Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 35-142, Arizona Revised Statutes, is amended to read:
35-142. Monies kept in funds separate from state general fund; receipt and withdrawal
A. All monies received for and belonging to the state shall be deposited in the state treasury and credited to the state general fund except the following, which shall be placed and retained in separate funds:
1. The unexpendable principal of monies received from federal land grants shall be placed in separate funds and the account of each such separate fund shall bear a title indicating the source and the institution or purpose to which such fund belongs.
2. The interest, rentals and other expendable money received as income from federal land grants shall be placed in separate accounts, each account bearing a title indicating the source and the institution or purpose to which the fund belongs. Such expendable monies shall be expended only as authorized, regulated and controlled by the general appropriation act or other act of the legislature.
3. All private or quasi‑private monies authorized by law to be paid to or held by the state treasurer shall be placed in separate accounts, each account bearing a title indicating the source and purpose of such fund.
4. All monies legally pledged to retirement of building indebtedness or bonds issued by those institutions authorized to incur such indebtedness or to issue such bonds shall be placed in separate accounts.
5. Monies of a multi‑county water conservation district authorized by law to be paid to or held by the state treasurer shall be placed in separate accounts, each account bearing a title indicating the source and purpose of such fund.
6. All monies collected by the Arizona game and fish department shall be deposited in a special fund known as the state game and fish protection fund for the use of the Arizona game and fish commission in carrying out the provisions of title 17.
7. All federal monies that are received by the department of economic security for family assistance benefits and medical eligibility as a result of efficiencies developed by the department of economic security and that would otherwise revert to the state general fund pursuant to section 35‑190 shall be retained for use by the department of economic security in accordance with the terms and conditions imposed by the federal funding source in an account or accounts established or authorized by the state treasurer.
8. Monies designated by law as special state funds shall not be considered a part of the general fund. Unless otherwise prescribed by law, the state treasurer shall be the custodian of all such funds.
9. All monies received and any accounts established and maintained by the director of the Arizona state retirement system or the administrator of the public safety personnel retirement system, the corrections officer retirement plan and the elected officials' retirement plan.
10. Monies received by a state agency or institution as a gift, devise or donation shall not be considered a part of the state general fund or transferred to the state general fund unless the gift, devise or donation specifically authorizes a general state use for the monies. A state agency or institution that receives a monetary gift, devise or donation shall account for those monies separately.
B. No money shall be received or held by the state treasurer except as authorized by law, and in every instance the treasurer shall issue a receipt for money received and shall record the transaction in the statewide accounting system. No money shall be withdrawn from the treasury except on the warrant or electronic funds transfer voucher of the department of administration.
C. Monies received for and belonging to the state and resulting from compromises or settlements by or against this state, excluding restitution and reimbursement to state agencies for costs or attorney fees, shall be credited to the state general fund unless specifically credited to another fund by law. A fund consisting of monies other than monies received for restitution, costs or attorney fees shall not be established on the basis of a court order without prior legislative authorization. For the purposes of this subsection, "restitution" means monies intended to compensate a specific, identifiable person, including this state, for economic loss.
D. All federal monies granted and paid to the state by the federal government shall be accounted for in the accounts or funds of the state in the necessary detail to meet federal and state accounting, budgetary and auditing requirements, and all appropriations for matching such federal monies shall be transferred from the general fund to such separate funds as needed, except as otherwise required by the federal government.
E. Nothing in this section requires the establishment of separate accounts or funds for such federal monies unless otherwise required by federal or state law. The department of administration has the authority to use the most efficient system of accounts and records, consistent with legal requirements and standard and necessary fiscal safeguards.
F. Nothing in this section precludes the creation by the department of administration of a clearing account or other acceptable accounting method to effect prompt payment of claims from an approved budget or appropriation. The department of administration shall report each account or fund established or cancelled to the directors of the joint legislative budget committee and the governor's office of strategic planning and budgeting.
G. Nothing in this section or any other section precludes the use of monies kept in funds separate from the general fund, the interest from which accrues to the general fund, for payment of claims against the general fund, provided sufficient monies remain available for payment of claims against such funds.
H. The department of administration may issue warrants for qualified expenditures of federal program monies before they are deposited in the state treasury. The receipt of federal monies shall be timed to coincide, as closely as administratively feasible, with the redemption of warrants by the state treasurer. The department of administration shall limit expenditures to the amount that has been made available for the use under the grant award by the federal government. The state agency initiating the expenditures is responsible for ensuring that expenditures qualify for coverage under the guidelines of the federal grant award.
I. The department of administration shall establish the policies and procedures for all state agencies for drawing federal monies. When the established method results in federal monies being held by this state, the department of administration may use the interest earned on the monies to pay the federal government for any related interest liability. If an interest liability is incurred due to a state agency varying from the established policies and procedures, the department of administration shall charge the appropriate agency account or fund. Any federal interest liability owed to this state as a result of the delayed federal disbursements shall be used to offset this state's interest liability to the federal government. Any remaining interest earnings shall be deposited in the state general fund.
J. Any state agency or authorized agent of a state agency may accept credit cards pursuant to an agreement entered into by the state treasurer pursuant to section 35‑315 for the payment of any amount due to that agency or agent or this state.
K. Except for the department of revenue for tax payments, agencies or authorized agents on behalf of state agencies that accept credit cards shall deduct any applicable discount fee and processing fee associated with the transaction amount before depositing the net amount in the appropriate state fund. No other reduction is permitted against the transaction amount. The net amount deposited in the appropriate state fund shall be considered as the full deposit required by law of monies received by the agency or the authorized agent. Payment of any applicable discount fee and processing fee shall be accounted for in the annual report submitted to the governor's office of strategic planning and budgeting in accordance with section 41‑1273. The transaction amount of any credit card transaction shall not be reduced by any discount fee or processing fee in an amount in excess of the merchant card settlement fees reflected in the state banking contract with the state treasurer's office.
L. Any state agency that contracts with an authorized agent for the electronic processing of transactions pursuant to title 41, chapter 23 may include a provision in the contract to allow the authorized agent to impose a convenience fee. If allowed, the convenience fee shall be charged to the cardholder in addition to the transaction amount, except for the following:
1. Except as provided in subsection S of this section, any permits, licenses or other authorizations needed to pursue a trade or occupation in this state.
2. Except as provided in subsection S of this section, any permits, licenses or other authorizations needed to establish, expand or operate a business in this state.
3. Except as provided in subsection S of this section, any permits, licenses or other authorizations needed to register a vehicle or license a driver in this state.
M. Each state agency or its authorized agent shall:
1. Deduct the amount of the convenience fee before depositing the transaction amount or the transaction amount reduced by the discount fee or the processing fee, or both, into the appropriate state fund.
2. Not deduct any part of the convenience fee from the transaction amount before depositing the net amount into the appropriate state fund.
3. Deduct the amount of the discount fee or the processing fee, or both, from the transaction amount before depositing the net amount into the appropriate state fund.
N. The net amount deposited in the appropriate state fund pursuant to subsection L or M of this section shall be considered as the full deposit of monies that is required by law and that is received by the agency.
O. Notwithstanding section 35‑142.01, convenience fees received by a state agency or its authorized agent are limited to, and may be used to offset, the costs imposed by the authorized agent in processing the transactions.
P. When the percentage of electronic transactions first exceeds at least thirty per cent of a state agency's total transactions, the state agency shall perform a cost benefit report, including costs of convenience fees, the amount of revenue generated and any realized cost savings.
Q. State agencies shall report the number of transactions, the number of electronic transactions, the total dollar amount of transactions processed, the total dollar amount of any discount fee, the total dollar amount of any processing fee and the total dollar amount of any convenience fee charged, deducted or paid pursuant to subsections K and L of this section annually by October 1 to the governor, the department of administration and the joint legislative budget committee.
R. Nothing in this section or any other provision of law authorizes any state agency, authorized agent of any state agency or budget unit to establish a bank account for any government monies. All monies received by or on behalf of this state shall be deposited with and in the custody of the state treasurer or in an account that is authorized by the state treasurer pursuant to this section. This subsection does not apply to monies received and any accounts established and maintained by the director of the Arizona state retirement system or the administrator of the public safety personnel retirement system, the corrections officer retirement plan and the elected officials' retirement plan.
S. If a state agency provides an alternative method of payment, the convenience fee may be charged to the cardholder in addition to the transaction amount.
Sec. 2. Section 41-132, Arizona Revised Statutes, is amended to read:
41-132. Electronic and digital signatures; exemptions; definitions
A. Unless otherwise provided by law, an electronic signature that complies with this section may be used to sign a writing on a document that is filed with or by a state agency, board or commission, and the electronic signature has the same force and effect as a written signature.
B. An electronic signature shall be unique to the person using it, shall be capable of reliable verification and shall be linked to a record in a manner so that if the record is changed the electronic signature is invalidated.
C. Except for returns, statements or other documents filed pursuant to titles 42 and 43, a document that contains an electronic signature that is a digital signature shall comply with all of the following:
1. Contain a computer-based certificate that identifies the issuing entity and the subscriber, contain the subscriber's public key and be digitally signed by the issuing entity. A valid subscriber to a digitally signed document shall be listed in the certificate, shall accept the certificate and lawfully holds the private key that corresponds to the public key that is listed in that certificate. A person who acquires a private key through theft, fraud, deceit, eavesdropping or other unlawful means does not lawfully hold the private key.
2. Contain a key pair used for verifying a digital signature that has a unique property so that the public key can verify the digital signature that the private key creates.
3. Be capable of verification by the person having the initial message and the signer's public key as follows:
(a) The person can accurately determine whether the transformation of the message was created by using the private key that corresponds to the signer's key.
(b) The person can accurately determine whether the initial message has been altered since the transformation was made.
D. The following records are not public records and are exempt from public inspection and reproduction pursuant to title 39, chapter 1, article 2:
1. Records containing information that would disclose or may reasonably lead to the disclosure of any component in the process used to execute or adopt an electronic or digital signature if the disclosure would or may reasonably cause the loss of sole control over the electronic or digital signature from the person using it.
2. Records that if disclosed would jeopardize or may reasonably lead to jeopardizing the security of a certificate issued in conjunction with a digital signature.
E. In For the purposes of this section, unless the context otherwise requires:
1. "Asymmetric cryptosystem" means an algorithm or series of algorithms that provide a secure key pair for a digital signature.
2. "Certificate" means a computer-based record that is contained in a document with a digital signature and that identifies the subscriber, contains the subscriber's public key and is digitally signed by the entity issuing the certificate.
3. "Digital signature" means a type of electronic signature that transforms a message through the use of an asymmetric cryptosystem.
4. "Electronic signature" means an electronic or digital method of identification that is executed or adopted by a person with the intent to be bound by or to authenticate a record.
5. "Entity issuing a certificate" means a person who creates and issues a certificate and notifies the subscriber listed in the certificate of the contents of the certificate.
6. "Key pair" means a private key and its corresponding public key in an asymmetric cryptosystem.
7. "Person" means a human being or an organization capable of signing a document, either legally or as a matter of fact.
8. "Private key" means the key of a key pair that is used to create a digital signature.
9. "Public key" means the key of a key pair that is used to verify a digital signature.
10. "Record" means information that is inscribed in a tangible medium or that is stored in an electronic or other medium and that is retrievable in a physically perceivable form. Record includes electronic records and printed, typewritten and tangible records.
11. "Subscriber" means a person who is the subject listed in a certificate, accepts that certificate and holds a private key that corresponds to a public key listed in that certificate.
12. "Transform" or "transform a message" means to subject data in a message to a mathematical change by electronic means.
Sec. 3. Section 42-1125, Arizona Revised Statutes, is amended to read:
42-1125. Civil penalties; definition
A. If a taxpayer fails to make and file a return for a tax administered pursuant to this article on or before the due date of the return or the due date as extended by the department, unless it is shown that the failure is due to reasonable cause and not due to wilful neglect, four and one‑half per cent of the tax required to be shown on such return shall be added to the tax for each month or fraction of a month elapsing between the due date of the return and the date on which it is filed. The total penalty shall not exceed twenty‑five per cent of the tax found to be remaining due. The penalty so added to the tax is due and payable on notice and demand from the department. For the purpose of computing the penalty imposed under this subsection, the amount required to be shown as tax on a return shall be reduced by the amount of any part of the tax which is paid on or before the beginning of such month and by the amount of any credit against the tax which may be claimed on the return. If the amount required to be shown as tax on a return is less than the amount shown as tax on such return, the penalty described in this subsection shall be applied by substituting such lower amount.
