Arizona Administrative Code, 15 — Revenue

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Ariz. Admin. Code tit. 15, ch. 6 [REPEALED]

Ariz. Admin. Code tit. 15, ch. 8 Reserved

Ariz. Admin. Code tit. 15, ch. 9 Reserved

Ariz. Admin. Code tit. 15, ch. 11 Reserved

Chapter 5 Department of Revenue - Transaction Privilege and Use Tax Section

Ariz. Admin. Code tit. 15, ch. 5, art. 27 RESERVED

Ariz. Admin. Code tit. 15, ch. 5, art. 28 RESERVED

Ariz. Admin. Code tit. 15, ch. 5, art. 29 RESERVED

Chapter 1 EXPIRED

Article 1 EXPIRED

Ariz. Admin. Code § R15-1-101 Expired

History

• Former Sections R15-1-01, R15-1-02, R15-1-04 through R15-1-10 renumbered and amended as Section R15-1-101 effective October 30, 1981 (Supp. 81-5). Amended subsection (A) effective July 23, 1985 (Supp. 85-4). Amended effective February 22, 1989 (Supp. 89-1). Amended by final rulemaking at 5 A.A.R. 3758, effective September 22, 1999 (Supp. 99-3). Section expired under A.R.S. § 41-1056(E) at 14 A.A.R. 1751, effective March 31, 2008 (Supp. 08-2).

Ariz. Admin. Code § R15-1-102 Expired

History

• Former Section R15-1-03 renumbered and amended as Section R15-1-102 effective October 30, 1981 (Supp. 81-5). Amended by final rulemaking at 5 A.A.R. 3758, effective September 22, 1999 (Supp. 99-3). Section expired under A.R.S. § 41-1056(E) at 14 A.A.R. 1751, effective March 31, 2008 (Supp. 08-2).

Ariz. Admin. Code § R15-1-103 Expired

History

• Former Section R15-1-11 renumbered and amended as Section R15-1-103 effective October 30, 1981 (Supp. 81-5). Section repealed; new Section adopted by final rulemaking at 5 A.A.R. 3758, effective September 22, 1999 (Supp. 99-3). Section expired under A.R.S. § 41-1056(E) at 14 A.A.R. 1751, effective March 31, 2008 (Supp. 08-2).

Ariz. Admin. Code § R15-1-104 Expired

History

• Former Section R15-1-12 renumbered and amended as Section R15-1-104 effective October 30, 1981 (Supp. 81-5). Section repealed; new Section adopted by final rulemaking at 5 A.A.R. 3758, effective September 22, 1999 (Supp. 99-3). Section expired under A.R.S. § 41-1056(E) at 14 A.A.R. 1751, effective March 31, 2008 (Supp. 08-2).

Chapter 2 DEPARTMENT OF REVENUE - INCOME AND WITHHOLDING TAX SECTION

Subchapter A GENERAL AND ADMINISTRATIVE

Article 1 DEFINITIONS AND GENERAL PROVISIONS

Ariz. Admin. Code § R15-2A-101 [REPEALED]

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section repealed by final rulemaking at 7 A.A.R. 653, effective January 11, 2001 (Supp. 01-1).

Ariz. Admin. Code § R15-2A-102 [REPEALED]

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section repealed by final rulemaking at 7 A.A.R. 2885, effective June 13, 2001 (Supp. 01-2).

Ariz. Admin. Code § R15-2A-103 Time for Filing Returns

A. Generally, a taxpayer shall file an income tax return on or before the 15th day of the fourth full calendar month following the close of the taxable year. This requirement is subject to the following exceptions:

1. The final income tax return of a decedent shall be filed on or before the 15th day of the fourth month following the close of the 12-month period that began with the first day of the taxable year in which the decedent died.

2. The Department may prescribe a later time for filing a return for a fractional part of a year upon a showing by the taxpayer of unusual circumstances.

3. A corporation liquidating all its assets and ceasing operations during any taxable year may file a return with the Department for that year immediately after liquidation and shall report the income of the corporation for the part of the year during which the corporation was engaged in business.

4. Under A.R.S. § 43-1126, a corporation taxable as an S corporation under the Internal Revenue Code shall file its income tax return with the Department on or before the 15th day of the third month following the close of the taxable year.

5. Under A.R.S. § 43-1241, an organization, otherwise exempt under A.R.S. § 43-1201, having unrelated business income shall file its income tax return with the Department on or before the 15th day of the fifth month following the close of the taxable year.

B. The due date for filing an income tax return with the Department is the date on or before which a return is required to be filed under A.R.S. Title 43 or the last day of the period covered by a filing extension granted by the Department. When the due date falls on Saturday, Sunday, or a legal holiday, the due date for filing the income tax return with the Department is the business day following the Saturday, Sunday, or legal holiday.

C. An income tax return that is placed in the United States mail, properly addressed with postage paid, is deemed filed on the date of the postmark stamped on the envelope. For purposes of this subsection, the terms "United States mail" and "postmark" have the meaning in A.R.S. § 1-218(E).

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 2885, effective June 13, 2001 (Supp. 01-2).

Ariz. Admin. Code § R15-2A-104 Returns Filed by Persons outside the United States

A. If a taxpayer is outside the United States and is unable to file an Arizona individual income tax return or perform any act required by A.R.S. Title 43, the taxpayer may request that the Department disregard the period in which the taxpayer was unable to comply by filing a written request with the Department within 30 days after returning to the United States that:

1. Explains the reasons why the taxpayer was unable to file the income tax return or perform the required act,

2. Indicates the time period in which the taxpayer was unable to file the income tax return or perform the required act, and

Includes the income tax return and any applicable tax payment.

B. The taxpayer shall mail the request required under subsection (A) to the Arizona Department of Revenue, Out-of-Country Waiver, 1600 West Monroe, Phoenix, Arizona 85007.

C. The Department may extend the request period under subsection (A) if circumstances exist that prevent the taxpayer from filing the request within the 30-day period.

D. A taxpayer may request an extension to file the income tax return required in subsection (A)(3) if:

1. The other requirements in subsection (A), including payment of the estimated tax due, are met, and

2. The taxpayer provides documentation of the taxpayer's inability to file the income tax return by the 30-day requirement.

E. If the Department determines that it was impossible or impracticable for the taxpayer to timely file an income tax return or perform the required act, the Department shall relieve the taxpayer from the interest and penalties accruing from the failure to file a timely return or perform the required act.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 2885, effective June 13, 2001 (Supp. 01-2).

Article 2 GENERAL ACCOUNTING PROVISIONS

Ariz. Admin. Code § R15-2A-201 [REPEALED]

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Repealed by final rulemaking at 7 A.A.R. 2885, effective June 13, 2001 (Due to clerical error Section not shown as repealed until Supp. 08-4).

Ariz. Admin. Code § R15-2A-202 Items Not Deductible in Computing Taxable Income

A. Personal and family expenses. Insurance paid on a dwelling owned and occupied by a taxpayer is a personal expense and not deductible. Premiums paid for life insurance by the insured are not deductible. In the case of a professional man who rents a property for residential purposes but incidentally receives clients, patients, or caller there in connection with his professional work (his place of business being elsewhere), no part of the rent is deductible as a business expense. However, if he uses part of the house for his office, such portion of the rent as is properly attributable to such office is deductible. If the father is entitled to the services of his minor children, any allowances that he gives them whether said to be in consideration of services or otherwise are not allowable deductions in his return of income. Generally, attorneys' fees paid in a suit for divorce or separate maintenance are not deductible. However, the part of an attorney's fee paid in a divorce or separate maintenance proceeding that is properly attributable to the production or collection of amounts of includible in gross income is deductible. Amounts paid as alimony or allowance for support on divorce or separation are not deductible except as otherwise provided. The cost of equipment of an Army officer to the extent only that it is especially required by his profession and does not merely take the place of articles required in civilian life is deductible. Accordingly, the cost of a sword is an allowable deduction, but the cost of a uniform is not. See Section 43-1049 for deduction of extraordinary medical expenses including amounts paid for accident or health insurance.

B. Amounts allocable to non-includible income

1. Class of non-includible income

a. This Section applies to income that is not required to be included in Arizona adjusted gross income or Arizona taxable income. Examples of such non-includible income would be interest exempt from the Arizona income tax by the Constitution or federal or state law, or the income of a corporation which was derived from sources outside this state. The fact that a person's otherwise taxable income may be reduced by allowable deductions and personal exemptions will not render such income subject to this provision.

b. The object is to segregate non-includible income from the taxable income in order that a double exemption may not be obtained through the reduction of taxable income by expenses and other items incurred in the production of items of non-includible income. Accordingly, just as certain items of income are excluded from the computation of Arizona gross income and Arizona taxable income by Sections 43-1022 and 43-1122, Section 43-961 excludes from the computation of deductions all items referable to the production of non-includible income as above defined.

2. Determination of amounts allocable to a class of exempt income

a. No deduction may be allowed for the amount of any item or part thereof allocable to a class or classes of exempt income, or other income not includible in Arizona adjusted gross income or Arizona taxable income.

Example: Expenses paid or incurred for the production or collection of income that is wholly exempt from income taxes such as interest or dividends of a type not includible in gross income are not deductible expenses. Items or parts of such items directly attributable to any class or classes of exempt income shall be allocated to that, and items or parts of such items directly attributable to any class or classes of taxable income shall not be allocated to that.

b. If an item is indirectly attributable both to taxable income and to non-includible income, a reasonable proportion of it determined in the light of the facts and circumstances in each case shall be allocated to each. Apportionments must in all cases be reasonable.

3. Statement of items of non-includible incomes-records

a. A taxpayer receiving any class of non-includible income or holding any property or engaging in any activity the income from which is non-includible shall submit with his return as a part of it an itemized statement in detail showing:

i. the amount of each class of such non-includible income and

ii. the amount of items or parts of items allocated to each such class (the amount allocated by apportionment being shown separately) as required by subsection (B)(2) of this subsection.

b. If an item is apportioned between a class of non-includible income and a class of taxable income, the statement shall show the basis of the apportionment.

Such statement shall also recite that each deduction claimed in the return is not in any way referable to non-includible income.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2).

Subchapter B WITHHOLDING

Article 1 WITHHOLDING BY EMPLOYER

Ariz. Admin. Code § R15-2B-101 Payment Schedule; Rates; Election by Employee

A. An employer shall determine its Arizona withholding payment schedule for each calendar quarter by calculating the average amount of Arizona income taxes withheld in the 4 preceding calendar quarters. The employer shall calculate this average at the beginning of each calendar quarter by adding the actual amount withheld in each of the 4 preceding calendar quarters and then dividing that sum by 4.

1. If the average amount of Arizona income taxes withheld in the 4 preceding calendar quarters does not exceed $1,500, the employer shall make its Arizona withholding payments on a quarterly basis.

Example:

An employer determines its Arizona withholding payment schedule for the 4th calendar quarter of 1999 as follows:

3rd quarter of 1999 withholding $1,100

2nd quarter of 1999 withholding $1,600

1st quarter of 1999 withholding $1,000

4th quarter of 1998 withholding $1,200

Total withholding $4,900

Divide by 4

Average withholding $1,225

The 4 quarter average of Arizona income taxes withheld does not exceed $1,500. Therefore, the employer shall make its Arizona withholding payments on a quarterly basis.

2. If the average amount of Arizona income taxes withheld in the 4 preceding calendar quarters exceeds $1,500, the employer shall make its Arizona withholding payments at the same time as the employer is required to make its federal withholding deposits.

Example:

An employer determines its Arizona withholding payment schedule for the 3rd calendar quarter of 1999 as follows:

2nd quarter of 1999 withholding $1,800

1st quarter of 1999 withholding $1,400

4th quarter of 1998 withholding $1,900

3rd quarter of 1998 withholding $1,300

Total withholding $6,400

Divide by 4

Average withholding $1,600

The 4 quarter average of Arizona income taxes withheld exceeds $1,500. Therefore, the employer shall make its Arizona withholding payments at the same time as its federal withholding deposits.

B. An employer that purchases an existing business shall determine its Arizona withholding payment schedule for each calendar quarter by calculating the average amount withheld in the 4 preceding calendar quarters as follows:

1. For the 1st quarter of withholding, the employer shall calculate the previous owner's average amount of Arizona income taxes withheld in the 4 preceding calendar quarters.

2. For the 2nd through 4th quarters of withholding, the employer shall calculate the average amount withheld in the 4 preceding calendar quarters by combining its prior quarters of withholding with the previous owner's quarters of withholding.

3. For subsequent quarters of withholding, the employer shall add the amounts it withheld in the 4 preceding calendar quarters and then divide that sum by 4.

C. A newly formed business shall determine its Arizona withholding payment schedule as follows:

1. For the 1st quarter of withholding, the employer shall make its Arizona withholding payments on a quarterly basis.

2. For the 2nd quarter of withholding, the employer shall determine its Arizona withholding payment schedule based on the amount withheld in the 1st quarter of withholding.

3. For the 3rd quarter of withholding, the employer shall determine its Arizona withholding payment schedule by adding the amounts withheld in the 1st and 2nd quarters and dividing by 2.

4. For the 4th quarter of withholding, the employer shall determine its Arizona withholding payment schedule by adding the amounts withheld in the 1st, 2nd, and 3rd quarters and dividing by 3.

5. For subsequent quarters of withholding, the employer shall determine its Arizona withholding payment schedule by adding the amounts withheld in the 4 preceding calendar quarters and dividing by 4.

D. If 2 or more employers consolidate their business activities to form 1 entity, the new employer shall determine its Arizona withholding payment schedule based on the combined withholding of the prior employers for the preceding 4 calendar quarters. Any prior employer with fewer than 4 full quarters of withholding activity shall annualize the amounts withheld and divide by 4. The new employer shall determine its Arizona withholding payment schedule by combining this amount with the quarterly averages of the other prior employers with 4 full quarters of withholding activity.

E. The employer shall complete the quarterly reconciliation required by A.R.S. § 43-401 by filing the quarterly tax return prescribed by the Department.

F. For calendar years beginning after December 31, 1997, an employer may make its Arizona withholding payments on an annual basis if all of the following conditions are met:

1. The employer has established a history of withholding activity by filing the quarterly tax return required by subsection (E) for at least the 4 preceding calendar quarters.

2. The employer's withholding liability was an amount greater than zero for at least 1 of the 4 preceding calendar quarters.

3. The average amount of Arizona income taxes withheld by the employer in the 4 preceding calendar quarters does not exceed $200. The employer will meet this average withholding requirement if the total amount withheld in the 4 preceding calendar quarters is $800 or less.

4. The employer has timely filed the quarterly tax return and has timely made its Arizona withholding payments for at least 3 of the 4 preceding calendar quarters.

5. The employer has filed the quarterly tax return for all preceding calendar quarters and does not have a balance due (tax, penalty, or interest) for any preceding calendar quarter.

6. The employer has filed the annual reconciliation tax return required by A.R.S. § 43-412 for all preceding calendar years and has timely filed the annual reconciliation tax return for the preceding calendar year.

G. An employer that makes its Arizona withholding payments on a annual basis under subsection (F), shall file the annual tax return required by A.R.S. § 43-401 on the form prescribed by the Department. The form shall contain all the information required by A.R.S. § 43-412. The employer shall make its annual Arizona withholding payment by February 28 of the year following the year for which the report was made.

H. An employer that makes its Arizona withholding payments on an annual basis under subsection (F), may continue to make its Arizona withholding payments on an annual basis for the succeeding calendar year if both of the following conditions are met:

1. The average amount of Arizona income taxes withheld by the employer in the 4 preceding calendar quarters does not exceed $200.

Example 1:

An employer determines whether the average amount of Arizona income taxes withheld in the 4 preceding calendar quarters does not exceed $200 as follows:

4th quarter of 1999 withholding $200

3rd quarter of 1999 withholding $200

2nd quarter of 1999 withholding $250

1st quarter of 1999 withholding $150

Total withholding $800

Divide by 4

Average withholding $200

The average amount of Arizona income taxes withheld in the 4 preceding calendar quarters does not exceed $200. Therefore, the employer may make its Arizona withholding payments on an annual basis for the succeeding calendar year, if the employer also meets the condition stated in subsection (H)(2).

Example 2:

An employer determines whether the average amount of Arizona income taxes withheld in the 4 preceding calendar quarters does not exceed $200 as follows:

4th quarter of 1999 withholding $200

3rd quarter of 1999 withholding $400

2nd quarter of 1999 withholding $250

1st quarter of 1999 withholding $150

Total withholding $1,000

Divide by 4

Average withholding $250

The average amount of Arizona income taxes withheld in the 4 preceding calendar quarters exceeds $200. Therefore, the employer may not make its Arizona withholding payments on an annual basis for the succeeding calendar year.

2. The employer has timely filed the annual tax return and has timely made its annual Arizona withholding payment as prescribed by subsection (G) for the preceding calendar year.

I. If the employer does not meet the conditions prescribed by subsection (H):

1. The employer shall determine its Arizona withholding payment schedule for succeeding calendar quarters as prescribed by subsection (A); and

2. The employer shall file the quarterly tax return for succeeding calendar quarters as prescribed by subsection (E).

J. An employer shall determine the applicable rate of withholding for each employee as follows:

1. If an employee whose annual compensation is less than $15,000 elects the minimum withholding rate, that rate shall apply until 1 of the following situations occurs:

a. Until the employee has 12 full months of work history with the employer, the employer shall determine the employee's annualized compensation at the end of each month. The employer may use any method of annualization that accurately reflects the employee's annual compensation. If the employer determines that the employee's annualized compensation is $15,000 or more, the employer shall adjust the employee's rate of withholding beginning the next full pay period following the determination. The employer shall adjust the rate to the minimum rate prescribed by A.R.S. § 43-401, unless the employee elects a higher prescribed rate of withholding for the employee's annual compensation. The employer shall apply the minimum rate of withholding until the employee has been employed for 12 full months, unless the employee elects a higher prescribed rate of withholding for the employee's annual compensation. After 12 full months of employment, the employer shall determine the rate under subsection (J)(1)(b);

b. If the employee has 12 full months of work history with the employer, the employer shall determine the employee's total compensation for the 12-month period. If the records for that period show that the employee earned $15,000 or more, the employer shall adjust the rate of withholding beginning the next full pay period following the determination. The employer shall adjust the rate to the minimum rate prescribed by A.R.S. § 43-401, unless the employee elects a higher prescribed rate of withholding for the employee's annual compensation. The employer shall apply this rate of withholding through the end of the calendar year, unless the employee elects a higher prescribed rate of withholding for the employee's annual compensation. At the end of that calendar year and at the end of each succeeding calendar year, the employer shall redetermine the employee's total annual compensation. If the employee's annual compensation for the preceding year changes the employee's rate of withholding, the rate change shall begin the next full pay period following the determination; or

c. If the employee receives a salary increase that makes the employee's annualized compensation $15,000 or more, the employer shall adjust the employe's rate of withholding to the minimum rate prescribed by A.R.S. § 43-401, beginning the next full pay period following the receipt of the increase by the employee.

2. An employee who has elected a withholding rate higher than the minimum prescribed withholding rate may later elect to reduce the rate to a lower prescribed rate for the employee's annual compensation.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2).

Ariz. Admin. Code § R15-2B-102 Employment Excluded from Withholding

A. An employer shall not withhold Arizona income taxes from:

1. Wages paid to an employee of a common carrier when that employee is a nonresident of Arizona and regularly performs services inside and outside the state.

2. Wages paid for domestic service in a private home. Generally, service of a household nature in or about a private home includes services rendered by cooks, maids, butlers, valets, housekeepers, gardeners, caretakers, companions, child-care providers (baby-sitter, governess, nanny), grooms, and chauffeurs of automobiles for family use. If the home is used primarily for the purpose of supplying board or lodging to the public as a business enterprise, it ceases to be a private home. The compensation paid for the services listed above is not exempt from withholding if performed in or about rooming or lodging houses, boarding houses, clubs, hotels, motels, bed-and-breakfasts, hospitals, charitable institutions, or commercial offices or establishments. Services that are not ordinarily part of household duties and that involve the use of skilled or specialized training are not domestic services. Compensation paid for services performed as a private secretary even though performed in the employer's home is not exempt from withholding.

3. Wages paid by employers for casual labor not in the course of the employer's trade or business. "Casual labor not in the course of the employer's trade or business" means services that do not promote or advance the trade or business of the employer. The term does not include services performed for a corporation. For example, casual labor includes the labor performed by a carpenter employed by an individual to do incidental work on the individual's house. If that individual employed a carpenter to do incidental work in a factory operated by the individual, the work would be in the course of the individual's trade or business. The compensation paid for that labor is not exempt from withholding. Seasonal employment of sales clerks during any peak sales periods of a business is subject to withholding.

4. Wages paid for part-time or seasonal agricultural labor. Wages paid to part-time or seasonal employees whose services to the employer consist solely of labor in connection with the planting, cultivating, harvesting, or field packing of seasonal agricultural crops are not subject to withholding. Wages paid to employees whose principal duties are to operate any mechanically driven device in these agricultural operations are subject to withholding. An employee is part-time or seasonal agricultural employee if:

a. The employer hires the employee to help in 1 of the steps in the development of a seasonal agricultural crop;

b. The employee does not perform any other services for the same employer; and

c. The employee understands, at the date of employment, that the employee's job will end on or before the completion of that step.

B. Wages paid to a nonresident of Arizona engaged in any phase of motion picture production are not subject to withholding if the employee qualifies for a credit for taxes paid to the employee's state of residency or domicile. Before payment of the wages is due, the employer shall apply for an exemption by having the employee complete the withholding exemption certificate prescribed by the Department. The employer shall submit the completed certificate for each employee with the next quarterly return required by R15-2B-101(E).

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Correction to manifest typographical error, under subsection R15-2B-102(A)(2), "used" corrected to "use' as adopted at 5 A.A.R. 3766 (Supp. 08-4).

Article 2 WITHHOLDING AS PAYMENT OF TAX FOR EMPLOYEE

Ariz. Admin. Code § R15-2B-201 Refund of Excess Withholding

If a refund for an overpayment of income tax withheld is payable to a deceased taxpayer, the surviving spouse or other claimant shall attach the form prescribed by the Department to the deceased taxpayer's income tax return to establish the claimant's right to the refund.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2).

Subchapter C INDIVIDUALS

Article 1 PAYMENT AND COLLECTION OF TAX

Ariz. Admin. Code § R15-2C-101 Payment of Estimated Income Tax by Individuals

A. Individual taxpayers subject to Arizona income tax who reasonably expect to have Arizona gross income of more than $75,000.00 in the current tax year or had Arizona gross income of more than $75,000.00 in the preceding tax year are subject to the provisions in this rule. For tax years ending on or before 12/31/92, the requirement to make estimated payments is based on Arizona gross income of more than $100,000.00.

1. The requirement to make estimated tax payments is based on the Arizona gross income of each individual taxpayer.

2. All taxpayers, whether classified as a nonresident or a resident, shall be subject to the estimated payment requirements.

Nonresidents shall use the definition of Arizona gross income pursuant to A.R.S. § 43-1091 for purposes of determining if estimated tax payments are required.

4. Individual taxpayers, moving into or out of Arizona during a tax year resulting in a change of residency status, shall use the definition of Arizona gross income in A.R.S. § 43-1001, allocated pursuant to A.R.S. § 43-1097, for purposes of determining if estimated tax payments are required for the portion of the year in which they are Arizona residents.

B. In projecting current Arizona gross income, the taxpayer shall use ordinary business care and prudence in determining if Arizona estimated tax payments are required.

1. The reasonableness of the projection of Arizona gross income shall depend on the facts of each case and the burden of proof rests on the taxpayer to substantiate that penalty and interest shall not be imposed for non-payment, late payment, or underpayment of estimated tax.

2. The taxpayer may request a waiver from the requirement to make estimated payments for 1 or more payment periods in the current year by attaching a written statement to the individual's income tax return for that year.

a. The waiver is available only if the individual taxpayer did not have Arizona gross income over $75,000.00 in the preceding tax year and cannot reasonably project that Arizona gross income for the current year exceeds $75,000.00. ($100,000.00 for tax years ending on or before 12/31/92).

b. The statement shall include the reason why Arizona gross income could not have reasonably been projected for 1 or more payment periods during the current tax year.

C. Other than as provided in subsection (D), Arizona estimated tax payments shall be paid in 4 equal installments on or before due dates established by the Internal Revenue Code.

1. For purposes of this rule, Arizona withholding shall be considered an estimated payment which is paid equally on each due date, unless the taxpayer establishes otherwise.

2. The sum of Arizona estimated tax payments, when combined with the taxpayer's Arizona withholding for the current year, shall equal the lesser of:

a. At least 90% of the Arizona tax liability for the current year; or

b. 100% of the Arizona tax liability, as shown on the personal income tax return for the preceding taxable year. This clause shall apply only if the individual is required to file and does file an Arizona personal income tax return for the preceding taxable year pursuant to the provisions under A.R.S. § 43-301.

D. Those taxpayers qualifying under the following circumstances may make Arizona estimated tax payments in other than 4 equal installments.

1. There shall be no requirement to make the 4th estimated tax payment if the taxpayer files an Arizona tax return, covering a calendar year, on or before January 31 of the year following the tax year or, for a fiscal year taxpayer, on or before the last day of the month following the close of the fiscal year, and the taxpayer pays in full the amount stated on the return as payable.

2. An individual who reports as a farmer or fisherman on the federal income tax return is only required to make 1 installment for a taxable year. The due date for such installment shall be January 15th of the year following a calendar tax year or the 15th day of the 1st month after the end of a fiscal year. There shall be no requirement to make this payment if, on or before March 1 of the year following a calendar tax year or on or before the 1st day of the 3rd month after the end of a fiscal year, the taxpayer files an Arizona income tax return for the tax year and pays in full the amount stated on the return as payable.

3. An individual who elects to be treated as a nonresident alien on the federal income tax return may make 3 estimated payments.

a. Payment shall be made on or before due dates established by the Internal Revenue Code.

b. The amount of the 1st required payment shall be 50% of the total estimated tax liability for the tax year. The 2nd and 3rd payments shall each be 25% of the total estimated tax liability.

4. A taxpayer may be able to reduce the amount of 1 or more required installments if income is not received evenly throughout the tax year. A taxpayer who uses the annualization method for determining the amount of the required installments on the federal individual income tax return may also use the annualization method on the Arizona personal income tax return. A taxpayer electing to use the annualization method for Arizona purposes shall use the method as delineated on the Arizona return and in the accompanying instructions. If the taxpayer elects to use the annualization method for 1 due date in a tax year, the taxpayer shall use that method for all due dates for that tax year.

5. A taxpayer, due to the provisions in subsection (B) of this rule, may not be required to make 4 equal payments of estimated tax. Such a taxpayer shall be liable for the payment of estimated tax beginning no later than the 1st due date after the taxpayer establishes that the Arizona gross income requirement is applicable.

a. If the taxpayer is 1st liable for the payment of estimated tax beginning in the 2nd payment period, such payment shall equal 50% of the total liability for the current tax year. If the liability occurs in the 3rd payment period, such payment shall equal 75% of the total liability for the current tax year. Subsequent payments shall equal 25% each.

b. The total of these payments shall equal the amount pursuant to subsection (C) of this rule.

E. Effective 7/17/93, a penalty shall be assessed on the underpayment amount for each payment period pursuant to A.R.S. § 42-136(O). The underpayment amount is the difference between the estimated payment required to be made and the estimated payment actually paid. Penalty and interest shall be assessed for each underpayment amount for the number of days that amount remains unpaid.

1. For the purpose of computing penalty and interest, a payment shall be applied to the quarter designated by the taxpayer regardless of any outstanding underpayment balance on an earlier installment. Any overpayment of the quarterly amount shall be applied to outstanding estimated payment balances, beginning with the oldest outstanding balance, unless otherwise designated by the taxpayer.

2. Penalty and interest, on late payment, non-payment or underpayment amounts of estimated tax, shall stop accruing at the earlier of the date of payment of the underpaid amount or of the original due date of the income tax return for the tax year in which the estimated payment is required.

F. Payments of estimated tax shall be made by check, cashier's check, certified check, money order, U.S. currency, or by the application of an overpayment from a prior tax return.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2).

