequency will also subject the taxpayer to penalties unless the taxpayer can show that the failure was due to reasonable cause and not willful neglect.

D. A taxpayer shall begin to report on a monthly basis at any time during a 12-month period if the annualized tax liability for the taxpayer reporting on an annual or quarterly basis equals or exceeds $1,250. A taxpayer shall begin to report on a quarterly basis at any time during a 12-month period if the annualized tax liability for the taxpayer reporting on an annual basis is expected to exceed $500, but be less than $1,250.

Historical Note

Former Section R15-5-2213 renumbered to R15-5-2211, new Section R15-5-2213 adopted effective October 14, 1993 (Supp. 93-4). Amended by final rulemaking at 7 A.A.R. 5065, effective October 5, 2001 (Supp. 01-4).

R15-5-2214. Establishing the Right to a Deduction by Use of a Certificate or Other Documentation

A. The vendor is responsible for the payment of tax and therefore shall provide sufficient documentation in support of all deductions.

B. The vendor may establish a deduction or exclusion from the tax base pursuant to A.R.S. § 42-1316 or 42-1328.

1. If the purchaser does not have a valid license number, the purchaser shall indicate the reason on any certificate.

2. Marking an invoice may be done either by recording the purchaser’s transaction privilege tax license number on the invoice or by cross referencing the specific transaction to the specific exemption certificate of the specific purchaser.

3. The Department has prescribed a certificate for establishing entitlement to statutory deductions. Reproductions of the blank prescribed original certificate shall be acceptable for use.

4. The appropriate certificate shall be accurately and fully completed by the purchaser.

5. If the vendor has reason to believe that the information contained in the certificate is not accurate, complete, or applicable to the transaction, the vendor may refuse to accept the certificate.

6. If at any time the vendor has reason to believe that the certificate is not applicable to a transaction, the vendor may refuse to honor the certificate for that transaction.

7. The Department may challenge the certificate as accepted by the vendor if the Department has reason to believe that the information in the certificate is incomplete, inaccurate, or if the exemption claimed is not based on statutory provisions. The burden of proof lies with the Department when a vendor accepts a completed departmental certificate and marks the applicable invoice pursuant to statute.

C. A blanket certificate may be accepted if the vendor and purchaser agree. The blanket certificate may continue in force, for applicable transactions, for a period of time as set forth on the certificate. For purposes of this rule, a blanket certificate is one which covers the indicated type of transaction over a specified period of time.

1. The vendor may refuse to honor a blanket certificate and shall cancel such a certificate if, at any time, the vendor has reason to believe that the information contained in the certificate is no longer accurate or complete or no longer applies.

2. A new, accurate, and complete certificate may then be accepted.

D. Documentation, including a certificate other than a departmental certificate, may be accepted by the vendor to establish the right to a deduction.

1. If the vendor accepts a form of documentation other than a completed departmental certificate, the burden of proof remains with the vendor to establish the right to the deduction.

2. Other documentation necessary to establish a deduction from the tax base shall contain the information required by A.R.S. § 42-1316(A).

E. Documentation or a certificate to establish a deduction from the tax base shall be provided for each transaction or if a blanket certificate is used for each different exemption category.

F. The vendor shall retain all documentation for the required statutory period pursuant to A.R.S. § 42-113.

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2). New Section R15-5-2214 adopted effective October 14, 1993 (Supp. 93-4).

R15-5-2215. Return and Payment of Tax-estimated Tax

A. For purposes of this rule, the following definitions apply:

1. “Annual estimated tax payment” means ½ of the total tax liability for the entire month of May or the total tax liability for the first 15 days of the month of June.

2. “Annual tax liability” means a total tax liability of $100,000.00 or more in the preceding calendar year or a reasonable anticipation of a total tax liability of $100,000.00 or more in the current year.

3. “Taxpayer” has the meaning set forth in A.R.S. § 42-1322(J). The following are considered a single taxpayer:

a. Members of an Arizona-affiliated group filing a consolidated corporate income tax return under A.R.S. § 43-947;

b. Corporations in a unitary business filing a combined corporate income tax return under A.A.C. R15-2-1131(E);

c. Married taxpayers operating separate sole proprietorships and filing a joint income tax return; or

d. Partnerships, Limited Liability Companies, S Corporations, trusts, or estates conducting multiple businesses, filing a single income tax return.

4. “Total tax liability” means the combined total of the transaction privilege tax, telecommunications services excise tax, and county excise tax liabilities.

B. The requirement to make an annual estimated tax payment is based on the annual tax liability. Use tax and severance tax are not subject to the estimated tax provisions.

1. A taxpayer shall make an annual estimated tax payment if during the current calendar year the taxpayer, through use of ordinary business care and prudence, can anticipate incurring the annual tax liability. For example:

ABC Company has been selling home electronics for several years. Its tax liability for previous calendar years has averaged between $60,000 and $70,000. In February of the current year, ABC Company begins selling computers and accessories as well. Early sales reports show an increase in total sales of approximately 50%. Based on these facts, ABC Company can reasonably anticipate incurring the annual tax liability.

2. Taxpayers with multiple locations shall make the annual estimated tax payment based on the combined actual or anticipated annual tax liability from all locations. Taxpayers with multiple locations, shall make a single estimated payment each June.

C. A taxpayer shall not amend an annual estimated tax payment except to increase the amount of the payment.

D. The annual estimated tax payment shall not be applied, credited, or refunded until a Transaction Privilege, Use, and Severance Tax Return (TPT-1) for the month of June is filed.

E. Late payment, underpayment, or non-payment of the annual estimated tax payment shall result in the following:

1. Application of the penalty provisions under A.R.S. § 42-136;

2. Accrual of interest beginning from the due date of the annual estimated tax payment as prescribed in A.R.S. § 42-1322(D); and

3. Loss of the accounting credit, as defined in A.R.S. § 42-1322.04 for the June reporting period.

F. Taxpayers who are not required to make the annual estimated tax payment but make a voluntary annual estimated payment are not subject to subsection (E).