B. If a taxpayer fails or refuses to file a return on notice and demand by the department, the taxpayer shall pay a penalty of twenty‑five per cent of the tax, which is due and payable on notice and demand by the department, in addition to any penalty prescribed by subsection A of this section, unless it is shown that the failure is due to reasonable cause and not due to wilful neglect. This penalty is payable on notice and demand from the department.
C. If a taxpayer fails or refuses to furnish any information requested in writing by the department, the department may add a penalty of twenty‑five per cent of the amount of any deficiency tax assessed by the department concerning the assessment of which the information was required, unless it is shown that the failure is due to reasonable cause and not due to wilful neglect.
D. If a person fails to pay the amount shown as tax on any return within the time prescribed, a penalty of one‑half of one per cent, not to exceed a total of ten per cent, shall be added to the amount shown as tax for each month or fraction of a month during which the failure continues, unless it is shown that the failure is due to reasonable cause and not due to wilful neglect. If the department determines that the person's failure to pay was due to reasonable cause and not due to wilful neglect and that a payment agreement pursuant to section 42‑2057 is appropriate, the department shall not impose the penalty unless the taxpayer fails to comply with the payment agreement. If the taxpayer is also subject to a penalty under subsection A of this section for the same tax period, the total penalties under subsection A of this section and this subsection shall not exceed twenty‑five per cent. For the purpose of computing the penalty imposed under this subsection:
1. The amount shown as tax on a return shall be reduced by the amount of any part of the tax that is paid on or before the beginning of that month and by the amount of any credit against the tax that may be claimed on the return.
2. If the amount shown as tax on a return is greater than the amount required to be shown as tax on that return, the penalty shall be applied by substituting the lower amount.
E. If a person fails to pay any amount required to be shown on any return that is not so shown within twenty‑one calendar days after the date of notice and demand, a penalty of one‑half of one per cent, not to exceed a total of ten per cent, shall be added to the amount of tax for each month or fraction of a month during which the failure continues, unless it is shown that the failure is due to reasonable cause and not due to wilful neglect. If the taxpayer is also subject to penalty under subsection A of this section for the same tax period, the total penalties under subsection A of this section and this subsection shall not exceed twenty‑five per cent. For the purpose of computing the penalty imposed under this subsection, any amount required to be shown on any return shall be reduced by the amount of any part of the tax that is paid on or before the beginning of that month and by the amount of any credit against the tax that may be claimed on the return.
F. In the case of a deficiency, for which a determination is made of an additional amount due, which is due to negligence but without intent to defraud, the person shall pay a penalty of ten per cent of the amount of the deficiency.
G. If part of a deficiency is due to fraud with intent to evade tax, fifty per cent of the total amount of the tax, in addition to the deficiency, interest and other penalties provided in this section, shall be assessed, collected and paid as if it were a deficiency.
H. If the amount, whether determined by the department or the taxpayer, required to be withheld by the employer pursuant to title 43, chapter 4 is not paid to the department on or before the date prescribed for its remittance, the department may add a penalty of twenty‑five per cent of the amount required to be withheld and paid, unless it is shown that the failure is due to reasonable cause and not due to wilful neglect.
I. A person who, with or without intent to evade any requirement of this article or any lawful administrative rule of the department of revenue under this article, fails to file a return or to supply information required under this article or who, with or without such intent, makes, prepares, renders, signs or verifies a false or fraudulent return or statement or supplies false or fraudulent information shall pay a penalty of not more than one thousand dollars. This penalty shall be recovered by the department of law in the name of this state by an action in any court of competent jurisdiction.
J. If the taxpayer files what purports to be a return of any tax administered pursuant to this article but that is frivolous or that is made with the intent to delay or impede the administration of the tax laws, that person shall pay a penalty of five hundred dollars.
K. If a taxpayer who is required to file or provide an information return under this title or title 43 fails to file the return at the prescribed time or files a return that fails to show the information required, that taxpayer shall pay a penalty of one hundred dollars for each month or fraction of a month during which the failure continues unless it is shown that the failure is due to reasonable cause and not due to wilful neglect. The total penalties under this subsection shall not exceed five hundred dollars.
L. If it appears to the superior court that proceedings before it have been instituted or maintained by a taxpayer primarily for delay or that the taxpayer's position is frivolous or groundless, the court may award damages in an amount not to exceed one thousand dollars to this state. Damages so awarded shall be collected as a part of the tax.
M. A person who is required under section 43‑413 to furnish a statement to an employee and who wilfully furnishes a false or fraudulent statement, or who wilfully fails to furnish a statement required by section 43‑413, is for each such failure subject to a penalty of fifty dollars.
N. A person who is required to collect or truthfully account for and pay a tax administered pursuant to this article, including any luxury privilege tax, and who wilfully fails to collect the tax or truthfully account for and pay the tax, or wilfully attempts in any manner to evade or defeat the tax or its payment, is, in addition to other penalties provided by law, liable for a penalty equal to the total amount of the tax evaded, not collected or not accounted for and paid. Except as provided in subsections T, U, V and V W of this section, no other penalty under this section relating to failure to pay tax may be imposed for any offense to which this subsection applies.
O. For reporting periods beginning from and after February 28, 2011, if a taxpayer who is required under section 42‑1129 to make payment by electronic funds transfer fails to do so, that taxpayer shall pay a penalty of five per cent of the amount of the payment not made by electronic funds transfer unless it is shown that the failure is due to reasonable cause and not due to wilful neglect.
P. Unless due to reasonable cause and not to wilful neglect:
1. A person who fails to provide that person's taxpayer identification number in any return, statement or other document as required by section 42‑1105, subsection A shall pay a penalty of five dollars for each such failure.
2. A person, when filing any return, statement or other document for compensation on behalf of a taxpayer, who fails to include that person's own taxpayer identification number and the taxpayer's identification number shall pay a penalty of fifty dollars for each such failure.
3. A person, when filing any return, statement or other document without compensation on behalf of a taxpayer, who fails to include that person's own taxpayer identification number and the taxpayer's identification number is not subject to a penalty.
No other penalty under this section may be imposed if the only violation is failure to provide taxpayer identification numbers.
Q. If a taxpayer fails to pay the full amount of estimated tax required by title 43, chapter 5, article 6, a penalty is assessed equal to the amount of interest that would otherwise accrue under section 42‑1123 on the amount not paid for the period of nonpayment, not exceeding ten per cent of the amount not paid. The penalty prescribed by this subsection is in lieu of any other penalty otherwise prescribed by this section and in lieu of interest prescribed by section 42‑1123.
R. Beginning January 1, 2015, if a taxpayer continues in business without timely renewing a municipal privilege tax license as prescribed in section 42-5005, subsection D, a civil penalty of up to twenty-five dollars shall be added to the renewal fee for each jurisdiction.
R. s. The department of law, with the consent of the department of revenue, may compromise any penalty for which it may bring an action under this section.
S. t. Penalties shall not be assessed under subsection D of this section on additional amounts of tax paid by a taxpayer at the time the taxpayer voluntarily files an amended return. This subsection does not apply if:
1. The taxpayer is under audit by the department.
2. The amended return was filed on demand or request by the department.
3. The total additional tax paid and due for the tax period represents a substantial understatement of tax liability. For the purposes of this paragraph, there is a substantial understatement of tax for any tax period if the amount of the understatement for the tax period exceeds the greater of ten per cent of the actual tax liability for the tax period or two thousand dollars.
T. u. In addition to other penalties provided by law, a person who knowingly and intentionally does not comply with any requirement under chapter 3, article 5 of this title relating to cigarettes shall pay a penalty of one thousand dollars. A person who knowingly and intentionally does not pay any luxury tax that relates to cigarettes imposed by chapter 3 of this title shall pay a penalty that is equal to ten per cent of the amount of the unpaid tax.
U. v. A cigarette manufacturer, cigarette importer or cigarette distributor, as defined in section 42-3001, who knowingly and intentionally sells or possesses cigarettes with false manufacturing labels or cigarettes with counterfeit tax stamps, or who obtains cigarettes through the use of a counterfeit license, shall pay the following penalties:
1. For a first violation involving two thousand or more cigarettes, one thousand dollars.
2. For a subsequent violation involving two thousand or more cigarettes, five thousand dollars.
V. w. The civil penalties in this section are in addition to any civil penalty under chapter 3, article 5 of this title.
W. x. For the purposes of this section, and only as applied to the taxes imposed by chapter 5, articles 1 through 6 and chapter 6, articles 1, 2 and 3 of this title, "reasonable cause" means a reasonable basis for the taxpayer to believe that the tax did not apply to the business activity or the storage, use or consumption of the taxpayer's tangible personal property in this state.
Sec. 4. Section 42-2003, Arizona Revised Statutes, as amended by Laws 2013, chapter 255, section 2, is amended to read:
42-2003. Authorized disclosure of confidential information
A. Confidential information relating to:
1. A taxpayer may be disclosed to the taxpayer, its successor in interest or a designee of the taxpayer who is authorized in writing by the taxpayer. A principal corporate officer of a parent corporation may execute a written authorization for a controlled subsidiary.
2. A corporate taxpayer may be disclosed to any principal officer, any person designated by a principal officer or any person designated in a resolution by the corporate board of directors or other similar governing body.
3. A partnership may be disclosed to any partner of the partnership. This exception does not include disclosure of confidential information of a particular partner unless otherwise authorized.
4. An estate may be disclosed to the personal representative of the estate and to any heir, next of kin or beneficiary under the will of the decedent if the department finds that the heir, next of kin or beneficiary has a material interest which will be affected by the confidential information.
5. A trust may be disclosed to the trustee or trustees, jointly or separately, and to the grantor or any beneficiary of the trust if the department finds that the grantor or beneficiary has a material interest that will be affected by the confidential information.
6. Any taxpayer may be disclosed if the taxpayer has waived any rights to confidentiality either in writing or on the record in any administrative or judicial proceeding.
7. The name and taxpayer identification numbers of persons issued direct payment permits may be publicly disclosed.
B. Confidential information may be disclosed to:
1. Any employee of the department whose official duties involve tax administration.
2. The office of the attorney general solely for its use in preparation for, or in an investigation that may result in, any proceeding involving tax administration before the department or any other agency or board of this state, or before any grand jury or any state or federal court.
3. The department of liquor licenses and control for its use in determining whether a spirituous liquor licensee has paid all transaction privilege taxes and affiliated excise taxes incurred as a result of the sale of spirituous liquor, as defined in section 4‑101, at the licensed establishment and imposed on the licensed establishments by this state and its political subdivisions.
4. Other state tax officials whose official duties require the disclosure for proper tax administration purposes if the information is sought in connection with an investigation or any other proceeding conducted by the official. Any disclosure is limited to information of a taxpayer who is being investigated or who is a party to a proceeding conducted by the official.
5. The following agencies, officials and organizations, if they grant substantially similar privileges to the department for the type of information being sought, pursuant to statute and a written agreement between the department and the foreign country, agency, state, Indian tribe or organization:
(a) The United States internal revenue service, alcohol and tobacco tax and trade bureau of the United States treasury, United States bureau of alcohol, tobacco, firearms and explosives of the United States department of justice, United States drug enforcement agency and federal bureau of investigation.
(b) A state tax official of another state.
(c) An organization of states, federation of tax administrators or multistate tax commission that operates an information exchange for tax administration purposes.
(d) An agency, official or organization of a foreign country with responsibilities that are comparable to those listed in subdivision (a), (b) or (c) of this paragraph.
(e) An agency, official or organization of an Indian tribal government with responsibilities comparable to the responsibilities of the agencies, officials or organizations identified in subdivision (a), (b) or (c) of this paragraph.
6. The auditor general, in connection with any audit of the department subject to the restrictions in section 42‑2002, subsection D.
7. Any person to the extent necessary for effective tax administration in connection with:
(a) The processing, storage, transmission, destruction and reproduction of the information.
(b) The programming, maintenance, repair, testing and procurement of equipment for purposes of tax administration.
(c) The collection of the taxpayer's civil liability.
8. The office of administrative hearings relating to taxes administered by the department pursuant to section 42‑1101, but the department shall not disclose any confidential information:
(a) Regarding income tax or withholding tax.
(b) On any tax issue relating to information associated with the reporting of income tax or withholding tax.