Article 2 ADDITIONS TO ARIZONA GROSS INCOME

Ariz. Admin. Code § R15-2C-201 Additions to and Subtractions from Arizona Gross Income

The starting point in calculating Arizona adjusted gross income is federal adjusted gross income calculated under the Internal Revenue Code. The taxpayer shall make additions to or subtractions from Arizona gross income under A.R.S. §§ 43-1021 and 43-1022 to calculate Arizona adjusted gross income.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 2889, effective June 13, 2001 (Supp. 01-2). Section heading corrected at request of the Department, Office File No. M12-227, filed June 6, 2012 (Supp. 12-1).

Ariz. Admin. Code § R15-2C-202 Expired

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 2889, effective June 13, 2001 (Supp. 01-2). Section expired under A.R.S. § 41- 1056(J) at 21 A.A.R. 465, effective October 28, 2014 (Supp. 15-1).

Ariz. Admin. Code § R15-2C-203 Expired

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section expired under A.R.S. § 41-1056(E) at 10 A.A.R. 5220, effective October 31, 2004 (Supp. 04-4).

Ariz. Admin. Code § R15-2C-204 Expired

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 2889, effective June 13, 2001 (Supp. 01-2). Section expired under A.R.S. § 41- 1056(J) at 21 A.A.R. 465, effective October 28, 2014 (Supp. 15-1).

Ariz. Admin. Code § R15-2C-205 Expired

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 2889, effective June 13, 2001 (Supp. 01-2). Section expired under A.R.S. § 41-1056(E) at 10 A.A.R. 5220, effective October 31, 2004 (Supp. 04-4).

Ariz. Admin. Code § R15-2C-206 Expired

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 2889, effective June 13, 2001 (Supp. 01-2). Section expired under A.R.S. § 41- 1056(J) at 23 A.A.R. 1044, effective April 11, 2017 (Supp. 17-2)

Ariz. Admin. Code § R15-2C-207 Expired

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 2889, effective June 13, 2001 (Supp. 01-2). Section expired under A.R.S. § 41- 1056(J) at 23 A.A.R. 1044, effective April 11, 2017 (Supp. 17-2).

Ariz. Admin. Code § R15-2C-208 [REPEALED]

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section repealed by final rulemaking at 7 A.A.R. 2889, effective June 13, 2001 (Supp. 01-2).

Ariz. Admin. Code § R15-2C-209 [REPEALED]

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section repealed by final rulemaking at 7 A.A.R. 2889, effective June 13, 2001 (Supp. 01-2).

Ariz. Admin. Code § R15-2C-210 Expired

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 2889, effective June 13, 2001 (Supp. 01-2). Section expired under A.R.S. § 41- 1056(J) at 23 A.A.R. 1044, effective April 11, 2017 (Supp. 17-2).

Ariz. Admin. Code § R15-2C-211 Amounts Already Deducted

A taxpayer shall not deduct the same expense twice in computing Arizona taxable income.

If a taxpayer includes an expense item in determining the current year's federal adjusted gross income or federal taxable income for the taxable year, the taxpayer shall not include that expense item a second time in determining Arizona taxable income for the same taxable year.

2. If a taxpayer deducted an expense item in an Arizona individual income tax return and deducts the expense item again in a subsequent return in computing either federal adjusted gross income or Arizona taxable income, the taxpayer shall add back the expense item to determine Arizona adjusted gross income.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 2889, effective June 13, 2001 (Supp. 01-2).

Article 3 SUBTRACTIONS FROM ARIZONA GROSS INCOME

Ariz. Admin. Code § R15-2C-301 Retirement Benefits, Annuities, Pensions

An individual is allowed to subtract up to $2,500.00 per taxable year from Arizona gross income for income received from sources as delineated in A.R.S. § 43-1022(2)(a) and (b).

1. An individual receiving income from more than 1 such source shall only subtract a total of $2,500.00 for all such income received during the taxable year.

2. The amount allowed as a subtraction is calculated per individual. The allowable subtraction for a married-filing- joint return when both spouses receive income from 1 or more such sources is determined based on the actual amount of income which is received by each individual but not to exceed $2,500.00 per individual.

3. The aggregate subtraction allowed for purposes of individuals filing married-filing-separate returns shall not exceed the limitations as delineated in this rule.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2).

Ariz. Admin. Code § R15-2C-302 [REPEALED]

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section repealed by final rulemaking at 7 A.A.R. 2889, effective June 13, 2001 (Supp. 01-2).

Ariz. Admin. Code § R15-2C-303 [REPEALED]

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section repealed by final rulemaking at 7 A.A.R. 2889, effective June 13, 2001 (Supp. 01-2).

Ariz. Admin. Code § R15-2C-304 Expired

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 2889, effective June 13, 2001 (Supp. 01-2). Section expired under A.R.S. § 41- 1056(J) at 23 A.A.R. 1044, effective April 11, 2017 (Supp. 17-2).

Ariz. Admin. Code § R15-2C-305 Social Security and Railroad Retirement Benefits

A. Under A.R.S. § 43-1022, a taxpayer shall subtract from Arizona gross income the amount of Social Security and Tier 1 Railroad Retirement benefits taxable under Internal Revenue Code § 86 that is included in federal adjusted gross income.

B. In accordance with 45 U.S.C. 231(m), a taxpayer shall subtract from Arizona gross income the amount of benefits provided under the Railroad Retirement Act of 1974 that is included in federal adjusted gross income and not subtracted under subsection (A).

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 2889, effective June 13, 2001 (Supp. 01-2).

Ariz. Admin. Code § R15-2C-306 Income Previously Recognized

A taxpayer shall not include the same income item twice in computing Arizona taxable income.

If a taxpayer includes an income item in determining federal adjusted gross income or federal taxable income for a taxable year, the taxpayer shall not include that income a second time in determining Arizona taxable income for the same taxable year.

2. If a taxpayer included an income item in an Arizona income tax return and includes the same income item again in the computation of either federal adjusted gross income or Arizona taxable income in a subsequent return, the taxpayer shall subtract the income item included for the second time in the subsequent return to determine Arizona adjusted gross income.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 2889, effective June 13, 2001 (Supp. 01-2).

Ariz. Admin. Code § R15-2C-307 Exemption for Blind Persons

A. If both a husband and wife are blind or partially blind and they elect to file a joint return, they may claim a total of 2 exemptions under A.R.S. § 43-1023(A). For purposes of this Section, "partially blind" means an individual whose vision is no better than 20/200 in the better eye with correcting lenses or who has a field of vision of 20 degrees or less.

B. If a taxpayer or the taxpayer's spouse dies during the taxable year and the decedent was blind or partially blind on the date of death, the decedent is eligible for the exemption under A.R.S. § 43-1023(A).

C. If a taxpayer or the taxpayer's spouse for whom the taxpayer is claiming an exemption under A.R.S. § 43-1023(A)(2) is partially blind on the last day of the taxable year, the taxpayer shall obtain a statement from a licensed optometrist or a physician skilled in diseases of the eye. The taxpayer shall keep the statement for the taxpayer's records. The statement shall certify that the person claiming the exemption or on whose behalf the exemption is claimed:

1. Has vision no better than 20/200 in the better eye with correcting lenses, or

2. Has a field of vision of 20 degrees or less.

D. If the taxpayer's vision is not likely to improve beyond the condition listed in subsection (C), the taxpayer may obtain a statement certified by a licensed optometrist or a physician skilled in diseases of the eye to this effect instead of the annual statement required under subsection (C). The taxpayer shall keep the statement for the taxpayer's records.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 2889, effective June 13, 2001 (Supp. 01-2).

Ariz. Admin. Code § R15-2C-308 [REPEALED]

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section repealed by final rulemaking at 7 A.A.R. 2889, effective June 13, 2001 (Supp. 01-2).

Ariz. Admin. Code § R15-2C-309 [REPEALED]

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section repealed by final rulemaking at 7 A.A.R. 2889, effective June 13, 2001 (Supp. 01-2).

Article 4 EXPIRED

Ariz. Admin. Code § R15-2C-401 Expired

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section expired under A.R.S. § 41- 1056(J) at 23 A.A.R. 3427, effective November 14, 2017 (Supp. 17-4).

Article 5 CREDITS

Ariz. Admin. Code § R15-2C-501 Expired

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 11 A.A.R. 2441, effective August 6, 2005 (Supp. 05-2). Section expired under A.R.S. § 41- 1056(J) at 23 A.A.R. 3427, effective November 14, 2017 (Supp. 17-4).

Ariz. Admin. Code § R15-2C-502 Property Tax Credit

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

1. "Adjusted gross income" means the sum of all income not specifically excluded in A.R.S. § 43-1072 whether or not subject to Arizona income tax, except those items that A.R.S. § 43-1072 specifically includes in income.

"Member of the household" means a claimant and any other person residing with the claimant in the homestead during the taxable year, whether or not the person is related to, or a dependent of, the claimant.

B. Household income determines eligibility for, and amount of, a property tax credit. A claimant shall arrive at household income by combining the separately determined income of each member of the household.

C. For purposes of arriving at adjusted gross income for each member of the household, all of the following apply:

1. Income from business or farm activities is net income or loss from business or farm activities, determined in the same manner as income or loss reportable for federal income tax purposes;

2. Income from rents or royalties is gross income from rent or royalty activities less deductions, determined in the same manner as income or loss reportable for federal income tax purposes; and

3. Income from capital gains is the net capital gains and losses for each member of the household. Net losses are limited to $1,500 for each household member.

D. There shall be only one claimant under this Section per household per year.

E. If a claimant files a property tax credit claim, the claimant shall attach the following documents to the claim, as applicable:

1. If the claimant owns a home, a copy of the property tax statement indicating the amount of taxes paid for the tax year, the property tax bill stamped "paid," or copies of cancelled checks for taxes paid and a copy of the property tax bill;

2. If the claimant is a resident of a nursing home or a renter, a copy of the completed Arizona Form 201;

3. If the claimant owns a mobile home and pays rent on the mobile home space, a copy of the completed Arizona Form 201 and a copy of the property tax statement indicating the amount of taxes paid on the mobile home for the tax year, the property tax bill stamped "paid," or copies of cancelled checks for taxes paid and a copy of the property tax bill;

4. If the claimant is a shareholder of a cooperative corporation or a condominium association, a statement of the claimant's pro rata share of the assessed property taxes for the tax year and a copy of either:

a. The mortgage company statement of the corporation or association indicating the total amount of property taxes paid for the tax year; or

b. A copy of the tax bill of the corporation or association stamped "paid;" or

5. If the claimant received Title 16 Supplemental Security Income payments, a statement from the Social Security Administration indicating the amount of payments for the current tax year.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 11 A.A.R. 2441, effective August 6, 2005 (Supp. 05-2).

Ariz. Admin. Code § R15-2C-503 Renewable Energy Production Tax Credit

A. For each year for which an owner of a qualified energy generator plans to claim a renewable energy production tax credit, the owner shall file one of the following applications:

1. An initial application in accordance with subsection (B) for:

a. Energy produced in 2011 for which an owner of a qualified energy generator plans to claim a credit on the 2011 tax return filed in 2012, and

b. Energy produced after 2011 for which an owner of a qualified energy generator did not have a place on the prior year's Credit Authorization List for the renewable energy production tax credit under A.R.S. § 43-1083.02(G).

2. A renewal application in accordance with subsection (C) for an owner of a qualified energy generator that did have a place on the prior year's Credit Authorization List for the renewable energy production tax credit under A.R.S. § 43-1083.02(G).

B. An initial application shall include the following information:

1. The information required by A.R.S. § 43-1083.02(F).

2. The business structure of the applicant.

3. If the credit will be passed through to shareholders or partners, a list including the name, taxpayer identification number, and ownership percentage of each shareholder or partner. If the tax year end is other than December 31, and the shareholders or partners, or ownership percentages change, the applicant shall update the list for the tax year end by the due date of the applicant's Arizona return, including extensions.

4. The applicant's tax year end.

5. The name of the contact person, his or her title, telephone number and fax number.

6. If the applicant has any affiliates or subsidiaries, a list of the affiliates and subsidiaries, including the name, address, taxpayer identification number, and percentage of ownership. The applicant may substitute a federal Form 851, or other federal form with the required information, for this list.

7. Self-assigned name or identification number of the qualified energy generator.

8. Assessor's parcel number or numbers of the land on which the qualified energy generator is located or, if not available, the legal description.

9. The centrally valued property tax identification number for the personal property on the land.

10. The type of qualified energy resource used to generate electricity. If the qualified energy resource is biomass, the type of biomass.

11. The generating capacity of the qualified energy generator.

12. The number of kilowatt-hours of electricity produced for the calendar year.

13. Printouts for the calendar year from the production meter located at the qualified energy generator that:

a. Measures the output from the qualified energy generator, and

b. Provides the output information to a grid-tied energy management system.

14. A signed affidavit in which the applicant states that the information contained in the application is true and correct under penalty of perjury and that the qualified energy generator for which the applicant is claiming the credit did not produce electricity prior to 2011.

C. A renewal application shall include the information required by subsections (B)(1) through (6) and (B)(12) through (14). In addition, where the information required by subsections (B)(7) through (11) has changed since the prior year's application, the applicant shall provide the new information on the renewal application.

D. Copies of invoices or receipts from the electricity purchaser, verifying kilowatt-hours sold, shall be made available to the Department upon request.

E. If an owner owns more than one qualified energy generator, the owner shall submit a separate application for each qualified energy generator.

F. Each application shall be mailed separately in its own envelope by United States Postal Service Express Mail to: Arizona Department of Revenue, Renewable Energy Production Tax Credit Program, P.O. Box 25248, Phoenix, AZ 85002. Notwithstanding A.R.S. § 1-218(E)(1), the Department shall not accept applications through any other delivery method for purposes of this Section and A.R.S. § 43-1083.02.

G. For each initial application received in accordance with subsections (B) and (F), the Department shall assign a priority placement number that reflects the date and time on the Express Mail label, without regard to which time zone mailing took place.

H. If the Department receives more than one initial application in accordance with subsection (G) that it would assign the same priority placement number based on date and time on the Express Mail label, then the order received shall be determined by a random drawing of affected applications.

I. If the Department denies an application or approves a smaller amount of credit than the amount requested on the application, the Department's decision is an appealable agency action as defined in A.R.S. § 41-1092(3) and the applicant may appeal the decision under subsection (J) and A.R.S. Title 41, Chapter 6, Article 10.

J. To appeal a decision made under subsection (I), the applicant shall file a petition, in accordance with A.A.C. R15-10-105(B) and A.R.S. § 41-1092.03(B), within 30 days of receipt of the Department's decision.

K. For each decision made under subsection (I), the Department shall reserve the portion of the cap that the applicant would have been entitled to if the Department had approved the application in full, up to the generator cap limit, until the applicant waives or exhausts the appeal rights in subsection (J).

L. For the cap reserved under subsection (K), once the applicant waives or exhausts the appeal rights in subsection (J), the Department shall certify the cap to the next eligible applicant on the Credit Authorization List, until the full cap is certified.

M. In addition to the definitions provided in A.R.S. § 43-1083.02, unless the context provides otherwise, the following definitions apply to this Section and to implementation of A.R.S. § 43-1083.02:

1. "Cap" means the annual tax credit limit of $20 million in A.R.S. §§ 43-1164.03(G) and 43-1083.02(G).

2. "Generator cap" means the annual tax credit limit of $2 million per qualified energy generator in A.R.S. §§ 43-1164.03(G) and 43-1083.02(G).

History

• New Section made by final rulemaking at 18 A.A.R. 600, effective April 8, 2012 (Supp. 12-1).

Article 6 NONRESIDENTS

Ariz. Admin. Code § R15-2C-601 Income of a Non-resident

A. Gross income

1. Non-residents of the state are required to include in the Arizona gross income only that portion of their federal adjusted gross income which is relevant in determining the amount of net income derived from sources within this state.

2. The gross income of a non-resident of the state who is a member of a partnership, pool, or syndicate includes the member's distributive share of the net income of the partnership, pool, or syndicate in addition to any other income from sources within this state to the extent that the member's distributive share is derived from sources within this state.

3. A non-resident beneficiary of an estate or trust must include in gross income, income from the estate or trust which is deductible by the estate or trust and which is derived from sources within this state.

B. Income from sources within this state includes:

1. Income from real or tangible personal property located in this state.

2. Income from a business, trade, or profession carried on within this state.

3. Income from stocks, bonds, notes, bank deposits, and other intangible personal property having a business or taxable situs in this state.

4. Rentals or royalties for the use of or for the privilege of using in this state patents, copyrights, secret processes and formulas, good will, trade marks, trade brands, franchises, and other like property having a taxable or business situs in this state.

C. Income from real or tangible personal property. Income of a non-resident from sources within this state includes rents from real or tangible personal property in this state, gains realized from the sale or transfer of such property regardless of where the sale or transfer is consummated, and any other type of income derived from the ownership, control, or management of real and tangible personal property located in this state irrespective of whether a trade, business, or profession is carried on within this state.

D. Income from a business, trade, or profession

1. If a non-resident's business, trade, or profession is carried on entirely without the state, no portion of the gross income therefrom should be reported. If, on the other hand, the non-resident's business, trade, or profession is conducted wholly within the state, the entire gross income therefrom must be reported.

2. If the non-resident's business, trade, or profession is conducted partly within and partly without the state, and the part within the state is so separate and distinct from and unconnected with the part without the state that the net income from the part within the state can be determined without regard to the part without the state, only the gross income from the business, trade, or profession within the state should be reported. Thus, if a non-resident operates hotels both in this state and elsewhere for example, he should report only the gross income from the hotels in this state.

3. Unitary business

a. The gross income from the entire business, trade, or profession must be reported if a business, trade, or profession carried on within this state is an integral part of a unitary business carried on both within and without the state, or if the part within the state is so connected with the part without the state that the net income from the part within the state cannot be accurately determined independently of the part without the state. Thus, if a non-resident engaged in the business of manufacturing and selling goods for example maintains a factory outside this state and sales offices in this state or vice versa, he must report the gross income from the entire business.

b. The net income from sources within this state subject to the tax imposed by the law should be determined by subtracting from gross income the deductions allowed by the law and by apportioning the remaining net income to sources within and without the state in the manner described in subsection (D)(4).

4. Every non-resident who conducts a business, trade, or profession within and without the state of the character described in subsection (D)(3) should accompany his return with a schedule of statement showing the following:

a. The total value of real and tangible personal property

i. Within the state

ii. Within and without the state

b. The total wages, salaries, and other compensation paid for personal services performed

i. Within the state

ii. Within and without the state

c. The total gross sales or charges for personal services performed

i. Within the state

ii. Within and without the state

d. "Total gross sales within the state" shall include all sales relating to Arizona business even though the sales may be subject to confirmation at an out-of- state office and even though title may actually pass at some point outside of this state. Such sales shall include all sales where the product sold is to be used in Arizona. The value of real and tangible personal property generally should be determined by taking the average of the value of such property at the beginning of the taxable year and at the end of the taxable year. Only property used in the business, trade, or profession should be included.

e. Generally, the amount of net income from a business, trade, or profession of the character described in (D)(3) above which is derived from sources within the state may be determined by taking that portion of the total net income equal to the average percentage of subsections (D)(4)(a)(i), (b)(i) and (c)(i) to subsections (D)(4)(a)(ii), (b)(ii) and (c)(ii) respectively as shown by the schedule or statement accompanying the return.

f. The use of the foregoing factors shall not be exclusive, and, if the Department believes that the net income from sources within this state cannot properly be determined by the above method, it may require additional factors to be used in making the allocation such as purchases or expenses of manufacture. If a non-resident taxpayer believes that the net income from sources within this state cannot properly be determined by the above method, he may employ another method after 1st receiving the consent of the Department.

g. Wages, salaries and other compensation for personal services performed in this state

i. The gross income from commissions earned by a non-resident traveling salesman, agent, or other employee for services performed or sales made whose compensation depends directly on the volume of business transacted by him includes that proportion of the compensation received which the volume of business transacted by that employee with this state bears to the total volume of business transacted by him within and without the state.

ii. Non-resident actors, singers, performers, entertainers, wrestlers, boxers, etc., must include in gross income as income from sources within this state the gross amount received for performances in this state.

iii. Non-resident attorneys, physicians, account ants, engineers, etc., even though not regularly engaged in carrying on their professions in this state, must include in gross income as income from sources within this state the entire amount of fees or compensation for services performed in this state on behalf of their clients.

iv. If non-resident employees including officers of corporations but excluding employees mentioned in subsection (D)(4)(g)(i) above are employed continuously in this state for a definite portion of any taxable year, the gross income of the employees from sources within this state includes the total compensation for the period employed in this state.

v. If non-resident employees are employed in this state at intervals throughout the year, as would be the case if employed in operating trains, boats, planes, motor buses, truck, etc., between this state and other states, and foreign countries, and are paid on a daily, weekly, or monthly basis; the gross income from sources within this state includes that portion of the total compensation for personal services which the total amount of working time within this state bears to the total amount of working time both within and without the state. If the employees are paid on a mileage basis, the gross income from sources within this state includes that portion of the total compensation for personal services which the number of miles traversed in this state bears to the total number of miles traversed within and without the state. If the employees are paid on some other basis, the total compensation for personal services must be apportioned between this state and other states and foreign countries in such a manner as to allocate to this state that portion of the total compensation which is reasonably attributable to personal services performed in this state.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Correction to manifest typographical error, under subsection R15-2C-601(D)(4)(d), deleted "0" between "sales" and "within" (Supp. 08-4).

Ariz. Admin. Code § R15-2C-602 Income from Intangible Personal Property

A. Income of non-residents from rentals or royalties for the use of or for the privilege of using patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other like property in this state is taxable if such intangible property has a business situs in this state within the meaning of subsection (C) below.

B. Income of non-residents from intangible personal property such as shares of stock in corporations, bonds, notes, bank deposits and other indebtedness is taxable as income from sources within this state only if the property has a situs for taxation in this state. However, if a non-resident buys or sells stocks, bonds, and other such property in this state or places orders with brokers in this state to buy or sell such property regularly, systematically, and continuously as to constitute doing business in this state, the profit or gain derived from such activity is taxable as income from a business carried on here irrespective of the situs of the property for taxation.

C. Business situs of intangible personal property

1. Intangible personal property has a business situs in this state if it is employed as capital in this state or possession and control of the property has been localized in connection with a business, trade, or profession in this state so that the substantial use of the property and the value attached to it become an asset of the business, trade, or profession in this state.

Example: If a non-resident pledges stocks, bonds, or other intangible personal property in this state as security for the payment of indebtedness, taxes, etc., incurred in connection with a business in this state, the property has a business situs here. Again, if a non-resident maintains a branch office here and a bank account on which the agent in charge of the branch office may draw for the payment of expenses in connection with the activities in this state, the bank account has a business situs here.

2. If intangible personal property of a non-resident has acquired a business situs here, the entire income from the sale thereof is income from sources within this state and is taxable to the non-resident regardless of where the sale is consummated.

D. Transactions in this state extending over a period of less than 6 months shall not constitute doing business within this state.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2).

Ariz. Admin. Code § R15-2C-603 Expired

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 11 A.A.R. 2441, effective August 6, 2005 (Supp. 05-2). Section expired under A.R.S. § 41- 1056(J) at 23 A.A.R. 3427, effective November 14, 2017 (Supp. 17-4).

Ariz. Admin. Code § R15-2C-604 Nonresident Members of Professional Athletic Teams

A. The Arizona source income of a nonresident individual who is a member of a professional athletic team includes that portion of the individual's total compensation for services rendered as a member of the professional athletic team during a taxable year which the number of duty days spent within Arizona rendering services for the team in any manner during the taxable year bears to the total number of duty days spent both within and without Arizona during the taxable year. Duty days shall be included in the taxable year in which they occur.

B. Travel days that do not involve a game, practice, team meeting, promotional caravan or other similar team event in Arizona are not considered duty days spent in Arizona. However, these travel days shall be considered in the total duty days spent both within and without Arizona.

C. For purposes of this Section:

1. The term "professional athletic team" includes, but is not limited to, any professional baseball, basketball, football, soccer, or hockey team.

2. The term "member of a professional athletic team" includes employees who are active players, players on the disabled list, and any other persons required to travel and who travel with and perform services for a professional athletic team on a regular basis. This includes, but is not limited to, coaches, managers, trainers, and broadcasters.

3. The term "duty days" includes:

a. All days during a taxable year from the beginning of a professional athletic team's 1st regular game of the season through the last game in which the team competes or is scheduled to compete except:

i. If a person joins a team during the period described in subsection (C)(3)(a), the person's duty days shall begin on the day the person joins the team. Conversely, if a person leaves a team during the period described in subsection (C)(3)(a), the person's duty days shall end on the day the person leaves the team. If a person switches teams during the taxable year, a separate duty day calculation shall be made for the period the person is with each team.

ii. Days for which a member of a professional athletic team is not compensated and is not rendering services for the team in any manner, including days when the member is suspended without pay and prohibited from performing any services for the team, shall not be treated as duty days.

b. Days that do not fall within the period described in subsection (C)(3)(a) on which a member of a professional athletic team renders a service for a team, except practice days and exhibition games before the 1st regular game of the season (for example, participation in instructional leagues, the "Pro Bowl," or promotional events). Rendering a service includes conducting training after the 1st regular game of the season and rehabilitation activities, but only if conducted at the team facilities.

c. Game days (except exhibition games, practice days, and days spent at team meetings after the 1st regular game of the season), promotional events, and days served with the team through all post-season games in which the team competes or is scheduled to compete.

d. Days on the disability list. However, days for which a member of a professional athletic team is on the disabled list and does not conduct rehabilitation activities at team facilities in Arizona and is not otherwise rendering services for the team in Arizona, shall not be considered duty days spent in Arizona.

e. The provisions of this subsection can be illustrated by the following examples:

Example 1: Player A, a member of a professional athletic team, is a nonresident of Arizona. Player A's contract for the team requires A to report to the team's training camp and to participate in all exhibition, regular season, and playoff games. Player A has a contract that covers seasons that occur during year1/year2 and year2/year3. Player A's contract provides that A receives $500,000 for the year1/year2 season and $600,000 for the year2/year3 season. Assuming player A receives $550,000 from the contract during taxable year 2 ($250,000 for one-half the year1/year2 season and $300,000 for one-half the year2/year3 season), the portion of the compensation received by player A for taxable year 2, attributable to Arizona, is determined by multiplying the compensation player A receives during the taxable year ($550,000) by a fraction, the numerator of which is the total number of duty days player A spends rendering services for the team in Arizona during taxable year 2 (attributable to both the year1/year2 season and the year2/year3 season) and the denominator of which is the total number of player A's duty days spent both within and without Arizona for the entire taxable year.

Example 2: Player B, a member of a professional athletic team, is a nonresident of Arizona. During the season, B is injured and is unable to render services for B's team. While B is undergoing medical treatment at a clinic, which is not a team facility, but is located in Arizona, B's team travels to Arizona for a game. The number of days B's team spends in Arizona for practice, games, meetings, and other activities, while B is present at the clinic, are not considered duty days spent in Arizona for B for that taxable year for purposes of this Section, but the days are included within total duty days spent both within and without Arizona.

Example 3: Player C, a member of a professional athletic team, is a nonresident of Arizona. During the season, C is injured and is unable to render services for C's team. C performs rehabilitation exercises at the team facilities in Arizona as well as at personal facilities in Arizona. The days C performs rehabilitation exercises in the team facilities are duty days spent in Arizona for C for that taxable year for purposes of this Section. However, days C spends at personal facilities in Arizona are not duty days spent in Arizona for C for the taxable year for purposes of this Section, but these days are included within total duty days spent both within and without Arizona.

Example 4: Player D, a member of a professional athletic team, is a nonresident of Arizona. During the season, D travels to Arizona to participate in the annual all-star game as a representative of D's team. The number of days D spends in Arizona for practice, the game, meetings, etc., are duty days spent in Arizona for D for the taxable year for purposes of this Section, as well as being included within total duty days spent both within and without Arizona.

Example 5: Assume the same facts as given in example 4, except that player D is not participating in the all-star game and is not rendering services for D's team in any manner. Instead D is travelling to and attending the game solely as a spectator. The number of days D spends in Arizona for the game are not duty days spent in Arizona for purposes of this Section. However, these days are included within total duty days spent both within and without Arizona.