Historical Note

Former Section R15-5-2215 renumbered to R15-5-2004, new Section R15-5-2215 renumbered from R15-5-212 effective October 14, 1993 (Supp. 93-4). Amended effective April 8, 1997 (Supp. 97-2).

R15-5-2216. Repealed

Historical Note

Repealed effective February 22, 1989 (Supp. 89-1).

R15-5-2217. Repealed

Historical Note

Repealed effective September 24, 1986 (Supp. 86-5).

R15-5-2218. Repealed

Historical Note

Repealed effective September 24, 1986 (Supp. 86-5).

R15-5-2219. Renumbered

Historical Note

Renumbered to R15-5-3005 effective July 23, 1985 (Supp. 85-4).

R15-5-2220. Registration and Licensing

A. Out-of-state vendors making sales to Arizona purchasers shall obtain a use tax license from the Department.

B. Use tax collected on an isolated sale to an Arizona customer may be remitted under a cover letter rather than on a standard report form.

Historical Note

Repealed effective July 23, 1985 (Supp. 85-4). New Section R15-5-2220 renumbered from R15-5-2363 and amended effective October 14, 1993 (Supp. 93-4).

R15-5-2221. Remittal of Use Tax on Purchases from Unlicensed Retailers

A. Arizona purchasers regularly making purchases from unlicensed vendors, where the purchases are subject to use tax, shall obtain a use tax license and remit payments directly to the Department.

B. An Arizona purchaser who is licensed in Arizona shall remit the use tax to the Department on the purchaser’s Sales, Use, and Severance Tax Return (ST-1) if tangible personal property is purchased from an out-of-state retailer who is not licensed to collect the use tax.

C. An Arizona purchaser who is not licensed in Arizona shall remit the use tax to the Department under a cover letter if tangible personal property is purchased from an out-of-state retailer who is not licensed to collect the use tax.

Historical Note

Amended effective March 18, 1981 (Supp. 81-2). Repealed effective February 22, 1989 (Supp. 89-1). New Section adopted effective October 14, 1993 (Supp. 93-4).

R15-5-2222. Record Retention

A vendor collecting use tax from a purchaser shall keep and preserve suitable records and other books and accounts necessary to determine the tax collected for the statutorily prescribed limitation period. For purposes of this rule, the limitation period is the period of time for which the Department may assess tax, penalties, or interest pursuant to A.R.S. § 42-113. Records, books, and accounts shall be open for inspection at any reasonable time by the Department or its authorized agent.

Historical Note

Repealed effective February 22, 1989 (Supp. 89-1). New Section adopted effective October 14, 1993 (Supp. 93-4).

R15-5-2223. Repealed

Historical Note

Repealed effective February 22, 1989 (Supp. 89-1).

R15-5-2224. Repealed

Historical Note

Repealed effective February 22, 1989 (Supp. 89-1).

R15-5-2225. Repealed

Historical Note

Repealed effective March 18, 1981 (Supp. 81-2).

R15-5-2226. Repealed

Historical Note

Repealed effective March 18, 1981 (Supp. 81-2).

R15-5-2227. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-2228. Repealed

Historical Note

Repealed effective February 22, 1989 (Supp. 89-1).

R15-5-2229. Repealed

Historical Note

Repealed effective September 24, 1986 (Supp. 86-5).

R15-5-2230. Repealed

Historical Note

Repealed effective September 24, 1986 (Supp. 86-5).

R15-5-2231. Repealed

Historical Note

Repealed effective September 24, 1986 (Supp. 86-5).

R15-5-2232. Repealed

Historical Note

Repealed effective September 24, 1986 (Supp. 86-5).

R15-5-2233. Repealed

Historical Note

Repealed effective September 24, 1986 (Supp. 86-5).

R15-5-2234. Repealed

Historical Note

Repealed effective September 24, 1986 (Supp. 86-5).

R15-5-2235. Repealed

Historical Note

Repealed effective September 24, 1986 (Supp. 86-5).

R15-5-2236. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-2237. Repealed

Historical Note

Repealed effective April 13, 1987 (Supp. 87-2).

R15-5-2238. Reserved

R15-5-2239. Reserved

R15-5-2240. Repealed

Historical Note

Adopted effective April 21, 1994 (Supp. 94-2). Section repealed by final rulemaking at 9 A.A.R. 5042, effective January 3, 2004 (Supp. 03-4).

R15-5-2241. Repealed

Historical Note

Adopted effective April 21, 1994 (Supp. 94-2). Section repealed by final rulemaking at 11 A.A.R. 5214, effective November 10, 2005 (Supp. 05-4).

R15-5-2242. Repealed

Historical Note

Adopted effective April 21, 1994 (Supp. 94-2). Section repealed by final rulemaking at 11 A.A.R. 5214, effective November 10, 2005 (Supp. 05-4).

ARTICLE 23. USE TAX

R15-5-2301. Definitions

The following definitions apply for the Department’s administration of use tax:

1. “Mail order retailer” means a retailer who solicits orders by mail, notwithstanding the fact that orders may be received by telephone or by mail or that goods may be delivered by mail or by private delivery system.

2. “Purchases” means purchase for storage, use, or consumption in Arizona.

3. “Retailer” includes any retailer located outside this state who solicits orders for tangible personal property by mail from points in this state if the solicitations are substantial and recurring.

Historical Note

Repealed effective July 23, 1985 (Supp. 85-4). New Section R15-5-2301 adopted effective December 6, 1990 (Supp. 90-4). Amended effective September 29, 1993 (Supp. 93-3).