9. The United States treasury inspector general for tax administration for the purpose of reporting a violation of internal revenue code section 7213A (26 United States Code section 7213A), unauthorized inspection of returns or return information.
10. The financial management service of the United States treasury department for use in the treasury offset program.
11. The United States treasury department or its authorized agent for use in the state income tax levy program and in the electronic federal tax payment system.
12. The Arizona commerce authority for its use in:
(a) Qualifying renewable energy operations for the tax incentives under sections 42‑12006, 43‑1083.01 and 43‑1164.01.
(b) Qualifying businesses with a qualified facility for income tax credits under sections 43‑1083.03 and 43‑1164.04.
(c) Fulfilling its annual reporting responsibility pursuant to section 41‑1511, subsections U and V and section 41‑1512, subsections U and V.
13. A prosecutor for purposes of section 32‑1164, subsection C.
14. The state fire marshal for use in determining compliance with and enforcing title 41, chapter 16, article 3.1.
15. The department of transportation for its use in administering taxes and surcharges prescribed by title 28.
C. Confidential information may be disclosed in any state or federal judicial or administrative proceeding pertaining to tax administration pursuant to the following conditions:
1. One or more of the following circumstances must apply:
(a) The taxpayer is a party to the proceeding.
(b) The proceeding arose out of, or in connection with, determining the taxpayer's civil or criminal liability, or the collection of the taxpayer's civil liability, with respect to any tax imposed under this title or title 43.
(c) The treatment of an item reflected on the taxpayer's return is directly related to the resolution of an issue in the proceeding.
(d) Return information directly relates to a transactional relationship between a person who is a party to the proceeding and the taxpayer and directly affects the resolution of an issue in the proceeding.
2. Confidential information may not be disclosed under this subsection if the disclosure is prohibited by section 42‑2002, subsection C or D.
D. Identity information may be disclosed for purposes of notifying persons entitled to tax refunds if the department is unable to locate the persons after reasonable effort.
E. The department, on the request of any person, shall provide the names and addresses of bingo licensees as defined in section 5‑401, verify whether or not a person has a privilege license and number, a distributor's license and number or a withholding license and number or disclose the information to be posted on the department's website or otherwise publicly accessible pursuant to section 42‑1124, subsection F and section 42‑3201, subsection A.
F. A department employee, in connection with the official duties relating to any audit, collection activity or civil or criminal investigation, may disclose return information to the extent that disclosure is necessary to obtain information that is not otherwise reasonably available. These official duties include the correct determination of and liability for tax, the amount to be collected or the enforcement of other state tax revenue laws.
G. If an organization is exempt from this state's income tax as provided in section 43‑1201 for any taxable year, the name and address of the organization and the application filed by the organization on which the department made its determination for exemption together with any papers submitted in support of the application and any letter or document issued by the department concerning the application are open to public inspection.
H. Confidential information relating to transaction privilege tax, use tax, severance tax, jet fuel excise and use tax and any other tax collected by the department on behalf of any jurisdiction may be disclosed to any county, city or town tax official if the information relates to a taxpayer who is or may be taxable by the a county, city or town or who may be subject to audit by the department pursuant to section 42‑6002. Any taxpayer information released by the department to the county, city or town:
1. May only be used for internal purposes, including audits.
2. May not be disclosed to the public in any manner that does not comply with confidentiality standards established by the department. The county, city or town shall agree in writing with the department that any release of confidential information that violates the confidentiality standards adopted by the department will result in the immediate suspension of any rights of the county, city or town to receive taxpayer information under this subsection.
I. The department may disclose statistical information gathered from confidential information if it does not disclose confidential information attributable to any one taxpayer. The department may disclose statistical information gathered from confidential information, even if it discloses confidential information attributable to a taxpayer, to:
1. The state treasurer in order to comply with the requirements of section 42‑5029, subsection A, paragraph 3.
2. The joint legislative income tax credit review committee and the joint legislative budget committee staff in order to comply with the requirements of section 43‑221.
J. The department may disclose the aggregate amounts of any tax credit, tax deduction or tax exemption enacted after January 1, 1994. Information subject to disclosure under this subsection shall not be disclosed if a taxpayer demonstrates to the department that such information would give an unfair advantage to competitors.
K. Except as provided in section 42‑2002, subsection C, confidential information, described in section 42‑2001, paragraph 1, subdivision (a), item (ii), may be disclosed to law enforcement agencies for law enforcement purposes.
L. The department may provide transaction privilege tax license information to property tax officials in a county for the purpose of identification and verification of the tax status of commercial property.
M. The department may provide transaction privilege tax, luxury tax, use tax, property tax and severance tax information to the ombudsman‑citizens aide pursuant to title 41, chapter 8, article 5.
N. Except as provided in section 42‑2002, subsection D, a court may order the department to disclose confidential information pertaining to a party to an action. An order shall be made only upon a showing of good cause and that the party seeking the information has made demand upon the taxpayer for the information.
O. This section does not prohibit the disclosure by the department of any information or documents submitted to the department by a bingo licensee. Before disclosing the information the department shall obtain the name and address of the person requesting the information.
P. If the department is required or permitted to disclose confidential information, it may charge the person or agency requesting the information for the reasonable cost of its services.
Q. Except as provided in section 42‑2002, subsection D, the department of revenue shall release confidential information as requested by the department of economic security pursuant to section 42‑1122 or 46‑291. Information disclosed under this subsection is limited to the same type of information that the United States internal revenue service is authorized to disclose under section 6103(l)(6) of the internal revenue code.
R. Except as provided in section 42‑2002, subsection D, the department of revenue shall release confidential information as requested by the courts and clerks of the court pursuant to section 42‑1122.
S. To comply with the requirements of section 42‑5031, the department may disclose to the state treasurer, to the county stadium district board of directors and to any city or town tax official that is part of the county stadium district confidential information attributable to a taxpayer's business activity conducted in the county stadium district.
T. The department shall release confidential information as requested by the attorney general for purposes of determining compliance with and enforcing section 44‑7101, the master settlement agreement referred to therein and subsequent agreements to which the state is a party that amend or implement the master settlement agreement. Information disclosed under this subsection is limited to luxury tax information relating to tobacco manufacturers, distributors, wholesalers and retailers and information collected by the department pursuant to section 44‑7101(2)(j).
U. For proceedings before the department, the office of administrative hearings, the board of tax appeals or any state or federal court involving penalties that were assessed against a return preparer, an electronic return preparer or a payroll service company pursuant to section 42‑1103.02, 42‑1125.01 or 43‑419, confidential information may be disclosed only before the judge or administrative law judge adjudicating the proceeding, the parties to the proceeding and the parties' representatives in the proceeding prior to its introduction into evidence in the proceeding. The confidential information may be introduced as evidence in the proceeding only if the taxpayer's name, the names of any dependents listed on the return, all social security numbers, the taxpayer's address, the taxpayer's signature and any attachments containing any of the foregoing information are redacted and if either:
1. The treatment of an item reflected on such return is or may be related to the resolution of an issue in the proceeding.
2. Such return or return information relates or may relate to a transactional relationship between a person who is a party to the proceeding and the taxpayer which directly affects the resolution of an issue in the proceeding.
3. The method of payment of the taxpayer's withholding tax liability or the method of filing the taxpayer's withholding tax return is an issue for the period.
V. The department may disclose to the attorney general confidential information received under section 44‑7111 and requested by the attorney general for purposes of determining compliance with and enforcing section 44‑7111. The department and attorney general shall share with each other the information received under section 44‑7111, and may share the information with other federal, state or local agencies only for the purposes of enforcement of section 36‑798.06, 44‑7101 or 44‑7111 or corresponding laws of other states.
W. The department may provide the name and address of qualifying hospitals and qualifying health care organizations, as defined in section 42‑5001, to a business classified and reporting transaction privilege tax under the utilities classification.
X. The department may disclose to the attorney general confidential information requested by the attorney general for the purposes of determining compliance with and enforcing section 36‑798.06.
Y. The department may disclose to an official of any city, town or county in a current agreement or considering a prospective agreement with the department as described in section 42‑5032.02, subsection F any information relating to amounts subject to distribution required by section 42‑5032.02. Information disclosed by the department under this subsection:
1. May only be used by the city, town or county for internal purposes.
2. May not be disclosed to the public in any manner that does not comply with confidentiality standards established by the department. The city, town or county must agree with the department in writing that any release of confidential information that violates the confidentiality standards will result in the immediate suspension of any rights of the city, town or county to receive information under this subsection.
Sec. 5. Section 42-2075, Arizona Revised Statutes, as amended by Laws 2013, chapter 255, section 4, is amended to read:
42-2075. Audit duration; definition
A. An audit of a taxpayer's return or claim for refund shall not exceed two years from the date of initial audit contact to the issuance of a notice of proposed deficiency assessment or proposed overpayment, except:
1. An audit of a fraudulent tax return.
2. An audit delayed as the result of the taxpayer's bankruptcy proceeding.
3. An audit in which the department has issued a letter to the taxpayer or the taxpayer's representative citing the potential imposition of the penalty described in section 42‑1125, subsection C for the taxpayer's failure or refusal to provide information pursuant to the department's written request.
4. An audit involving proceedings concerning the enforcement or validity of a subpoena or subpoena duces tecum issued pursuant to section 42‑1006, subsection C.
5. An audit involving a proceeding under section 42‑2056.
6. An audit where a taxpayer has filed a petition pursuant to section 43‑1148, but only in relation to the effect of the petition request.
7. An audit in which the taxpayer provides a written request to extend the audit beyond the two‑year period. A request for extension under this paragraph is not a substitute for a waiver of the statute of limitations pursuant to section 42‑1104, subsection B, paragraph 9. However, a waiver of the statute of limitations is considered to be a written request to extend the audit beyond the two‑year period under this paragraph.
B. This section applies to audits conducted by the department and to audits conducted by the department and cities and towns pursuant to section 42‑6002.
C. For the purposes of this section, "initial audit contact" means:
1. For a field audit, the date of the first meeting between the taxpayer or the taxpayer's representative and a member of the department's audit staff.
2. For a desk or office audit or a review conducted pursuant to section 42‑1109, the date of the first letter to the taxpayer regarding the audit or review.
Sec. 6. Section 42-5005, Arizona Revised Statutes, is amended to read:
42-5005. Transaction privilege tax licenses; fees; renewal; revocation; violation; classification
A. Every person who receives gross proceeds of sales or gross income upon on which a transaction privilege tax is imposed by this article, desiring and who desires to engage or continue in business, shall make application apply to the department for a an annual transaction privilege tax license accompanied by a fee of twelve dollars. Such licenses shall be effective indefinitely. Such a person shall not engage or continue in business until the person has obtained a transaction privilege tax license.
B. A person desiring to engage or continue in business within a city or town that imposes a municipal privilege tax shall apply to the department of revenue for an annual municipal privilege tax license accompanied by a fee of up to fifty dollars. The person shall submit the fee, which must be prorated, with each new license application. the person may not engage or continue in business until the person has obtained a municipal privilege tax license. The department must collect, hold, pay and manage the fees in trust for the city or town and may not use the monies for any other purposes.
C. A transaction privilege tax license is valid only for the calendar year in which it is issued, but it may be renewed for the following calendar year. There is no fee for the renewal of the transaction privilege tax license. The transaction privilege tax license must be renewed at the same time and in the manner as the municipal privilege tax license renewal.
D. A municipal privilege tax license is valid only for the calendar year in which it is issued, but it may be renewed for the following calendar year by the payment of a license renewal fee of up to fifty dollars. The renewal fee is due and payable on January 1 and is considered delinquent if not received on or before the last business day of January. The department must collect, hold, pay and manage the fees in trust for the city or town and may not use the monies for any other purposes.
E. A licensee that remains in business after the municipal privilege tax license has expired is subject to the payment of the license renewal fee and the civil penalty prescribed in section 42-1125, subsection R.
B. f. If the applicant is not in arrears in payment of any tax imposed by this article, the department shall issue a license authorizing the applicant to engage and continue in such business, upon on the condition that the applicant complies with this article. The license number shall be continuous.
C. g. The transaction privilege tax license shall not be and the municipal privilege tax license are not transferable upon on a change of ownership or change of location of the business. For the purposes of this subsection:
1. "Location" means the business address appearing in the application for the license and on the transaction privilege tax or municipal privilege tax license.