4. The term "total compensation for services rendered as a member of a professional athletic team" means the total compensation received during the taxable year for services rendered from the beginning of the official pre-season training period through the last game in which the team competes or is scheduled to compete during the taxable year. Total compensation includes compensation received for services that are rendered during the taxable year on a date that does not fall within this period (for example, participation in instructional leagues, the "Pro Bowl," or promotional events).

5. For purposes of subsection (C)(4) total compensation includes, but is not limited to, salaries, wages, bonuses as described in subsection (C)(6), and any other type of compensation paid during the taxable year to a member of a professional athletic team for services performed during the year. Total compensation does not include strike benefits, severance pay, termination pay, contract or option year buy-out payments, expansion or relocation payments, or any other payments not related to services rendered for the team.

6. For purposes of this Section, "bonuses" included in "total compensation for services rendered as a member of a professional athletic team" subject to the allocation described in subsection (A) are:

a. Bonuses earned as a result of play (for example, performance bonuses) during the season, including bonuses paid for championship, playoff or "bowl" games played by the team, or for selection to all-star league or other honorary positions; and

b. Bonuses paid for signing a contract, unless all of the following conditions are met:

i. The payment of the signing bonus is not conditional upon the signee playing any games for the team, or performing any subsequent services for the team, or even making the team;

ii. The signing bonus is payable separately from the salary and any other compensation; and

iii. The signing bonus is nonrefundable.

D. If it is demonstrated that the method provided under this Section does not fairly and equitably apportion compensation, the Department may allow the member of a professional athletic team to apportion and allocate compensation under an alternative method prescribed by the Department as long as the prescribed method results in a fair and equitable apportionment. A nonresident member of a professional athletic team may submit a proposal for an alternative method to apportion compensation if the nonresident member demonstrates that the method provided under this Section does not fairly and equitably apportion compensation. The proposed method must be fully explained in the nonresident member's Arizona nonresident personal income tax return.

E. This Section is effective January 1, 2001.

History

• New Section adopted by final rulemaking at 6 A.A.R. 4504, effective January 1, 2001 (Supp. 00-4).

Ariz. Admin. Code § R15-2C-605 Nonresident Professional Athletes Who Are Not Team Members

Individual nonresident professional athletes who are not members of a professional athletic team and whose income is event-oriented (for example, golfers, tennis players, boxers, and jockeys) shall allocate to Arizona income earned in Arizona and expenses allowable in arriving at federal adjusted gross income that are allocable to the Arizona source income.

Example: A professional golfer comes into Arizona to compete in a tournament. The golfer wins $150,000 prize money based on success in the tournament. The golfer must report the $150,000 to Arizona as Arizona income. The golfer may subtract expenses that are allowable in arriving at federal adjusted gross income and that are incurred in winning the $150,000.

History

• New Section adopted by final rulemaking at 6 A.A.R. 4504, effective November 7, 2000 (Supp. 00-4).

Article 7 REPEALED

Ariz. Admin. Code § R15-2C-701 [REPEALED]

History

• New Section made by exempt rulemaking at 7 A.A.R. 5715, effective November 29, 2001 (Supp. 01-4). Repealed by exempt rulemaking at 14 A.A.R. 4249, effective October 24, 2008 (Supp.08-4).

Ariz. Admin. Code § R15-2C-702 [REPEALED]

History

• New Section made by exempt rulemaking at 7 A.A.R. 5715, effective November 29, 2001 (Supp. 01-4). Repealed by exempt rulemaking at 14 A.A.R. 4249, effective October 24, 2008 (Supp.08-4).

Ariz. Admin. Code § R15-2C-703 [REPEALED]

History

• New Section made by exempt rulemaking at 7 A.A.R. 5715, effective November 29, 2001 (Supp. 01-4). Repealed by exempt rulemaking at 14 A.A.R. 4249, effective October 24, 2008 (Supp.08-4).

Ariz. Admin. Code § R15-2C-704 [REPEALED]

History

• New Section made by exempt rulemaking at 7 A.A.R. 5715, effective November 29, 2001 (Supp. 01-4). Repealed by exempt rulemaking at 14 A.A.R. 4249, effective October 24, 2008 (Supp.08-4).

Ariz. Admin. Code § R15-2C-705 [REPEALED]

History

• New Section made by exempt rulemaking at 7 A.A.R. 5715, effective November 29, 2001 (Supp. 01-4). Repealed by exempt rulemaking at 14 A.A.R. 4249, effective October 24, 2008 (Supp.08-4).

Subchapter D CORPORATIONS

Article 1 GENERAL

Ariz. Admin. Code § R15-2D-101 Definitions

In addition to the definitions provided in A.R.S. §§ 43-104, 43-1101, and 43-1131, the following definitions apply to this Subchapter:

"Allocation" means the assignment of nonbusiness income to a particular state.

"Apportionment" means the division of business income between states by the use of a formula that contains apportionment factors.

"Arizona affiliated group" has the same meaning as prescribed in A.R.S. § 43-947(I).

"Business activity" means transactions and activity occurring in the regular course of a particular trade or business of a taxpayer.

"Combined return" means a corporate income tax return filed by a group of commonly owned corporations or businesses that constitute a unitary business, except that a combined return does not include either a foreign corporation that is not itself subject to a tax imposed by A.R.S. Title 43, or an insurance company that is exempt under A.R.S. § 43-1201.

"Consolidated return" means a corporate income tax return filed by an Arizona affiliated group under A.R.S. § 43-947.

"Employee" means any officer of a corporation; or any individual who, under the usual common-law rules applicable in determining the employer-employee relationship, has the status of an employee.

"Incidental to" means occurring in, or associated with, the normal, typical, or customary operations of the particular trade or business under consideration.

"Sales" means all gross receipts derived by a taxpayer from transactions and activity in the regular course of a trade or business and includes all gross receipts of the taxpayer not allocated under A.R.S. §§ 43-1134 through 43-1138.

"Unitary business" means an entity, group of entities, or components of an entity whose basic operations are substantially integrated and interdependent. The determination of whether an entity, group of entities, or components of an entity constitute a unitary business is made under R15-2D-401.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Article 2 ADDITIONS TO ARIZONA GROSS INCOME

Ariz. Admin. Code § R15-2D-201 [REPEALED]

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section repealed by final rulemaking at 7 A.A.R. 654, effective January 11, 2001 (Supp. 01-1).

Article 3 SUBTRACTIONS FROM ARIZONA GROSS INCOME

Ariz. Admin. Code § R15-2D-301 [REPEALED]

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section repealed by final rulemaking at 7 A.A.R. 654, effective January 11, 2001 (Supp. 01-1).

Ariz. Admin. Code § R15-2D-302 Corporate Net Operating Loss

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

1. "Arizona adjusted income" means Arizona gross income of the taxpayer adjusted by the additions and subtractions as delineated in A.R.S. Title 43, Chapter 11, Article 3, except as provided in subsections (B) and (E) of this rule.

2. "Arizona gross income" means federal taxable income for the taxable year.

3. "Arizona net operating loss" means Arizona adjusted income which is a negative amount.

4. "Taxable year" means taxable year as defined in statute.

B. In calculating the Arizona net operating loss, the taxpayer shall not include:

1. An Arizona net operating loss carryforward,

2. A net operating loss incurred by the taxpayer prior to doing business in Arizona; or,

3. A net operating loss from a prior period if such loss was incurred by another corporation or group of corporations, prior to a merger, consolidation, or reorganization with the taxpayer, to the extent that Arizona adjusted income, earned after the merger, consolidation, or reorganization, is not attributable to the same entity which incurred the net operating loss.

a. A net operating loss, incurred by a separate corporation required to file a combined return, may be carried forward against that portion of the combined income which is related to the former separate corporation.

b. The portion of any combined net operating loss which is related to a separate corporation which is determined to not be includible in the unitary group may be carried forward against income of that corporation computed on a separate basis.

c. The portion of the combined income or loss which is related to the separate corporation shall be determined by computing a ratio based on the property, payroll, and sales factors of the separate corporation to the combined group's total property, payroll, and sales factors. This ratio shall be multiplied by the combined net income or loss subject to apportionment resulting in the net income or loss attributable to the separate corporation.

d. If the separate corporation operates both within and without Arizona, the Arizona portion of the separate corporation's income or loss shall be computed by multiplying the income attributable to that separate corporation by the corporation's ratio of Arizona property, payroll, and sales factors to the corporation's total property payroll and sales factors plus any income or loss allocable to Arizona.

C. An Arizona net operating loss may be carried forward to each of the 5 succeeding taxable years of the taxpayer.

1. An Arizona net operating loss, or any part thereof, which is not used during the 5 succeeding taxable years, shall be lost to the taxpayer.

2. A taxpayer shall not carryback an Arizona net operating loss.

3. Arizona net operating loss carryforwards shall be reduced by the amount of Arizona adjusted income incurred in any of the 5 succeeding taxable years.

For purposes of determining the 5-year carryforward limitation, each Arizona net operating loss carryover shall be applied separately to Arizona adjusted income in the order in which the Arizona net operating loss was incurred.

5. The aggregate of all Arizona net operating loss carryforwards meeting the 5-year carryforward limitation may be applied to any Arizona adjusted income incurred in a taxable year.

D. A taxpayer claiming an Arizona net operating loss carryforward shall file a statement with the corporate income tax return for the taxable year in which the Arizona net operating loss carryforward is claimed. The statement shall include a detailed schedule showing the computation of the Arizona net operating loss carryforward.

E. In calculating and applying an Arizona net operating loss, a multistate taxpayer shall be subject to:

1. The provisions of A.R.S. Title 43, Chapter 11, Article 4;

2. The statutory provisions regarding the Arizona net operating loss; and

3. The provisions of this rule.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2).

Ariz. Admin. Code § R15-2D-303 Domestic International Sales Corporation (DISC)

A. For purposes of this Section, "DISC" means a corporation that elects to be treated as a DISC under Internal Revenue Code § 992. The Arizona gross income of a DISC is the DISC's federal taxable income computed as if the DISC were a corporation that had not elected to be treated as a DISC. A DISC that meets the combined return filing requirements of R15-2D-401 shall file as part of a combined return unless:

1. The DISC is a foreign corporation that is not subject to Arizona income tax, or

2. The corporation with which the DISC would otherwise be required to file a combined return is a member of an Arizona affiliated group as defined in A.R.S. § 43-947.

B. For purposes of subsections (B) and (C), "deducted amount" means the amount of commissions, rentals, and other amounts paid or accrued to a DISC that is deducted in computing federal taxable income. A corporation that directly or indirectly owns or controls 50% or more of the voting stock of a DISC shall add to Arizona gross income the entire deducted amount, unless either subsection (B)(1) or (B)(2) applies.

1. If the corporation and the DISC file as part of the same Arizona combined return, no addition to Arizona gross income is required.

2. If the DISC is taxable in Arizona and subsection (B)(1) does not apply, the addition to Arizona gross income is the deducted amount minus the quotient of the DISC's Arizona taxable income attributable to the deducted amount divided by the corporation's apportionment ratio computed under A.R.S. § 43-1139. In no case shall the addition to Arizona gross income be less than zero.

Example: Corporation A owns 60% of the voting stock of a DISC. Corporation A has a 50% Arizona apportionment ratio and the DISC has a 10% Arizona apportionment ratio for the taxable year. Corporation A and the DISC are not required to file a combined return. Corporation A pays the DISC commissions of $100,000 and deducts this amount on its federal income tax return. The DISC's Arizona taxable income attributable to the commission is $10,000 ($100,000 x 10%). Therefore, Corporation A's addition to Arizona gross income for the DISC commissions is $80,000 ($100,000 - ($10,000 .50)).

C. A corporation that deducts the interest charge required under Internal Revenue Code § 995(f) in determining federal taxable income for the taxable year shall add to Arizona gross income the amount of the interest charge deducted, unless subsection (C)(1), (C)(2), or (C)(3) applies.

1. If the corporation and a DISC file as part of the same Arizona combined return for the taxable year in which the corporation reports DISC income related to the interest charge, the corporation shall not add the interest charge to Arizona gross income.

2. If the interest charge is attributable to the deducted amount that the corporation is required to add to Arizona gross income under subsection (B), the corporation shall not add the interest charge to Arizona gross income.

3. If the interest charge is attributable to income of a DISC, the dividends of which are includible in the corporation's Arizona taxable income, the corporation shall not add the interest charge to Arizona gross income.

Example: Corporation B owns 30% of a DISC that is not a foreign corporation. If the DISC dividends are includible in the Arizona taxable income of Corporation B, the interest charge is not added to Corporation B's Arizona gross income.

D. The Department shall not adjust DISC transactions that comply with the inter-company pricing provisions of Internal Revenue Code § 994.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 2896, effective June 13, 2001 (Supp. 01-2).

Ariz. Admin. Code § R15-2D-304 Expired

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section expired under A.R.S. § 41-1056(E) at 10 A.A.R. 5220, effective October 31, 2004 (Supp. 04-4).

Ariz. Admin. Code § R15-2D-305 Deferred Exploration Expenses

A. A taxpayer may elect to subtract a ratable portion of deferred exploration expenses added to income under A.R.S. § 43-1121. To make the election, a taxpayer shall attach a statement to the return for the applicable taxable year. The taxpayer shall disclose the following in the statement:

1. The amount of exploration expenses subject to the election; and

2. The name, location, and nature of the ore or mineral deposit to which the election relates.

B. A taxpayer may make an election under this Section at any time before the expiration of the period for filing a claim for credit or refund for the taxable year the election is to be effective. An election made under this Section is binding for the taxable year unless the taxpayer revokes the election to deduct exploration expenses under Internal Revenue Code § 617. If the taxpayer revokes the federal election, the taxpayer shall file Arizona amended income tax returns to reflect the changes in federal taxable income and Arizona taxable income that result from the revocation of the election.

C. Except as provided by subsection (D), a taxpayer shall compute the subtraction for a ratable portion of deferred exploration expenses by using the following formula:

A = B x [C / (C + D)]

The above variables are defined as follows:

"A" is the deferred exploration expense subtraction allowable for the taxable year,

"B" is the total deferred exploration expenses reduced by the amount of deferred exploration expenses subtracted in prior taxable years,

"C" is the number of units of ore or mineral sold during the taxable year from the mine or deposit for which the deferred exploration expenses were incurred, and

"D" is the number of units of ore or mineral remaining at the end of the taxable year to be recovered and sold from the mine or deposit for which the deferred exploration expenses were incurred.

D. A taxpayer that has elected to recapture and capitalize exploration expenses under Internal Revenue Code § 617(b)(1)(A) shall reduce the amount computed under subsection (C) by the amount of the federal depletion deducted for the current taxable year that is allocable to the amount of Arizona deferred exploration expenses. A taxpayer shall not reduce the amount computed under subsection (C) to less than zero. A taxpayer shall compute the amount of the federal depletion deduction allocable to the Arizona deferred exploration expenses by multiplying the federal depletion deduction that relates to the mineral interest for which the exploration expenses were incurred by the ratio of the Arizona deferred exploration expenses to the total federal adjusted basis of the mineral interest before any depletion deduction. A taxpayer shall make the computation under this subsection for each subsequent taxable year until the cumulative amount of subtractions for deferred exploration expenses for all taxable years equals the total amount of exploration expenses that were deferred. The amount of the federal depletion deduction allocable to the deferred exploration expenses shall be considered a subtraction of deferred exploration expenses for purposes of computing:

1. The variable B in the formula under subsection (C) for subsequent taxable years,

2. The Arizona adjusted basis under subsection (I), and

3. The cumulative amount of subtractions for deferred exploration expenses.

E. A taxpayer that has elected to recapture and capitalize exploration expenses under Internal Revenue Code § 617(b)(1)(A) and not to defer up to $75,000 of exploration expenses under A.R.S. § 43-1121, shall add to Arizona gross income the amount of federal depletion deducted for the current taxable year that is allocable to the exploration expenses not deferred. A taxpayer shall compute the amount of the federal depletion deduction allocable to the exploration expenses not deferred by multiplying the federal depletion deduction that relates to the mineral interest for which the exploration expenses were incurred by the ratio of the exploration expenses not deferred to the total federal adjusted basis of the mineral interest before any depletion deduction. A taxpayer shall make the adjustment under this subsection for each subsequent taxable year until the cumulative adjustments for all taxable years equal the total amount of exploration expenses not deferred.

F. For purposes of computing the subtraction under subsection (C), a taxpayer shall estimate the number of recoverable units of ore or mineral according to an accepted industry method. The taxpayer shall revise the estimate if, before the close of the current taxable year, it is determined, as the result of further discovery, development, or operation, that the remaining units are materially greater or less than the units previously estimated. The revised estimate shall be used for the current taxable year and subsequent taxable years until it is determined that another revision is required.

G. A taxpayer that leases an ore or mineral deposit and retains a royalty interest in the ore or mineral deposit may subtract the ratable portion of related deferred exploration expenses as computed under subsection (C).

H. If a taxpayer abandons an ore or mineral interest, the taxpayer may subtract the related unamortized deferred exploration expenses in the taxable year of abandonment. For purposes of this subsection, a taxpayer has abandoned an ore or mineral interest during the taxable year if all of the following conditions exist:

1. The taxpayer has discontinued all operations and activities with respect to the ore or mineral interest.

2. The taxpayer has no intention of exploring, developing, or otherwise using the ore or mineral interest in the future.

3. The taxpayer has no intention of selling, exchanging, or otherwise disposing of the ore or mineral interest.

I. A taxpayer that sells property for which exploration expenses were incurred shall report the difference between the federal adjusted basis of the property and the Arizona adjusted basis of the property in the year of the sale. If the Arizona adjusted basis exceeds the federal adjusted basis, a subtraction from income for the excess is required. If the federal adjusted basis exceeds the Arizona adjusted basis, an addition to income for the excess is required. The Arizona adjusted basis of the property is computed as follows:

1. The federal adjusted basis, plus

2. The exploration expenses added to income under A.R.S. § 43-1121, minus

3. The subtraction from income for the federal exploration expense recapture under A.R.S. § 43-1122, minus

4. The total subtractions from income for deferred exploration expenses allowed under this Section.

J. A taxpayer shall not include the amount of mine exploration expenses that were not deferred under A.R.S. § 43-1121 in computing the subtraction from income for the recapture of mine exploration expenses under A.R.S. § 43-1122.

K. Under A.R.S. § 43-1122, a taxpayer may elect to subtract a ratable portion of deferred exploration expenses related to oil, gas, or geothermal resources. A taxpayer shall make the election and compute the subtraction in the same manner as the election related to ore and mineral property.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section repealed; new Section adopted by final rulemaking at 6 A.A.R. 4105, effective October 4, 2000 (Supp. 00-4).

Ariz. Admin. Code § R15-2D-306 Amortization of Property Used for Atmospheric and Water Pollution Control

A. A taxpayer may elect to amortize, over a 60-month period, the adjusted basis of any device, machinery, or equipment that is certified by the Arizona Department of Environmental Quality as property that collects and controls atmospheric and water pollutants and contaminants at their source. The amortization subtractions allowed for the 60-month period are in lieu of the federal depreciation and amortization related to the pollution control property. The related federal depreciation and amortization deducted in computing federal taxable income is an addition to income under A.R.S. § 43-1121. The adjusted basis for purposes of amortization is the basis for determining depreciation under Internal Revenue Code § 167 on the date the pollution control property is placed in service. The adjusted basis does not include land or buildings.

B. A taxpayer that elects to amortize pollution control property shall include a statement in the original or amended return for the taxable year of election. The taxpayer shall identify in the statement each piece of property subject to the election, the month the property is placed in service, the adjusted basis of the property, and the date of certification by the Arizona Department of Environmental Quality.

C. The amortization period is 60 consecutive months beginning with the month the property is placed in service. If the property is disposed of or retired from service before the end of the 60-month period, the amortization period ends with the month of disposition or retirement. The monthly amortization allowable is computed by dividing the adjusted basis of the property at the beginning of the amortization period by 60. The total amortization subtraction for a particular taxable year is the sum of the amortization for each month of the amortization period that falls within the taxable year.

D. A taxpayer may elect to discontinue the amortization election before the end of the 60-month amortization period.

1. A taxpayer shall include a statement in the original or amended return for the taxable year that the election to discontinue amortization is effective. The taxpayer shall identify in the statement each piece of property for which the election to discontinue amortization applies and the last month of amortization.

2. Generally, a taxpayer is not required to make the addition to income referred to in subsection (A) for the months following the election to discontinue amortization. However, an addition to income is required for the federal depreciation or amortization that exceeds the adjusted basis not previously recovered through depreciation or amortization. For example, a taxpayer elects to discontinue amortization after 48 months. If the property had an adjusted basis of $100,000 at the beginning of the amortization period, the adjusted basis remaining to be recovered is $20,000 ($100,000 minus the previous amortization of $80,000). If federal depreciation for the property is $10,000 per year for 10 years, an addition to income of $10,000 per year is required beginning with the third taxable year following the election to discontinue amortization.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section repealed; new Section adopted by final rulemaking at 6 A.A.R. 4105, effective October 4, 2000 (Supp. 00-4).

Ariz. Admin. Code § R15-2D-307 Amortization of Child Care Facilities

A. The following definitions apply for purposes of amortization of child care facilities under A.R.S. § 43-1130 and this Section:

1. "Child care facility" means a facility as defined under A.R.S. § 36-881.

2. "Employee" means any person employed by a taxpayer that owns a child care facility.

3. "Property" means a child care facility and its related equipment of a character subject to depreciation.

B. For purposes of qualifying for the 24-month amortization period under A.R.S. § 43-1130(B), a child care facility is considered to be primarily for the children of employees of the taxpayer if the required ratio is at least 80% for the taxable year during which the property is placed in service. The taxpayer shall maintain a required ratio of at least 80% for the subsequent taxable years that include part of the 24-month amortization period.

1. "Required ratio" means:

a. The total daily attendance of employee children for the taxable year, divided by

b. The total daily attendance of all children for the taxable year.

For purposes of computing the required ratio, the employees of all joint owners of a child care facility are considered to be employees of each of the joint owners.

C. To elect either the 24-month or the 60-month amortization period, a taxpayer shall attach to the income tax return for the taxable year during which the property is placed in service a written statement that contains all of the following information:

1. A clear description of the property.

2. The date of expenditure or the period during which the expenditures were made for the property.

3. The date the property was placed in service.

4. The amount of the expenditure.

5. The amortization period elected.

6. The annual amortization deduction claimed with respect to the property.

D. A taxpayer may make an election under this Section at any time before the expiration of the period for filing a claim for credit or refund for the taxable year that the property is placed in service.

E. A taxpayer may revoke an election made under this Section at any time before the expiration of the period for filing a claim for credit or refund for the taxable year that the property is placed in service. A taxpayer that revokes an election made under this Section shall attach a statement to an amended income tax return for the taxable year that the election was made. The taxpayer shall identify in the statement the property for which the revocation is effective.

F. The amortization period begins with the month the property is placed in service. A taxpayer shall compute the monthly amortization allowable by dividing the cost of the property by the number of months in the amortization period. The total amortization subtraction for a particular taxable year is the sum of the amortization for each month of the amortization period that falls within the taxable year.

1. If the amortization election is terminated as provided under subsection (H), the taxpayer shall prorate the amortization for the month during which the termination occurs, based on the ratio of the number of days in the month that are before the termination date to the total number of days in the month.

2. If a taxpayer qualified for the 24-month amortization in the preceding taxable year and fails to meet the 80% requirement under subsection (B) in the current taxable year, the last month of the preceding taxable year is the final month of amortization.

G. A taxpayer shall treat additions or improvements to an existing item of amortized property as a separate item of property. A taxpayer may treat 2 or more items of property as a single item of property if the items are placed in service within the same month.

H. The amortization election made with respect to an item of property is terminated as of the earliest date on which either of the following occurs:

1. The specific use of the item of property in connection with the operation of a child care facility is discontinued.

2. The child care facility no longer meets applicable requirements in this Section.

I. Under A.R.S. § 43-1121, a taxpayer that elects to amortize child care facility property shall add to Arizona gross income the related federal depreciation or amortization deducted under Internal Revenue Code § 167 or 188. If the Arizona amortization election is terminated, the taxpayer may recover the remaining unamortized cost of the property by reducing the addition to income required under A.R.S. § 43-1121.

1. The amount of the reduction for the taxable year of termination is the amount of the related federal depreciation and amortization allocable to the portion of the taxable year after the termination date.

2. The amount of the reduction for taxable years subsequent to the taxable year of termination is the amount of the related federal depreciation and amortization.

3. The taxpayer may reduce the addition to income in the taxable year of termination and subsequent taxable years until the cumulative reductions equal the unamortized cost of the property.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section repealed; new Section adopted by final rulemaking at 6 A.A.R. 4105, effective October 4, 2000 (Supp. 00-4).

Article 4 MULTISTATE DIVISION OF INCOME

Ariz. Admin. Code § R15-2D-401 Unitary Business and Combined Returns

A. An entity, group of entities, or components of an entity is not a unitary business for apportionment purposes unless there is actual substantial interdependence and integration of the basic operations of the business carried on in more than one taxing jurisdiction. The potential to operate an entity or a component as part of the unitary business is not dispositive.

B. The determination of whether the operations of a taxpayer constitute a unitary business is based on economic substance and not form. Therefore, a unitary business may consist of part of a corporation, one corporation, or many corporations. If the unitary business consists of more than one corporation, the corporations comprising the unitary business shall file a combined return apportioning the business income of the corporations using a single apportionment formula.

C. The main reason for defining a business as unitary is that its components in various states are so tied together at the basic operational level that it is difficult to determine the state in which profits are earned. Centralized top-level management, financing, accounting, insurance and benefit programs, or overhead functions by a home office are not sufficient for a business to be unitary without further analysis of the basic operations of the components.

D. The following are necessary threshold characteristics for components of an entity, an entity, or a group of entities to be considered a unitary business:

1. The entities comprising the unitary business are owned or controlled, directly or indirectly, by the same interests that collectively own more than 50 percent of the voting stock,

2. The entities or components share common management, and

3. The entities or components have reconciled accounting systems.

E. The presence of the three characteristics listed in subsection (D) is not sufficient for a business to be considered unitary without evidence of substantial operational integration. Factors that indicate operational integration include the following:

1. The same or similar business conducted by components;

2. Vertical development of a product by components, such as manufacturing, distribution, and sales;

3. Horizontal development of a product by components, such as sales, service, repair, and financing;

4. Transfer of materials, goods, products, and technological data and processes between components;

5. Sharing of assets by components;

6. Sharing or exchanging of operational employees by components;

Centralized training of operational employees;

8. Centralized mass purchasing of inventory, materials, equipment, and technology;

9. Centralized development and distribution of technology relating to the day-to-day operations of the components;

10. Use of common trademark or logo at the basic operational level;

11. Centralized advertising with impact at the basic operational level;

Exclusive sales-purchase agreements between components;

13. Price differentials between components as compared to unrelated businesses;

14. Sales or leases between components; and

15. Any other integration between components at the basic operational level.

F. Not all of the factors listed in subsection (E) need be present in every unitary business.

G. A manufacturing, producing, or mercantile type of business is not a unitary business unless there is a substantial transfer of material, products, goods, technological data and processes, or machinery and equipment between the branches, divisions, subsidiaries, or affiliates.

1. A transfer of 20 percent of the total goods annually manufactured, produced, or purchased as inventory for processing or sale, or both, by the transferor, or 20 percent of the total goods annually acquired for processing or sale, or both, by the transferee is presumptive evidence of a unitary business.

2. A smaller percentage of goods transferred may be indicative of a unitary business if other characteristics indicating substantial operational integration are present.

H. In a unitary service business, the operations of the various components or entities of the business are integrated and interrelated by their involvement with the central office or parent in delivering substantially the same service. The day-to-day operations of the components or entities use the same procedures and technologies that are developed, organized, purchased, or prescribed by the central office or parent. There usually is an exchange of employees among the components or entities and centralized training of employees.

I. A taxpayer may have more than one unitary business. In this case, it is necessary to determine the business income attributable to each separate unitary business. The income of each business is apportioned using an apportionment formula that considers the in-state and out-of-state factors of the business.