R15-5-2302. General

A. In this Section, “retailer” and “utility business” have the same meanings as prescribed in A.R.S. § 42-5151.

B. A.R.S. § 42-5155 imposes Arizona use tax upon a purchaser that purchases tangible personal property from an out-of-state retailer or utility business if the retailer or utility business’s gross receipts from the sale have not already been included in the measure of Arizona transaction privilege tax. Because Arizona transaction privilege tax and Arizona use tax are complementary taxes, only one of the taxes is imposed on a given transaction.

C. Arizona use tax generally applies to the use, storage, or consumption in this state of tangible personal property purchased from an out-of-state retailer or utility business.

D. If a purchaser pays to an out-of-state retailer or utility business a tax of another state levied on the sale or use of tangible personal property that is subject to Arizona use tax, the purchaser may apply the amount of tax paid to the other state against the purchaser’s use tax liability.

E. A purchaser that purchases tangible personal property exempt from tax because the property is purchased for resale in the ordinary course of business but subsequently uses or consumes the tangible personal property shall pay Arizona use tax.

Historical Note

Amended by final rulemaking at 11 A.A.R. 2293, effective August 6, 2005 (Supp. 05-2).

R15-5-2303. Repealed

Historical Note

Repealed effective January 16, 1997 (Supp. 97-1).

R15-5-2304. Presumption of Taxability of Property Brought into Arizona

A. If tangible personal property is purchased outside Arizona and is subsequently brought into this state for use, storage, or consumption, the purchaser of such property shall be subject to the Arizona use tax unless the purchaser establishes to the satisfaction of the Department:

1. That the property is not used in conducting a business in Arizona; and

2. That the property was purchased for bona fide use or consumption outside Arizona. Unless shown otherwise, it shall be presumed that the property was purchased for bona fide use or consumption outside of Arizona if the property was purchased at least three months prior to its initial entry into Arizona; or

3. If the property was purchased by a nonresident individual, that the first actual use or consumption of the property occurred outside Arizona.

B. It shall be presumed that property brought into the state is subject to the use tax. The burden of proof that a purchase is not subject to use tax rests upon the purchaser.

Historical Note

Former Section R15-5-2311 repealed, new Section R15-5-2311 adopted effective August 7, 1985 (Supp. 85-4). Former Section R15-5-2304 repealed, new Section R15-5-2304 renumbered from R15-5-2311 and amended effective September 29, 1993 (Supp. 93-3).

R15-5-2305. Expired

Historical Note

Section expired under A.R.S. § 41-1056(E) at 13 A.A.R. 1744, effective March 31, 2007 (Supp. 07-2).

R15-5-2306. Repealed

Historical Note

Section repealed by final rulemaking at 11 A.A.R. 2293, effective August 6, 2005 (Supp. 05-2).

R15-5-2307. Repealed

Historical Note

Section repealed by final rulemaking at 11 A.A.R. 2293, effective August 6, 2005 (Supp. 05-2).

R15-5-2308. Repealed

Historical Note

Section repealed by final rulemaking at 11 A.A.R. 2293, effective August 6, 2005 (Supp. 05-2).

R15-5-2309. Exemptions -- Purchases for Resale or Lease

A. Purchases of tangible personal property from a retailer for resale in the ordinary course of the purchaser’s business are not subject to use tax.

B. Purchases of tangible personal property from a retailer for subsequent leasing or renting in the ordinary course of the purchaser’s business are not subject to use tax.

Historical Note

Former Section R15-5-2309 renumbered to R15-5-2363, new Section R15-5-2309 renumbered from R15-5-2322 and amended effective September 29, 1993 (Supp. 93-3). Amended by final rulemaking at 12 A.A.R. 4099, effective December 4, 2006 (Supp. 06-4).

R15-5-2310. Payment of Use Tax by Purchaser

A. The Use Tax must be paid to:

1. An out-of-state vendor holding a certificate of authority for the collection of Use Tax, or

2. The Arizona Department of Revenue in cases where the vendor is not registered for the collection of the tax.

B. Arizona purchasers making recurring purchases from out of state may apply to the Department for a registration certificate and remit payment directly to the state on a monthly report form in lieu of making payment to the vendor.

C. The purchaser will be relieved of his liability for the tax when payment is made directly to the out-of-state vendor registered and a receipt of the tax paid is obtained by him.

R15-5-2311. Renumbered

Historical Note

Former Section R15-5-2311 repealed, new Section R15-5-2311 adopted effective August 7, 1985 (Supp. 85-4). Former Section R15-5-2311 renumbered to R15-5-2304 effective September 29, 1993 (Supp. 93-3).

R15-5-2312. Casual Sales

Tangible personal property purchased in a casual sale, as defined in R15-5-2001, is not taxable.

Historical Note

Former Section R15-5-2312 repealed, new Section R15-5-2312 adopted effective September 29, 1993
(Supp. 93-3).

R15-5-2313. Lease-purchase Agreements

A. Purchase payments made after conversion from a lease to a purchase of tangible personal property are subject to use tax unless the lease-purchase transaction is subject to the transaction privilege tax.

B. The purchase price of tangible personal property includes conversion charges paid or incurred at the time the lease is converted to a purchase.

Historical Note

Former Section R15-5-2313 repealed, new Section R15-5-2313 adopted effective September 29, 1993 (Supp. 93-3). Amended by final rulemaking at 12 A.A.R. 4099, effective December 4, 2006 (Supp. 06-4).

R15-5-2314. Purchases from Trustees, Receivers, and Assignees

A. Tangible personal property purchased for storage, use, or consumption in Arizona from a trustee, receiver, or assignee is subject to use tax if the purchase of the tangible personal property in the hands of the owner would be subject to use tax.

B. Tangible personal property purchased for storage, use, or consumption in Arizona from a trustee, receiver, or assignee is not subject to use tax if the purchase of the property from the owner would not be subject to use tax.