2. "Ownership" means any right, title or interest in the business.
3. "Transferable" means the ability to convey or change the right or privilege to engage or continue in business by virtue of the issuance of the transaction privilege tax or municipal privilege tax license.
D. h. When the ownership or location of a business upon on which a transaction privilege tax or municipal privilege tax is imposed by this article has been changed within the meaning of subsection C G of this section, the licensee shall surrender the license to the department. The license shall be reissued to the new owners or for the new location upon on application by the taxpayer and payment of the twelve-dollar fee for a transaction privilege tax license and a fee of up to fifty dollars per jurisdiction for a municipal privilege tax license. The department must collect, hold, pay and manage the fees in trust for the city or town and may not use the monies for any other purposes.
E. i. A person who is engaged in or conducting a business in two or more locations or under two or more business names shall procure a transaction privilege tax license for each location or business name regardless of whether all locations or business names are reported on a consolidated return under a single transaction privilege tax license number. This requirement shall not be construed as conflicting with section 42‑5020.
J. A person who is engaged in or conducting a business in two or more locations or under two or more business names shall procure a municipal privilege tax license for each location or business name regardless of whether all locations or business names are reported on a consolidated return.
K. A person who is engaged in or conducting business at two or more locations or under two or more business names and who files a consolidated return under a single transaction privilege tax license number as provided by section 42-5020 is required to pay only a single municipal privilege tax license renewal fee for each local jurisdiction pursuant to subsection D of this section. A person who is engaged in or conducting business at two or more locations or under two or more business names and who does not file a consolidated return under a single license number is required to pay a license renewal fee for each location or license in a local jurisdiction.
F. l. If a person violates this article or any rule adopted under this article, the department upon hearing may revoke any transaction privilege tax or municipal privilege tax license issued to the person. The department shall provide ten days' written notice of the hearing, stating the time and place and requiring the person to appear and show cause why the license or licenses should not be revoked. The department shall provide written notice to the person of the revocation of the license. The notices may be served personally or by mail pursuant to section 42‑5037. After revocation, the department shall not issue a new license to the person unless the person presents evidence satisfactory to the department that the person will comply with this article and with the rules adopted under this article. The department may prescribe the terms under which a revoked license may be reissued.
G. m. A person who violates any provision of this section is guilty of a class 3 misdemeanor.
Sec. 7. Section 42-5009, Arizona Revised Statutes, as amended by Laws 2013, chapter 40, section 3, is amended to read:
42-5009. Certificates establishing deductions; liability for making false certificate
A. A person who conducts any business classified under article 2 of this chapter may establish entitlement to the allowable deductions from the tax base of that business by both:
1. Marking the invoice for the transaction to indicate that the gross proceeds of sales or gross income derived from the transaction was deducted from the tax base.
2. Obtaining a certificate executed by the purchaser indicating the name and address of the purchaser, the precise nature of the business of the purchaser, the purpose for which the purchase was made, the necessary facts to establish the appropriate deduction and the tax license number of the purchaser to the extent the deduction depends on the purchaser conducting business classified under article 2 of this chapter and a certification that the person executing the certificate is authorized to do so on behalf of the purchaser. The certificate may be disregarded if the seller has reason to believe that the information contained in the certificate is not accurate or complete.
B. A person who does not comply with subsection A of this section may establish entitlement to the deduction by presenting facts necessary to support the entitlement, but the burden of proof is on that person.
C. The department may prescribe a form for the certificate described in subsection A of this section. Under such rules as it may prescribe, the department may also describe transactions with respect to which a person is not entitled to rely solely on the information contained in the certificate provided for in subsection A of this section but must instead obtain such additional information as required by the rules in order to be entitled to the deduction.
D. If a seller is entitled
to a deduction by complying with subsection A of this section, the department
may require the purchaser that caused the execution of the certificate to
establish the accuracy and completeness of the information required to be
contained in the certificate that would entitle the seller to the deduction.
If the purchaser cannot establish the accuracy and completeness of the
information, the purchaser is liable in an amount equal to any tax, penalty and
interest that the seller would have been required to pay under this article if
the seller had not complied with subsection A of this section. Payment
of the amount under this subsection exempts the purchaser from liability for
any tax imposed under article 4 of this chapter. The amount shall be
treated as tax revenues collected from the seller in order to designate the
distribution base for purposes of section 42‑5029.
E. If a seller is entitled to a deduction by complying with subsection B of this section, the department may require the purchaser to establish the accuracy and completeness of the information provided to the seller that entitled the seller to the deduction. If the purchaser cannot establish the accuracy and completeness of the information, the purchaser is liable in an amount equal to any tax, penalty and interest that the seller would have been required to pay under this article if the seller had not complied with subsection B of this section. Payment of the amount under this subsection exempts the purchaser from liability for any tax imposed under article 4 of this chapter. The amount shall be treated as tax revenues collected from the seller in order to designate the distribution base for purposes of section 42‑5029.
F. The department may prescribe a form for a certificate used to establish entitlement to the deductions described in section 42‑5061, subsection A, paragraph 47 46 and section 42‑5063, subsection B, paragraph 3. Under rules the department may prescribe, the department may also require additional information for the seller to be entitled to the deduction. If a seller is entitled to the deductions described in section 42‑5061, subsection A, paragraph 47 46 and section 42‑5063, subsection B, paragraph 3, the department may require the purchaser who executed the certificate to establish the accuracy and completeness of the information contained in the certificate that would entitle the seller to the deduction. If the purchaser cannot establish the accuracy and completeness of the information, the purchaser is liable in an amount equal to any tax, penalty and interest that the seller would have been required to pay under this article. Payment of the amount under this subsection exempts the purchaser from liability for any tax imposed under article 4 of this chapter. The amount shall be treated as tax revenues collected from the seller in order to designate the distribution base for purposes of section 42‑5029.
G. If a seller claims a deduction under section 42‑5061, subsection A, paragraph 25 and establishes entitlement to the deduction with an exemption letter that the purchaser received from the department and the exemption letter was based on a contingent event, the department may require the purchaser that received the exemption letter to establish the satisfaction of the contingent event within a reasonable time. If the purchaser cannot establish the satisfaction of the event, the purchaser is liable in an amount equal to any tax, penalty and interest that the seller would have been required to pay under this article if the seller had not been furnished the exemption letter. Payment of the amount under this subsection exempts the purchaser from liability for any tax imposed under article 4 of this chapter. The amount shall be treated as tax revenues collected from the seller in order to designate the distribution base for purposes of section 42‑5029. For the purposes of this subsection, "reasonable time" means a time limitation that the department determines and that does not exceed the time limitations pursuant to section 42‑1104.
H. The department shall prescribe forms for certificates used to establish the satisfaction of the criteria necessary to qualify the sale of a motor vehicle for the deductions described in section 42-5061, subsection A, paragraph 14, paragraph 28, subdivision (a) and paragraph 45 44 and subsection U. Except as provided in subsection J of this section, to establish entitlement to these deductions, a motor vehicle dealer shall retain:
1. A valid certificate as prescribed by this subsection completed by the purchaser and obtained prior to the issuance of the nonresident registration permit authorized by section 28‑2154.
2. A copy of the nonresident registration permit authorized by section 28‑2154.
3. A legible copy of a current valid driver license issued to the purchaser by another state or foreign country that indicates an address outside of this state. For the sale of a motor vehicle to a nonresident entity, the entity's representative must have a current valid driver license issued by the same jurisdiction as that in which the entity is located.
4. For the purposes of the deduction provided by section 42‑5061, subsection A, paragraph 14, a certificate documenting the delivery of the motor vehicle to an out‑of‑state location.
I. Notwithstanding subsection A, paragraph 2 of this section, if a motor vehicle dealer has established entitlement to a deduction by complying with subsection H of this section, the department may require the purchaser who executed the certificate to establish the accuracy and completeness of the information contained in the certificate that entitled the motor vehicle dealer to the deduction. If the purchaser cannot establish the accuracy and completeness of the information, the purchaser is liable in an amount equal to any tax, penalty and interest that the motor vehicle dealer would have been required to pay under this article and under articles IV and V of the model city tax code as defined in section 42‑6051. Payment of the amount under this subsection exempts the purchaser from liability for any tax imposed under article 4 of this chapter and any tax imposed under article VI of the model city tax code as defined in section 42‑6051. The amount shall be treated as tax revenues collected from the motor vehicle dealer in order to designate the distribution base for purposes of section 42‑5029.
J. To establish entitlement to the deduction described in section 42‑5061, subsection A, paragraph 45, a public consignment auction dealer as defined in section 28‑4410.01 28-4301 shall submit the valid certificate prescribed by subsection H of this section to the department and retain a copy for its records.
K. Notwithstanding any other law, compliance with subsection H of this section by a motor vehicle dealer entitles the motor vehicle dealer to the exemption provided in section 42‑6004, subsection A, paragraph 4.
L. The department shall prescribe a form for a certificate to be used by a contractor that is not otherwise subject to tax under section 42-5075, subsection O when purchasing tangible personal property to be incorporated or fabricated by the person into any real property, structure, project, development or improvement to provide documentation to a retailer that the sale of tangible personal property qualifies for the deduction under section 42-5061, subsection A, paragraph 27. A prime contractor shall obtain the certificate from the department and shall provide a copy to any contractor working on the project that does not have a transaction privilege tax license by reason of not being subject to tax under section 42‑5075, subsection O. The prime contractor shall obtain a new certificate for each project to which this subsection applies. For the purposes of this subsection, the following apply:
1. The contractor may use the certificate issued pursuant to this subsection only with respect to tangible personal property that will be incorporated into a project for which the gross receipts are subject to tax under section 42-5075.
2. The department shall issue the certificate to the prime contractor on receiving sufficient documentation to establish that the prime contractor meets the requirements of this subsection.
3. If a contractor uses the certificate provided under this subsection to purchase tangible personal property to be used in a nontaxable contract, the contractor is liable in an amount equal to any tax, penalty and interest that the seller would have been required to pay under this article if the seller had not complied with subsection a of this section. Payment of the amount under this section exempts the contractor from liability for any tax imposed under article 4 of this chapter. The amount shall be treated as tax revenues collected from the seller in order to designate the distribution base for purposes of section 42-5029.
M. Notwithstanding any other law, compliance with subsection L of this section by a contractor entitles the contractor purchasing tangible personal property to be incorporated or fabricated by the person into any real property, structure, project, development or improvement to the exemption provided in section 465, subsection (k) of the model city tax code.
Sec. 8. Repeal
Section 42-5009, Arizona Revised Statutes, as amended by Laws 2013, chapter 255, section 5, is repealed.
Sec. 9. Section 42-5014, Arizona Revised Statutes, as amended by Laws 2013, chapter 255, section 7, is amended to read:
42-5014. Return and payment of tax; estimated tax; extensions; abatements
A. Except as provided in subsection B, C or D of this section, the taxes levied under this article:
1. Are due and payable monthly in the form required by section 42‑5018 for the amount of the tax, to the department, on or before the twentieth day of the month next succeeding the month in which the tax accrues.
2. Are delinquent as follows:
(a) For taxpayers electing to that file by mail, if not postmarked on or before the twenty‑fifth day of that month or if not received by the department on or before the business day preceding the last business day of the month.
(b) For taxpayers electing that are required or elect to file and pay electronically in any month, if not received by the department on or before the last business day of the month.
(c) For all other taxpayers, if not received by the department on or before the business day preceding the last business day of the month.
B. The department, for any taxpayer whose estimated annual liability for taxes imposed or administered by this article, or chapter 6 of this title is between five hundred dollars and one thousand two hundred fifty dollars, may authorize such taxpayer to pay such taxes on a quarterly basis. The department, for any taxpayer whose estimated annual liability for taxes imposed by this article is five hundred dollars or less, may authorize such taxpayer to pay such taxes on an annual basis.
C. The department may require a taxpayer whose business is of a transient character to file the return and remit the taxes imposed by this article on a daily, a weekly or a transaction by transaction basis, and those returns and payments are due and payable on the date fixed by the department without a grace period otherwise allowed by this section. For the purposes of this subsection, "business of a transient character" means sales activity by a taxpayer not regularly engaged in selling within the state conducted from vehicles, portable stands, rented spaces, structures or booths, or concessions at fairs, carnivals, circuses, festivals or similar activities for not more than thirty consecutive days.