J. Generally, a conglomerate composed of diverse businesses is not a single unitary business. However, a line or lines of business within the conglomerate may be a unitary business if the operations of the components of the line or lines are integrated and interrelated.

K. All members of a combined return shall determine income using the same accounting period.

1. If the members of a combined return have different accounting periods, the accounting period to be used by the members shall be determined as follows:

a. If the combined return includes the common parent corporation, the parent's accounting period is used.

b. If the combined return does not include the common parent corporation, the accounting period of a member that has a presence in Arizona shall be used. The same group member's accounting period shall be used consistently from year to year.

2. Each member of a combined return that uses an accounting period that is different from the common accounting period determined in subsection (K)(1), shall use one of the following methods to determine the income to be included in the common accounting period:

a. Determine income and related deductions using actual book or accounting entries for the relevant period.

b. Determine income based on the number of months falling within the required common accounting period. For example, if one member uses a calendar year, and the common accounting period ends October 31, 1981, the member will include 2/12 of the income for the year ended December 31, 1980, and 10/12 of the income for the year ended December 31, 1981. Estimates may be necessary if this proration method involves a member's year that ends subsequent to the common accounting period.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-402 [REPEALED]

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section repealed by final rulemaking at 7 A.A.R. 654, effective January 11, 2001 (Supp. 01-1).

Ariz. Admin. Code § R15-2D-403 Taxable in Another State

A. A taxpayer is subject to the allocation and apportionment provisions of A.R.S. §§ 43-1131 through 43-1148 if it has income from business activity that is taxable both within and without this state. A taxpayer's income from business activity is taxable without this state if the taxpayer, by reason of the business activity, is taxable in another state under either one of the two tests specified in A.R.S. § 43-1133. A taxpayer is not taxable in another state with respect to a particular trade or business merely because the taxpayer conducts activities in that other state pertaining to the production of nonbusiness income or business activities relating to a separate trade or business.

B. A taxpayer is "subject to" one of the taxes specified in A.R.S. § 43-1133(1) if it carries on business activities in a state and that state imposes one of the taxes on the taxpayer. Any taxpayer that asserts that it is subject to one of the taxes specified in A.R.S. § 43-1133(1) in another state shall furnish to the Department upon its request evidence to support that assertion. The Department may request that the evidence include proof that the taxpayer has filed the requisite tax return in the other state and has paid any taxes imposed under the laws of the other state. The taxpayer's failure to produce this proof may be taken into account in determining whether the taxpayer is subject to one of the taxes specified in A.R.S. § 43-1133(1) in the other state.

1. A taxpayer that voluntarily files and pays one or more of the taxes specified in A.R.S. § 43-1133(1) when not required to do so by the laws of the other state or pays a minimal fee for qualification, organization, or the privilege of doing business in that state is not "subject to" one of the taxes specified in A.R.S. § 43-1133(1) if the taxpayer:

a. Does not engage in business activity in that state; or

b. Engages in some business activity, not sufficient for nexus, and the minimum tax bears no relationship to the taxpayer's business activity within that state.

2. The concept of taxability in another state is based upon the premise that every state in which the taxpayer is engaged in business activity may impose an income tax even though every state does not do so. In states that do not impose an income tax, other types of taxes may be imposed as a substitute. Therefore, the Department shall consider only those taxes enumerated in A.R.S. § 43-1133(1) that are basically revenue raising rather than regulatory measures in determining whether the taxpayer is "subject to" one of the taxes in another state.

Example 1: State A requires all nonresident corporations that qualify or register in State A to pay to the Secretary of State an annual license fee or tax for the privilege of doing business in the state regardless of whether the privilege is in fact exercised. The amount paid is determined according to the total authorized capital stock of the corporation; the rates are progressively higher by bracketed amounts. The statute sets a minimum fee of $50 and a maximum fee of $500. Failure to pay the tax bars a corporation from using the state courts for enforcement of its rights. State A also imposes a corporation income tax. Nonresident Corporation X is qualified in State A and pays the required fee to the Secretary of State but does not carry on any business activity in State A (although it may use the courts of State A). Corporation X is not "taxable" in State A.

Example 2: The facts are the same as example one except that Corporation X is subject to and pays the corporation income tax. Payment is prima facie evidence that Corporation X is "subject to" the net income tax of State A and is "taxable" in State A.

Example 3: State B requires all nonresident corporations qualified or registered in State B to pay to the Secretary of State an annual permit fee or tax for doing business in the state. The base of the fee or tax is the sum of outstanding capital stock, and surplus and undivided profits. The fee or tax base attributable to State B is determined by a three-factor apportionment formula. Nonresident Corporation X, which operates a plant in State B, pays the required fee or tax to the Secretary of State. Corporation X is "taxable" in State B.

Example 4: State A has a corporation franchise tax measured by net income for the privilege of doing business in that state. Corporation X files a return based on its business activity in the state but the amount of computed liability is less than the minimum tax. Corporation X pays the minimum tax. Corporation X is subject to State A's corporation franchise tax.

C. A.R.S. § 43-1133(2) applies if the taxpayer's business activity is sufficient to give the state jurisdiction to impose a net income tax by reason of the business activity. Jurisdiction to tax is not present if the state is prohibited from imposing the tax by reason of the provisions of Public Law 86-272, 15 U.S.C.A. §§ 381 - 384.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4). Correction to manifest typographical error, under subsection R15-2D-403(B), deleted "2" between "A.R.S." and "§" as adopted at 5 A.A.R. 3766 (Supp. 08-4).

Ariz. Admin. Code § R15-2D-404 Apportionment Formula

A. All business income of each trade or business of the taxpayer shall be apportioned to this state by use of the apportionment formula in A.R.S. § 43-1139. The elements of the apportionment formula are the property factor, the payroll factor, and the sales factor of the trade or business of the taxpayer.

B. A unitary business that files a combined return shall use an apportionment formula that combines the property, payroll, and sales figures of all of the unitary group members before calculating the factors.

C. An Arizona affiliated group that files a consolidated return shall use an apportionment formula that combines the property, payroll, and sales figures of all of the members of the Arizona affiliated group before calculating the factors.

D. This Section does not apply to a taxpayer engaged in air commerce that apportions its income in accordance with A.R.S. § 43-1139(B).

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-405 Intercompany Eliminations

Members of a combined or consolidated return shall eliminate intercompany amounts included in the group's income, expense, and apportionment factors when necessary to avoid distortion of the group's Arizona taxable income.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Article 5 BUSINESS AND NONBUSINESS INCOME

Ariz. Admin. Code § R15-2D-501 General

A. For purposes of administration, the income of a taxpayer is business income unless clearly classifiable as nonbusiness income.

B. The classification of income by labels, such as manufacturing income, compensation for services, sales income, interest, dividends, rents, royalties, gains, operating income, or nonoperating income, is of no aid in determining whether income is business or nonbusiness income. Income of any type or class and from any source is business income if it arises from transactions and activity occurring in the regular course of a trade or business. Accordingly, the critical elements in determining whether income is "business income" or "nonbusiness income" are the transactions and activity of a particular trade or business. In general, all transactions and activity of a taxpayer that are the result of or incidental to the operations of a particular trade or business of the taxpayer are transactions and activity arising in the regular course of, and constitute integral parts of, a trade or business.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-502 Rents from Real and Tangible Personal Property

Rental income from real and tangible personal property is business income if the property with respect to which the rental income is received is used in the taxpayer's trade or business or is incidental to the trade or business and is includable in the property factor.

Example 1: The taxpayer operates a multistate car rental business. The income from the car rentals is business income.

Example 2: The taxpayer is engaged in the heavy construction business in which it uses equipment such as cranes, tractors, and earth-moving vehicles. The taxpayer makes short-term leases of the equipment when particular pieces of equipment are not needed on any particular project. The rental income is business income.

Example 3: The taxpayer operates a multistate chain of men's clothing stores. The taxpayer purchases a five-story office building for use in connection with its trade or business. It uses the street floor as one of its retail stores and the second and third floors for its general corporate headquarters. The remaining two floors are leased to others. The rental of the two floors is incidental to the operation of the taxpayer's trade or business. The rental income is business income.

Example 4: The taxpayer operates a multistate chain of grocery stores. It purchases as an investment an office building in another state with surplus funds and leases the entire building to others. The net rental income is not business income of the grocery store trade or business. Therefore, the net rental income is nonbusiness income.

Example 5: The taxpayer operates a multistate chain of men's clothing stores. The taxpayer invests in a 20-story office building and uses the street floor as one of its retail stores and the second floor for its general corporate headquarters. The remaining 18 floors are leased to others. The rental of the 18 floors is not incidental to but rather is separate from the operation of the taxpayer's trade or business. The net rental income is not business income of the clothing store trade or business. Therefore, the net rental income is nonbusiness income.

Example 6: The taxpayer constructed a plant for use in its multistate manufacturing business and 20 years later the plant was closed and put up for sale. The plant was rented for a temporary period from the time it was closed by the taxpayer until it was sold 18 months later. The rental income is business income and the gain on the sale of the plant is business income.

Example 7: The taxpayer operates a multistate chain of grocery stores. It owned an office building that it occupied as its corporate headquarters. Because of inadequate space, the taxpayer acquired a new and larger building elsewhere for its corporate headquarters. The old building was rented to an investment company under a five-year lease. Upon expiration of the lease, the taxpayer sold the building at a gain (or loss). The net rental income received over the lease period is nonbusiness income and the gain (or loss) on the sale of the building is nonbusiness income.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-503 Gains or Losses from Sales of Assets

Gain or loss from the sale, exchange, or other disposition of tangible or intangible personal property or real property constitutes business income if the property while owned by the taxpayer was used in the taxpayer's trade or business. However, if the property was used for the production of nonbusiness income or otherwise was removed from the property factor, in accordance with Article 6, before its sale, exchange, or other disposition, the gain or loss constitutes nonbusiness income.

Example 1: In conducting its multistate manufacturing business, the taxpayer systematically replaces automobiles, machines, and other equipment used in the business. The gains or losses resulting from those sales constitute business income.

Example 2: The taxpayer constructed a plant for use in its multistate manufacturing business and 20 years later sold the property at a gain while it was in operation by the taxpayer. The gain is business income.

Example 3: Same as example two except that the plant was closed and put up for sale but was not in fact sold until a buyer was found 18 months later. The gain is business income.

Example 4: Same as example two except that the plant was rented while being held for sale. The rental income is business income and the gain on the sale of the plant is business income.

Example 5: The taxpayer operates a multistate chain of grocery stores. It owned an office building that it occupied as its corporate headquarters. Because of inadequate space, the taxpayer acquired a new and larger building elsewhere for its corporate headquarters. The old building was rented to an unrelated investment company under a five-year lease. Upon expiration of the lease, the taxpayer sold the building at a gain (or loss). The gain (or loss) on the sale is nonbusiness income and the rental income received over the lease period is nonbusiness income.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-504 Interest

Interest income is business income if the intangible property with respect to which the taxpayer receives interest arises out of or is created in the regular course of the taxpayer's trade or business operations or if the purpose for acquiring and holding the intangible property is related to or incidental to the trade or business operations.

Example 1: The taxpayer operates a multistate chain of department stores, selling for cash and on credit. The taxpayer receives service charges, interest, or time-price differentials and the like with respect to installment sales and revolving charge accounts. These amounts are business income.

Example 2: The taxpayer conducts a multistate manufacturing business. During the year the taxpayer receives a federal income tax refund and collects a judgment against a debtor of the business. Both the tax refund and the judgment bear interest. The interest income is business income.

Example 3: The taxpayer is engaged in a multistate manufacturing and wholesaling business. In connection with that business, the taxpayer maintains special accounts to cover items such as worker's compensation claims, rain and storm damage, and machinery replacement. The moneys in those accounts are invested at interest. Similarly, the taxpayer temporarily invests funds intended for payment of federal, state, and local tax obligations. The interest income is business income.

Example 4: The taxpayer is engaged in a multistate money order and traveler's check business. In addition to the fees received in connection with the sale of the money orders and traveler's checks, the taxpayer earns interest income by investing the funds pending their redemption. The interest income is business income.

Example 5: The taxpayer is engaged in a multistate manufacturing and selling business. The taxpayer usually has working capital totaling $200,000 that it regularly invests in short-term, interest-bearing securities. The interest income is business income.

Example 6: In January, the taxpayer sells all of the stock of a subsidiary for $20,000,000. The funds are placed in an interest-bearing account pending a decision by management as to how the funds are to be used. The interest income is nonbusiness income.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-505 Dividends

Dividends are business income if the stock with respect to which the taxpayer receives dividends arises out of or was acquired in the regular course of the taxpayer's trade or business operations or if the purpose for acquiring and holding the stock is related to or incidental to the trade or business operations.

Example 1: The taxpayer operates a multistate chain of stock brokerage houses. During the year, the taxpayer receives dividends on stock that it owns. The dividends are business income.

Example 2: The taxpayer is engaged in a multistate manufacturing and wholesaling business. In connection with that business, the taxpayer maintains special accounts to cover items such as worker's compensation claims, rain and storm damage, and machinery replacement. A portion of the moneys in those accounts is invested in interest-bearing bonds. The remainder is invested in various common stocks listed on national stock exchanges. Both the interest income and any dividends are business income.

Example 3: The taxpayer and several unrelated corporations own all of the stock of a corporation whose business operations consist solely of acquiring and processing materials for delivery to the corporate owners. The taxpayer acquired the stock to obtain a source of supply of materials used in its manufacturing business. The dividends are business income.

Example 4: The taxpayer is engaged in a multistate heavy construction business. Much of its construction work is performed for agencies of the federal government and various state governments. Under state and federal laws applicable to contracts for these agencies, a contractor must have adequate bonding capacity, as measured by the ratio of its current assets (cash and marketable securities) to current liabilities. To maintain an adequate bonding capacity, the taxpayer holds various stocks and interest-bearing securities. Both the interest income and any dividends received are business income.

Example 5: The taxpayer receives dividends from the stock of its subsidiary or affiliate, which acts as the marketing agency for products manufactured by the taxpayer. The dividends are business income.

Example 6: The taxpayer is engaged in a multistate glass manufacturing business. It also holds a portfolio of stock and interest-bearing securities, the acquisition and holding of which are unrelated to the manufacturing business. The dividends and interest income received are nonbusiness income.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-506 Royalties

Patent and copyright royalties are business income if the patent or copyright with respect to which the taxpayer receives royalties arises out of or is created in the regular course of the taxpayer's trade or business operations or if the purpose for acquiring and holding the patent or copyright is related to the trade or business operations. Other royalties and licensing fees are business income if the property or licensing agreement that generates the income arises out of or is created in the regular course of the taxpayer's trade or business operations or if the purpose for acquiring and holding the property or license agreement is related to or incidental to the trade or business operations.

Example 1: The taxpayer is engaged in the multistate business of manufacturing and selling industrial chemicals. In connection with that business the taxpayer obtained patents on certain of its products. The taxpayer licensed the production of the chemicals in foreign countries, in return for which the taxpayer receives royalties. The royalties received by the taxpayer are business income.

Example 2: The taxpayer is engaged in the music publishing business and holds copyrights on numerous songs. The taxpayer acquires the assets of a smaller publishing company, including music copyrights. The taxpayer later uses these acquired copyrights in its business. Any royalties received on these copyrights are business income.

Example 3: The same as example two, except that the acquired company also held the patent on a type of phonograph needle. The taxpayer does not manufacture or sell phonographs or phonograph equipment. Any royalties received on the patent are nonbusiness income.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-507 Proration of Deductions

In most cases an allowable deduction of a taxpayer will be applicable only to the business income arising from a particular trade or business or to a particular item of nonbusiness income. In some cases an allowable deduction may apply to the business incomes of more than one trade or business or to several items of nonbusiness income. In these cases the deduction shall be prorated among the trades or businesses and the items of nonbusiness income in a manner that fairly distributes the deduction among the classes of income to which it applies.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-508 Consistency and Uniformity in Reporting

A. If a taxpayer departs from or modifies the manner in which income has been classified as business income or nonbusiness income, or the manner of prorating any related deduction, in Arizona returns for prior years, the taxpayer shall disclose in the return for the current year the nature and extent of the modification.

B. If the returns or reports filed by a taxpayer for all states to which the taxpayer reports under the Uniform Division of Income for Tax Purposes Act are not uniform in the classification of income as business or nonbusiness income, or the application or proration of any related deduction, the taxpayer shall disclose the nature and extent of the variance upon request by the Department.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Article 6 PROPERTY FACTOR

Ariz. Admin. Code § R15-2D-601 General

A. The property factor, as defined in A.R.S. § 43-1140, for each trade or business of a taxpayer includes all real and tangible personal property owned or rented by the taxpayer and used during the tax period in the regular course of the trade or business. The term "real and tangible personal property" includes land, buildings, machinery, stocks of goods, equipment, but does not include coin or currency.

B. A taxpayer shall exclude from the property factor property used in connection with the production of nonbusiness income.

C. Property used both in the regular course of a taxpayer's trade or business and in the production of nonbusiness income is included in the property factor only to the extent the property is used in the regular course of the taxpayer's trade or business. The method of determining that portion of the value to be included in the property factor will depend upon the facts of each case.

D. The property factor includes the average value of property includable in the factor.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-602 Property Used for the Production of Business Income

A. A taxpayer shall include in the property factor property that is used, available for use, or capable of being used during the tax period in the regular course of the taxpayer's trade or business.

B. A taxpayer shall include in the property factor property held as reserves or standby facilities or property held as a reserve source of materials. For example, a plant temporarily idle or raw material reserves not currently being processed are includable in the factor.

C. A taxpayer shall exclude from the property factor property or equipment under construction during the tax period, except inventoriable goods in process, until the property or equipment is used in the regular course of the taxpayer's trade or business. If the property or equipment is partially used in the regular course of the taxpayer's trade or business while under construction, the value of the property to the extent used shall be included in the property factor.

D. Property used in the regular course of the trade or business of the taxpayer remains in the property factor until its permanent withdrawal is established by an identifiable event such as its conversion to the production of nonbusiness income, its sale, or the lapse of an extended period of time (normally, five years) during which the property is held for sale.

Example 1: The taxpayer closes its manufacturing plant in State X and holds the property for sale. The property remains vacant until its sale one year later. The value of the manufacturing plant is included in the property factor until the plant is sold.

Example 2: Same as example one except that the property is rented until the plant is sold. The plant is included in the property factor until the plant is sold.

Example 3: The taxpayer closes its manufacturing plant and leases the building under a five-year lease. The plant is included in the property factor until the lease begins.

Example 4: The taxpayer operates a chain of retail grocery stores. Taxpayer closes Store A, which is then remodeled into three small retail stores such as a dress shop, dry cleaning, and barber shop, which are leased to unrelated parties. The property is removed from the property factor on the date the remodeling of Store A begins.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-603 Property Factor Numerator

The numerator of the property factor is the average value of the real and tangible personal property owned or rented by a taxpayer and used in this state during the tax period in the regular course of the taxpayer's trade or business.

Property in transit between locations of the taxpayer to which it belongs is considered to be at its destination for purposes of the property factor.

2. Property in transit between a buyer and seller that is included by a taxpayer in the denominator of its property factor in accordance with its regular accounting practices is included in the numerator according to the state of destination.

3. The value of mobile or movable property such as construction equipment, trucks, or leased electronic equipment that is located within and without this state during the tax period is determined for purposes of the numerator of the property factor on the basis of total time within the state during the tax period.

4. An automobile assigned to a traveling employee is included in the numerator of the property factor of the state to which the employee's compensation is assigned under the payroll factor or in the numerator of the property factor of the state in which the automobile is licensed.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-604 Valuation of Owned Property

A. Property owned by a taxpayer is valued at its original cost. Generally, "original cost" means the basis of the property for federal income tax purposes (before any federal adjustments) at the time of acquisition by the taxpayer and adjusted by subsequent capital additions or improvements to the property and partial disposition of the property, by reason of sale, exchange, abandonment, or other similar event. However, capitalized intangible drilling and development costs are included in the property factor whether or not they have been expensed for either federal or state tax purposes.

Example 1: The taxpayer acquires a factory building in this state at a cost of $500,000 and, 18 months later, expends $100,000 for major remodeling of the building. The taxpayer files its return for the current taxable year on the calendar-year basis. The taxpayer claims a depreciation deduction in the amount of $22,000 with respect to the building on the return for the current taxable year. The value of the building includable in the numerator and the denominator of the property factor is $600,000; the depreciation deduction is not taken into account in determining the value of the building for purposes of the property factor.

Example 2: During the current taxable year, Corporation X merges into Corporation Y in a tax-free reorganization under the Internal Revenue Code. At the time of the merger, Corporation X owns a factory that it built five years earlier at a cost of $1,000,000. Corporation X has been depreciating the factory at the rate of two percent per year, and its basis to Corporation X, at the time of the merger is $900,000. Because the property is acquired by Corporation Y in a transaction in which, under the Internal Revenue Code, its basis to Corporation Y is the same as its basis to Corporation X, Corporation Y includes the property in its property factor at Corporation X's original cost, without adjustment for depreciation, $1,000,000.

Example 3: Corporation Y acquires the assets of Corporation X in a liquidation by which Corporation Y is entitled to use its stock cost as the basis of the Corporation X assets under Internal Revenue Code § 334(b)(2). Under these circumstances, Corporation Y's cost of the assets is the purchased price of the Corporation X stock, prorated over the Corporation X assets.

B. If the original cost of property is unascertainable, the property is included in the property factor at its fair market value as of the date of acquisition by the taxpayer.

C. Inventory of stock of goods is included in the property factor in accordance with the valuation method used for federal income tax purposes.

D. Property acquired by gift or inheritance is included in the property factor at its basis for determining depreciation for federal income tax purposes.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-605 Valuation of Rented Property

A. Property rented by a taxpayer is valued at eight times its net annual rental rate. The net annual rental rate for any item of rented property is the annual rental rate paid by the taxpayer for the property, less the aggregate annual subrental rates paid by subtenants of the taxpayer. Subrents are not deducted when the subrents constitute business income because the taxpayer uses the property that produces the subrents in the regular course of a trade or business of the taxpayer when it is producing the subrent income; accordingly, there is no reduction in its value. If the adjustment for subrents produces a negative or inaccurate value of rented property, the special provisions in R15-2D-902 apply.

Example 1: The taxpayer receives subrents from a bakery concession in a food market operated by the taxpayer. Because the subrents are business income they are not deducted from rent paid by the taxpayer for the food market.

Example 2: The taxpayer rents a five-story office building primarily for use in its multistate business, uses three floors for its offices and subleases two floors to various other businesses and persons such as professionals and shops. The rental of the two floors is incidental to the operation of the taxpayer's trade or business. Because the subrents are business income, they are not deducted from the rent paid by the taxpayer.

Example 3: The taxpayer rents a 20-story office building and uses the lower two stories for its general corporation headquarters. The remaining 18 floors are subleased to others. The rental of the 18 floors is not incidental to but rather is separate from the operation of the taxpayer's trade or business. Because the subrents are nonbusiness income they are deducted from the rent paid by the taxpayer.

B. "Annual rental rate" means the amount paid as rental for property for a 12-month period.

1. If property is rented for less than a 12-month period, the rent paid for the actual period of rental is the "annual rental rate" for the tax period.

If a taxpayer has rented property for a term of 12 or more months and the current tax period covers a period of less than 12 months (due, for example, to a reorganization or change of accounting period), the taxpayer shall annualize the rent paid for the short tax period. If the rental term is for less than 12 months, the rent is not annualized beyond its term.

Example 1: Taxpayer A ordinarily files its returns based on a calendar year and merges into Taxpayer B on April 30. The net rent paid under a lease with five years remaining is $2,500 a month. The rent for the tax period January 1 to April 30 is $10,000. After the rent is annualized the net rent is $30,000 ($2,500 x 12).

Example 2: Same facts as in example one except that the lease would have terminated on August 31. In this case, the annualized rent is $20,000 ($2,500 x 8).

3. A taxpayer shall not annualize rent when the rental term is on a month-to-month basis.

C. "Annual rent" means the actual sum of money or other consideration payable, directly or indirectly, by a taxpayer or for its benefit for the use of property and includes:

1. Any amount payable for the use of real or tangible personal property, or any part of the property, whether designated as a fixed sum of money or as a percentage of sales, profits, or otherwise.

Example: A taxpayer, under the terms of a lease, pays a lessor $1,000 per month as a base rental and at the end of year pays the lessor one percent of its gross sales of $400,000. The annual rent is $16,000 ($12,000 plus one percent of $400,000 or $4,000).

2. Any amount payable as additional rent or instead of rents, such as interest, taxes, insurance, repairs, or any other items that are required to be paid by the terms of the lease or other arrangement, not including amounts paid as service charges, such as utilities or janitor services. If a payment includes rent and other charges unsegregated, the amount of rent is determined by consideration of the relative values of the rent and the other items.

Example 1: A taxpayer, under to the terms of a lease, pays the lessor $12,000 a year rent plus taxes in the amount of $2,000 and interest on a mortgage in the amount of $1,000. The annual rent is $15,000.

Example 2: A taxpayer stores part of its inventory in a public warehouse. The total charge for the year is $1,000 of which $700 is for the use of storage space and $300 for inventory insurance, handling and shipping charges, and C.O.D. collections. The annual rent is $700.

D. "Annual rent" does not include:

1. Incidental day-to-day expenses, such as hotel or motel accommodations and daily rental of automobiles; and

2. Royalties based on extraction of natural resources, whether represented by delivery or purchase. For purposes of this subsection, a royalty includes any consideration conveyed or credited to a holder of an interest in property that constitutes a sharing of current or future production of natural resources from the property, irrespective of the method of payment or how the consideration may be characterized, whether as a royalty, advance royalty, rental, or otherwise.

E. For purposes of the property factor, leasehold improvements are treated as property owned by a taxpayer regardless of whether the taxpayer is entitled to remove the improvements or the improvements revert to the lessor upon expiration of the lease. The original cost of leasehold improvements are included in the property factor.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-606 Averaging of Monthly Property Values

The Department may require or allow averaging of monthly values if that method is required to properly reflect the average value of a taxpayer's property for the tax period. The Department shall not require the averaging of monthly values if that method has a de minimis effect on a taxpayer's Arizona tax liability for the tax period.

1. Averaging of monthly values will generally be required if substantial fluctuations in the values of the property exist during the tax period or if property is acquired after the beginning of the tax period or disposed of before the end of the tax period.

Example: The monthly value of the taxpayer's property is as follows:

| January | $2,000 | July | $15,000 | | --- | --- | --- | --- | | February | $2,000 | August | $17,000 | | March | $3,000 | September | $23,000 | | April | $3,500 | October | $25,000 | | May | $4,500 | November | $13,000 | | June | $10,000 | December | $2,000 | | Subtotal | $25,000 | Subtotal | $95,000 | | | | Total | $120,000 |

The average monthly value of the taxpayer's property includable in the property factor for the income year is $10,000 (120,000 divided by 12).

2. Rented property is averaged by determining the net annual rental rate of the property.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-607 Consistency and Uniformity in Reporting

A. If a taxpayer departs from or modifies the manner of valuing property, or of excluding or including property in the property factor, used in Arizona returns for prior years, the taxpayer shall disclose in the return for the current year the nature and extent of the modification.

B. If the returns or reports filed by a taxpayer with all states to which the taxpayer reports under the Uniform Division of Income for Tax Purposes Act are not uniform in the valuation of property or in the exclusion or inclusion of property in the property factor, the taxpayer shall disclose the nature and extent of the variance upon request by the Department.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Article 7 PAYROLL FACTOR

Ariz. Admin. Code § R15-2D-701 General

A. The payroll factor, as defined in A.R.S. § 43-1143, for each trade or business of a taxpayer includes the total amount paid by the taxpayer in the regular course of its trade or business for compensation during the tax period.

1. The total amount "paid" to employees is determined upon the basis of the taxpayer's accounting method.

a. If the taxpayer has adopted the accrual method of accounting, all compensation properly accrued is deemed to have been paid.

b. Notwithstanding the taxpayer's method of accounting, compensation paid to employees may, at the election of the taxpayer, be included in the payroll factor by use of the cash method if the taxpayer is required to report the compensation under that method for unemployment compensation purposes.