Historical Note

Former Section R15-5-2314 renumbered to R15-5-2321, new Section adopted effective September 29, 1993 (Supp. 93-3). Amended by final rulemaking at 12 A.A.R. 4099, effective December 4, 2006 (Supp. 06-4).

R15-5-2315. Renumbered

Historical Note

Former Section R15-5-2315 renumbered to R15-5-3006 effective July 23, 1985 (Supp. 85-4).

R15-5-2316. Repealed

Historical Note

Repealed effective September 29, 1993 (Supp. 93-3).

R15-5-2317. Renumbered

Historical Note

Former Section R15-5-2317 renumbered to R15-5-2352 effective September 29, 1993 (Supp. 93-3).

R15-5-2318. Repealed

Historical Note

Repealed effective September 29, 1993 (Supp. 93-3).

R15-5-2319. Renumbered

Historical Note

Former Section R15-5-2319 renumbered to R15-5-2353 effective September 29, 1993 (Supp. 93-3).

R15-5-2320. Exemptions -- Machinery or Equipment

A. Machinery or equipment used in manufacturing or processing includes machinery or equipment that constitutes the entire primary manufacturing or processing operation from the initial stage where actual processing begins through the completion of the finished end product, and that is used in the production, manufacture, fabrication, processing, finishing, or packaging of articles of commerce. Manufacturing is the performance as a business of an integrated series of operations which place tangible personal property in a form, composition, or character different from that in which it was acquired, and transforms it into a different product with a distinctive name, character, or use.

B. Purchase of repair or replacement parts for exempt machinery or equipment is not subject to the use tax. Repair or replacement parts are defined as those individual component and constituent items which, together, comprise exempt machinery or equipment.

Historical Note

Amended effective November 7, 1978, unless otherwise noted (Supp. 78-6). Amended subsection (B) effective March 18, 1981 (Supp. 81-2). Former Section R15-5-2320 renumbered to R15-5-2362, new Section R15-5-2320 renumbered from R15-5-2321 and amended effective September 29, 1993 (Supp. 93-3).

R15-5-2321. Exemptions -- Articles to be Incorporated into a Manufactured Product

Purchases of articles which become an integral part of a manufactured product are not subject to the Use Tax. They are considered purchases for resale.

Historical Note

Amended effective November 7, 1978, unless otherwise noted (Supp. 78-6). Amended paragraphs (9) and (10) effective March 18, 1981 (Supp. 81-2). Former Section R15-5-2321 renumbered to R15-5-2320, new Section R15-5-2321 renumbered from R15-5-2314 effective September 29, 1993 (Supp. 93-3).

R15-5-2322. Renumbered

Historical Note

Former Section R15-5-2322 renumbered to R15-5-2309 effective September 29, 1993 (Supp. 93-3).

R15-5-2323. Repealed

Historical Note

Amended effective November 7, 1978 (Supp. 78-6). Repealed effective September 29, 1993 (Supp. 93-3).

R15-5-2324. Repealed

Historical Note

Repealed effective September 29, 1993 (Supp. 93-3).

R15-5-2325. Repealed

Historical Note

Repealed effective September 29, 1993 (Supp. 93-3).

R15-5-2326. Manufacturing Labor

The cost of labor employed in the manufacturing, processing, or fabricating of tangible personal property shall not be allowed as a deduction from the sales price on a purchase of such property.

Historical Note

Former Section R15-5-2326 repealed, new Section R15-5-2326 adopted effective September 29, 1993
(Supp. 93-3).

R15-5-2327. Fuels

A. In this Section, “aviation fuel,” “dyed diesel fuel,” and “use fuel” have the same meanings as prescribed in A.R.S. §§ 28-101 and 28-5601.

B. Except as provided in subsection (D), a purchase of use fuel is subject to use tax under A.R.S. § 42-5155 on the date the consumer is issued a refund because the use fuel is not subject to the use fuel tax under A.R.S. § 28-5606.

C. Dyed diesel fuel is subject to use tax if transaction privilege tax is not imposed by the Department.

D. Liquefied petroleum gas or natural gas used to propel a motor vehicle is exempt from use tax.

E. Aviation fuel is subject to tax under A.R.S. § 28-8344 only.

F. A purchase of jet fuel is subject to the jet fuel excise and use tax under A.R.S. § 42-5352.

Historical Note

Former Section R15-5-2327 renumbered to R15-5-2360, new Section R15-5-2327 renumbered from R15-5-3006 and amended effective September 29, 1993 (Supp. 93-3). Section amended by final rulemaking at 10 A.A.R. 4480, effective December 4, 2004 (Supp. 04-4).

R15-5-2328. Electric Power Transmission and Distribution

Purchases of machinery, equipment, or transmission lines for direct use in producing or transmitting power but not including distribution are subject to use tax based on the same definitions as in R15-5-128.

Historical Note

Former Section R15-5-2328 renumbered to R15-5-2361, new Section R15-5-2328 adopted effective September 29, 1993 (Supp. 93-3).

R15-5-2329. Repealed

Historical Note

Former Section R15-5-2329 repealed effective September 29, 1993 (Supp. 93-3).

R15-5-2330. Tangible Personal Property Used in Conjunction with Warranty or Service Contracts or Provisions

A. For purposes of this rule, the following definition applies:

“Covered” means covered as defined in R15-5-138 for tangible personal property under a warranty or service contract, or covered as defined in R15-5-137 for tangible personal property under a warranty or service provision.

B. A warrantor or service person is subject to use tax on the cost of covered tangible personal property that is purchased for resale but subsequently taken out of inventory and used in the servicing of a warranty or service contract.

C. Tangible personal property that is covered under a warranty or service contract and used in the servicing of the contract is subject to use tax unless transaction privilege tax was paid when the tangible personal property was acquired or the tangible personal property is otherwise statutorily exempt.

D. Tangible personal property that is covered under a warranty or service provision and used in the servicing of the provision is not subject to use tax as the transaction privilege tax was paid when the tangible personal property was acquired.