D. In 2010, 2011 and 2012, if a business entity under which a taxpayer reports and pays income tax under title 43 has an annual total tax liability under this article, article 6 of this chapter and chapter 6, article 3 of this title in calendar year 2010, 2011 or 2012 of one hundred thousand dollars or more, based on the actual tax liability in calendar year 2009, 2010 or 2011, regardless of the number of offices at which the taxes imposed by this article, article 6 of this chapter or chapter 6, article 3 of this title are collected, or if the taxpayer can reasonably anticipate such liability in calendar year 2010, 2011 or 2012, the taxpayer shall report on a form prescribed by the department and pay an estimated tax payment in June, 2010, 2011 or 2012. Thereafter, If the business entity under which a taxpayer reports and pays income tax under title 43 has an annual total tax liability under this article, article 6 of this chapter and chapter 6, article 3 of this title of one million dollars or more, based on the actual tax liability in the preceding calendar year, regardless of the number of offices at which the taxes imposed by this article, article 6 of this chapter or chapter 6, article 3 of this title are collected, or if the taxpayer can reasonably anticipate such liability in the current year, the taxpayer shall report on a form prescribed by the department and pay an estimated tax payment each June. Any other taxpayer may voluntarily elect to pay the estimated tax payment pursuant to this subsection. The payment shall be made on or before June 20 and is delinquent if not postmarked on or before that date or if not received by the department on or before the business day preceding the last business day of June for those taxpayers electing to file by mail, or delinquent if not received by the department on the business day preceding the last business day of June for those taxpayers electing to file in person. The estimated tax paid shall be credited against the taxpayer's tax liability under this article, article 6 of this chapter and chapter 6, article 3 of this title for the month of June for the current calendar year. The estimated tax payment shall equal either:
1. One‑half of the actual tax liability under this article plus one‑half of any tax liability under article 6 of this chapter and chapter 6, article 3 of this title for May of the current calendar year.
2. The actual tax liability under this article plus any tax liability under article 6 of this chapter and chapter 6, article 3 of this title for the first fifteen days of June of the current calendar year.
E. The taxpayer shall prepare a return showing the amount of the tax for which the taxpayer is liable for the preceding month, and shall mail or deliver the return to the department in the same manner and time as prescribed for the payment of taxes in subsection A of this section. If the taxpayer fails to file the return in the manner and time as prescribed for the payment of taxes in subsection A of this section, the amount of the tax required to be shown on the return is subject to the penalty imposed pursuant to section 42‑1125, subsection A, without any reduction for taxes paid on or before the due date of the return. The return shall be verified by the oath of the taxpayer or an authorized agent or as prescribed by the department pursuant to section 42‑1105, subsection B.
F. Any person who is taxable under this article and who makes cash and credit sales shall report such cash and credit sales separately and upon on making application may obtain from the department an extension of time for payment of taxes due on the credit sales. The extension shall be granted by the department under such rules as the department prescribes. When the extension is granted, the taxpayer shall thereafter include in each monthly report all collections made on such credit sales during the month next preceding and shall pay the taxes due at the time of filing such report.
G. The returns required under this article shall be made upon on forms prescribed by the department and shall capture data with sufficient specificity to meet the needs of all taxing jurisdictions.
H. Any person who is engaged in or conducting business in two or more locations or under two or more business names shall file the return required under this article by electronic means.
H. i. The department, for good cause, may extend the time for making any return required by this article and may grant such reasonable additional time within which to make the return as it deems proper, but the time for filing the return shall not be extended beyond the first day of the third month next succeeding the regular due date of the return.
I. j. The department, with the approval of the attorney general, may abate small tax balances if the administration costs exceed the amount of tax due.
J. k. For the purposes of subsection D of this section, "taxpayer" means the business entity under which the business reports and pays state income taxes regardless of the number of offices at which the taxes imposed by this article, article 6 of this chapter or chapter 6, article 3 of this title are collected.
Sec. 10. Section 42-5015, Arizona Revised Statutes, is amended to read:
42-5015. Filing by electronic means
On or before January 1, 2015, the online portal prescribed by section 42‑6001 shall be modified so that a taxpayer who is required to pay any transaction privilege and affiliated excise taxes to this state or a county or municipality may report and pay the required tax through the online portal electronic means. The online portal electronic system shall be administered by the department of revenue. The costs of the online portal shall be paid by the department may enter into an agreement with the cities and towns that did not have an intergovernmental contract or agreement in effect as of January 1, 2013 with the department to provide for unified or coordinated licensing, collection and auditing programs for the cities and towns to contribute to the payment of the electronic system through money or resources. The expanded online portal electronic system shall:
1. Include a single point for licensing, filing a single return and paying transaction privilege and affiliated excise taxes for all state, county and municipal taxing jurisdictions.
2. Consolidate data in a manner compatible with the data systems of the department of revenue.
3. Capture data with sufficient specificity to meet the needs of the taxing jurisdictions.
4. Allow for identification of the correct taxing jurisdictions and tax rates based on the place where the transaction is sourced.
Sec. 11. Section 42-5075, Arizona Revised Statutes, as amended by Laws 2013, first regular session, chapter 153, section 1 and Laws 2013, first special session, chapter 9, section 6, is amended to read:
42-5075. Prime contracting classification; exemptions; definitions
A. The prime contracting classification is comprised of the business of prime contracting and dealership of manufactured buildings. Sales for resale to another dealership of manufactured buildings are not subject to tax. Sales for resale do not include sales to a lessor of manufactured buildings. The sale of a used manufactured building is not taxable under this chapter. The proceeds from alteration and repairs to a used manufactured building are taxable under this section.
B. The tax base for the prime contracting classification is sixty‑five per cent of the gross proceeds of sales or gross income derived from the business. The following amounts shall be deducted from the gross proceeds of sales or gross income before computing the tax base:
1. The sales price of land, which shall not exceed the fair market value.
2. Sales and installation of groundwater measuring devices required under section 45‑604 and groundwater monitoring wells required by law, including monitoring wells installed for acquiring information for a permit required by law.
3. The sales price of furniture, furnishings, fixtures, appliances and attachments that are not incorporated as component parts of or attached to a manufactured building or the setup site. The sale of such items may be subject to the taxes imposed by article 1 of this chapter separately and distinctly from the sale of the manufactured building.
4. The gross proceeds of sales or gross income received from a contract entered into for the construction, alteration, repair, addition, subtraction, improvement, movement, wrecking or demolition of any building, highway, road, railroad, excavation, manufactured building or other structure, project, development or improvement located in a military reuse zone for providing aviation or aerospace services or for a manufacturer, assembler or fabricator of aviation or aerospace products within an active military reuse zone after the zone is initially established or renewed under section 41‑1531. To be eligible to qualify for this deduction, before beginning work under the contract, the prime contractor must have applied for a letter of qualification from the department of revenue.
5. The gross proceeds of sales or gross income derived from a contract to construct a qualified environmental technology manufacturing, producing or processing facility, as described in section 41‑1514.02, and from subsequent construction and installation contracts that begin within ten years after the start of initial construction. To qualify for this deduction, before beginning work under the contract, the prime contractor must obtain a letter of qualification from the department of revenue. This paragraph shall apply for ten full consecutive calendar or fiscal years after the start of initial construction.
6. The gross proceeds of sales or gross income from a contract to provide for one or more of the following actions, or a contract for site preparation, constructing, furnishing or installing machinery, equipment or other tangible personal property, including structures necessary to protect exempt incorporated materials or installed machinery or equipment, and tangible personal property incorporated into the project, to perform one or more of the following actions in response to a release or suspected release of a hazardous substance, pollutant or contaminant from a facility to the environment, unless the release was authorized by a permit issued by a governmental authority:
(a) Actions to monitor, assess and evaluate such a release or a suspected release.
(b) Excavation, removal and transportation of contaminated soil and its treatment or disposal.
(c) Treatment of contaminated soil by vapor extraction, chemical or physical stabilization, soil washing or biological treatment to reduce the concentration, toxicity or mobility of a contaminant.
(d) Pumping and treatment or in situ treatment of contaminated groundwater or surface water to reduce the concentration or toxicity of a contaminant.
(e) The installation of structures, such as cutoff walls or caps, to contain contaminants present in groundwater or soil and prevent them from reaching a location where they could threaten human health or welfare or the environment.
This paragraph does not include asbestos removal or the construction or use of ancillary structures such as maintenance sheds, offices or storage facilities for unattached equipment, pollution control equipment, facilities or other control items required or to be used by a person to prevent or control contamination before it reaches the environment.
7. The gross proceeds of sales or gross income that is derived from a contract for the installation, assembly, repair or maintenance of machinery, equipment or other tangible personal property that is either deducted from the tax base of the retail classification under section 42‑5061, subsection B or that is exempt from use tax under section 42‑5159, subsection B and that has independent functional utility, pursuant to the following provisions:
(a) The deduction provided in this paragraph includes the gross proceeds of sales or gross income derived from all of the following:
(i) Any activity performed on machinery, equipment or other tangible personal property with independent functional utility.
(ii) Any activity performed on any tangible personal property relating to machinery, equipment or other tangible personal property with independent functional utility in furtherance of any of the purposes provided for under subdivision (d) of this paragraph.
(iii) Any activity that is related to the activities described in subdivision (a), items (i) and (ii) of this paragraph subdivision, including, but not limited to, inspecting the installation of, or testing, the machinery, equipment or other tangible personal property.
(b) The deduction provided in this paragraph does not include gross proceeds of sales or gross income from the portion of any contracting activity that consists of the development of, or modification to, real property in order to facilitate the installation, assembly, repair, maintenance or removal of machinery, equipment or other tangible personal property that is either deducted from the tax base of the retail classification under section 42‑5061, subsection B or exempt from use tax under section 42‑5159, subsection B.
(c) The deduction provided in this paragraph shall be determined without regard to the size or useful life of the machinery, equipment or other tangible personal property.
(d) For the purposes of this paragraph, "independent functional utility" means that the machinery, equipment or other tangible personal property can independently perform its function without attachment to real property, other than attachment for any of the following purposes:
(i) Assembling the machinery, equipment or other tangible personal property.
(ii) Connecting items of machinery, equipment or other tangible personal property to each other.
(iii) Connecting the machinery, equipment or other tangible personal property, whether as an individual item or as a system of items, to water, power, gas, communication or other services.
(iv) Stabilizing or protecting the machinery, equipment or other tangible personal property during operation by bolting, burying or performing other similar nonpermanent connections to either real property or real property improvements.
8. The gross proceeds of sales or gross income attributable to the purchase of machinery, equipment or other tangible personal property that is exempt from or deductible from transaction privilege and use tax under:
(a) Section 42‑5061, subsection A, paragraph 25, 29 or 59.
(b) Section 42‑5061, subsection B.
(c) Section 42‑5159, subsection A, paragraph 13, subdivision (a), (b), (c), (d), (e), (f), (i), (j) or (l) or paragraph 54.
(d) Section 42‑5159, subsection B.
9. The gross proceeds of sales or gross income received from a contract for the construction of an environmentally controlled facility for the raising of poultry for the production of eggs and the sorting, cooling and packaging of eggs.
10. The gross proceeds of sales or gross income that is derived from a contract entered into with a person who is engaged in the commercial production of livestock, livestock products or agricultural, horticultural, viticultural or floricultural crops or products in this state for the construction, alteration, repair, improvement, movement, wrecking or demolition or addition to or subtraction from any building, highway, road, excavation, manufactured building or other structure, project, development or improvement used directly and primarily to prevent, monitor, control or reduce air, water or land pollution.
11. The gross proceeds of sales or gross income that is derived from the installation, assembly, repair or maintenance of clean rooms that are deducted from the tax base of the retail classification pursuant to section 42‑5061, subsection B, paragraph 16.
12. For taxable periods beginning from and after June 30, 2001, the gross proceeds of sales or gross income derived from a contract entered into for the construction of a residential apartment housing facility that qualifies for a federal housing subsidy for low income persons over sixty‑two years of age and that is owned by a nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code.
13. For taxable periods beginning from and after December 31, 1996 and ending before January 1, 2017, the gross proceeds of sales or gross income derived from a contract to provide and install a solar energy device. The contractor shall register with the department as a solar energy contractor. By registering, the contractor acknowledges that it will make its books and records relating to sales of solar energy devices available to the department for examination.
14. The gross proceeds of sales or gross income derived from a contract entered into for the construction of a launch site, as defined in 14 Code of Federal Regulations section 401.5.