2. The compensation of any employee for activities that are connected with the production of nonbusiness income is excluded from the payroll factor.

Example 1: The taxpayer uses some of its employees in the construction of a storage building which, upon completion, is used in the regular course of the taxpayer's trade or business. The wages paid to those employees are treated as a capital expenditure by the taxpayer. The amount of those wages is included in the payroll factor.

Example 2: The taxpayer owns various securities that it holds as an investment separate and apart from its trade or business. The management of the taxpayer's investment portfolio is the only duty of Mr. X, an employee. The salary paid to Mr. X is excluded from the payroll factor.

3. Payments made to an independent contractor or any other person not properly classifiable as an employee are excluded from the payroll factor.

4. Only amounts paid directly to employees are included in the payroll factor. Amounts considered paid directly include the value of board, rent, housing, lodging, and other benefits or services furnished to employees by the taxpayer in return for personal services, provided that the amounts constitute income to the recipient under the Internal Revenue Code. In the case of employees not subject to the Internal Revenue Code, such as those employed in foreign countries, the determination of whether benefits or services would constitute income to the employees shall be made as though the employees were subject to the Internal Revenue Code.

B. Generally, a person is considered to be an employee if the person is treated by the taxpayer as an employee for purposes of the payroll taxes imposed by the Federal Insurance Contributions Act. However, because certain individuals are included within the term "employees" in the Federal Insurance Contributions Act who are not employees under the usual common-law rules, a taxpayer may establish that a person who is treated as an employee for purposes of the Federal Insurance Contributions Act is not an employee for purposes of this Section.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-702 Payroll Factor Denominator

The denominator of the payroll factor is the total compensation paid by the taxpayer everywhere during the tax period. Therefore, compensation paid to employees whose services are performed entirely in a state where the taxpayer is immune from taxation is included in the denominator of the payroll factor.

Example: A taxpayer has employees in its state of legal domicile (State A) and is taxable in State B. In addition, the taxpayer has other employees whose services are performed entirely in State C where the taxpayer is immune from taxation under the provisions of Public Law 86-272. The compensation paid to the employees in State C is assigned to State C where the services are performed (included in the denominator but not the numerator of the payroll factor) even though the taxpayer is not taxable in State C.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-703 Payroll Factor Numerator

The numerator of the payroll factor is the total compensation paid in this state during the tax period by the taxpayer for compensation. The tests in A.R.S. § 43-1144 for determining whether compensation is paid in this state are derived from the Model Unemployment Compensation Act. Accordingly, if the taxpayer includes compensation paid to employees in the payroll factor by use of the cash method of accounting or if the taxpayer is required to report the compensation under this method for unemployment compensation purposes, the Department shall presume that the total wages reported by the taxpayer to this state for unemployment compensation purposes constitute compensation paid in this state except for compensation excluded under this Article. The presumption may be overcome by evidence satisfactory to the Department that an employee's compensation is not properly reportable to this state for unemployment compensation purposes.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-704 Compensation Paid in This State: Definitions

For the purpose of determining whether compensation is paid in this state under this Article and A.R.S. § 43-1144, the following definitions apply:

"Incidental" means any service that is temporary or transitory in nature or rendered in connection with an isolated transaction.

2. "Place from which the service is directed or controlled" means the site from which the power to direct or control is exercised by the taxpayer.

3. "Base of operations" means the site of more or less permanent nature from which the employee starts work and to which the employee customarily returns in order to:

a. Receive instructions from the taxpayer,

b. Receive communications from the taxpayer's customers or other persons,

c. Replenish stock or other materials,

d. Repair equipment, or

e. Perform any other functions necessary to the exercise of the trade or profession.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-705 Consistency and Uniformity in Reporting

A. If the taxpayer departs from or modifies the treatment of compensation paid used in Arizona returns for prior years, the taxpayer shall disclose in the return for the current year the nature and extent of the modification.

B. If the returns or reports filed by a taxpayer with all states to which the taxpayer reports under the Uniform Division of Income for Tax Purposes Act are not uniform in the treatment of compensation paid, the taxpayer shall disclose the nature and extent of the variance upon request by the Department.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Article 8 SALES FACTOR

Ariz. Admin. Code § R15-2D-801 General

A. The following are provisions for determining "sales" under A.R.S. § 43-1145:

1. In the case of a taxpayer engaged in manufacturing and selling or purchasing and reselling goods or products, "sales" includes all gross receipts from the sales of the goods or products (or other property of a kind that would properly be included in the inventory of the taxpayer if on hand at the close of the tax period) held by the taxpayer primarily for sale to customers in the ordinary course of its trade or business. For purposes of this subsection, "gross receipts" means gross sales less returns and allowances and includes all interest income, service charges, carrying charges, or time-price differential charges incidental to the sales. Federal and state excise taxes (including sales taxes) are included as part of the receipts if the taxes are passed on to the buyer or included as part of the selling price of the product.

2. In the case of cost-plus-fixed-fee contracts, such as the operation of a government-owned plant for a fee, "sales" includes the entire reimbursed cost plus the fee.

3. In the case of a taxpayer engaged in providing services, such as the operation of an advertising agency or the performance of equipment service contracts or research and development contracts, "sales" includes the gross receipts from the performance of the services including fees, commissions, and similar items.

4. In the case of a taxpayer engaged in renting or licensing the use of real or tangible property, "sales" includes the gross receipts from these activities.

5. In the case of a taxpayer engaged in the sale, assignment, or licensing the use of intangible personal property such as patents and copyrights, "sales" includes the gross receipts from these activities.

6. If a taxpayer derives receipts from the sale of equipment used in its business, those receipts constitute "sales." For example, a truck express company owns a fleet of trucks and sells its trucks under a regular replacement program. The gross receipts from the sales of the trucks are included in the sales factor.

B. In some cases certain gross receipts are disregarded in determining the sales factor so that the apportionment formula will operate fairly to apportion to this state the income of the taxpayer's trade or business. See R15-2D-903.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-802 [REPEALED]

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section repealed by final rulemaking at 7 A.A.R. 654, effective January 11, 2001 (Supp. 01-1).

Ariz. Admin. Code § R15-2D-803 Sales Factor Numerator

The numerator of the sales factor is the gross receipts attributable to this state and derived by the taxpayer from transactions and activity in the regular course of its trade or business. All interest income, service charges, carrying charges, or time-price differential charges incidental to the gross receipts are included regardless of the place where the accounting records are maintained or the location of the contract or other evidence of indebtedness.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-804 Property Delivered or Shipped to a Purchaser within This State

A. Property is deemed to be delivered or shipped to a purchaser within this state if the recipient is located in this state, even though the property is ordered from outside this state.

Example: The taxpayer, with inventory in State A, sells $100,000 of its products to a purchaser with branch stores in several states, including this state. The order for the purchase is placed by the purchaser's central purchasing department, located in State B. The taxpayer ships $25,000 of the purchase order directly to purchaser's branch store in this state. The branch store in this state is the "purchaser within this state" with respect to $25,000 of the taxpayer's sales.

B. Property is delivered or shipped to a purchaser within this state if the shipment terminates in this state, even though the property is subsequently transferred by the purchaser to another state.

Example: The taxpayer makes a sale to a purchaser who maintains a central warehouse in this state at which all merchandise purchases are received. The purchaser reships the goods to its branch stores in other states for sale. All of the taxpayer's products shipped to the purchaser's warehouse in this state constitute property delivered or shipped to a purchaser within this state.

C. The term "purchaser within this state" includes the ultimate recipient of the property if the taxpayer in this state, at the designation of the purchaser, delivers to or has the property shipped to the ultimate recipient within this state.

Example: A taxpayer in this state sells merchandise to a purchaser in State A. The taxpayer directs the manufacturer or supplier of the merchandise in State B to ship the merchandise to the purchaser's customer in this state according to purchaser's instructions. The sale by the taxpayer is "in this state."

D. If property being shipped by a seller from the state of origin to a consignee in another state is diverted while en route to a purchaser in this state, the sales are in this state.

Example: The taxpayer, a produce grower in State A, begins shipment of perishable produce to the purchaser's place of business in State B. While en route, the produce is diverted to the purchaser's place of business in this state in which the taxpayer is subject to tax. The sale by the taxpayer is in this state.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-805 Sales of Tangible Personal Property to the United States Government

Sales of tangible personal property to the United States Government are not included in the numerator of the sales factor. For the purposes of this Section, only sales for which the United States Government makes direct payment to the seller under the terms of a contract constitute sales to the United States Government. Thus, as a general rule, sales by a subcontractor to a prime contractor, who has the contract with the United States Government, do not constitute sales to the United States Government.

Example 1: A taxpayer contracts with General Services Administration to deliver X number of trucks that are paid for by the United States Government. The sale is a sale to the United States Government.

Example 2: The taxpayer, as a subcontractor to a prime contractor with the National Aeronautics and Space Administration, contracts to build a component of a rocket for $1,000,000. The sale by the subcontractor to the prime contractor is not a sale to the United States Government.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-806 Sales Other Than Sales of Tangible Personal Property in This State

This Section provides for the inclusion in the numerator of the sales factor of gross receipts from transactions other than sales of tangible personal property (including transactions with the United States Government). Under this Section, gross receipts are attributed to this state if the income-producing activity that gives rise to the receipts is performed wholly within this state. Also, gross receipts are attributed to this state if, with respect to a particular item of income, the income-producing activity is performed within and without this state but the greater proportion of the income-producing activity is performed in this state rather than in any other state, based on costs of performance.

1. The term "income-producing activity" applies to each separate item of income and means the transactions and activities directly engaged in by a taxpayer in the regular course of its trade or business for the ultimate purpose of obtaining gains or profit. Income-producing activity does not include transactions and activities performed on behalf of a taxpayer, such as those conducted on its behalf by an independent contractor. Accordingly, "income-producing activity" includes but is not limited to the following:

a. The rendering of personal services by employees or the use of tangible and intangible property by the taxpayer in performing a service;

b. The sale, rental, leasing, licensing, or other use of real property;

c. The rental, leasing, licensing, or other use of tangible personal property; and

d. The sale, licensing, or other use of intangible personal property. The mere holding of intangible personal property is not, of itself, an income-producing activity.

2. The term "costs of performance" means direct costs determined in a manner consistent with generally accepted accounting principles and in accordance with accepted conditions or practices in the trade or business of the taxpayer.

3. The following are special provisions for determining when receipts from the income-producing activities described are in this state:

a. Gross receipts from the sale, lease, rental, or licensing of real property are in this state if the real property is located in this state.

b. Gross receipts from the rental, lease, or licensing of tangible personal property are in this state if the property is located in this state. The rental, lease, licensing, or other use of tangible personal property in this state is an income-producing activity separate from the rental, lease, licensing, or other use of the same property while located in another state; consequently, if property is within and without this state during the rental, lease, or licensing period, gross receipts attributable to this state are measured by the ratio of the time the property is physically present or is used in this state to the total time the property is present or used anywhere during that period.

Example: The taxpayer is the owner of 10 railroad cars. During the year, the total of the days during which each railroad car is present in this state is 50 days. The receipts attributable to the use of each of the railroad cars in this state are a separate item of income and shall be determined as follows:

[(10 x 50)] (10 x 365)] x Total Receipts = Receipts Attributable to this State

c. Gross receipts for the performance of personal services are attributable to this state to the extent the services are performed in this state. If services relating to a single item of income are performed partly within and partly without this state, the gross receipts from the performance of the services are attributable to this state only if the greater proportion of the services is performed in this state, based on costs of performance. Usually, if services are performed partly within and partly without this state, the services performed in each state constitute a separate income-producing activity; in such a case the gross receipts from the performance of services attributable to this state are measured by the ratio of the time spent performing the services in this state to the total time spent performing the services everywhere. Time spent performing services includes the amount of time expended in the performance of a contract or other obligation that gives rise to the gross receipts. Personal service not directly connected with the performance of the contract or other obligation, such as time expended in negotiating the contract, is excluded from the computations.

Example 1: The taxpayer, a road show, gives theatrical performances at various locations in State X and in this state during the tax period. All gross receipts from performances given in this state are attributed to this state.

Example 2: The taxpayer, a public opinion survey corporation, conducts a poll by means of its employees in State X and in this state for the sum of $9,000. The project required 600 hours to obtain the basic data and prepare the survey report. The taxpayer expended 200 of the 600 hours in this state. The receipts attributable to this state are $3,000 [(200 600) x $9,000].

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-807 Consistency and Uniformity in Reporting

A. If the taxpayer departs from or modifies the basis for excluding or including gross receipts in the sales factor used in Arizona returns for prior years, the taxpayer shall disclose in the return for the current year the nature and extent of the modification.

B. If the returns or reports filed by the taxpayer with all states to which the taxpayer reports under the Uniform Division of Income for Tax Purposes Act are not uniform in the inclusion or exclusion of gross receipts, the taxpayer shall disclose the nature and extent of the variance upon request by the Department.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Article 9 DEPARTURE FROM STANDARD APPORTIONMENT AND ALLOCATION PROVISIONS

Ariz. Admin. Code § R15-2D-901 General

A. A.R.S. § 43-1148 permits a departure from the allocation and apportionment provisions only in limited cases. A.R.S. § 43-1148 may be invoked only if unusual fact situations produce incongruous results under the apportionment and allocation provisions contained in A.R.S. Title 43, Chapter 11, Article 4.

B. If a departure from the allocation and apportionment provisions referred to in subsection (A) includes a change in the number of factors, the denominator of the apportionment ratio shall be adjusted to reflect the change.

Example 1: If two equally weighted factors are used, the denominator is two.

Example 2: If two factors are used and one of the factors is double weighted, the denominator is three.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-902 Special Provisions for the Property Factor

The following special provisions apply to the property factor of the apportionment formula:

1. If the subrents taken into account in determining the net annual rental rate under R15-2D-605 produce a negative or inaccurate value for any item of property, the Department shall require and the taxpayer shall use another method that will properly reflect the value of the rented property. In no case, however, shall the value be less than an amount that bears the same ratio to the annual rental rate paid by the taxpayer for the property as the fair market value of that portion of the property used by the taxpayer bears to the total fair market value of the rented property.

Example: The taxpayer rents a 10-story building at an annual rental rate of $1,000,000. Taxpayer occupies two stories and sublets eight stories for $1,000,000 a year. The net annual rental rate of the taxpayer shall not be less than 2/10ths of the taxpayer's annual rental rate for the entire year, or $200,000.

2. If property owned by others is used by the taxpayer at no charge or rented by the taxpayer for a nominal rate, the net annual rental rate for the property shall be determined on the basis of a reasonable market rental rate for the property.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Ariz. Admin. Code § R15-2D-903 Special Provisions for the Sales Factor

The following special provisions apply to the sales factor of the apportionment formula:

1. If substantial amounts of gross receipts arise from an incidental or occasional sale of a fixed asset used in the regular course of the taxpayer's trade or business, those gross receipts are excluded from the sales factor. For example, gross receipts from the sale of a factory or plant are excluded.

2. Insubstantial amounts of gross receipts, arising from incidental or occasional transactions or activities, may be excluded from the sales factor, unless their exclusion would materially affect the amount of income apportioned to this state. For example, the taxpayer ordinarily may include or exclude from the sales factor gross receipts from transactions such as the sale of office furniture, business automobiles, or other similar items.

3. If the income-producing activity with respect to business income from intangible personal property can be readily identified, the income is included in the denominator of the sales factor and, if the income-producing activity occurs in this state, in the numerator of the sales factor as well. For example, usually the income-producing activity can be readily identified with respect to interest income received on deferred payments on sales of tangible property and income from the sale, licensing, or other use of intangible personal property. If business income from intangible property cannot readily be attributed to any particular income-producing activity of the taxpayer, the income is not assigned to the numerator of the sales factor for any state and is excluded from the denominator of the sales factor. For example, if business income in the form of dividends received on stock, royalties received on patents or copyrights, or interest received on bonds, debentures, or government securities results from the mere holding of the intangible personal property by the taxpayer, the dividends and interest shall be excluded from the denominator of the sales factor.

4. Items of income that are not subject to taxation under A.R.S. Title 43 or judicial decision is excluded from the sales factor. Examples of these items include controlled corporation dividends, gross-up dividends, Subpart F dividends, and interest from federal obligations.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp. 01-4).

Article 10 CREDITS

Ariz. Admin. Code § R15-2D-1001 Environmental Technology Facility Tax Credit

A. A taxpayer claiming a tax credit for a qualified environmental technology facility under A.R.S. § 43-1169 shall retain records as required by A.R.S. § 42-1105. In addition, a taxpayer shall retain the following records to substantiate the tax credit:

1. A copy of the completed application packet submitted to the Arizona Department of Commerce.

2. The certificate of qualification issued by the Arizona Department of Commerce.

3. A copy of the memorandum of understanding entered into with the Arizona Department of Commerce.

4. A copy of each of the environmental technology annual qualification reports filed with the Arizona Department of Commerce.

5. A schedule showing the amount of credit claimed for each taxable year and the amount used for each taxable year.

6. The source documents that support the amount and date of capital expenditures made in constructing a qualified environmental technology facility.

B. A taxpayer shall retain the records specified in subsection (A) for the period in which the Department may issue a deficiency assessment for any taxable year that the taxpayer claims a credit or a carryover credit. A taxpayer may retain source documents in a machine-sensible format or through microfilm or microfiche, if the information is retrievable on request by Department personnel.

C. In addition to the recapture of previously used credits required by subsections (G) and (H) of A.R.S. § 43-1169, a taxpayer shall reduce the amount of any unused carryover credit related to amounts spent to construct a qualified environmental technology facility as follows:

1. If, before the facility is placed in service, the taxpayer abandons construction or changes plans in a manner that no longer qualifies as an environmental technology manufacturing, producing, or processing facility under A.R.S. § 41-1514.02, the total unused carryover credit is reduced to zero.

2. If, within five years after being placed in service, the facility ceases for any reason to operate as an environmental technology manufacturing, producing, or processing facility as described in A.R.S. § 41-1514.02, the total unused carryover credit is reduced by the applicable percentage in A.R.S. § 43-1169(H).

History

• New Section adopted by final rulemaking at 6 A.A.R. 4105, effective October 4, 2000 (Supp. 00-4).

Ariz. Admin. Code § R15-2D-1002 Renewable Energy Production Tax Credit

A. For each year for which an owner of a qualified energy generator plans to claim a renewable energy production tax credit, the owner shall file one of the following applications:

1. An initial application in accordance with subsection (B) for:

a. Energy produced in 2011 for which an owner of a qualified energy generator plans to claim a credit on the 2011 tax return filed in 2012, and

b. Energy produced after 2011 for which an owner of a qualified energy generator did not have a place on the prior year's Credit Authorization List for the renewable energy production tax credit under A.R.S. § 43-1164.03(G).

2. A renewal application in accordance with subsection (C) for an owner of a qualified energy generator that did have a place on the prior year's Credit Authorization List for the renewable energy production tax credit under A.R.S. § 43-1164.03(G).

B. An initial application shall include the following information:

1. The information required by A.R.S. § 43-1164.03(F).

2. The business structure of the applicant.

3. If the credit will be passed through to shareholders or partners, a list including the name, taxpayer identification number, and ownership percentage of each shareholder or partner. If the tax year end is other than December 31, and the shareholders or partners, or ownership percentages change, the applicant shall update the list for the tax year end by the due date of the applicant's Arizona return, including extensions.

4. The applicant's tax year end.

5. The name of the contact person, his or her title, telephone number and fax number.

6. If the applicant has any affiliates or subsidiaries, a list of the affiliates and subsidiaries, including the name, address, taxpayer identification number, and percentage of ownership. The applicant may substitute a federal Form 851, or other federal form with the required information, for this list.

7. Self-assigned name or identification number of the qualified energy generator.

8. Assessor's parcel number or numbers of the land on which the qualified energy generator is located or, if not available, the legal description.

9. The centrally valued property tax identification number for the personal property on the land.

10. The type of qualified energy resource used to generate electricity. If the qualified energy resource is biomass, the type of biomass.

11. The generating capacity of the qualified energy generator.

12. The number of kilowatt-hours of electricity produced for the calendar year.

13. Printouts for the calendar year from the production meter located at the qualified energy generator that:

a. Measures the output from the qualified energy generator, and

b. Provides the output information to a grid-tied energy management system.

14. A signed affidavit in which the applicant states that the information contained in the application is true and correct under penalty of perjury and that the qualified energy generator for which the applicant is claiming the credit did not produce electricity prior to 2011.

C. A renewal application shall include the information required by subsections (B)(1) through (6) and (B)(12) through (14). In addition, where the information required by subsections (B)(7) through (11) has changed since the prior year's application, the applicant shall provide the new information on the renewal application.

D. Copies of invoices or receipts from the electricity purchaser, verifying kilowatt-hours sold, shall be made available to the Department upon request.

E. If an owner owns more than one qualified energy generator, the owner shall submit a separate application for each qualified energy generator.

F. Each application shall be mailed separately in its own envelope by United States Postal Service Express Mail to: Arizona Department of Revenue, Renewable Energy Production Tax Credit Program, P.O. Box 25248, Phoenix, AZ 85002. Notwithstanding A.R.S. § 1-218(E)(1), the Department shall not accept applications through any other delivery method for purposes of this Section and A.R.S. § 43-1164.03.

G. For each initial application received in accordance with subsections (B) and (F), the Department shall assign a priority placement number that reflects the date and time on the Express Mail label, without regard to which time zone mailing took place.

H. If the Department receives more than one initial application in accordance with subsection (G) that it would assign the same priority placement number based on date and time on the Express Mail label, then the order received shall be determined by a random drawing of affected applications.

I. If the Department denies an application or approves a smaller amount of credit than the amount requested on the application, the Department's decision is an appealable agency action as defined in A.R.S. § 41-1092(3) and the applicant may appeal the decision under subsection (J) and A.R.S. Title 41, Chapter 6, Article 10.

J. To appeal a decision made under subsection (I), the applicant shall file a petition, in accordance with A.A.C. R15-10-105(B) and A.R.S. § 41-1092.03(B), within 30 days of receipt of the Department's decision.

K. For each decision made under subsection (I), the Department shall reserve the portion of the cap that the applicant would have been entitled to if the Department had approved the application in full, up to the generator cap limit, until the applicant waives or exhausts the appeal rights in subsection (J).

L. For the cap reserved under subsection (K), once the applicant waives or exhausts the appeal rights in subsection (J), the Department shall certify the cap to the next eligible applicant on the Credit Authorization List, until the full cap is certified.

M. In addition to the definitions provided in A.R.S. § 43-1164.03, unless the context provides otherwise, the following definitions apply to this Section and to implementation of A.R.S. § 43-1164.03:

1. "Cap" means the annual tax credit limit of $20 million in A.R.S. §§ 43-1164.03(G) and 43-1083.02(G).

2. "Generator cap" means the annual tax credit limit of $2 million per qualified energy generator in A.R.S. §§ 43-1164.03(G) and 43-1083.02(G).

History

• New Section made by final rulemaking at 18 A.A.R. 603, effective April 8, 2012 (Supp. 12-1).

Article 11 REPEALED

Ariz. Admin. Code § R15-2D-1101 [REPEALED]

History

• New Section made by exempt rulemaking at 7 A.A.R. 5720, effective November 29, 2001 (Supp. 01-4). Repealed by exempt rulemaking at 14 A.A.R. 4253, effective October 24, 2008 (Supp. 08-4).

Ariz. Admin. Code § R15-2D-1102 [REPEALED]

History

• New Section made by exempt rulemaking at 7 A.A.R. 5720, effective November 29, 2001 (Supp. 01-4). Repealed by exempt rulemaking at 14 A.A.R. 4253, effective October 24, 2008 (Supp. 08-4).

Ariz. Admin. Code § R15-2D-1103 [REPEALED]

History

• New Section made by exempt rulemaking at 7 A.A.R. 5720, effective November 29, 2001 (Supp. 01-4). Repealed by exempt rulemaking at 14 A.A.R. 4253, effective October 24, 2008 (Supp. 08-4).

Ariz. Admin. Code § R15-2D-1104 [REPEALED]

History

• New Section made by exempt rulemaking at 7 A.A.R. 5720, effective November 29, 2001 (Supp. 01-4). Repealed by exempt rulemaking at 14 A.A.R. 4253, effective October 24, 2008 (Supp. 08-4).

Ariz. Admin. Code § R15-2D-1105 [REPEALED]

History

• New Section made by exempt rulemaking at 7 A.A.R. 5720, effective November 29, 2001 (Supp. 01-4). Repealed by exempt rulemaking at 14 A.A.R. 4253, effective October 24, 2008 (Supp. 08-4).

Subchapter E EXPIRED

Article 1 EXPIRED

Ariz. Admin. Code § R15-2E-101 Expired

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 2326, effective May 14, 2001 (Supp. 01-2). Section expired under A.R.S. § 41- 1056(J) at 24 A.A.R. 2431, effective July 19, 2018 (Supp. 18-3).

Article 2 EXPIRED

Ariz. Admin. Code § R15-2E-201 Expired

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 2326, effective May 14, 2001 (Supp. 01-2). Section expired under A.R.S. § 41- 1056(J) at 24 A.A.R. 2431, effective July 19, 2018 (Supp. 18-3).

Ariz. Admin. Code § R15-2E-202 Expired

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 2326, effective May 14, 2001 (Supp. 01-2). Section expired under A.R.S. § 41- 1056(J) at 24 A.A.R. 2431, effective July 19, 2018 (Supp. 18-3).

Ariz. Admin. Code § R15-2E-203 Expired

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 2326, effective May 14, 2001 (Supp. 01-2). Section expired under A.R.S. § 41- 1056(J) at 24 A.A.R. 2431, effective July 19, 2018 (Supp. 18-3).

Article 3 EXPIRED

Ariz. Admin. Code § R15-2E-301 Expired

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 2326, effective May 14, 2001 (Supp. 01-2). Section expired under A.R.S. § 41- 1056(J) at 24 A.A.R. 2431, effective July 19, 2018 (Supp. 18-3).

Subchapter F ESTATES AND TRUSTS

Article 1 RETURNS

Ariz. Admin. Code § R15-2F-101 Fiduciary Returns

A. In cases in which the gross income of the estate or trust is $5,000 or more, a copy of the will or trust instrument sworn to by the fiduciary as a true and complete copy must be filed with the fiduciary return of the estate or trust together with a statement by the fiduciary indicating the provisions of the will or trust instrument which in his opinion determine the extent to which the income of the estate or trust is taxable to the estate or trust, the beneficiaries, or the grantor respectively. However, if a copy of the will or trust instrument and statement relating to the provisions of the will or trust instrument have once been filed, they need not be filed again if the fiduciary return contains a statement showing when they were filed. If the trust instrument is amended in any way after such copies have been filed, a copy of the amendment must be filed with the return for the taxable year in which the amendment was made. In addition, the fiduciary must attach a statement to the copy of the amendment indicating the effect, if any, in his opinion of such amendment on the extent to which the income of the estate or trust is taxable to the estate or trust, the beneficiaries, or the grantor, respectively.

B. A certificate that all taxes due or to become due from the decedent or estate for whom a fiduciary acts have been paid or secured will not be issued unless all the following requirements are complied with:

1. A return must be filed by or on behalf of the decedent and for the estate for each taxable year in which the respective incomes of the decedent or estate exceeded the requirements for filing returns.

2. Although it is possible that no tax will become due from an estate for the year in which it is distributed, since all the income of the estate may be either properly paid or credited to the beneficiaries and hence deductible, a return for each year must be filed at the time the certificate is requested, regardless of the amount of gross or net income for such year. Such return must disclose all income to be distributed to beneficiaries upon the final distribution of the estate as well as income property paid or credited to beneficiaries during the year covered by the return and prior to final distribution.

3. A statement under declaration of perjury must be made by the fiduciary on the request for certificate, regarding the status of returns filed by or on behalf of the decedent or for the estate for the 4 taxable years immediately preceding the date a certificate is requested. The statement required should indicate the years for which returns were filed or indicate the years for which the gross and net incomes were less than the amount necessary to require the filing of returns. If additional information is required, a supplemental statement will be requested.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2).

Ariz. Admin. Code § R15-2F-102 Expired

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section expired under A.R.S. § 41-1056(E) at 11 A.A.R. 618, effective October 31, 2004 (Supp. 05-1).