Historical Note

Adopted effective September 3, 1978 (Supp. 78-6). Former Section R15-5-2330 renumbered to R15-5-2343, new Section R15-5-2330 adopted effective September 29, 1993 (Supp. 93-3). Amended by final rulemaking at 13 A.A.R. 679, effective April 7, 2007 (Supp. 07-1).

R15-5-2331. Repealed

Historical Note

Adopted as an emergency effective July 1, 1980, pursuant to A.R.S. § 41-1003, valid for only 90 days (Supp. 80-3). Former emergency adoption now adopted effective October 15, 1980 (Supp. 80-5). Repealed effective September 29, 1993 (Supp. 93-3).

R15-5-2332. Delivery Charges

A charge by a retailer for delivery from the retailer’s location to the purchaser’s location, if separately stated on the sales invoice, is not taxable.

Historical Note

Adopted effective December 6, 1990 (Supp. 90-4). Former Section R15-5-2332 renumbered to R15-5-2350, new Section R15-5-2332 adopted effective September 29, 1993 (Supp. 93-3).

R15-5-2333. Reserved

R15-5-2334. Purchases of Restaurant Accessories

A. If a person engaged in the restaurant business purchases disposable containers, paper napkins, and other similar food accessories and, transfers these accessories in the regular course of business to facilitate the consumption of the food, drink, or condiment provided, the purchases are considered purchases for resale.

B. If a person engaged in the restaurant business purchases matchbooks, advertisement fliers, and other similar tangible personal property and transfers this property for the convenience, operation, or benefit of the restaurant business, the purchases are subject to tax.

Historical Note

Adopted effective September 29, 1993 (Supp. 93-3). Amended by final rulemaking at 13 A.A.R. 679, effective April 7, 2007 (Supp. 07-1).

R15-5-2335. Reserved

R15-5-2336. Reserved

R15-5-2337. Reserved

R15-5-2338. Reserved

R15-5-2339. Reserved

R15-5-2340. Tangible Personal Property Used in Soil Remediation Activities

The purchase of tangible personal property for incorporation or fabrication into any real property, structure, project, development or improvement under a contract specified in A.R.S. § 42-5075(B)(6) is exempt from tax. The purchase of tangible personal property used in soil remediation activities but not incorporated or fabricated into any real property, structure, project, development or improvement is taxable.

Historical Note

Adopted effective December 11, 1998 (Supp. 98-4).
R15-5-2340 corrected to reflect updated citation reference to Arizona Revised Statutes (Supp. 07-2).

R15-5-2341. Four-inch Pipes or Valves

Purchases of pipes, valves, or fire hydrants with an inside diameter of four inches or more are not taxable if the pipes, valves, or fire hydrants are to be used to transport oil, natural gas, artificial gas, water, or coal slurry.

Historical Note

Adopted effective September 29, 1993 (Supp. 93-3).

R15-5-2342. Computer Hardware and Software

Purchases of computer hardware and software are subject to the use tax based on the same provisions as delineated in R15-5-154.

Historical Note

Adopted effective September 29, 1993 (Supp. 93-3).

R15-5-2343. Purchases of Prescription Drugs and Prosthetic Appliances

A. In this Section:

1. “Drug” means an article that, according to federal or state law, is:

a. Recognized in the official United States Pharmacopeia, official Homeopathic Pharmacopeia of the United States, official National Formulary, or any supplement to these documents; or

b. Intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in humans or animals; or

c. Not food and is intended to affect the structure or any function of the body of humans or animals; or

d. Intended for use as a component of any article specified in subsections (a), (b), or (c).

2. “Drug on a prescription” means a prescription drug.

3. “Food” means an article used for food or drink for humans or animals, chewing gum, or an article used as a component of such an article.

4. “Hearing aid” means any wearable device designed as a remedy or to compensate for defective human hearing, including parts, attachments, accessories, and earmolds.

5. “Legend drug” means a drug that 21 U.S.C. 353(b)(4)(A) requires to bear the symbol “Rx only” before dispensing.

6. “Nonprescription product” means a drug or other article that can be purchased by the final consumer of the drug or article without a prescription, regardless of whether purchased on the advice or recommendation of a member of the medical, dental, or veterinarian profession. Examples include over-the-counter drugs and those dietary supplements, vitamins, minerals, herbs, and other similar supplements that do not qualify as prescription drugs.

7. “Over-the-counter drug” means a drug that is subject to federal labeling requirements in 21 CFR 201.66.

8. “Prescriber” means a member of the medical, dental, or veterinary profession authorized by federal or state law to prescribe a drug.

9. “Prescription” means an order for a drug issued in any form.

10. “Prescription drug” means a legend drug or a drug that, according to federal or state law, can be dispensed only:

a. Upon a written prescription of a prescriber for the drug;

b. Upon an oral prescription by the prescriber for the drug that federal or state law requires be reduced promptly to a form of writing by the prescriber and then filed by a pharmacist or the prescriber; or

c. By refilling a written or oral prescription if refilling is authorized by the prescriber for the drug either in the original prescription or by oral order that is first reduced promptly to writing and then filed by a pharmacist or the prescriber.

11. “Prescription eyeglasses” includes frames and other component parts of eyeglasses if purchased for use with the prescription lenses.

12. “Prosthetic appliance” means an artificial device that fully or partially replaces a part or function of the human body or increases the acuity of a sense organ.

B. The storage, use, or consumption in this state of the following kinds of tangible personal property is not subject to tax:

1. Prescription drugs, including those used in the course of treating patients;

2. Medical oxygen, pursuant to A.R.S. § 42-5159(A)(16);

3. Insulin, insulin syringes, and glucose strips, whether or not prescribed;

4. Prosthetic appliances, prescribed or recommended by a statutorily-authorized individual;

5. Durable medical equipment, pursuant to A.R.S. § 42-5159(A)(21);

6. Prescription eyeglasses and contact lenses; and

7. Hearing aids. Batteries and cords are subject to tax.

C. The purchase of component and repair parts for any tangible personal property that is exempt under either subsection (B) or (F) is not subject to tax.