15. The gross proceeds of sales or gross income derived from a contract entered into for the construction of a domestic violence shelter that is owned and operated by a nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code.
16. The gross proceeds of sales or gross income derived from contracts to perform postconstruction treatment of real property for termite and general pest control, including wood destroying organisms.
17. The gross proceeds of sales or gross income received from contracts entered into before July 1, 2006 for constructing a state university research infrastructure project if the project has been reviewed by the joint committee on capital review before the university enters into the construction contract for the project. For the purposes of this paragraph, "research infrastructure" has the same meaning prescribed in section 15‑1670.
18. The gross proceeds of sales or gross income received from a contract for the construction of any building, or other structure, project, development or improvement owned by a qualified business under section 41‑1516 for harvesting or processing qualifying forest products removed from qualifying projects as defined in section 41‑1516 if actual construction begins before January 1, 2024. To qualify for this deduction, the prime contractor must obtain a letter of qualification from the Arizona commerce authority before beginning work under the contract.
19. Any amount of the gross proceeds of sales or gross income attributable to development fees that are incurred in relation to a contract for construction, development or improvement of real property and that are paid by a prime contractor or subcontractor. For the purposes of this paragraph:
(a) The attributable amount shall not exceed the value of the development fees actually imposed.
(b) The attributable amount is equal to the total amount of development fees paid by the prime contractor or subcontractor, and the total development fees credited in exchange for the construction of, contribution to or dedication of real property for providing public infrastructure, public safety or other public services necessary to the development. The real property must be the subject of the development fees.
(c) "Development fees" means fees imposed to offset capital costs of providing public infrastructure, public safety or other public services to a development and authorized pursuant to section 9‑463.05, section 11‑1102 or title 48 regardless of the jurisdiction to which the fees are paid.
C. Entitlement to the deduction pursuant to subsection B, paragraph 7 of this section is subject to the following provisions:
1. A prime contractor may establish entitlement to the deduction by both:
(a) Marking the invoice for the transaction to indicate that the gross proceeds of sales or gross income derived from the transaction was deducted from the base.
(b) Obtaining a certificate executed by the purchaser indicating the name and address of the purchaser, the precise nature of the business of the purchaser, the purpose for which the purchase was made, the necessary facts to establish the deductibility of the property under section 42‑5061, subsection B, and a certification that the person executing the certificate is authorized to do so on behalf of the purchaser. The certificate may be disregarded if the prime contractor has reason to believe that the information contained in the certificate is not accurate or complete.
2. A person who does not comply with paragraph 1 of this subsection may establish entitlement to the deduction by presenting facts necessary to support the entitlement, but the burden of proof is on that person.
3. The department may prescribe a form for the certificate described in paragraph 1, subdivision (b) of this subsection. The department may also adopt rules that describe the transactions with respect to which a person is not entitled to rely solely on the information contained in the certificate provided in paragraph 1, subdivision (b) of this subsection but must instead obtain such additional information as required in order to be entitled to the deduction.
4. If a prime contractor is entitled to a deduction by complying with paragraph 1 of this subsection, the department may require the purchaser who caused the execution of the certificate to establish the accuracy and completeness of the information required to be contained in the certificate that would entitle the prime contractor to the deduction. If the purchaser cannot establish the accuracy and completeness of the information, the purchaser is liable in an amount equal to any tax, penalty and interest that the prime contractor would have been required to pay under article 1 of this chapter if the prime contractor had not complied with paragraph 1 of this subsection. Payment of the amount under this paragraph exempts the purchaser from liability for any tax imposed under article 4 of this chapter. The amount shall be treated as a transaction privilege tax to the purchaser and as tax revenues collected from the prime contractor in order to designate the distribution base for purposes of section 42‑5029.
D. Subcontractors or others who perform services in respect to any improvement, building, highway, road, railroad, excavation, manufactured building or other structure, project, development or improvement are not subject to tax if they can demonstrate that the job was within the control of a prime contractor or contractors or a dealership of manufactured buildings and that the prime contractor or dealership is liable for the tax on the gross income, gross proceeds of sales or gross receipts attributable to the job and from which the subcontractors or others were paid.
E. Amounts received by a contractor for a project are excluded from the contractor's gross proceeds of sales or gross income derived from the business if the person who hired the contractor executes and provides a certificate to the contractor stating that the person providing the certificate is a prime contractor and is liable for the tax under article 1 of this chapter. The department shall prescribe the form of the certificate. If the contractor has reason to believe that the information contained on the certificate is erroneous or incomplete, the department may disregard the certificate. If the person who provides the certificate is not liable for the tax as a prime contractor, that person is nevertheless deemed to be the prime contractor in lieu of the contractor and is subject to the tax under this section on the gross receipts or gross proceeds received by the contractor.
F. Every person engaging or continuing in this state in the business of prime contracting or dealership of manufactured buildings shall present to the purchaser of such prime contracting or manufactured building a written receipt of the gross income or gross proceeds of sales from such activity and shall separately state the taxes to be paid pursuant to this section.
G. For the purposes of section 42‑5032.01, the department shall separately account for revenues collected under the prime contracting classification from any prime contractor engaged in the preparation or construction of a multipurpose facility, and related infrastructure, that is owned, operated or leased by the tourism and sports authority pursuant to title 5, chapter 8.
H. For the purposes of section 42‑5032.02, from and after September 30, 2013, the department shall separately account for revenues reported and collected under the prime contracting classification from any prime contractor engaged in the construction of any buildings and associated improvements that are for the benefit of a manufacturing facility. For the purposes of this subsection, "associated improvements" and "manufacturing facility" have the same meanings prescribed in section 42‑5032.02.
I. The gross proceeds of sales or gross income derived from a contract for lawn maintenance services are not subject to tax under this section if the contract does not include landscaping activities. Lawn maintenance service is a service pursuant to section 42‑5061, subsection A, paragraph 1, and includes lawn mowing and edging, weeding, repairing sprinkler heads or drip irrigation heads, seasonal replacement of flowers, refreshing gravel, lawn de‑thatching, seeding winter lawns, leaf and debris collection and removal, tree or shrub pruning or clipping, garden and gravel raking and applying pesticides, as defined in section 3‑361, and fertilizer materials, as defined in section 3‑262.
J. The gross proceeds of sales or gross income derived from landscaping activities are subject to tax under this section. Landscaping includes installing lawns, grading or leveling ground, installing gravel or boulders, planting trees and other plants, felling trees, removing or mulching tree stumps, removing other imbedded plants, building or modifying irrigation berms, repairing sprinkler or watering systems, installing railroad ties and installing underground sprinkler or watering systems.
K. The portion of gross proceeds of sales or gross income attributable to the actual direct costs of providing architectural or engineering services that are incorporated in a contract is not subject to tax under this section. For the purposes of this subsection, "direct costs" means the portion of the actual costs that are directly expended in providing architectural or engineering services.
L. Operating a landfill or a solid waste disposal facility is not subject to taxation under this section, including filling, compacting and creating vehicle access to and from cell sites within the landfill. Constructing roads to a landfill or solid waste disposal facility and constructing cells within a landfill or solid waste disposal facility may be deemed prime contracting under this section.
M. The following apply to in determining the taxable situs of sales of manufactured buildings:
1. For sales in this state where the dealership of manufactured buildings building dealer contracts to deliver the building to a setup site or to perform the setup in this state, the taxable situs is the setup site.
2. For sales in this state where the dealership of manufactured buildings building dealer does not contract to deliver the building to a setup site or does not perform the setup, the taxable situs is the location of the dealership where the building is delivered to the buyer.
3. For sales in this state where the dealership of manufactured buildings contracts to deliver the building to a setup site that is outside this state, the situs is outside this state and the transaction is excluded from tax.
N. The gross proceeds of sales or gross income attributable to a separate, written contract for design phase services contract or professional services contract, executed before modification begins and with terms, conditions and pricing of all of these services separately stated in the contract from those for construction phase services, is not subject to tax under this section, regardless of whether the services are provided sequential to or concurrent with prime contracting activities that are subject to tax under this section. This subsection does not include the gross proceeds of sales or gross income attributable to construction phase services. For the purposes of this subsection:
1. "Construction phase services" means services for the execution and completion of any modification, including the following:
(a) Administration or supervision of any modification performed on the project, including team management and coordination, scheduling, cost controls, submittal process management, field management, safety program, close-out process and warranty period services.
(b) Administration or supervision of any modification performed pursuant to a punch list. For the purposes of this subdivision, "punch list" means minor items of modification work performed after substantial completion and before final completion of the project.
(c) Administration or supervision of any modification performed pursuant to change orders. For the purposes of this subdivision, "change order" means a written instrument issued after execution of a contract for modification work, providing for all of the following:
(i) The scope of a change in the modification work, contract for modification work or other contract documents.
(ii) The amount of an adjustment, if any, to the guaranteed maximum price as set in the contract for modification work. For the purposes of this item, "guaranteed maximum price" means the amount guaranteed to be the maximum amount due to a prime contractor for the performance of all modification work for the project.
(iii) The extent of an adjustment, if any, to the contract time of performance set forth in the contract.
(d) Administration or supervision of any modification performed pursuant to change directives. For the purposes of this subdivision, "change directive" means a written order directing a change in modification work before agreement on an adjustment of the guaranteed maximum price or contract time.
(e) Inspection to determine the dates of substantial completion or final completion.
(f) Preparation of any manuals, warranties, as-built drawings, spares or other items the prime contractor must furnish pursuant to the contract for modification work. For the purposes of this subdivision, "as-built drawing" means a drawing that indicates field changes made to adapt to field conditions, field changes resulting from change orders or buried and concealed installation of piping, conduit and utility services.
(g) Preparation of status reports after modification work has begun detailing the progress of work performed, including preparation of any of the following:
(i) Master schedule updates.
(ii) Modification work cash flow projection updates.
(iii) Site reports made on a periodic basis.
(iv) Identification of discrepancies, conflicts or ambiguities in modification work documents that require resolution.
(v) Identification of any health and safety issues that have arisen in connection with the modification work.
(h) Preparation of daily logs of modification work, including documentation of personnel, weather conditions and on-site occurrences.
(i) Preparation of any submittals or shop drawings used by the prime contractor to illustrate details of the modification work performed.
(j) Administration or supervision of any other activities for which a prime contractor receives a certificate for payment or certificate for final payment based on the progress of modification work performed on the project.
2. "Design phase services" means services for developing and completing a design for a project that are not construction phase services, including the following:
(a) Evaluating surveys, reports, test results or any other information on-site conditions for the project, including physical characteristics, legal limitations and utility locations for the site.
(b) Evaluating any criteria or programming objectives for the project to ascertain requirements for the project, such as physical requirements affecting cost or projected utilization of the project.
(c) Preparing drawings and specifications for architectural program documents, schematic design documents, design development documents, modification work documents or documents that identify the scope of or materials for the project.
(d) Preparing an initial schedule for the project, excluding the preparation of updates to the master schedule after modification work has begun.
(e) Preparing preliminary estimates of costs of modification work before completion of the final design of the project, including an estimate or schedule of values for any of the following:
(i) Labor, materials, machinery and equipment, tools, water, heat, utilities, transportation and other facilities and services used in the execution and completion of modification work, regardless of whether they are temporary or permanent or whether they are incorporated in the modifications.
(ii) The cost of labor and materials to be furnished by the owner of the real property.
(iii) The cost of any equipment of the owner of the real property to be assigned by the owner to the prime contractor.
(iv) The cost of any labor for installation of equipment separately provided by the owner of the real property that has been designed, specified, selected or specifically provided for in any design document for the project.
(v) Any fee paid by the owner of the real property to the prime contractor pursuant to the contract for modification work.
(vi) Any bond and insurance premiums.
(vii) Any applicable taxes.
(viii) Any contingency fees for the prime contractor that may be used before final completion of the project.
(f) Reviewing and evaluating cost estimates and project documents to prepare recommendations on site use, site improvements, selection of materials, building systems and equipment, modification feasibility, availability of materials and labor, local modification activity as related to schedules and time requirements for modification work.
(g) Preparing the plan and procedures for selection of subcontractors, including any prequalification of subcontractor candidates.
3. "Professional services" means architect services, assayer services, engineer services, geologist services, land surveying services or landscape architect services that are within the scope of those services as provided in title 32, chapter 1 and for which gross proceeds of sales or gross income has not otherwise been deducted under subsection K of this section.