Ariz. Admin. Code § R15-2F-103 Expired

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section expired under A.R.S. § 41-1056(E) at 11 A.A.R. 618, effective October 31, 2004 (Supp. 05-1).

Article 2 IMPOSITION OF TAX ON ESTATES AND TRUSTS

Ariz. Admin. Code § R15-2F-201 Expired

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section expired under A.R.S. § 41-1056(E) at 10 A.A.R. 5220, effective October 31, 2004 (Supp. 04-4).

Subchapter G PARTNERSHIPS

Article 1 TAXATION OF PARTNERSHIPS

Ariz. Admin. Code § R15-2G-101 Partnerships

A. For purposes of this Section:

1. "Distributive share of the partnership" means a partner's share, as determined under the partnership agreement, of the items enumerated in A.R.S. § 43-1412.

2. "Arizona distributive share of the partnership" means the amount computed in subsection (A)(1), subject to the allocation and apportionment provisions of A.R.S. §§ 43-1131 through 43-1148.

B. A partnership is not subject to income tax but shall file a return of income for information purposes.

C. In computing taxable income:

1. A resident partner shall include the resident partner's distributive share of the partnership.

2. A nonresident partner shall include the nonresident partner's Arizona distributive share of the partnership.

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Amended by final rulemaking at 7 A.A.R. 2898, effective June 13, 2001 (Supp. 01-2).

Ariz. Admin. Code § R15-2G-102 [REPEALED]

History

• Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section repealed by final rulemaking at 7 A.A.R. 2898, effective June 13, 2001 (Supp. 01-2).

Chapter 3 Department of Revenue - Luxury Tax Section

Article 1 REPEALED

Ariz. Admin. Code § R15-3-101 [REPEALED]

History

• Adopted effective March 18, 1981 (Supp. 81-2). Repealed effective May 14, 1993 (Supp. 93-2).

Ariz. Admin. Code § R15-3-102 [REPEALED]

History

• Adopted effective March 18, 1981 (Supp. 81-2). Repealed effective May 14, 1993 (Supp. 93-2).

Ariz. Admin. Code § R15-3-103 [REPEALED]

History

• Adopted effective March 18, 1981 (Supp. 81-2). Repealed effective May 14, 1993 (Supp. 93-2).

Ariz. Admin. Code § R15-3-104 [REPEALED]

History

• Adopted effective March 18, 1981 (Supp. 81-2). Repealed effective May 14, 1993 (Supp. 93-2).

Article 2 GENERAL

Ariz. Admin. Code § R15-3-201 Definitions

In this Chapter, unless otherwise specified:

1. "Acquire" or any variation thereof means to receive, to come to own or have, or to come into possession or control of tobacco products, regardless of the means or manner and whether the tobacco products are later transferred, sold, distributed or otherwise given to another person.

1 2. "Alcoholic beverage" means cider, malt liquor, spirituous liquor, and vinous liquor, as these terms are defined in A.R.S. § 42-3001.

2 3. "Applicant" means a person applying for a distributor's license under A.R.S. § 42-3401.

4. "Business location" means either of the following:

a. Pursuant to A.R.S. § 42-3151(A), any place where books, papers, invoices, or records of a wholesaler, distributor, or retailer are open for inspection by the Department; or

b. Pursuant to A.R.S. § 42-3151(B), any place where luxuries are placed, produced, stored, or sold.

3 5. "Cigar" has the same meaning as prescribed in A.R.S. § 42-3001.

4 6. "Cigarette" has the same meaning as prescribed in A.R.S. § 42-3001.

5. "Cigarette distributor" has the same meaning as prescribed in A.R.S. § 42-3001 .

6 7. "Consumer" has the same meaning as prescribed in A.R.S. § 42-3001.

8. "Department" means the Arizona Department of Revenue.

7 9. "Distributor" has the same meaning as prescribed in A.R.S. § 42-3001.

8 10."Luxury" has the same meaning as prescribed in A.R.S. § 42-3001.

11. "Nonparticipating manufacturer" has the same meaning as prescribed in A.R.S. § 44-7111.

9. 12. "Other tobacco products" has the same meaning as prescribed in A.R.S. § 42-3001.

13. "Participating manufacturer" has the same meaning as prescribed in A.R.S. § 44-7111.

14. "Place of business" has the same meaning as prescribed in A.R.S. § 42-3001.

10 15. "Primary source of supply" has the same meaning as prescribed in A.R.S. § 4-243.01(E)(1).

11 16. "Retailer" has the same meaning as prescribed in A.R.S. § 42-3001.

17. "Roll-your-own tobacco" has the same meaning as prescribed in A.R.S. § 42-3001.

12 18. "Sale" means the act of soliciting, receiving an order for, keeping or offering for sale, delivering for value, peddling, or keeping with intent to sell any of the luxuries taxable under this Chapter.

13 19. "Tobacco products" has the same meaning as prescribed in A.R.S. § 42-3001.

14 20. "Tobacco taxes" means all taxes imposed on tobacco products under A.R.S. Title 42, Chapter 3.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Amended effective May 14, 1993 (Supp. 93-2). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4). Amended by final rulemaking at 22 A.A.R. 1843, effective 6/24/2016.

Ariz. Admin. Code § R15-3-202 Reserved

Ariz. Admin. Code § R15-3-203 [REPEALED]

History

• Adopted effective March 18, 1981 (Supp. 81-2). Repealed effective July 23, 1985 (Supp. 85-4).

Ariz. Admin. Code § R15-3-204 [REPEALED]

History

• Adopted effective March 18, 1981 (Supp. 81-2). Repealed effective July 23, 1985 (Supp. 85-4).

Article 3 TAXES ON TOBACCO PRODUCTS

Ariz. Admin. Code § R15-3-301 Licensing

A. A person shall obtain a distributor's license before engaging in business as a distributor. The Department shall issue a distributor's license to the person named in the license application for a business making the initial sale or distribution of tobacco products in this state, pursuant to the requirements of A.R.S. § 42-3401 and any applicable bonding requirements under A.R.S. § 42-1102(B).

B. The person shall disclose all places of business and business locations in its distributor's license application.

C. A licensee shall apply for a new distributor's license if it changes its legal entity or otherwise changes the legal structure of its business.

D. A licensee shall obtain a distributor's license for each business location that maintains an inventory of tobacco products and shall display the license in a conspicuous place at the business location.

E C. The Department shall issue a distributor's license only if the distributor maintains any books, papers, invoices, records, and tobacco products subject to the Department's inspection under A.R.S. §§ 42-3151, 42-3401(D), and 42-3405 in a place and manner at the business location that is accessible to the Department during normal business hours without a judicial warrant or prior written consent. For example, if a licensee or its agent uses the same property for residential purposes and as a business location, as that term is defined in A.A.C. R15-3-201, the books, papers, invoices, records, and tobacco products located on that property shall be maintained in a place and manner that is completely separate from the residential portion of the property so that the Department will not need a judicial warrant or written consent to inspect the business location of that property during normal business hours.

F. If a business maintains any books, papers, invoices, or records electronically, the Department shall issue a license for a business location only if the business provides access to the data for the Department's inspection at the business location, regardless of the storage location of the data. The business shall provide the access at the business location in a place and manner that is accessible to the Department during normal business hours without a judicial warrant or prior written consent of the licensee.

G D. If an applicant remits payment of the licensee fee by cashier's check or money order, the payment shall bear

1. the applicant's name as the purchaser or remitter; or, if the payment is made by company check, the check shall bear

2. the applicant's name as the drawer or maker.

H E. Pursuant to A.R.S. §§ 42-3004(1) and 42-3401(C), the Department may request an applicant to submit additional supporting documentation for the purpose of enforcing this section.

F. For purposes of licensing, "person" means any firm partnership, limited liability company, limited liability partnership or association, or corporation, and the person's members, officers, or owners who directly or indirectly own an aggregate amount of ten percent or more of ownership interest.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Former Section R15-3-301 repealed, new R15-3-301 renumbered from R15-3-302 and amended effective June 20, 1990 (Supp. 90-2). Amended by final rulemaking at 5 A.A.R. 2168, effective June 15, 1999 (Supp. 99-2). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4). Amended by exempt rulemaking at 19 A.A.R. 520, effective February 19, 2013 (Supp. 13-1). Amended by final rulemaking at 22 A.A.R. 1843, effective 6/24/2016.

Ariz. Admin. Code § R15-3-302 [REPEALED]

History

• Adopted effective March 18, 1981 (Supp. 81-2). Former Section R15-3-302 renumbered to R15-3-301, new Section R15-3-302 renumbered from R15-3-304 and amended effective June 20, 1990 (Supp. 90-2). Section repealed by final rulemaking at 5 A.A.R. 2168, effective June 15, 1999 (Supp. 99-2). New Section made by final rulemaking at 8 A.A.R. 459, effective January 10, 2002 (Supp. 02-1). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4). Repealed by final rulemaking at 22 A.A.R. 1843, effective 6/24/2016.

Ariz. Admin. Code § R15-3-303 [REPEALED]

History

• Adopted effective March 18, 1981 (Supp. 81-2). Former Section R15-3-303 repealed, new Section R15-3-303 renumbered from R15-3-305 and amended effective June 20, 1990 (Supp. 90-2). Section repealed by final rulemaking at 5 A.A.R. 2168, effective June 15, 1999 (Supp. 99-2). New Section made by final rulemaking at 12 A.A.R. 4892, effective December 5, 2006 (Supp. 06-4). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4). Repealed by final rulemaking at 22 A.A.R. 1843, effective 6/24/2016.

Ariz. Admin. Code § R15-3-304 Change of Licensee's Business Name

A licensee that changes the name under which its business operates shall notify the Department in writing within 30 days of the name change and request a reissuance of its distributor's license.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Former Section R15-3-304 renumbered to R15-3-302, new Section R15-3-304 renumbered from R15-3-306 and amended effective June 20, 1990 (Supp. 90-2). Amended by final rulemaking at 5 A.A.R. 2168, effective June 15, 1999 (Supp. 99-2). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4). Amended by final rulemaking at 22 A.A.R. 1843, effective 6/24/2016.

Ariz. Admin. Code § R15-3-305 Change of Licensee's Place of Business, Business Location or Mailing Address

A. Except as provided in subsection (C), a licensee shall notify the Department in writing within 30 days of a change in a place of business or business location and request a reissuance of its distributor's license that contains the licensee's change in information.

B. Except as provided in subsection (C), a licensee shall notify the Department in writing within 30 days of a change in the licensee's mailing address (where all correspondence is mailed). The licensee shall specify whether the change is for the mailing address only.

C. A licensee that has received a service of documents from the Department pursuant to A.R.S. § 41-1092.04 shall notify the Department of any change in the licensee's place of business, business location or mailing address that would affect the subsequent service of documents within five days of the change.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Former Section R15-3-305 renumbered to R15-3-303, new Section R15-3-305 renumbered from R15-3-307 and amended effective June 20, 1990 (Supp. 90-2). Amended by final rulemaking at 5 A.A.R. 2168, effective June 15, 1999 (Supp. 99-2). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4). Amended by final rulemaking at 22 A.A.R. 1483, effective 6/24/2016.

Ariz. Admin. Code § R15-3-306 Recordkeeping, Invoicing and Filing-related Requirements

A. A licensee shall maintain books and records subject to inspection under A.R.S. §§ 42-3151 and 42-3405, including invoices required under A.R.S. § 42-3462(A)(13) for transactions with nonparticipating manufacturers, in a manner that allows the Department to segregate transactions by the distributor's business location, regardless of how the distributor lists transactions on a monthly return for tobacco products.

B. A licensee shall submit electronic copies of invoices or equivalent documentation for any nonparticipating manufacturer's cigarettes or roll-your-own tobacco purchased, acquired, or exported by or to the licensee. Pursuant to A.R.S. §§ 42-3462(A)(13), copies of those invoices shall be submitted with the licensee's monthly returns required under A.R.S. § 42-3462.

1. This subsection applies to any nonparticipating manufacturer's cigarettes or roll-your-own tobacco entering or leaving the inventory of a business location or place of business in the state, and to any transaction in which a nonparticipating manufacturer's cigarettes or roll-your-tobacco leave an out-of-state business location for any location within the state.

2. "Equivalent documentation" means letters, memoranda, receipts, billing records or other written documentation that records or documents transactions for the purchase, acquisition or export of a nonparticipating manufacturer's cigarettes or roll-your-own tobacco in a manner that allows the Department to match those transactions with transactions recorded in a distributor's invoices, books and records. Equivalent documentation shall contain for each transaction:

a. the purchase, acquisition or export date;

b. the corresponding invoice number;

c. the brand names and quantities of each brand of cigarettes or roll-your-own tobacco purchased, acquired or exported;

d. the identification of any cigarette tax stamps affixed to each brand of cigarettes, if applicable; and

e. the recipient's name and delivery address.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Former Section R15-3-306 renumbered to R15-3-304, new Section R15-3-306 renumbered from R15-3-308 and amended effective June 20, 1990 (Supp. 90-2). Section repealed by final rulemaking at 5 A.A.R. 2168, effective June 15, 1999 (Supp. 99-2). Adopted by final rulemaking at 22 A.A.R. 1843, effective 6/24/2016.

Ariz. Admin. Code § R15-3-307 Cancellation of Distributor's License

A. If a licensee sells or terminates its business or voluntarily ceases all tobacco distribution activity, the licensee shall notify the Department in writing within 30 days of selling or terminating its business or ceasing its tobacco distribution activity, including the date of the sale, termination or cessation of tobacco distribution activity. The Department shall cancel the license, effective as of the date of sale, termination or voluntary cessation of tobacco distribution activity.

B. In the event a license is cancelled, the licensee shall file a final monthly return by the 20th day of the month immediately following the cancellation's effective date. Late or fraudulent filings are subject to civil and criminal penalties under A.R.S. §§ 42-1125(K), (U) and 42-1127(B)(1) -(2), (B)(4).

History

• Adopted effective March 18, 1981 (Supp. 81-2). Former Section R15-3-307 renumbered to R15-3-305, new Section R15-3-307 renumbered from R15-3-309 and amended effective June 20, 1990 (Supp. 90-2). Amended by final rulemaking at 5 A.A.R. 2168, effective June 15, 1999 (Supp. 99-2). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4). Amended by final rulemaking at 22 A.A.R. 1843, effective 6/24/2016.

Ariz. Admin. Code § R15-3-308 Revocation or Suspension of Distributor's License

A. The Department shall not issue or renew a distributor's license if any of the conditions listed under A.R.S. § 42-3401(E) -(F) applies. The Department shall give written notice of a denial to issue or renew a license to the applicant or licensee by delivering the notice by certified mail, return receipt requested, or by personal service, to the applicant or licensee's place of business.

B. Except as otherwise provided in A.R.S. § 42-3401 and this section, the Department may revoke or suspend a license for more than two violations within a three-year period of any provision of A.R.S. Title 42 or this Article pursuant to A.R.S. § 42-3401(G).

C. The Department may revoke a license for a violation of A.R.S. §§ 42-3401(F), 42-3461(A) or any other statute that permits revocation.

D. The Department shall give written notice of a revocation or suspension to a licensee by delivering the notice by certified mail, return receipt requested, or by personal service, to the licensee's place of business.

E. The applicant or licensee may request a hearing in writing within 30 days after receipt of the notice to appeal the Department's decision. If the notice is delivered by certified mail, return receipt requested, the applicant or licensee is presumed to have received notice upon the date shown on the return receipt signed by or on behalf of the applicant or licensee, or, if the receipt is unsigned, upon the date that the United States Postal Service attempted to deliver the notice. If the notice is delivered by personal service, the applicant or licensee is presumed to have received notice upon the date of service.

F. If the applicant or licensee does not file an appeal within the 30-day period, the Department's determination becomes final. The Department shall consider the appeal filed on the earlier of the date received by the Department or the date deposited in the United States mail as evidenced by a postmark. If the applicant or licensee files a timely appeal, the Department shall request a hearing by the Office of Administrative Hearings.

G. If the applicant or licensee appeals the revocation or suspension, the Department shall suspend action until the final order of the Department has been issued under A.A.C. R15-10-131.

H. Pursuant to A.R.S. §§ 41-1092.11(B) and 42-3401(J), the Department may order the summary suspension of a license, pending a hearing by the Office of Administrative Hearings on the revocation or suspension, if the Department finds the public health, safety or welfare imperatively requires emergency action and incorporates that finding in the written notice described in subsection (D).

I. In the event a license is revoked, the person holding the revoked license is subject to the final monthly reporting requirement of A.A.C. R15-3-307(B).

J. In the event a license is suspended, the licensee remains subject to the final monthly reporting requirement as provided in A.R.S. §§ 42-3462 and 42-3501 during the period of suspension.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Former Section R15-3-308 renumbered to Section R15-3-306, new Section R15-3-308 renumbered from R15-3-310 and amended effective June 20, 1990 (Supp. 90-2). Amended by final rulemaking at 5 A.A.R. 2168, effective June 15, 1999 (Supp. 99-2). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4). Amended by exempt rulemaking at 19 A.A.R. 520, effective February 19, 2013 (Supp. 13-1). Amended by final rulemaking at 22 A.A.R. 1843, effective 6/24/2016.

Ariz. Admin. Code § R15-3-309 Inspection of Tobacco Product Retailers

A. A tobacco product retailer shall maintain any books, papers, invoices, records, and luxuries subject to the Department's inspection under A.R.S. § 42-3151 in a place and manner at the retail operation that is accessible to the Department during normal business hours without a judicial warrant or prior written consent. For example, if a retailer or agent of the retailer uses the same property for residential purposes and as a business location, the retailer shall maintain its books, papers, invoices, records, and luxuries in a place and manner that is separate and apart from the residential portion so that the Department does not need a judicial warrant or written consent to inspect the business location on that property during normal business hours.

B. If the retailer maintains any books, papers, invoices, or records electronically, the retailer shall provide access to the data for the Department's inspection at the business location, regardless of the data's storage location. The retailer shall provide access at the business location in a place and manner that is accessible to the Department during normal business hours without a judicial warrant or the retailer's prior written consent.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Former Section R15-3-309 renumbered to Section R15-3-307, new Section R15-3-309 renumbered from R15-3-311 and amended effective June 20, 1990 (Supp. 90-2). Section repealed by final rulemaking at 5 A.A.R. 2168, effective June 15, 1999 (Supp. 99-2). New Section made by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4). Amended by final rulemaking at 22 A.A.R. 1844, effective 6/24/2016.

Ariz. Admin. Code § R15-3-310 Vending Machine Identification and Inspection

A. An owner, operator, or person in possession of a vending machine shall ensure that any agent of the Department is able to inspect all cigarettes that are offered for sale using the vending machine. Except as provided in subsection (B), the owner, operator, or person in possession of the vending machine shall visibly display cigarettes in the vending machine so the Department's agent is able to inspect the cigarettes in the machine to verify that the required cigarette tax stamps are properly affixed.

B. If the cigarettes cannot be visually inspected in a vending machine, the owner, operator, or person in possession of the machine shall have access to the cigarettes in the machine and shall permit the Department's agent to inspect the cigarettes as needed to ensure they are properly affixed with tax stamps.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Former Section R15-3-310 renumbered to R15-3-308, new Section R15-3-310 renumbered from R15-3-313 and amended effective June 20, 1990 (Supp. 90-2). Amended by final rulemaking at 5 A.A.R. 2168, effective June 15, 1999 (Supp. 99-2). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4). Amended by final rulemaking at 22 A.A.R. 1844, effective 6/24/2016.

Ariz. Admin. Code § R15-3-311 [REPEALED]

History

• Adopted effective March 18, 1981 (Supp. 81-2). Former Section R15-3-311 renumbered to Section R15-3-309, new Section R15-3-311 renumbered from R15-3-314 and amended effective June 20, 1990 (Supp. 90-2). Amended by final rulemaking at 5 A.A.R. 2168, effective June 15, 1999 (Supp. 99-2). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4). Repealed by final rulemaking at 22 A.A.R. 1844, effective 6/24/2016.

Ariz. Admin. Code § R15-3-312 Purchase of Cigarette Tax Stamps

A. A distributor shall obtain unaffixed cigarette tax stamps only from the Department. The Department shall not provide cigarette tax stamps to a person who does not hold a valid distributor's license issued by the Department.

B. A distributor shall not sell, lend, give, purchase, or otherwise transfer cigarette tax stamps to or for another person at any time.

C. If a distributor remits payment for cigarette tax stamps by cashier's check, company check, or money order, the payment shall bear one of the following:

The name of the distributor purchasing the cigarette tax stamps as the purchaser or remitter, if the payment is made by cashier's check or money order; or

2. The name of the distributor purchasing the cigarette tax stamps as the drawer or maker, if the payment is made by company check.

History

• Former Section R15-3-316 renumbered to R15-3-312 and amended effective June 20, 1990 (Supp. 90-2). Amended by final rulemaking at 5 A.A.R. 2168, effective June 15, 1999 (Supp. 99-2). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4). Amended by final rulemaking at 22 A.A.R. 1844, effective 6/24/2016.

Ariz. Admin. Code § R15-3-313 Invoice Issued by a Distributor

For the purpose of enforcing A.R.S. § 42-3452 and pursuant to A.R.S. § 42-3004, a distributor of tobacco products shall issue an invoice or equivalent documentation for each transaction that involves the sale, purchase, or consignment of tobacco products to a retailer or the distributor's customer. The invoice or equivalent documentation shall include the distributor's license number. A copy of the invoice or equivalent documentation shall be maintained in accordance with A.R.S. § 42-3405.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Former Section R15-3-313 renumbered to R15-3-310, new Section R15-3-313 renumbered from R15-3-318 effective June 20, 1990 (Supp. 90-2). Section expired under A.R.S. § 41-1056(E) at 9 A.A.R. 4135, effective July 31, 2003 (Supp. 03-3). New Section made by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4). Amended by final rulemaking at 22 A.A.R. 1844, effective 6/24/2016.

Ariz. Admin. Code § R15-3-314 Sales in Interstate or Foreign Commerce

Tobacco products sold by licensed distributors to purchasers located outside the state are exempt from tobacco taxes if the following conditions are met:

1. The distributor ships or delivers the tobacco products to a location outside the state for use outside the state;

2. The distributor files with the Department the applicable monthly return or report for the tobacco products being sold, in the form and manner required by the Department;

3. In the appropriate section of the return or report filed under subsection (2), the distributor indicates the amount of out-of-state sales and the party to whom the sales were made;

4. The distributor provides to the Department a copy of either the invoice issued by the distributor to the out-of-state party to whom the sales were made or a copy of the return or report filed with the taxing authority of the state of destination of the cigarettes or other tobacco products; and

4 5. Pursuant to A.R.S. § 42-3405, the distributor retains one copy of each return or report for four years following the close of the calendar year in which the tobacco products are sold.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Former Section R15-3-314 renumbered to R15-3-311, new Section R15-3-314 renumbered from R15-3-319 and amended effective June 20, 1990 (Supp. 90-2). Amended by final rulemaking at 5 A.A.R. 2168, effective June 15, 1999 (Supp. 99-2). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4). Amended by final rulemaking at 22 A.A.R. 1844, effective 6/24/2016.

Ariz. Admin. Code § R15-3-315 Credit Purchases of Cigarette Tax Stamps

A distributor may increase its credit limit for cigarette tax stamp purchases by increasing the amount of its bond on file with the Department.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Amended effective November 5, 1986 (Supp. 86-6). Former Section R15-3-315 repealed, new Section R15-3-315 renumbered from R15-3-321 and amended effective June 20, 1990 (Supp. 90-2). Amended by final rulemaking at 5 A.A.R. 2168, effective June 15, 1999 (Supp. 99-2). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4). Amended by final rulemaking at 22 A.A.R. 1844, effective 6/24/2016.

Ariz. Admin. Code § R15-3-316 Sale of Unstamped Cigarettes

A. Except as otherwise provided in A.R.S. Title 42, Chapter 3, Articles 10 and 11, a distributor shall file the applicable monthly return with the Department in the form and manner required by the Department showing that the distributor purchased a sufficient number of cigarette tax stamps to be affixed to all cigarettes it distributes in this state during the period. If the distributor does not provide this information, the Department shall presume the distributor sold unstamped cigarettes. In that case, and in addition to any other applicable penalties, the Department shall determine the amount of unstamped cigarettes sold by the distributor and shall issue a proposed deficiency assessment for any luxury tax found due. The proposed deficiency assessment becomes final unless the distributor protests the assessment within 45 days under A.R.S. § 42-1108 and 15 A.A.C. 10, Article 1.

B. If a retailer maintains or possesses cigarettes at its place of business that, upon the Department's inspection, are loose or otherwise repackaged in a manner different from that distributed for sale by the cigarette manufacturer, the Department shall presume the retailer is offering the cigarettes for sale in violation of A.R.S. § 42-3456 unless the retailer establishes the contrary.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Former Section R15-3-316 renumbered to R15-3-312, new Section R15-3-316 renumbered from R15-3-322 and amended effective June 20, 1990 (Supp. 90-2). Amended by final rulemaking at 5 A.A.R. 2168, effective June 15, 1999 (Supp. 99-2). Amended to correct typographical error in citation to Arizona Revised Statues (Supp. 00-1). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4). Amended by final rulemaking at 22 A.A.R. 1844, effective 6/24/2016.

Ariz. Admin. Code § R15-3-317 Contraband and the Disposition of Seized Tobacco Products

A. Tobacco products considered to be contraband under A.R.S. § 42-3402 that are ordered, purchased or transported in violation of A.R.S. § 36-798.06 may be voluntarily reported by a person other than a licensed distributor and are subject to tax pursuant to A.R.S. § 36-798.06(E).

A. B. Except as provided in subsection (C), tobacco products seized by the Department under A.R.S. § 42-1124 are subject to return to a licensee that prevails in an appeal of the seizure.

B. The Department will destroy products seized under any of the following circumstances:

1. Tobacco products, other than pipe tobacco or cigars, seized for a violation of A.R.S. § 36-798.06 .

2. Cigarettes seized for noncompliance with A.R.S. § 41-2170.01 or for lack of markings required by A.R.S. § 41-2170.03 ;

3. Cigarettes seized for a violation of A.R.S. § 42-3210.

4. Cigarettes seized pursuant to A.R.S. § 44-7111(6)(b) . For the purposes of this paragraph, "cigarette" has the same meaning prescribed in A.R.S. § 44-7101(2)(d) .

5. Seizure of tobacco products under any other A.R.S. section that requires destruction of the products seized.

C. Tobacco products shall be forfeited to the state and destroyed if the tobacco products constitute contraband tobacco products, as described in A.R.S. § 42-3402, or are subject to seizure and destruction under any other statute.

History

• New Section made by exempt rulemaking at 19 A.A.R. 520, effective February 19, 2013 (Supp. 13-1). Amended by final rulemaking at 22 A.A.R. 1844, effective 6/24/2016.

Ariz. Admin. Code § R15-3-318 Refunds, Rebates and Redemption of Cigarette Tax Stamps

A. The Department does not bear the risk of loss or theft of cigarette tax stamps sold to a licensee and are no longer in the Department's possession.

B. The Department is not obligated to issue a refund or rebate for or to redeem lost cigarette tax stamps or cigarette tax stamps rendered unusable due to a licensee's mistake in the handling, usage or record-keeping of stamps in the licensee's possession.

C. The Department is not obligated to issue a refund for cigarette tax stamps unless the licensee proves it is entitled to a refund under one of the conditions of A.R.S. § 42-3008(A) and, if applicable, meets the requirements of A.A.C. R15-3-314 .

1. The conditions provided in R15-3-314 have been met to show that the licensee affixed the stamps to cigarettes exported from Arizona;

2. The licensee affixed stamps to articles upon which stamps are that do not required stamps, except for articles deemed contraband under A.R.S. Title 42, Chapter 3;

3. The licensee affixed stamps to cigarettes that are unfit for sale due to breakage or spoilage, unless the cigarettes are deemed contraband under A.R.S. Title 42, Chapter 3; or

4. The licensee has not used the stamps.

D. Pursuant to A.R.S. § 42-3008(C), the Department will not issue a refund for cigarette tax stamps affixed to tobacco products that are deemed contraband under A.R.S. Title 42, Chapter 3.