D. If a written prescription or recommendation is required to purchase tangible personal property, a taxpayer shall maintain the prescription or recommendation as part of the taxpayer’s records. The taxpayer’s records for documenting purchases shall provide reasonable detail to allow the Department, upon inspection, to identify property as exempt.

E. Purchases by a final consumer of nonprescription products and those medical supplies or appliances not provided for under subsection (B) are subject to tax.

F. Purchases of nonprescription products or other medical supplies or appliances by doctors, dentists, or veterinarians are subject to tax unless the purchase qualifies as a purchase for resale and the doctor, dentist, or veterinarian is a retailer in the business of reselling the property.

Historical Note

Renumbered from R15-5-2330 and amended effective September 29, 1993 (Supp. 93-3). Amended by final rulemaking at 11 A.A.R. 2952, effective September 10, 2005 (Supp. 05-3).

R15-5-2344. Postage Stamps

A. The purchase of postage stamps is not subject to use tax if the stamps are purchased for the purpose of transporting mail.

B. The purchase of postage stamps is subject to use tax if the stamps are purchased for any purpose other than transporting mail.

C. The Department shall presume that a postage stamp is purchased for a purpose other than transporting mail if the postage stamp is purchased for at least 50% more than its face value. A purchaser may overcome the presumption; however, the burden of proof will remain on the purchaser.

D. The purchase of cancelled postage stamps is subject to use tax.

Historical Note

New Section adopted by final rulemaking at 6 A.A.R. 4112, effective October 4, 2000 (Supp. 00-4).

R15-5-2345. Reserved

R15-5-2346. Reserved

R15-5-2347. Reserved

R15-5-2348. Reserved

R15-5-2349. Reserved

R15-5-2350. Mail Order Retailers

This rule is not a limitation on other provisions of Arizona Revised Statutes, Title 42, Chapter 8. Article 2. A mail order retailer’s transactions are substantial and recurring if the following conditions are satisfied:

1. The sale of tangible personal property would be subject to transaction privilege taxation if the transaction would have occurred in this state, and

2. During any 12-month period:

a. The retailer’s total sales in this state exceed $100,000.00; or

b. Two or more mailings, aggregating 5,000 or more solicitations, are made to points in this state.

Historical Note

Adopted effective December 6, 1990 (Supp. 90-4). Renumbered from R15-5-2332 effective September 29, 1993 (Supp. 93-3).

R15-5-2351. Purchases by Non-U.S. Citizens

Purchases of tangible personal property by non-U.S. citizens shall be subject to the use tax unless otherwise exempt.

Historical Note

Adopted effective September 29, 1993 (Supp. 93-3).

R15-5-2352. Expired

Historical Note

Section R15-5-2352 renumbered from R15-5-2317 and amended effective September 29, 1993 (Supp. 93-3). Section expired under A.R.S. § 41-1056(E) at 18 A.A.R. 1652, effective March 31, 2012 (Supp. 12-2).

R15-5-2353. Property Purchased Outside of the United States

A. Tangible personal property purchased outside of the United States is taxable when purchased for business use.

B. In any one calendar month, tangible personal property purchases with a cumulative purchase price of $200 or less are not taxable if purchased for nonbusiness use. Purchases in excess of the $200 exemption are taxable on the excess amount.

Historical Note

Section R15-5-2353 renumbered from R15-5-2319 and amended effective September 29, 1993 (Supp. 93-3).

R15-5-2354. Reserved

R15-5-2355. Reserved

R15-5-2356. Reserved

R15-5-2357. Reserved

R15-5-2358. Reserved

R15-5-2359. Reserved

R15-5-2360. Government Purchases

A. Purchases of tangible personal property by any state or its political subdivisions are taxable.

B. Purchases by the Federal Government are not taxable.

Historical Note

Section R15-5-2360 renumbered from R15-5-2327 and amended effective September 29, 1993 (Supp. 93-3).

R15-5-2361. Nonprofit Organizations

A. Purchases of tangible personal property by nonprofit churches, schools, and other nonprofit organizations are taxable unless otherwise exempt.

B. Purchases of tangible personal property from a charitable nonprofit organization recognized as having tax-exempt status for income tax purposes with the Internal Revenue Service and the Department are not taxable.

C. If an organization wishes to obtain tax-exempt status by being recognized by the Department as a nonprofit charitable organization, it shall submit a letter to the Department requesting tax-exempt status and shall include a copy of its Internal Revenue Service recognition.

D. For purposes of the statutory exemption and for this rule, the Internal Revenue Service recognition of a charitable nonprofit organization is as defined in Internal Revenue Code § 501(c)(3).

Historical Note

Section R15-5-2361 renumbered from R15-5-2328 and amended effective September 29, 1993 (Supp. 93-3).

R15-5-2362. Exempt Purchases by Health Organizations

A. Purchases by qualifying hospitals, nursing care institutions, qualifying health care organizations, rehabilitation programs for mentally or physically handicapped persons, and qualifying community health centers are exempt from tax pursuant to statutory provisions.

B. The Department may, upon review of the written request and any other information requested by the Department to make a proper determination, provide an Exemption Letter to organizations meeting the statutory criteria. The Exemption Letter shall be valid for a period of 12 months from the first day of the month following the issue date of the Exemption Letter unless the organization’s tax exempt status changes prior to the end of the 12-month period, or the organization misrepresented or omitted material information in its exemption request.