O. The gross proceeds of sales or gross income derived from a contract with the owner of real property or the person owning the improvements to the real property for the maintenance, repair, replacement or alteration of existing property is not subject to tax under this section if the contract does not include modification activities, except as specified in this subsection. The gross proceeds of sales or gross income derived from a de minimis amount of modification activity that is essential to the completion of the maintenance, repair, replacement or alteration contract does not subject the entire contract to tax under this section. For the purposes of this subsection, each contract or project is independent of Any other contract.
O. p. Notwithstanding subsection P q, paragraph 8 of this section, a person owning real property who enters into a contract for sale of the real property, who is responsible to the new owner of the property for modifications made to the property in the period subsequent to the transfer of title and who receives a consideration for the modifications is considered a prime contractor solely for purposes of taxing the gross proceeds of sale or gross income received for the modifications made subsequent to the transfer of title. The original owner's gross proceeds of sale or gross income received for the modifications shall be determined according to the following methodology:
1. If any part of the contract for sale of the property specifies amounts to be paid to the original owner for the modifications to be made in the period subsequent to the transfer of title, the amounts are included in the original owner's gross proceeds of sale or gross income under this section. Proceeds from the sale of the property that are received after transfer of title and that are unrelated to the modifications made subsequent to the transfer of title are not considered gross proceeds of sale or gross income from the modifications.
2. If the original owner enters into an agreement separate from the contract for sale of the real property providing for amounts to be paid to the original owner for the modifications to be made in the period subsequent to the transfer of title to the property, the amounts are included in the original owner's gross proceeds of sale or gross income received for the modifications made subsequent to the transfer of title.
3. If the original owner is responsible to the new owner for modifications made to the property in the period subsequent to the transfer of title and derives any gross proceeds of sale or gross income from the project subsequent to the transfer of title other than a delayed disbursement from escrow unrelated to the modifications, it is presumed that the amounts are received for the modifications made subsequent to the transfer of title unless the contrary is established by the owner through its books, records and papers kept in the regular course of business.
4. The tax base of the original owner is computed in the same manner as a prime contractor under this section.
P. q. For the purposes of this section:
1. "Contracting" means engaging in business as a contractor.
2. "Contractor" is synonymous with the term "builder" and means any person or organization that undertakes to or offers to undertake to, or purports to have the capacity to undertake to, or submits a bid to, or does personally or by or through others, modify any building, highway, road, railroad, excavation, manufactured building or other structure, project, development or improvement, or to do any part of such a project, including the erection of scaffolding or other structure or works in connection with such a project, and includes subcontractors and specialty contractors. For all purposes of taxation or deduction, this definition shall govern without regard to whether or not such contractor is acting in fulfillment of a contract.
4. 3. "Manufactured building" means a manufactured home, mobile home or factory‑built building, as defined in section 41‑2142.
3. 4. "Dealership of Manufactured buildings building dealer" means a dealer who either:
(a) Is licensed pursuant to title 41, chapter 16 and who sells manufactured buildings to the final consumer.
(b) Supervises, performs or coordinates the excavation and completion of site improvements, or the setup or moving of a manufactured building including the contracting, if any, with any subcontractor or specialty contractor for the completion of the contract.
5. "Modification" means construction, alteration, repair, addition, subtraction, improvement, movement, wreckage or demolition.
6. "Modify" means to construct, alter, repair, add to, subtract from, improve, move, wreck or demolish.
7. "Prime contracting" means engaging in business as a prime contractor.
8. "Prime contractor" means a contractor who supervises, performs or coordinates the modification of any building, highway, road, railroad, excavation, manufactured building or other structure, project, development or improvement including the contracting, if any, with any subcontractors or specialty contractors and who is responsible for the completion of the contract. Except as provided in subsections E and O P of this section, a person who owns real property, who engages one or more contractors to modify that real property and who does not itself modify that real property is not a prime contractor within the meaning of this paragraph regardless of the existence of a contract for sale or the subsequent sale of that real property.
9. "Sale of a used manufactured building" does not include a lease of a used manufactured building.
Sec. 12. Repeal
Section 42-5075, Arizona Revised Statutes, as amended by Laws 2013, chapter 255, section 15, is repealed.
Sec. 13. Section 42-6001, Arizona Revised Statutes, as amended by Laws 2013, chapter 255, section 18, is amended to read:
42-6001. Collection and administration of transaction privilege tax and affiliated excise taxes; intergovernmental contract or agreement; method of payment
A. The department shall collect and administer any transaction privilege and affiliated excise taxes, including use tax, severance tax, jet fuel excise and use tax, and rental occupancy tax, imposed by any city or town. , and The department and any each city or town shall enter into a intergovernmental contracts contract or agreements agreement to provide a uniform method of administration, collection, audit and licensing of transaction privilege and affiliated excise taxes imposed by the state or cities or towns pursuant to title 11, chapter 7, article 3. The contract or agreement shall include criteria for the denial of a request from a city or town for an audit of a taxpayer that is engaged in business in more than one city or town.
B. The director shall enter into agreements with cities and towns of this state that levy transaction privilege and affiliated excise taxes to provide for unified or coordinated licensing, collection and auditing programs for such taxes levied by cities and towns and taxes levied pursuant to chapter 5 of this title. Cities and towns shall enter into agreements with the department to provide for unified or coordinated licensing, collection and auditing programs for transaction privilege and affiliated excise taxes levied by cities and towns and for taxes levied pursuant to chapter 5 of this title.
C. The director shall establish with the cities and towns a uniform licensing, collection and audit committee to direct such unified or coordinated functions.
D. A taxpayer who is required to pay any municipal transaction privilege and affiliated excise taxes to a city or town that did not have an intergovernmental contract or agreement with the department of revenue in effect as of January 1, 2013 to provide a coordinated method of collecting municipal transaction privilege and affiliated excise taxes may instead report and pay the required tax to that city or town through an online portal. The online portal shall be procured by the department of administration pursuant to a public-private partnership entered into pursuant to section 41‑2559, shall include access to a single point of filing and paying the tax and shall provide security measures to protect taxpayer information. The department of revenue shall administer the portal.
E. b. A taxpayer that does not report and pay the required tax to a city or town through the portal electronically shall file and pay the tax to the department of revenue if the department has developed the electronic and nonelectronic tools necessary to capture data with sufficient specificity to meet the needs of all taxing jurisdictions, including specific data regarding each tax classification and any corresponding deductions at each business location of the taxpayer.
Sec. 14. Section 42-6002, Arizona Revised Statutes, as amended by Laws 2013, chapter 255, section 19, is amended to read:
42-6002. Administration; procedures for levy, collection and enforcement applicable to cities and towns
A. Unless the context otherwise requires, chapter 1 and chapter 5, article 1 of this title govern the administration of the municipal privilege taxes levied by a city or town.
A. B. The procedures for levy, collection and enforcement of payment of transaction privilege and affiliated excise taxes, including use tax, severance tax, jet fuel excise and use tax, and rental occupancy tax, levied by a city or town shall be in the same manner as authorized by chapter 5 of this title.
B. C. An intergovernmental contract or agreement entered into pursuant to section 42‑6001, subsection A shall include the following provisions:
1. All audits shall be conducted in accordance with standard audit procedures defined in the department of revenue audit manual.
2. All auditors shall be trained in accordance with the policies of the department.
3. An auditor that is trained and authorized to conduct an audit may not represent any taxpayer in any tax matter.
3. 4. Except as provided in paragraph 4 5 of this subsection, the audit of a taxpayer that has locations in two or more cities or towns shall be conducted by the department.
4. 5. All audits shall include all taxing jurisdictions in this state regardless of which jurisdiction conducts the audit. A city or town may conduct an audit of any taxpayer that is engaged in business in only one city or town and any other taxpayer authorized by the department.
5. 6. The department shall issue all audit assessments on behalf of all taxing jurisdictions in a single notice to the taxpayer.
6. 7. Appeals of audit assessments shall be directed to the department.
8. Appeals of audit assessments shall be administered pursuant to chapter 1, article 6 of this title.
7. 9. The department shall notify all affected cities and towns before entering into any compromise, closing, settlement or other agreement with a person related to the tax levied and imposed by the cities and towns.
Sec. 15. Section 42-6004, Arizona Revised Statutes, as amended by Laws 2013, first regular session, chapter 27, section 2, chapter 120, section 2, chapter 153, section 2 and chapter 236, section 6 and Laws 2013, first special session, chapter 9, section 8, is amended to read:
42-6004. Exemption from municipal tax
A. A city, town or special taxing district shall not levy a transaction privilege, sales, use or other similar tax on:
1. Exhibition events in this state sponsored, conducted or operated by a nonprofit organization that is exempt from taxation under section 501(c)(3), 501(c)(4) or 501(c)(6) of the internal revenue code if the organization is associated with a major league baseball team or a national touring professional golfing association and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.
2. Interstate telecommunications services, which include that portion of telecommunications services, such as subscriber line service, allocable by federal law to interstate telecommunications service.
3. Sales of warranty or service contracts.
4. Sales of motor vehicles to nonresidents of this state for use outside this state if the vendor motor vehicle dealer ships or delivers the motor vehicle to a destination outside this state.
5. Interest on finance contracts.
6. Dealer documentation fees on the sales of motor vehicles.
7. Sales of food or other items purchased with United States department of agriculture food stamp coupons issued under the food stamp act of 1977 (P.L. 95‑113; 91 Stat. 958) or food instruments issued under section 17 of the child nutrition act (P.L. 95‑627; 92 Stat. 3603; P.L. 99‑661, section 4302; 42 United States Code section 1786) but may impose such a tax on other sales of food. If a city, town or special taxing district exempts sales of food from its tax or imposes a different transaction privilege rate on the gross proceeds of sales or gross income from sales of food and nonfood items, it shall use the definition of food prescribed by rule adopted by the department pursuant to section 42‑5106.
8. Orthodontic devices dispensed by a dental professional who is licensed under title 32, chapter 11 to a patient as part of the practice of dentistry.
9. Sales of internet access services to the person's subscribers and customers. For the purposes of this paragraph:
(a) "Internet" means the computer and telecommunications facilities that comprise the interconnected worldwide network of networks that employ the transmission control protocol or internet protocol, or any predecessor or successor protocol, to communicate information of all kinds by wire or radio.
(b) "Internet access" means a service that enables users to access content, information, electronic mail or other services over the internet. Internet access does not include telecommunication services provided by a common carrier.
10. The gross proceeds of sales or gross income retained by the Arizona exposition and state fair board from ride ticket sales at the annual Arizona state fair.
11. Through August 31, 2014, sales of Arizona centennial medallions by the historical advisory commission.
12. Leasing real property between affiliated companies, businesses, persons or reciprocal insurers. For the purposes of this paragraph:
(a) "Affiliated companies, businesses, persons or reciprocal insurers" means the lessor holds a controlling interest in the lessee, the lessee holds a controlling interest in the lessor, an affiliated entity holds a controlling interest in both the lessor and the lessee or an unrelated person holds a controlling interest in both the lessor and lessee.
(b) "Controlling interest" means direct or indirect ownership of at least eighty per cent of the voting shares of a corporation or of the interests in a company, business or person other than a corporation.
(c) "Reciprocal insurer" has the same meaning prescribed in section 20‑762.
13. The gross proceeds of sales or gross income derived from a contract for the installation, assembly, repair or maintenance of machinery, equipment or other tangible personal property described in section 42‑5061, subsection B and that has independent functional utility, pursuant to the following provisions:
(a) The deduction provided in this paragraph includes the gross proceeds of sales or gross income derived from all of the following:
(i) Any activity performed on machinery, equipment or other tangible personal property with independent functional utility.
(ii) Any activity performed on any tangible personal property relating to machinery, equipment or other tangible personal property with independent functional utility in furtherance of any of the purposes provided for under subdivision (d) of this paragraph.
(iii) Any activity that is related to the activities described in subdivision (a), items (i) and (ii) of this paragraph subdivision, including, but not limited to, inspecting the installation of, or testing, the machinery, equipment or other tangible personal property.
(b) The deduction provided in this paragraph does not include gross proceeds of sales or gross income from the portion of any contracting activity that consists of the development of, or modification to, real property in order to facilitate the installation, assembly, repair, maintenance or removal of machinery, equipment or other tangible personal property described in section 42‑5061, subsection B.