E. Except as provided in subsections (A) and (B) above, the Department shall redeem unused or spoiled cigarette tax stamps that satisfy all conditions of A.R.S. § 42-3460, provided the Department first receives a complete request for redemption. To request a redemption, the licensee shall submit a request to the Department and the unused or spoiled stamps sought to be redeemed. The Department shall not issue a redemption unless the Department receives the cigarette tax stamps sought to be redeemed.

F. Except as provided in subsections (A) and (B) above, the Department may issue a rebate of taxes paid on tobacco products pursuant to Article 7 of A.R.S. Title 42, Chapter 3 if the licensee establishes entitlement to the rebate pursuant to A.R.S. § 42-3406. The request for a rebate and all supporting documentation shall be submitted through the electronic filing system established by the Department.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Former Section R15-3-318 renumbered to R15-3-313 effective June 20, 1990 (Supp. 90-2). New Section made by exempt rulemaking at 19 A.A.R. 520, effective February 19, 2013 (Supp. 13-1). Amended by final rulemaking at 22 A.A.R. 1844, effective 6/24/2016.

Ariz. Admin. Code § R15-3-319 Cigarette Samples

A. A person shall not distribute loose individual cigarettes or cigarette packs containing less than 20 cigarettes within the state regardless of whether the cigarettes or cigarette packs are distributed free of charge or as samples.

B. A person may distribute cigarettes packaged in quantities of 20 or 25 as samples if the samples were obtained from a licensed distributor that reported and affixed cigarette tax stamps to the cigarette packs in accordance with A.R.S. Title 42, Chapter 3.

C. A person may distribute tobacco products other than cigarettes as samples within Arizona if the samples were first obtained from a licensed distributor that timely reported and remitted payment of applicable state tobacco taxes on the samples.

D. Any person providing samples of cigarettes, as described under subsection (B), or samples of other tobacco products, as described under subsection (C), should retain invoices from the licensed distributor that reported the samples.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Former Section R15-3-319 renumbered to R15-3-314 effective June 20, 1990 (Supp. 90-2). Adopted by final rulemaking at 22 A.A.R. 1844, effective 6/24/2016.

Ariz. Admin. Code § R15-3-320 [REPEALED]

History

• Adopted effective March 18, 1981 (Supp. 81-2). Repealed effective June 20, 1990 (Supp. 90-2).

Ariz. Admin. Code § R15-3-321 Renumbered

History

• Adopted effective March 18, 1981 (Supp. 81-2). Former Section R15-3-321 renumbered to R15-3-315 effective June 20, 1990 (Supp. 90-2).

Ariz. Admin. Code § R15-3-322 Renumbered

History

• Adopted effective March 18, 1981 (Supp. 81-2). Former Section R15-3-322 renumbered to Section R15-3-316 effective June 20, 1990 (Supp. 90-2).

Article 4 TAX ON ALCOHOLIC BEVERAGES

Ariz. Admin. Code § R15-3-401 Tax Return Filing Requirements for a Malt Liquor Wholesaler

On or before the statutory deadline each month, each wholesaler of malt liquor shall file a return on a form prescribed by the Department. The return shall show the following:

1. Taxpayer's name, mailing address, business address, liquor license number issued by the Department of Liquor Licenses and Control, and identification number;

2. The itemized quantity of malt liquor purchased during the month the tax accrued, listed by supplier and invoice number;

3. The itemized quantity of tax-free sales of malt liquor during the month the tax accrued, listed by purchaser and invoice number;

The itemized quantity of out-of-state sales of malt liquor during the month the tax accrued, listed by purchaser and invoice number;

5. The itemized quantity of malt liquor purchased from other licensed Arizona wholesalers during the month the tax accrued, listed by supplier and invoice number;

6. The total quantity of malt liquor purchased in Arizona during the month the tax accrued;

7. The amount of luxury tax accrued during the month; and

8. Supporting documentation for the information provided in the return.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Amended effective July 23, 1985 (Supp. 85-4). Amended by final rulemaking at 5 A.A.R. 3768, effective September 22, 1999 (Supp. 99-3). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4).

Ariz. Admin. Code § R15-3-402 Tax Return Filing Requirements for a Spirituous or Vinous Liquor Wholesaler

On or before the statutory deadline each month, each spirituous or vinous liquor wholesaler shall file a return on a form prescribed by the Department. The return shall show the following:

1. Taxpayer's name, mailing address, business address, liquor license number issued by the Department of Liquor Licenses and Control, and identification number;

2. The itemized quantity of spirituous or vinous liquor sold during the month the tax accrued, listed by purchaser and invoice number;

3. The itemized quantity of spirituous or vinous liquor received during the month the tax accrued, listed by supplier and invoice number;

4. The total quantity of spirituous or vinous liquor available at the beginning and at the end of the month the tax accrued;

5. The itemized quantity of tax-free sales of spirituous or vinous liquor during the month the tax accrued, listed by purchaser and invoice number;

6. The itemized quantity of out-of-state sales of spirituous or vinous liquor during the month the tax accrued, listed by purchaser and invoice number;

The itemized quantity of spirituous or vinous liquor sold to other licensed Arizona wholesalers during the month the tax accrued, listed by purchaser and invoice number;

8. The total quantity of spirituous or vinous liquor sold in Arizona during the month the tax accrued;

9. The amount of luxury tax accrued during the month; and

10. Supporting documentation for the information provided in the return.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Amended effective July 23, 1985 (Supp. 85-4). Amended by final rulemaking at 5 A.A.R. 3768, effective September 22, 1999 (Supp. 99-3). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4).

Ariz. Admin. Code § R15-3-403 Tax Return Filing Requirements for a Domestic Microbrewery, Domestic Farm Winery, or Beer Manufacturer

On or before the statutory deadline each month, each domestic microbrewery, domestic farm winery, or beer manufacturer subject to A.R.S. § 42-3355 shall file a return on a form prescribed by the Department. The return shall show the following:

1. Taxpayer's name, mailing address, business address, liquor license number issued by the Department of Liquor Licenses and Control, and identification number;

2. The itemized quantity of tax-free sales to Arizona purchasers during the month the tax accrued, listed by purchaser and invoice number;

3. For taxpayers filing for locations physically within the state, the itemized quantity of out-of-state sales during the month the tax accrued, listed by purchaser and invoice number;

4. The itemized quantity of beer, malt liquor, or vinous liquor sold to other licensed Arizona wholesalers during the month the tax accrued, listed by purchaser and invoice number;

5. The total quantity of beer, malt liquor, or vinous liquor sold to Arizona purchasers during the month the tax accrued;

6. The amount of luxury tax accrued during the month; and

7. Supporting documentation for the information provided in the return.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Section repealed; new Section adopted by final rulemaking at 5 A.A.R. 3768, effective September 22, 1999 (Supp. 99-3). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4).

Ariz. Admin. Code § R15-3-404 Taxes Remitted

Any domestic farm winery or domestic microbrewery required under A.R.S. Title 4, Chapter 2, Article 1 to remit transaction privilege tax shall remit the tax under the retail classification (see 15 A.A.C. 5, Article 1) on its gross receipts from the sale in addition to luxury tax, regardless of its business location.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Section repealed by final rulemaking at 5 A.A.R. 3768, effective September 22, 1999 (Supp. 99-3). New Section made by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4).

Ariz. Admin. Code § R15-3-405 Alcoholic Beverage Samples

Samples of alcoholic beverages, whether intended for personal or commercial use and consumption, and whether provided for a consideration, are subject to luxury tax at the rates prescribed in A.R.S. § 42-3052 unless otherwise exempt under A.R.S. Title 42, Chapter 3.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Section repealed by final rulemaking at 5 A.A.R. 3768, effective September 22, 1999 (Supp. 99-3). New Section made by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4).

Ariz. Admin. Code § R15-3-406 Metric Conversion

To compute the luxury tax for alcoholic beverages in metric containers, each taxpayer shall multiply the quantity in liters by 0.264172 to determine the equivalent quantity in gallons.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Amended by final rulemaking at 5 A.A.R. 3768, effective September 22, 1999 (Supp. 99-3). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4).

Ariz. Admin. Code § R15-3-407 Expired

History

• Adopted effective March 18, 1981 (Supp. 81-2). Amended by final rulemaking at 5 A.A.R. 3768, effective September 22, 1999 (Supp. 99-3). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4). Adopted effective March 18, 1981 (Supp. 81-2). Amended by final rulemaking at 5 A.A.R. 3768, effective September 22, 1999 (Supp. 99-3). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4). Section expired under A.R.S. § 41-1056(J) at 24 A.A.R. 2702, effective July 28, 2018 (Supp. 18-3).

Ariz. Admin. Code § R15-3-408 Failure to Report Purchases from a Primary Source of Supply

If the Department determines that an Arizona wholesaler failed to transmit to the Department copies of all invoices for alcoholic beverages purchased from any primary source of supply as required by A.R.S. § 4-243.01, the Department shall report the failure to the Department of Liquor Licenses and Control.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Amended by final rulemaking at 5 A.A.R. 3768, effective September 22, 1999 (Supp. 99-3). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4).

Ariz. Admin. Code § R15-3-409 [REPEALED]

History

• Adopted effective March 18, 1981 (Supp. 81-2). Section repealed by final rulemaking at 5 A.A.R. 3768, effective September 22, 1999 (Supp. 99-3).

Ariz. Admin. Code § R15-3-410 Failure to File a Return or Pay Tax

The Department shall report any failure by a licensee to file a return or pay the tax due to the Department of Liquor Licenses and Control, and the Department shall request that the Department of Liquor Licenses and Control take any applicable action authorized under A.R.S. Title 4.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Amended by final rulemaking at 5 A.A.R. 3768, effective September 22, 1999 (Supp. 99-3). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4).

Article 5 ADMINISTRATION

Ariz. Admin. Code § R15-3-501 Filing of Luxury Tax Reports and Returns

The Department shall deem a report or return required to be filed under A.R.S. Title 42, Chapter 3 or this Chapter timely filed if the taxpayer submits the report or return through the electronic filing system established by the Department on or before the statutory due date.

History

• Adopted effective March 18, 1981 (Supp. 81-2). Amended effective June 20, 1990 (Supp. 90-2). Amended by final rulemaking at 14 A.A.R. 4410, effective January 3, 2009 (Supp. 08-4). Amended by final rulemaking at 22 A.A.R. 1844, effective 6/24/2016.

Ariz. Admin. Code § R15-3-502 [REPEALED]

History

• Adopted effective March 18, 1981 (Supp. 81-2). Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-3-503 [REPEALED]

History

• Adopted effective March 18, 1981 (Supp. 81-2). Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-3-504 [REPEALED]

History

• Adopted effective March 18, 1981 (Supp. 81-2). Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-3-505 [REPEALED]

History

• Adopted effective March 18, 1981 (Supp. 81-2). Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-3-506 [REPEALED]

History

• Adopted effective March 18, 1981 (Supp. 81-2). Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-3-507 [REPEALED]

History

• Adopted effective March 18, 1981 (Supp. 81-2). Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-3-508 [REPEALED]

History

• Adopted effective March 18, 1981 (Supp. 81-2). Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-3-509 [REPEALED]

History

• Adopted effective March 18, 1981 (Supp. 81-2). Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-3-510 Expired

History

• Adopted effective March 18, 1981 (Supp. 81-2). Amended effective June 20, 1990 (Supp. 90-2). Section expired under A.R.S. § 41-1056(E) at 9 A.A.R. 4135, effective July 31, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-3-511 [REPEALED]

History

• Adopted effective March 18, 1981 (Supp. 81-2). Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-3-512 [REPEALED]

History

• Adopted effective March 18, 1981 (Supp. 81-2). Repealed effective February 22, 1989 (Supp. 89-1).

Chapter 4 Department of Revenue - Property Tax

Article 1 PROPERTY VALUATION

Ariz. Admin. Code § R15-4-101 [REPEALED]

History

• Former Rule 1. Former Section R15-4-01 renumbered as Section R15-4-101 without change effective December 10, 1985 (Supp. 85-6). Repealed effective April 13, 1987 (Supp. 87-2).

Ariz. Admin. Code § R15-4-102 [REPEALED]

History

• Former Rule 2. Former Section R15-4-02 renumbered as Section R15-4-102 without change effective December 10, 1985 (Supp. 85-6). Repealed effective April 13, 1987 (Supp. 87-2).

Ariz. Admin. Code § R15-4-103 Prorating Value for Classification Purposes

A. If the assessor determines that a parcel of property should have more than one assessment ratio due to multiple uses under A.R.S. § 42-15010, the assessor shall:

1. Calculate the assessment ratios according to subsections (B) and (C), and

2. Apply the ratios to the full cash value of the entire parcel.

B. For secondary tax purposes, the assessor shall calculate separate assessment ratios for land and improvements.

1. The assessment ratio for land is calculated by taking the full cash value of the land in each class divided by the total full cash value of the land. The resultant quotient for each class is then multiplied by the assessment ratio for the class. The sum of these products is the ratio for the land.

2. The assessment ratio for improvements is calculated by taking the full cash value of the improvements in each class divided by the total full cash value of the improvements. The resultant quotient for each class is then multiplied by the assessment ratio for the class. The sum of these products is the assessment ratio for improvements.

C. For primary tax purposes, the assessor shall calculate a single assessment ratio to apply to the limited value. The single assessment ratio is the sum of the factors calculated in subsections (C)(1) and (C)(2).

1. The full cash value of the land is divided by the total full cash value of land and improvements. The resultant quotient is then multiplied by the assessment ratio for land as calculated in subsection (B)(1).

2. The full cash value of improvements is divided by the total full cash value of land and improvements. The resultant quotient is then multiplied by the assessment ratio for improvements as calculated in subsection (B)(2).

History

• Former Rule 3. Former Section R15-4-03 renumbered as Section R15-4-103 without change effective December 10, 1985 (Supp. 85-6). Former Section R15-4-103 repealed, new Section R15-4-103 adopted effective September 16, 1987 (Supp. 87-3). Amended by final rulemaking at 7 A.A.R. 657, effective January 11, 2001 (Supp. 01-1).

Ariz. Admin. Code § R15-4-104 [REPEALED]

History

• Former Rule 4. Former Section R15-4-04 renumbered as Section R15-4-104 without change effective December 10, 1985 (Supp. 85-6). Repealed effective April 13, 1987 (Supp. 87-2).

Ariz. Admin. Code § R15-4-105 [REPEALED]

History

• Former Rule 5. Former Section R15-4-05 renumbered as Section R15-4-105 without change effective December 10, 1985 (Supp. 85-6). Repealed effective April 13. 1987 (Supp. 87-2).

Ariz. Admin. Code § R15-4-106 [REPEALED]

History

• Former Rule 6. Former Section R15-4-06 renumbered as Section R15-4-106 without change effective December 10, 1985 (Supp. 85-6). Repealed effective April 13, 1987 (Supp. 87-2).

Ariz. Admin. Code § R15-4-107 Separately Owned Minerals and Mineral Rights

A. If the ownership of minerals or mineral rights in land is different from the ownership of the surface rights, the assessor shall assess any minerals or mineral rights separately from the surface rights.

B. The assessor shall value separately owned minerals or mineral rights on a standard amount per acre that is annually determined by the Department unless:

1. There are known mineral reserves,

2. There is a current mineral lease on the property, or

3. There is a reasonable basis for believing that the value of the mineral rights or the minerals located on the property exceeds the standard amount per acre determined by the Department.

History

• Former Rule 7. Former Section R15-4-07 renumbered as Section R15-4-107 without change effective December 10, 1985 (Supp. 85-6). Amended by final rulemaking at 7 A.A.R. 657, effective January 11, 2001 (Supp. 01-1).

Ariz. Admin. Code § R15-4-108 [REPEALED]

History

• Former Rule 8. Former Section R15-4-08 renumbered as Section R15-4-108 without change effective December 10, 1985 (Supp. 85-6). Section repealed by final rulemaking at 7 A.A.R. 657, effective January 11, 2001 (Supp. 01-1).

Ariz. Admin. Code § R15-4-109 Taxpayer Reports

A. On or before the statutory deadline each year, mines, railroad companies, private car companies, pipelines, natural gas distribution companies, water companies, electric companies, sewer companies, airline companies, telecommunications companies, and oil, gas, and geothermal producers shall file property tax reports in a form prescribed by the Director. The form shall contain all the information necessary to identify the taxpayer and the property and to value the property according to prescribed statutory methods or standard appraisal methods and techniques contained in guidelines or manuals prescribed under A.R.S. § 42-11054. The Department shall not accept a form that does not contain all the necessary information.

B. A taxpayer may request that the Director grant an extension of time for filing a property tax report. The taxpayer shall submit the extension request to the Director or the Director's designee in writing on or before the statutory due date.

History

• Former Rule 9. Former Section R15-4-09 renumbered as Section R15-4-109 without change effective December 10, 1985 (Supp. 85-6). Amended effective June 25, 1987 (Supp. 87-2). Amended by final rulemaking at 7 A.A.R. 657, effective January 11, 2001 (Supp. 01-1).

Ariz. Admin. Code § R15-4-110 [REPEALED]

History

• Former Rule 10. Former Section R15-4-10 renumbered as Section R15-4-110 without change effective December 10, 1985 (Supp. 85-6). Amended effective June 25, 1987 (Supp. 87-2). Repealed effective December 11, 1998 (Supp. 98-4).

Ariz. Admin. Code § R15-4-111 [REPEALED]

History

• Former Rule 11. Former Section R15-4-11 renumbered as Section R15-4-111 without change effective December 10, 1985 (Supp. 85-6). Repealed effective April 13, 1987 (Supp. 87-2).

Ariz. Admin. Code § R15-4-112 [REPEALED]

History

• Adopted effective May 13, 1980 (Supp. 80-3). Former Section R15-4-12 renumbered as Section R15-4-112 without change effective December 10, 1985 (Supp. 85-6). Repealed effective April 13, 1987 (Supp. 87-2).

Ariz. Admin. Code § R15-4-113 [REPEALED]

History

• Adopted effective May 13, 1980 (Supp. 80-3). Former Section R15-4-13 renumbered as Section R15-4-113 without change effective December 10, 1985 (Supp. 85-6). Repealed effective April 13, 1987 (Supp. 87-2).

Ariz. Admin. Code § R15-4-114 [REPEALED]

History

• Adopted effective May 13, 1980 (Supp. 80-3). Former Section R15-4-14 renumbered as Section R15-4-114 without change effective December 10, 1985 (Supp. 85-6). Repealed effective April 13, 1987 (Supp. 87-2).

Ariz. Admin. Code § R15-4-115 [REPEALED]

History

• Adopted effective May 13, 1980 (Supp. 80-3). Former Section R15-4-15 renumbered as Section R15-4-115 without change effective December 10, 1985 (Supp. 85-6). Section repealed by final rulemaking at 7 A.A.R. 657, effective January 11, 2001 (Supp. 01-1).

Ariz. Admin. Code § R15-4-116 Exemption for Totally and Permanently Disabled Person

A. For purposes of the property tax exemption in A.R.S. Const. Art. 9, § 2.2, a person is "totally and permanently disabled" if the person is unable to engage in any substantial gainful activity, for pay or profit, by reason of any physical or mental impairment that is expected to:

1. Last for a continuous period of 12 months or more, or

Result in death within 12 months.

B. To qualify for the exemption, a disabled person shall be certified as totally and permanently disabled by a person licensed under:

1. A.R.S. Title 32, Chapter 8, 13, 14, 17, 19.1, or 29; or

2. The laws of another state that are comparable to the laws governing persons qualifying under subsection (B)(1).

History

• Adopted as an emergency effective June 20, 1980, pursuant to A.R.S. § 41-1003, valid for only 90 days (Supp. 80-3). Former emergency adoption now adopted effective October 30, 1980 (Supp. 80-5). Former Section R15-4-16 renumbered as Section R15-4-116 without change effective December 10, 1985 (Supp. 85-6). Amended by final rulemaking at 7 A.A.R. 657, effective January 11, 2001 (Supp. 01-1).

Ariz. Admin. Code § R15-4-117 [REPEALED]

History

• Adopted effective February 17, 1988 (Supp. 88-1). Amended effective July 31, 1989 (Supp. 89-3). Amended effective July 3, 1991 (Supp. 91-3). Repealed effective June 15, 1998 (Supp. 98-2).

Ariz. Admin. Code § R15-4-118 Sales Screening and Processing

A. Except as provided in subsection (B), the Department's sales-ratio studies shall be based upon sales data contained in property value affidavits that are screened by the county assessor and the Department.

B. In preparing sales-ratio studies, the Department may supplement the sales data contained in property value affidavits with an appraisal or other industry-standard market value information.

C. The Department shall maintain a list of validation codes to be used by the county assessor for the screening, editing, and processing of a property value affidavit. The county assessor shall assign a validation code from the Department's list to each property value affidavit before transmittal to the Department. The county assessor shall transmit a property value affidavit to the Department as follows:

1. For a sale that does not require a change in a parcel's legal description, the assessor shall transmit the property value affidavit to the Department within 30 days of recording;

2. For a sale that requires a change in a parcel's legal description, the assessor shall transmit the property value affidavit to the Department by January 31 of the year following the calendar year of recording.

D. The Department may modify the validation code assigned to a property value affidavit. The Department shall notify the county assessor in writing of the modification within 30 days after the modification. The county assessor may request the Department to reconsider the modified validation code within 15 days after receiving notice of the Department's modification.

E. If the validation code as assigned by the county assessor or as modified by the Department indicates that a sale does not represent the market value of the subject property, the Department shall exclude that sale from the Department's sales-ratio studies.

F. If the validation code as assigned by the county assessor or as modified by the Department indicates that a sale represents the market value of the subject property, the Department shall:

1. Compute the ratio of the full cash value of the property to the selling price of the property; and

2. Include the ratio in the sales-ratio studies, unless the ratio:

a. Is extremely high or extremely low,

b. Relates to the sale of property that has substantially changed since the date of the sale and the assessor's full cash value for the property reflects the change, or

c. Relates to a sale that does not represent the market value of the property.

History

• Adopted effective February 17, 1988 (Supp. 88-1). Amended by final rulemaking at 7 A.A.R. 657, effective January 11, 2001 (Supp. 01-1).

Ariz. Admin. Code § R15-4-119 [REPEALED]

History

• Adopted effective February 17, 1988 (Supp. 88-1). Repealed effective June 15, 1998 (Supp. 98-2).

Ariz. Admin. Code § R15-4-120 [REPEALED]

History

• Adopted effective February 17, 1988 (Supp. 88-1). Repealed effective June 15, 1998 (Supp. 98-2).

Ariz. Admin. Code § R15-4-121 [REPEALED]

History

• Adopted effective February 17, 1988 (Supp. 88-1). Amended effective July 31, 1989 (Supp. 89-3). Repealed effective June 15, 1998 (Supp. 98-2).

Ariz. Admin. Code § R15-4-122 [REPEALED]

History

• Adopted effective February 17, 1988 (Supp. 88-1). Repealed effective June 15, 1998 (Supp. 98-2).

Ariz. Admin. Code § R15-4-123 [REPEALED]

History

• Adopted effective February 17, 1988 (Supp. 88-1). Repealed effective June 15, 1998 (Supp. 98-2).

Article 2 VALUATION OF MINES

Ariz. Admin. Code § R15-4-201 Mine Valuation

A. For the purpose of determining the "full cash value", the Department shall annually utilize standard appraisal methods and techniques, and the 3 approaches to value. Those approaches, as defined in R15-4-203, R15-4-204, and R15-4-205, are:

1. The Income Approach,

2. The Cost Approach, and

3. The Market Approach.

B. The Department shall prepare appraisal reports on mine properties with a full cash value greater than $1,000,000. The appraisal reports shall include a description of the subject property, the full cash value determined for the property, and detail of the methods and calculations employed in determining the full cash value of the property. Information extracted from:

1. Recent field visits,

2. Technical reports, and

3. Engineering and financial studies for approved projects, shall be included, if available.

No copies of any pages from such field visit and technical reports and engineering and financial studies shall be included in the appraisal report. Technical literature data shall be included.

C. The Department shall, upon written request, hold informal conferences with the taxpayer after preliminary worksheets are issued and before the final values are established. At the informal conference, the Department shall review with the taxpayer the procedures and calculations employed in the valuation of the property. If the taxpayer requests a revision of the appraisal report, the taxpayer shall provide copies of feasibility studies and/or other information pertaining to the requested revision.

D. At the request of the taxpayer, preliminary appraisal worksheets shall be made available to the taxpayer at least 7 calendar days before the informal conference on the preliminary determination of value. If a date sooner than 7 calendar days is mutually agreeable between the taxpayer and the Department, then the 7-day requirement is waived. The Department shall release final worksheets and the determination of value by June 15. The Department shall provide the taxpayer with a final appraisal report by July 25 upon request.

E. The Department shall annually prepare an appraisal manual for mines and natural resources. The manual shall include the guidelines necessary for the appraising of the properties subject to these rules. The manual shall contain, but not be limited to appropriate schedules for the discount rate, ore reserve values, residual value factors, salvage value factors, reproduction cost new less depreciation and the effective income tax rate for valuation purposes. The Department shall annually hold a meeting for affected taxpayers concerning the manual prior to February 1 for the purpose of discussing changes the Department proposes to make in the manual for the current tax year. The Department shall make available any information which is not confidential in nature that is utilized in the determination of the schedules and other factors contained in the manual. Reporting forms and instructions shall be supplied to the taxpayers by February 1 of each year. The manual shall be made available to the taxpayer by March 15 of the tax year.

History

• Adopted effective December 10, 1985 (Supp. 85-6). Amended subsection (B) effective May 24, 1989 (Supp. 89-2).

Ariz. Admin. Code § R15-4-202 Definitions

A. "Extracted for commercial purposes" means extraction on a commercial scale at an operating production rate, with a significant amount of the mineral becoming subject to the Arizona severance tax on a continuing basis. Public announcements shall be considered an indication of producing status. Extraction of mineral for assay, research or development purposes does not constitute extraction for commercial purposes.

B. "Mine" means a producing mine, nonproducing mine or mine unit and includes all taxable properties located within the state and operated in conjunction with or formerly used in a mine, including but not limited to, the following:

1. All facilities and equipment situated within the state used in, or formerly used in mine operations, including mine plants, mills, concentrators, smelters, refineries, chemical plants, electro-winning plants, and all related facilities which directly or indirectly contribute or contributed to the production of the mine revenues. Manufacturing facilities, such as a rod plant, incorporated railroads, utilities and custom facilities shall not be included in the mine. Custom smelters are those which are not operated as an integral part of the mine facilities and/or located at the mine site.

2. Land which is being used or formerly used for production. The outer boundary shall be 1 claim beyond the producing claims, or, in the case of a fee interest, 1500 feet beyond the boundary of the fee parcel. The mine unit includes land on which the items described in subsection (B)(2) are situated, all ore reserves, ultimate pit or subsidence limits, all waste storage, leach and tailing dump sites, water facilities used for production, rights-of-way used for mine-operated unincorporated railway lines, conveyor lines, water and utility lines. Land shall include patented and unpatented mining claims, fee simple interests, severed mineral rights, leased land and surface rights used in the mine operations.

3. Health care facilities situated in proximity to the mine which are operated primarily for the benefit of the employees.

C. "Ore" means mineralized rock, which can be mined, processed, and made to yield saleable metal or other mineral products at a profit.

D. "Ore reserves" means that estimate of ore which is in existence and can reasonably be estimated to be capable of extraction, processing and sale at a profit.

E. "Reproduction cost" means the cost of construction of an exact duplicate at current prices using the same materials, construction standards, design, layout and quality of workmanship.

F. "Depreciation" means the loss of value from any source and includes:

1. Physical deterioration which is normally caused by wear and tear.

2. Functional obsolescence which is the decrease in the capacity or efficiency to perform the function for which it was intended in terms of current standards.

3. Economic obsolescence which comes from factors outside the property itself.

G. "Capital expenditures" for the purpose of the income approach shall be classified as follows:

1. Original capital investment, such as original land acquisition, exploration, development including pre-mine stripping and initial plant construction.

2. Expansion capital, such as plant construction and additional equipment that results in increased plant capacity or increased production of the mine unit as a whole; expansion capital does not include equipment or construction necessary to maintain production levels.