C. Qualifying hospitals, qualifying health care organizations, rehabilitation programs for mentally or physically handicapped persons, and qualifying community health centers shall annually submit to the Department a written request for an Exemption Letter. The request shall be submitted at least 30 days prior to the first day of the exemption period. For purposes of this rule, “exemption period” means the 12-month period beginning on the first day of the month following the issue date of the Exemption Letter or the 12-month period requested by the organization.

1. Qualifying hospitals shall attach to their annual exemption request a copy of their current license issued by the Department of Health Services.

2. Qualifying health care organizations shall attach to their exemption request letter the statutorily required annual financial audit and a copy of their Internal Revenue Code 501(c) recognition unless the Department has previously received a copy of this recognition.

3. Rehabilitation programs for mentally or physically handicapped persons shall attach to their exemption request a copy of their Internal Revenue Code 501(c)(3) recognition unless the Department has previously received a copy of this recognition.

4. Qualifying community health centers shall attach to their exemption request documentation supporting the statutory criteria and a copy of their Internal Revenue Code 501(c)(3) recognition unless the Department has previously received a copy of this recognition.

Historical Note

Section R15-5-2362 renumbered from R15-5-2310 and amended effective September 29, 1993 (Supp. 93-3). Amended effective April 21, 1995 (Supp. 95-2).

R15-5-2363. Renumbered

Historical Note

Renumbered from R15-5-2309 effective September 29, 1993 (Supp. 93-3). Renumbered to R15-5-2220 effective October 14, 1993 (Supp. 93-4).

ARTICLE 24. REPEALED

R15-5-2401. Repealed

Historical Note

Repealed effective October 14, 1993 (Supp. 93-4).

R15-5-2402. Repealed

Historical Note

Repealed effective October 14, 1993 (Supp. 93-4).

R15-5-2403. Repealed

Historical Note

Repealed effective October 14, 1993 (Supp. 93-4).

R15-5-2404. Repealed

Historical Note

Repealed effective October 14, 1993 (Supp. 93-4).

R15-5-2405. Repealed

Historical Note

Repealed effective October 14, 1993 (Supp. 93-4).

R15-5-2406. Repealed

Historical Note

Amended effective March 18, 1981 (Supp. 81-2). Repealed effective October 14, 1993 (Supp. 93-4).

R15-5-2407. Repealed

Historical Note

Repealed effective July 23, 1985 (Supp. 85-4).

R15-5-2408. Repealed

Historical Note

Repealed effective July 23, 1985 (Supp. 85-4).

R15-5-2409. Repealed

Historical Note

Repealed effective October 14, 1993 (Supp. 93-4).

R15-5-2410. Repealed

Historical Note

Repealed effective September 24, 1986 (Supp. 86-5).

R15-5-2411. Repealed

Historical Note

Repealed effective July 23, 1985 (Supp. 85-4).

R15-5-2412. Repealed

Historical Note

Repealed effective July 23, 1985 (Supp. 85-4).

R15-5-2413. Repealed

Historical Note

Repealed effective July 23, 1985 (Supp. 85-4).

R15-5-2414. Repealed

Historical Note

Repealed effective February 22, 1989 (Supp. 89-1).

R15-5-2415. Repealed

Historical Note

Repealed effective July 23, 1985 (Supp. 85-4).

R15-5-2416. Repealed

Historical Note

Repealed effective February 22, 1989 (Supp. 89-1).

R15-5-2417. Repealed

Historical Note

Repealed effective February 22, 1989 (Supp. 89-1).

R15-5-2418. Repealed

Historical Note

Repealed effective February 22, 1989 (Supp. 89-1).

R15-5-2419. Repealed

Historical Note

Repealed effective September 24, 1986 (Supp. 86-5).

R15-5-2420. Repealed

Historical Note

Repealed effective September 24, 1986 (Supp. 86-5).

R15-5-2421. Repealed

Historical Note

Repealed effective September 24, 1986 (Supp. 86-5).

R15-5-2422. Repealed

Historical Note

Repealed effective September 24, 1986 (Supp. 86-5).

R15-5-2423. Repealed

Historical Note

Repealed effective September 24, 1986 (Supp. 86-5).

R15-5-2424. Repealed

Historical Note

Repealed effective September 24, 1986 (Supp. 86-5).

R15-5-2425. Repealed

Historical Note

Repealed effective September 24, 1986 (Supp. 86-5).

R15-5-2426. Repealed

Historical Note

Repealed effective April 21, 1995 (Supp. 95-2).

ARTICLE 25. REPEALED

R15-5-2501. Repealed

Historical Note

Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

R15-5-2502. Repealed

Historical Note

Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

R15-5-2503. Repealed

Historical Note

Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

R15-5-2504. Repealed

Historical Note

Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

R15-5-2505. Repealed

Historical Note

Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

R15-5-2506. Repealed

Historical Note

Amended effective November 7, 1978, unless otherwise noted (Supp. 78-6). Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

R15-5-2507. Repealed

Historical Note

Amended effective March 18, 1981 (Supp. 81-2). Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

ARTICLE 26. REPEALED

R15-5-2601. Repealed

Historical Note

Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

R15-5-2602. Repealed

Historical Note

Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

R15-5-2603. Repealed

Historical Note

Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

R15-5-2604. Repealed

Historical Note

Repealed effective July 23, 1985 (Supp. 85-4).

R15-5-2605. Repealed

Historical Note

Repealed effective February 22, 1989 (Supp. 89-1).

R15-5-2606. Repealed

Historical Note

Repealed effective February 22, 1989 (Supp. 89-1).

R15-5-2607. Repealed

Historical Note

Repealed effective July 23, 1985 (Supp. 85-4).

R15-5-2608. Repealed

Historical Note

Repealed effective July 23, 1985 (Supp. 85-4).

R15-5-2609. Repealed

Historical Note

Repealed effective July 23, 1985 (Supp. 85-4).

R15-5-2610. Repealed

Historical Note

Repealed effective July 23, 1985 (Supp. 85-4).