(c) The deduction provided in this paragraph shall be determined without regard to the size or useful life of the machinery, equipment or other tangible personal property.
(d) For the purposes of this paragraph, "independent functional utility" means that the machinery, equipment or other tangible personal property can independently perform its function without attachment to real property, other than attachment for any of the following purposes:
(i) Assembling the machinery, equipment or other tangible personal property.
(ii) Connecting items of machinery, equipment or other tangible personal property to each other.
(iii) Connecting the machinery, equipment or other tangible personal property, whether as an individual item or as a system of items, to water, power, gas, communication or other services.
(iv) Stabilizing or protecting the machinery, equipment or other tangible personal property during operation by bolting, burying or performing other dissimilar nonpermanent connections to either real property or real property improvements.
14. The leasing or renting of certified ignition interlock devices installed pursuant to the requirements prescribed by section 28‑1461. For the purposes of this paragraph, "certified ignition interlock device" has the same meaning prescribed in section 28‑1301.
15. Computer data center
equipment purchased by the owner, operator or qualified colocation tenant of
the computer data center or an authorized agent of the owner, operator or
qualified colocation tenant during the qualification period for use in a
computer data center that is certified by the Arizona commerce authority under
section 41‑1519. To qualify for this deduction, at the time of
purchase, the owner, operator or qualified colocation tenant must present to
the retailer its certificate that is issued pursuant to section 41‑1519
and that establishes its qualification for the deduction. For the
purposes of this paragraph, "computer data center", "computer
data center equipment", "qualification period" and
"qualified colocation tenant" have the same meanings prescribed in
section 41‑1519.
16. The gross proceeds of sales or gross income derived from a contract with the owner of real property or the person owning the improvements to the real property for the maintenance, repair, replacement or alteration of existing property is not subject to tax under this section if the contract does not include modification activities, except as specified in this paragraph. The gross proceeds of sales or gross income derived from a de minimis amount of modification activity that is essential to the completion of the maintenance, repair, replacement or alteration contract does not subject the entire contract to tax under this section. For the purposes of this paragraph, each contract or project is independent of any other contract.
B. A city, town or other taxing jurisdiction shall not levy a transaction privilege, sales, use, franchise or other similar tax or fee, however denominated, on natural gas or liquefied petroleum gas used to propel a motor vehicle.
C. A city, town or other taxing jurisdiction shall not levy a transaction privilege, sales, gross receipts, use, franchise or other similar tax or fee, however denominated, on gross proceeds of sales or gross income derived from any of the following:
1. A motor carrier's use on the public highways in this state if the motor carrier is subject to a fee prescribed in title 28, chapter 16, article 4.
2. Leasing, renting or licensing a motor vehicle subject to and upon on which the fee has been paid under title 28, chapter 16, article 4.
3. The sale of a motor vehicle and any repair and replacement parts and tangible personal property becoming a part of such motor vehicle to a motor carrier who is subject to a fee prescribed in title 28, chapter 16, article 4 and who is engaged in the business of leasing, renting or licensing such property.
4. Incarcerating or detaining in a privately operated prison, jail or detention facility prisoners who are under the jurisdiction of the United States, this state or any other state or a political subdivision of this state or of any other state.
5. Transporting for hire persons, freight or property by light motor vehicles subject to a fee under title 28, chapter 15, article 4.
6. Any amount attributable to development fees that are incurred in relation to the construction, development or improvement of real property and paid by the taxpayer as defined in the model city tax code or by a contractor providing services to the taxpayer. For the purposes of this paragraph:
(a) The attributable amount shall not exceed the value of the development fees actually imposed.
(b) The attributable amount is equal to the total amount of development fees paid by the taxpayer or by a contractor providing services to the taxpayer and the total development fees credited in exchange for the construction of, contribution to or dedication of real property for providing public infrastructure, public safety or other public services necessary to the development. The real property must be the subject of the development fees.
(c) "Development fees" means fees imposed to offset capital costs of providing public infrastructure, public safety or other public services to a development and authorized pursuant to section 9‑463.05, section 11‑1102 or title 48 regardless of the jurisdiction to which the fees are paid.
D. A city, town or other taxing jurisdiction shall not levy a transaction privilege, sales, use, franchise or other similar tax or fee, however denominated, in excess of one-tenth of one per cent of the value of the entire product mined, smelted, extracted, refined, produced or prepared for sale, profit or commercial use, on persons engaged in the business of mineral processing, except to the extent that the tax is computed on the gross proceeds or gross income from sales at retail.
E. In computing the tax base, any city, town or other taxing jurisdiction shall not include in the gross proceeds of sales or gross income:
1. A manufacturer's cash rebate on the sales price of a motor vehicle if the buyer assigns the buyer's right in the rebate to the retailer.
2. The waste tire disposal fee imposed pursuant to section 44‑1302.
F. A city or town shall not levy a use tax on the storage, use or consumption of tangible personal property in the city or town by a school district or charter school.
Sec. 16. Repeal
Section 42-6004, Arizona Revised Statutes, as amended by Laws 2013, chapter 255, section 20, is repealed.
Sec. 17. Repeal
Section 42-6009, Arizona Revised Statutes, is repealed.
Sec. 18. Repeal
Section 42‑6056, Arizona Revised Statutes, is repealed.
Sec. 19. Refunds; definitions
A. For tax periods ending before January 1, 2015, claims for credit or refund of municipal privilege tax shall be made to the tax collector of the city or town to which the tax was originally paid.
B. A claim for credit or refund of municipal transaction privilege tax filed with the tax collector is valid for purposes of filing if the claim is in writing, identifies the claimant by name and the claimant's address and tax identification number and provides the amount of credit or refund requested, the specific tax period involved and the specific grounds for the claim.
C. If a credit or refund claim is valid under subsection B of this section, the tax collector shall not refuse to process the claim or require the claimant to refile the credit or refund claim. If the tax collector refuses to process or requires refiling of a credit or refund claim that is valid under subsection B of this section:
1. For purposes of the limitation period, the credit or refund claim is deemed received on the date the original filing was received by the tax collector, notwithstanding the tax collector's refusal to process or requirement to refile the claim.
2. The claimant may treat the tax collector's refusal to process or requirement to refile as a denial of the credit or refund claim by filing a petition for hearing regarding the refusal to process or requirement to refile under the administrative review provisions of the model city tax code or state law, as applicable. The claimant may file a petition for hearing at any time after the refusal to process or requirement to refile the claim.
D. A denial of the credit or refund claim does not occur until the tax collector notifies the claimant in writing that:
1. The claim for credit or refund has been denied and the reasoning for the denial.
2. The notice constitutes a denial of the credit or refund claim that triggers the deadline for filing a petition for hearing under the administrative review provisions of the model city tax code or state law, as applicable. The time limitation for filing an administrative appeal does not begin until the tax collector issues the notification.
E. Any request by the tax collector for additional information to process the credit or refund claim must be reasonably related to the credit or refund claim. The tax collector may not require a claimant to provide any report or information that is not required to be maintained in the normal course of business under the record keeping requirements of the model city tax code. Except for information reasonably necessary to substantiate a customer's exemption claim, the tax collector shall not require a claimant to provide any information relating to the claimant's specific customers, whether or not the claimant collected the tax from customers by separately stated itemization. The tax collector may not impose unreasonable time limits for a claimant to respond to any valid request for a report or information. The tax collector shall grant a claimant's reasonable request for one or more extensions to provide any requested report or information. Any denial of the request must state in writing that:
1. The claim for credit or refund has been denied and the reason for the denial.
2. The notice constitutes a denial of the credit or refund claim that triggers the deadline for filing a petition for hearing under the administrative review provisions of the model city tax code or state law, as applicable.
F. The tax collector may not condition a credit or refund on the claimant's remittance of the credit or refund to customers, whether or not the tax was collected by separately stated itemization. Tax paid on an activity that is not subject to tax or that qualifies for an exemption, deduction, exclusion or credit is not excess collected tax.
G. Interest on a credit or refund for overpaid municipal transaction privilege tax shall be paid to the claimant at the rate and in the manner prescribed by section 42-1123, subsection A, Arizona Revised Statutes. Interest on a refund or credit claim shall be computed from the date the claim is filed.
H. A claimant that is ultimately determined to be entitled to a credit or refund of municipal transaction privilege tax may be awarded by order of a court, board or hearing officer reasonable fees and other costs relating to the administrative processing or administrative appeal of the credit or refund claim if the tax collector's position was not substantially justified or was brought for the purpose of harassing the claimant, frustrating the credit or refund process or delaying the credit or refund.
I. If a discrepancy occurs between this section and any provision of the model city tax code, this section applies.
J. For the purposes of this section:
1. "Claimant" means a taxpayer that has paid the municipal transaction privilege tax that is the subject of the credit or refund claim. Unless the taxpayer has granted a customer a power of attorney to pursue a credit or refund claim on the taxpayer's behalf, claimant does not include any customer of that taxpayer, whether or not the claimant collected the tax from customers by separately stated itemization.
2. "Model city tax code" means the model city tax code as defined in section 42-6051, Arizona Revised Statutes, and its appendices and regulations, as adopted in the city or town and includes the specific state law incorporated in the model city tax code and the interpretation of state law.
3. "Municipal transaction privilege tax" means a municipal transaction privilege tax, municipal privilege license tax or municipal transaction privilege license tax, municipal use tax or similar excise tax that is imposed by the tax collector.
4. "Reasonable fees and other costs" means fees and other costs that are based on prevailing market rates for the kind and quality of the furnished services, not to exceed the amounts actually paid for expert witnesses, the cost of any study, analysis, report, test, project or computer program that is found to be necessary to prepare the claimant's case and necessary fees for attorneys or other representatives.
5. "Tax collector" means the municipal tax collector or the department of revenue if it is acting as the tax collector for those cities and towns in the state collection program, as applicable under the model city tax code and its appendices.
Sec. 20. Appeals
Reviews of petitions for hearing or redetermination under the model city tax code for cities and towns that did not have an intergovernmental contract or agreement with the department of revenue in effect as of January 1, 2013 to provide a coordinated method of collecting municipal privilege tax that relates to liabilities established before January 1, 2015 must be heard by the municipal hearing office established under section 42‑6056, Arizona Revised Statutes, as amended by this act.
Sec. 21. License renewal notices
From and after September 30, 2014, the department of revenue shall mail a single notice for the annual license renewal prescribed by section 42-5005, Arizona Revised Statutes, as amended by this act, to existing license holders. The renewal notice must include license renewals for state transaction privilege and municipal privilege and affiliated taxes.
Sec. 22. Department of revenue; exemption from rulemaking
The department of revenue is exempt from the rulemaking requirements of title 41, chapter 6, Arizona Revised Statutes, for the purpose of implementing this act.
Sec. 23. Effective date
A. Sections 35-142 and 41-132, Arizona Revised Statutes, as amended by this act, are effective from and after September 30, 2014.
B. Sections 42-1125 and 42-5005, Arizona Revised Statutes, as amended by this act, are effective from and after December 31, 2014.
C. Section 42‑2003, Arizona Revised Statutes, as amended by Laws 2013, chapter 255, section 2 and this act, is effective retroactively to from and after September 12, 2013.
D. Section 42‑2075, Arizona Revised Statutes, as amended by Laws 2013, chapter 255, section 4 and this act, section 42-5009, Arizona Revised Statutes, as amended by Laws 2013, chapter 40, section 3 and this act, section 42-5014, Arizona Revised Statutes, as amended by Laws 2013, chapter 255, section 7 and this act, section 42-5075, Arizona Revised Statutes, as amended by Laws 2013, first regular session, chapter 153, section 1 and Laws 2013, first special session, chapter 9, section 6 and this act, section 42-6001, Arizona Revised Statutes, as amended by Laws 2013, chapter 255, section 18 and this act, section 42‑6002, Arizona Revised Statutes, as amended by Laws 2013, chapter 255, section 19 and this act, and section 42-6004, Arizona Revised Statutes, as amended by Laws 2013, first regular session, chapter 27, section 2, chapter 120, section 2, chapter 153, section 2 and chapter 236, section 6 and Laws 2013, first special session, chapter 9, section 8 and this act, are effective from and after December 31, 2014.
E. The repeal of section 42-6009, Arizona Revised Statutes, by this act is effective from and after December 31, 2014.
F. Sections 19, 20 and 21 of this act are effective from and after December 31, 2014.