R15-5-2611. Repealed

Historical Note

Repealed effective February 22, 1989 (Supp. 89-1).

R15-5-2612. Repealed

Historical Note

Repealed effective February 22, 1989 (Supp. 89-1).

R15-5-2613. Repealed

Historical Note

Repealed effective February 22, 1989 (Supp. 89-1).

R15-5-2614. Repealed

Historical Note

Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

R15-5-2615. Repealed

Historical Note

Repealed effective February 22, 1989 (Supp. 89-1).

R15-5-2616. Repealed

Historical Note

Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

R15-5-2617. Repealed

Historical Note

Repealed effective February 22, 1989 (Supp. 89-1).

R15-5-2618. Repealed

Historical Note

Repealed effective February 22, 1989 (Supp. 89-1).

R15-5-2619. Repealed

Historical Note

Repealed effective February 22, 1989 (Supp. 89-1).

R15-5-2620. Repealed

Historical Note

Repealed effective April 21, 1995 (Supp. 95-2).

ARTICLE 27. RESERVED

ARTICLE 28. RESERVED

ARTICLE 29. RESERVED

ARTICLE 30. INTERIM RULES

R15-5-3001. Reserved

R15-5-3002. Reserved

R15-5-3003. Reserved

R15-5-3004. Renumbered

Historical Note

(A.R.S. § 1321) Former Section R15-5-1846 renumbered as Section R15-5-3004 and amended effective July 23, 1985 (Supp. 85-4). Renumbered to R15-5-127 effective August 9, 1993 (Supp. 93-3).

R15-5-3005. Renumbered

Historical Note

(A.R.S. § 42-1451) Former Section R15-5-2219 renumbered as Section R15-5-3005 and amended effective July 23, 1985 (Supp. 85-4). Former Section R15-5-3005 renumbered to R15-5-2212 effective October 14, 1993 (Supp. 93-4).

R15-5-3006. Renumbered

Historical Note

(A.R.S. § 42-1409) Former Section R15-5-2315 renumbered as Section R15-5-3006 and amended effective July 23, 1985 (Supp. 85-4). Former Section R15-5-3006 renumbered to R15-5-2327 effective September 29, 1993 (Supp. 93-3).

R15-5-3007. Reserved

R15-5-3008. Reserved

R15-5-3009. Reserved

R15-5-3010. Reserved

R15-5-3011. Reserved

R15-5-3012. Reserved

R15-5-3013. Reserved

R15-5-3014. Reserved

R15-5-3015. Reserved

R15-5-3016. Repealed

Historical Note

(A.R.S. §§ 42-1313, 42-1317) Adopted effective October 1, 1986 (Supp. 86-5). Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

R15-5-3017. Reserved

R15-5-3018. Renumbered

Historical Note

(A.R.S. § 42-1305) Adopted effective September 3, 1986 (Supp. 86-5). Renumbered to R15-5-2206 effective October 14, 1993 (Supp. 93-4).

R15-5-3019. Reserved

R15-5-3020. Reserved

R15-5-3021. Repealed

Historical Note

Adopted effective August 13, 1987 (Supp. 87-3). Repealed effective October 14, 1993 (Supp. 93-4).

R15-5-3022. Repealed

Historical Note

Adopted effective August 13, 1987 (Supp. 87-3). Repealed effective October 14, 1993 (Supp. 93-4).

R15-5-3023. Renumbered

Historical Note

(A.R.S. § 42-1302) Former Section R15-5-209 renumbered and amended as Section R15-5-3023 effective August 26, 1987 (Supp. 87-3). Section R15-5-209 renumbered as Section R15-5-3023 and amended in error, see Section R15-5-209 (Supp. 88-3).

R15-5-3024. Repealed

Historical Note

(A.R.S. § 42-1307) Former Section R15-5-2102 renumbered and amended as Section R15-5-3024 (Supp. 86-6). Correction, effective date of last amendment to read: “effective December 31, 1986” (Supp. 87-3). Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

R15-5-3025. Renumbered

Historical Note

(A.R.S. § 42-1322.01) Adopted effective September 24, 1986 (Supp. 86-5). Renumbered to R15-5-2007 (Supp. 94-2).

R15-5-3026. Reserved

R15-5-3027. Reserved

R15-5-3028. Reserved

R15-5-3029. Reserved

R15-5-3030. Reserved

R15-5-3031. Reserved

R15-5-3032. Repealed

Historical Note

(A.R.S. § 42-1472) Adopted effective September 24, 1986 (Supp. 86-5). Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

R15-5-3033. Reserved

R15-5-3034. Reserved

R15-5-3035. Determination of taxable basis: nuclear fuel

A. The quantity of uranium oxide used in producing a nuclear fuel assembly shall be determined by calculating the total amount of uranium oxide that was required to produce the nuclear fuel assembly, without any allowance for waste or loss due to processing.

B. The average cost allocated to the total amount of uranium oxide that was required to produce the nuclear fuel assembly shall be the taxable base of the nuclear fuel assembly. For purposes of fixing the point in time at which the average costs reflected in the taxpayer’s books and records shall be allocated under various circumstances, the average cost of the quantities identified in subsection (A) shall be determined as follows:

1. If uranium oxide in the form of uranium hexafluoride is delivered by the taxpayer to the United States Department of Energy for enrichment, at the end of the month in which such delivery occurs;

2. If no enrichment is undertaken, at the end of the first month in which natural uranium oxide in the form of uranium hexafluoride is delivered for fabrication; or

3. If uranium oxide is first purchased after final enrichment, at the end of the month in which the purchase occurs.

Historical Note

Adopted effective September 16, 1987 (Supp. 87-3).

R15-5-3036. Renumbered

Historical Note

Adopted effective August 7, 1987 (Supp. 87-3). Renumbered to R15-5-157 effective August 9, 1993 (Supp. 93-3).

 


Scott Cancelosi
Director
Public Services Division

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