3. Replacement capital, such as necessary replacements of plant, equipment, or construction required to maintain production levels.

4. Mandated expenditures, such as environmental or safety facilities and equipment.

H. "Temporary shutdown" means a shutdown on a continued maintenance basis with the intention to restart when conditions improve. The mine will be valued on the basis of the residual cost approach.

I. "Permanent shutdown" means a shutdown due to complete depletion of the orebody or the lack of commercial value of the orebody. The mine shall be considered a nonproducing mine and valued on the basis of salvage.

J. "Liquid supplies" means supply inventory items which are readily marketable, such as tools, fuels, cable, pipe, electric motors, lumbers and the like.

K. "Salvage value" means the sum of the salvage value for plant and equipment, construction-in-progress and supplies. Salvage value shall include a value for land.

L. "Residual value" means the sum of the residual value for plant and equipment, ore reserve, supplies and construction-in- progress. The residual value shall include a value for land. The residual value for plant and equipment is determined by applying the Department's residual factors contained in the Department's percent good factor table.

M. "Prolonged shutdown" means reduction in production to 20 percent or less of the recent historic production for more than 6 months.

History

• Adopted effective December 10, 1985 (Supp. 85-6). Amended effective May 24, 1989 (Supp. 89-2).

Ariz. Admin. Code § R15-4-203 Income Approach Procedures for Mines

A. The income approach estimate of value for mine property shall be based on a discount of projected future cash flows to a present value at a discount rate adequate to justify current mine investments. Derivation of the cash flows shall be based on the use of a 5-year arithmetic average margin per unit of product multiplied by projected output of metal or mineral over the life of the mine. The life of the mine shall be based on the size of the ore reserve and the projected rate of production. Cash flow shall be based on an all-equity investment on a production basis, not a sales basis, assuming all production is sold in the year produced. Financing and interest charges shall not be considered.

B. Discount rates shall be developed annually by the Department. The discounting technique used by the Department shall be the single rate method. No adjustments shall be made for sales, product inventory, financing or interest charges.

C. To calculate the margin, the 5-year period shall be on a cents or dollars per unit of production basis and averaged to find the historic margin. The historic 5-year margin shall be calculated on the following basis:

Gross income, calculated by summing subsections (C)(1)(a) and (b) below:

a. The gross value of production. The historic average selling price per unit of each mineral product should be computed by dividing the sales revenue of each mineral product by the units of that product which were sold.

This quotient shall be multiplied by the quantity of mine output and the product shall be the historical gross value of production for the year.

b. Miscellaneous revenue composed of the income or loss from power sales, water sales, miscellaneous sales, acid sales, as well as toll processing, the rentals of real and personal property, and hospital facilities if operated as part of the mine unit.

2. Expenses, calculated by deducting subsections (C)(2)(a), (b), and (c) below:

a. All expenses associated with the production, administration, distribution, development and marketing functions of the operation on the basis of generally accepted accounting principles and the cash expenses associated with the miscellaneous revenue specified in subsection (C)(1)(b) above, if not already deducted. Income tax charges, depreciation and depletion, and amortization of fixed assets shall not be included as expenses. The expenses for smelting and/or refining will be calculated on a market basis if the material is processed out of state or at a location which is locally assessed and not includable in the producing mine unit from which the material was extracted. Intracompany charges between centrally assessed producing mine units within the state will be calculated at actual cost.

b. Federal and Arizona income taxes shall be based upon general tax concepts, computed with respect to the mining property. Provisions contained in Federal and Arizona income tax statutes and regulations shall not be determinative. Due to their hypothetical nature all tax calculations shall be governed exclusively by the rules contained below.

i. Income taxes shall be calculated as if the producing mine were a separate taxable entity. The effective tax rate for mines shall be developed annually by the Department and included in the manual.

ii. Income taxes shall be calculated separately for each year of the 5-year historic margin period. In this respect, the following shall apply:

(1) Negative as well as positive tax liabilities shall be determined, and

(2) No provision is made for the carryback or carryover of losses or credits.

iii. Taxable income shall be determined by subtracting the expenses specified in rule R15-4-19(C)(2) from the gross income specified in rule R15-4-19(C)(1).

iv. Federal and Arizona income tax liabilities, both positive and negative liabilities, shall be determined by multiplying the effective tax rate by the final taxable income or loss determined in accordance with all provisions of subsection (C)(2)(b)(iii) above.

c. All replacement and mandated capital expenditures incurred during the year. Capitalized lease payments for replacement and mandated items will be treated as capital expenditures. For the purposes of this subsection "capital expenditures" means allowable capital expenditures computed on an amortization or depreciation basis over 10 years, or the life of the mine, whichever is less.

3. The historic margin shall be determined based on the 5 years preceding the current tax year, including loss years. Nonrepresentative years in which a drastic change or a prolonged shutdown occurs shall not be utilized. A drastic change or a prolonged shutdown must be one so significant that the 5-year average margin cannot be adjusted adequately to reflect current conditions.

D. Temporary suspension of operations due to strikes and losses resulting from operations during unfavorable market conditions shall be included in the 5-year historic margin. If the suspension is not likely to recur it shall not be included.

E. In instances where a particular property has not been taxed as a producing mine for 5 years preceding the tax year, the historic margin shall be determined based upon the number of years the property has been a producing mine.

F. The historic margin shall be applied to estimated future production to derive future cash flows. The taxpayer shall be required to report estimated future production and the factors used in the estimating procedure. The historic margin used in the cash flow computation shall be adjusted under certain circumstances to reflect changes in economic or operating conditions. Such adjustments shall not be made unless conditions exist that will have a significant impact on the future economic performance of the unit and are not reflected in the historic margin. Any adjustment made to the historic margin shall account for all reasonable operating and capital cost changes, shall be supported by documentation and field visit data, and shall include an income tax adjustment. The taxpayer's estimates of future production shall be adjusted, where appropriate, by the appraiser. Other adjustments shall be made, provided such adjustments are not based on speculation or made for conditions already reflected in the historic margin.

History

• Adopted effective December 10, 1985 (Supp. 85-6). Amended effective May 24, 1989 (Supp. 89-2).

Ariz. Admin. Code § R15-4-204 Cost Approach Procedures for Mines

A. The cost approach estimate for mine property shall include a value for land, supplies inventory, ore reserves, construction work in progress, improvements and personal property. This value shall be based on the theory of reproduction cost new, less all applicable forms of depreciation for the property.

B. Ore reserve value is based on a representative value factor multiplied by units of recoverable metal or mineral that can be expected to be mined during the life of the mine. The value factors are based on an analysis of sales of comparable mineralized bodies in the United States and Canada. Values for land included within the producing unit are based on land values supplied by the county assessor and approved by the Department. Changes in ore reserve factors shall be made available, upon request, by the Department by March 1 of the tax year.

C. Supplies inventory for the mine shall be valued at cost less any appropriate depreciation. Shrinkage shall be considered if the taxpayer supplies quantitative data related to the amount warranted. Physical depreciation for supplies shall be limited to shelf life deterioration and shall not include wear and tear. Functional and/or economic obsolescence shall be considered where the amount of obsolescence was computed on the overall performance of the mine unit or utilizing the "unit concept". Residual or salvage factors shall be applied to nonliquid supplies when residual or salvage values are determinative. Liquid supplies shall be valued at cost in every case except when the taxpayer can show cause for spoilage. Supplies which are totally obsolete shall be valued at salvage. The inventory amounts shall not include any value attributable to metals inventory or other production inventory held for sale.

D. Construction work in progress shall be discounted at the mine's discount rate if completion is expected to be in excess of 1 year. Functional and/or economic obsolescence shall be considered where the amount of obsolescence was computed on the overall performance of the mine unit or utilizing the "unit concept". Residual and salvage factors shall be applied if the residual and salvage values are determinative. Physical depreciation shall not be considered.

E. Improvements and personal property as reflected in the financial statements of the taxpayer shall be valued on a reproduction cost new less depreciation basis. The cost index for valuing mine property shall be derived from the Department's manual unless actual market values are ascertainable. The basis for physical depreciation shall be straight line.

F. Depreciation schedules shall be included in the Department's appraisal manual for mines. Residual value factors shall be applied to equipment still in service after the expiration of its depreciable life. Residual value factors shall be based on resale values for equipment where resale values are available. Appropriate obsolescence shall be applied to residual value. Salvage values for all improvements and personal property shall be derived by applying the Department's factor to the original cost of the improvement or personal property unless actual salvage values are ascertainable. A summary of equipment lives, salvage factors, and an itemized listing of equipment categories shall be included in the manual. For purposes of this cost approach procedure there shall be at least 8 major classes of equipment and improvements:

1. Mining, small scale;

2. Mining, large scale;

3. Milling and leaching;

4. Smelting;

5. Office;

6. Environmental;

7. Shovels and drag lines; and

8. Buildings and improvements.

G. Depreciation in the form of functional or economic obsolescence shall be applied to improvements and personal property where warranted. These forms of obsolescence may be a result of a lack of necessary environmental facilities, technological changes, long-term production curtailments, production performance versus projected performance, or environmental regulations. The mine's financial performance shall be considered as an indicator of obsolescence. Economic and/or functional obsolescence shall be considered on an individual basis for each property and may be related to the life of the ore reserve. Salvage value shall be the controlling limit of the maximum amount of depreciation that may be applied. Economic obsolescence shall be applied when appropriate.

History

• Adopted effective December 10, 1985 (Supp. 85-6). Amended effective May 24, 1989 (Supp. 89-2).

Ariz. Admin. Code § R15-4-205 Market Approach Procedures for Mines

A. The market approach to value shall be considered where the transaction is an arms-length sale between a willing buyer and a willing seller of the subject property, an undivided interest in the property, or a comparable property. The Department may require detailed information regarding the terms of the sale.

B. The market approach to value shall be used only where the following conditions exist:

An arms-length sale of more than 50% interest in the assets, such as mineral reserves, plant, equipment, and inventories, of a mine located wholly within the state of Arizona, or

2. The sale of more than 50% of the stocks, bonds, notes, convertible debentures, warrants, or other documents that represent a share in a corporation or a debt owed by a corporation. This sale is of limited use if the value of the corporation's out-of-state assets is significant relative to its in-state assets subject to valuation under these rules.

3. Minority interest sales may be considered if the other indicators of value are less reliable and the sale price was derived from an analysis of a value for 100% of the mine unit.

History

• Adopted effective December 10, 1985 (Supp. 85-6). Amended effective May 24, 1989 (Supp. 89-2).

Ariz. Admin. Code § R15-4-206 Determination of Value

A. The income approach shall be the primary method for the determination of full cash value of mines and shall ordinarily be considered the best indicator of value. The cost and market approaches shall also be considered and correlated with the income approach where applicable.

B. The income approach shall be the primary method of valuation except when 1 or more of the following situations exist:

1. Ore reserves of the mine are wholly or predominantly located on nontaxable lands. The value indicated by the cost approach shall be determinative of the full cash value of the mine.

2. The mine property has recently commenced production, or has recently been added to the mine rolls.

3. The mine property is near the end of its economic life;

4. Operations of the mine have resulted in an overall loss, as determined by the historic margin. If estimates of future cash flow can reasonably be made, the income approach shall be utilized. If estimates of future cash flow cannot reasonably be made, the value of the mine shall approximate the property's residual value with appropriate obsolescence applied.

5. Permanently shutdown mines shall be valued at salvage.

6. A sale of the mine unit, or a sale as described in R15-4-205, has occurred within the preceding 12 months. In this case either the income or market approach may be the primary method of value. When the market approach is selected as the primary method of value, the income and cost approaches shall also be considered.

C. In situations (B)(2) and (B)(3) above, the value indicated by the cost approach shall be considered with the value indicated by the income approach with the relative weight to be applied as follows.

If estimates of future cash flow can reasonably be made, the income approach shall be weighted more heavily.

If estimates of future cash flow cannot reasonably be made, the cost approach, with appropriate obsolescence, shall be weighted more heavily.

D. Full cash value shall never be less than salvage value.

History

• Adopted effective December 10, 1985 (Supp. 85-6). Amended effective May 24, 1989 (Supp. 89-2).

Article 3 VALUATION OF AIRLINE PROPERTY

Ariz. Admin. Code § R15-4-301 [REPEALED]

History

• Adopted effective May 5, 1986 (Supp. 86-3). Repealed effective December 11, 1998 (Supp. 98-4).

Ariz. Admin. Code § R15-4-302 Definitions

For purposes of valuation and taxation of airline companies under A.R.S. Title 42, Chapter 14, Article 6, the following definitions apply:

1. "Flight property" as defined in A.R.S. § 42-14251 includes both owned and leased aircraft.

2. "Permanently removed from operations" means aircraft that are entirely terminated from regularly scheduled operations by an airline company.

3. "Regularly scheduled" means the operation of aircraft that completed at least 120 landings or takeoffs within Arizona during the preceding calendar year, according to a plan of dates or times for landings and takeoffs, regardless of whether the plan is published for customer use.

History

• Adopted effective May 5, 1986 (Supp. 86-3). Amended effective January 5, 1988 (Supp. 88-1). Amended by final rulemaking at 7 A.A.R. 657, effective January 11, 2001 (Supp. 01-1).

Ariz. Admin. Code § R15-4-303 [REPEALED]

History

• Adopted effective May 5, 1986 (Supp. 86-3). Repealed effective December 11, 1998 (Supp. 98-4).

Article 4 CLASS SEVEN LIMITED VALUE AND ASSESSMENT RATIO

Ariz. Admin. Code § R15-4-401 Calculation of Class Seven Assessment Ratios

A. The Department of Revenue shall calculate the assessment ratios for primary and secondary tax purposes for all Class Seven property in accordance with this Regulation. The Department shall transmit these assessment ratios to the counties on or before the third Monday in June of every tax year.

B. For the purpose of determining the Class Seven assessment ratio for secondary property taxes as defined in A.R.S. § 42-227, the Director shall calculate the total assessed valuation and total full cash value of all property in Classes One, Two and Three as follows: The assessed value and full cash value of all property valued by the Department in Classes One, Two, and Three shall be based upon the values determined by the Department on or before the first Monday in June. The assessed value and full cash value of all real property valued by the counties in Class Three shall be based upon the Notices of Value prepared by the county assessors pursuant to A.R.S. § 42-221. The assessed value and full cash value of all secured and unsecured personal property valued by the counties in Class Three shall be estimated based upon the full cash value of such property for the previous tax year. The full cash value of all property valued by the counties in Class Three shall be adjusted to market value, if necessary, based upon:

1. The weighed mean sales ratio reflected in the Department's preliminary sales ratio reports for the tax year, and

The adjustment determined by the Director for cash equivalency, personal property, and sampling considerations. The sales ratio study shall be conducted in accordance with the statistical principles applicable to such studies.

C. For the purpose of calculating the Class Seven assessment ratio for primary property taxes as defined in A.R.S. § 42-227, the Director shall calculate the total assessed valuation and total limited valuation of all property in Classes One, Two and Three by using the same property values determined under subsection (B) of this rule, except as follows: The assessed value and limited property value of Class Three property valued by the Department shall be based upon the limited property value of such property as determined by the Department on or before the first Monday in June. The assessed value and limited property value of all real property valued by the counties in Class Three shall be based upon the Notices of Value prepared by the county assessors pursuant to A.R.S. § 42-221. The limited property value of all property valued by the counties in Class Three shall be adjusted by the same percentage as the adjustment made to the full cash value of such property under subsection (B) of this rule.

History

• Adopted effective November 14, 1986 (Supp. 86-6).

Ariz. Admin. Code § R15-4-402 [REPEALED]

History

• Adopted effective November 14, 1986 (Supp. 86-6). Repealed effective December 11, 1998 (Supp. 98-4).

Article 5 VALUATION OF PIPELINE COMPANIES

Ariz. Admin. Code § R15-4-501 [REPEALED]

History

• Adopted effective August 6, 1986 (Supp. 86-4). Amended subsections (A), (B) and (D) effective February 22, 1989 (Supp. 89-1). Section repealed by final rulemaking at 5 A.A.R. 2735, effective July 21, 1999 (Supp. 99-3).

Ariz. Admin. Code § R15-4-502 Pipeline Companies

For purposes of determining class 2 property under A.R.S. § 42-12002, "pipeline companies" are individuals, partnerships, or corporations that are engaged in the business of producing, storing, selling, or transporting within, through, into, or from the state through a pipeline system the following: oil, natural gas, processed gas, manufactured gas, petroleum products, coal, or other products.

History

• Adopted effective August 6, 1986 (Supp. 86-4). Amended paragraph (22) effective February 22, 1989 (Supp. 89-1). Amended by final rulemaking at 5 A.A.R. 2735, effective July 21, 1999 (Supp. 99-3).

Ariz. Admin. Code § R15-4-503 [REPEALED]

History

• Adopted effective August 6, 1986 (Supp. 86-4). Amended subsection (A) effective February 22, 1989 (Supp. 89-1). Section repealed by final rulemaking at 5 A.A.R. 2735, effective July 21, 1999 (Supp. 99-3).

Ariz. Admin. Code § R15-4-504 [REPEALED]

History

• Adopted effective August 6, 1986 (Supp. 86-4). Amended subsection (A) effective February 22, 1989 (Supp. 89-1). Section repealed by final rulemaking at 5 A.A.R. 2735, effective July 21, 1999 (Supp. 99-3).

Ariz. Admin. Code § R15-4-505 [REPEALED]

History

• Adopted effective August 6, 1986 (Supp. 86-4). Amended subsection (A) effective February 22, 1989 (Supp. 89-1). Section repealed by final rulemaking at 5 A.A.R. 2735, effective July 21, 1999 (Supp. 99-3).

Ariz. Admin. Code § R15-4-506 [REPEALED]

History

• Adopted effective August 6, 1986 (Supp. 86-4). Amended subsection (A) effective February 22, 1989 (Supp. 89-1). Repealed effective December 11, 1998 (Supp. 98-4).

Ariz. Admin. Code § R15-4-507 [REPEALED]

History

• Adopted effective August 6, 1986 (Supp. 86-4). Section repealed by final rulemaking at 5 A.A.R. 2735, effective July 21, 1999 (Supp. 99-3).

Ariz. Admin. Code § R15-4-508 [REPEALED]

History

• Adopted effective August 6, 1986 (Supp. 86-4). Amended subsections (A) and (C) effective February 22, 1989 (Supp. 89-1). Section repealed by final rulemaking at 5 A.A.R. 2735, effective July 21, 1999 (Supp. 99-3).

Chapter 5 Department of Revenue - Transaction Privilege and Use Tax Section

Article 1 RETAIL CLASSIFICATION

Ariz. Admin. Code § R15-5-101 Definitions

In this Chapter, unless the context requires otherwise or unless otherwise defined:

"AZTaxes.gov" has the same meaning as prescribed in R15-10-301.

1. 2. "Casual activity or sale" means an occasional transaction of an isolated nature made by persons who neither represent themselves to be nor are engaged in a business that is subject to transaction privilege tax. Casual activity or sale includes, but is not limited to, sales of used capital assets, provided that the volume and frequency of such sales do not indicate that the seller regularly engages in selling such property.

2. 3. "Department" has the same meaning as prescribed in A.R.S. § 42-1001.

3. 4. "Gross income," "gross receipts," "marketplace facilitator," and "marketplace seller" have the same meanings as prescribed in A.R.S. § 42-5001.

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

5. "Real property" means land and anything permanently affixed to land.

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

6. "Remote seller" has the same meaning as prescribed in A.R.S. § 42-5001.

7. "Retailer" has the same meaning as prescribed in A.R.S. § 42-5001, and includes a wholesaler, manufacturer, or other seller of tangible personal property.

8. "Taxpayer" has the same meaning as prescribed in A.R.S. § 42-5001.

7. 9. "Vendor" means any person engaged in a business activity that is subject to any tax levied under A.R.S. Title 42, Chapter 5 and 6, including a retailer.

History

• Amended effective November 7, 1978 (Supp. 78-6). Renumbered from R15-5-1811 and amended effective August 9, 1993 (Supp. 93-3). Amended by final rulemaking at 12 A.A.R. 4099, effective December 4, 2006 (Supp. 06-4). Renumbered from R15-5-2001 by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-102 Casual Activities or Sales

A. Gross receipts from a casual activity or sale are not taxable under the retail classification.

B. Except as otherwise provided in R15-5-2002, a retailer, including as a marketplace facilitator or remote seller, cannot engage in a casual sale of tangible personal property of the same type or character as that which the person regularly sells at retail. A marketplace facilitator is deemed to regularly sell any tangible personal property sold on its marketplace.

History

• Adopted effective August 9, 1993 (Supp. 93-3). Amended by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-103 Sale of Business Enterprises

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

History

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

Ariz. Admin. Code § R15-5-104 Service Businesses

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

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

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

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-105 Services in Connection with Retail Sales

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

History

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

Ariz. Admin. Code § R15-5-106 Finance Charges in Connection with Retail Sales

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

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

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

History

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

Ariz. Admin. Code § R15-5-107 Sales for Resale or Lease

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

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

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

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

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

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

History

• Amended by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-108 Reserved

Ariz. Admin. Code § R15-5-109 Reserved

Ariz. Admin. Code § R15-5-110 Lease-purchase Agreements

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

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

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

History

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

Ariz. Admin. Code § R15-5-111 Consignment Sales

A. In this Section:

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

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

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

C. Except as provided in subsection (D), a consignee shall obtain a transaction privilege tax license before making consignment sales.

D. A consignee who is a marketplace facilitator without a physical presence in Arizona, as provided in R15-5-2002(B), is required to obtain a transaction privilege tax license upon meeting the threshold requirements in A.R.S. § 42-5044.

History

• Renumbered from R15-5-1808 and amended effective August 9, 1993 (Supp. 93-3). Amended by final rulemaking at 12 A.A.R. 4099, effective December 4, 2006 (Supp. 06-4). Amended by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-112 Sales by Auctioneers

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

B. Except as provided in subsection (C), an auctioneer shall obtain a transaction privilege tax license before conducting an auction.

C. An auctioneer who is a marketplace facilitator without a physical presence in Arizona, as provided in R15-5-2002(B), is required to obtain a transaction privilege tax license upon meeting the threshold requirements in A.R.S. § 42-5044.

History

• Renumbered from R15-5-1834 and amended effective August 9, 1993 (Supp. 93-3). Amended by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-113 Sales by Trustees, Receivers, and Assignees

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

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

History

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

Ariz. Admin. Code § R15-5-114 Reserved

Ariz. Admin. Code § R15-5-115 Reserved

Ariz. Admin. Code § R15-5-116 Reserved

Ariz. Admin. Code § R15-5-117 Reserved

Ariz. Admin. Code § R15-5-118 Reserved

Ariz. Admin. Code § R15-5-119 Reserved

Ariz. Admin. Code § R15-5-120 Exempt Sales of Machinery or Equipment

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

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

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

History

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

Ariz. Admin. Code § R15-5-121 Sales of Fuel Used in Manufacturing

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

History

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

Ariz. Admin. Code § R15-5-122 Articles Incorporated into a Manufactured Product

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

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

History

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

Ariz. Admin. Code § R15-5-123 Sale of Tools and Supplies to Businesses

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

History

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

Ariz. Admin. Code § R15-5-124 Reserved

Ariz. Admin. Code § R15-5-125 Reserved

Ariz. Admin. Code § R15-5-126 Manufacturing Labor

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

History

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

Ariz. Admin. Code § R15-5-127 Sales of Fuel

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

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-128 Electric Power Transmission and Distribution

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

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

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

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

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

1. "Transmission system" means:

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

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

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

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

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

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

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

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

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-129 Discounts, Refunds, and Coupon Redemption

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-130 Reserved

Ariz. Admin. Code § R15-5-131 Lay-away Sales

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

History

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

Ariz. Admin. Code § R15-5-132 Retail Sales with Trade-ins

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

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

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

History

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

Ariz. Admin. Code § R15-5-133 Delivery Charges in Connection with Retail Sales

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

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

History

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

Ariz. Admin. Code § R15-5-134 Sales of Containers, Bottles, and Labels

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

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

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-135 Sales of Restaurant Accessories

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

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

History

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

Ariz. Admin. Code § R15-5-136 Returnable Containers

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

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

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

History

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

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

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

1. "Covered" means included in the warranty or service provision.

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

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

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

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

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

History

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

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

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

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-139 Reserved

Ariz. Admin. Code § R15-5-140 Reserved

Ariz. Admin. Code § R15-5-141 Reserved

Ariz. Admin. Code § R15-5-142 Reserved

Ariz. Admin. Code § R15-5-143 Reserved

Ariz. Admin. Code § R15-5-144 Reserved

Ariz. Admin. Code § R15-5-145 Reserved

Ariz. Admin. Code § R15-5-146 Reserved

Ariz. Admin. Code § R15-5-147 Reserved

Ariz. Admin. Code § R15-5-148 Reserved

Ariz. Admin. Code § R15-5-149 Reserved

Ariz. Admin. Code § R15-5-150 Sale of Photography

A. In this Section:

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

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

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

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

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-151 Artists and Sales of Artwork

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

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

C. Except as otherwise provided in A.R.S. § 42-6017, gross receipts from the sale by the creating artist of a painting, drawing, etching, sculpture, or a piece of craftwork that is not a reproduction of an original work shall not be taxable if:

1. The sale is a casual activity or sale; or

2. The sale is a work of fine art at an art auction or gallery in this state to a nonresident of this state for use outside the state, if the retailer ships or delivers the work to a destination outside this state and if exempt under A.R.S. § 42-5061(A). In this subsection, "work of fine art" has the same meaning as prescribed in A.R.S. § 44-1771.

3. The sale is of commissioned artwork by an individual artist. In this subsection, "commissioned artwork" is a custom, one-of-a-kind art creation made by the individual artist pursuant to the particular requirements of a specific purchaser.

History

• Adopted effective April 15, 1993 (Supp. 93-2). Section heading amended effective August 9, 1993 (Supp. 93-3). Amended by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.
• R15-5-1812, referenced in subsection (C)(1) above, was repealed. Please refer to R15-5-2001 for information about casual sales.

Ariz. Admin. Code § R15-5-152 Tangible Personal Property Used in Soil Remediation Activities

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

History

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

Ariz. Admin. Code § R15-5-153 Four-inch Pipes or Valves

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

History

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

Ariz. Admin. Code § R15-5-154 Computer Hardware and Software

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

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-155 Delivery Sales of Tobacco Products

A. In this Section:

1. "Delivery sale" means a sale made by using any of the following:

a. The mail or a delivery service.

b. The Internet or a computer network.

c. Any other electronic method.

"Tobacco product" has the same meaning as prescribed in A.R.S. § 36-798.06.

B. A retailer, including a remote seller or marketplace seller, or marketplace facilitator shall not make or facilitate a delivery sale of any tobacco product that violates A.R.S. § 36-798.06.

History

• Amended by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-156 Sales of Prescription Drugs and Prosthetic Appliances

A. In this Section:

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

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

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

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

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

2. "Drug on a prescription" means prescription drug.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

6. Prescription eyeglasses and contact lenses; and

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

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-157 Membership Fees

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

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

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

History

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

Ariz. Admin. Code § R15-5-158 Postage Stamps

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-159 Reserved

Ariz. Admin. Code § R15-5-160 Reserved

Ariz. Admin. Code § R15-5-161 Reserved

Ariz. Admin. Code § R15-5-162 Reserved

Ariz. Admin. Code § R15-5-163 Reserved

Ariz. Admin. Code § R15-5-164 Reserved

Ariz. Admin. Code § R15-5-165 Reserved

Ariz. Admin. Code § R15-5-166 Reserved

Ariz. Admin. Code § R15-5-167 Reserved

Ariz. Admin. Code § R15-5-168 Reserved

Ariz. Admin. Code § R15-5-169 Reserved

Ariz. Admin. Code § R15-5-170 Interstate and Foreign Transactions

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

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

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

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

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

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

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

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

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

c. Parcel post receipt;

d. Export declaration;

e. Receipt from a licensed broker; or

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

History

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

Ariz. Admin. Code § R15-5-171 Sales to a Common Carrier

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

History

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

Ariz. Admin. Code § R15-5-172 Sales by Florists

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

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-173 Sales of Property Subsequently Taken Out-of- State

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

History

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

Ariz. Admin. Code § R15-5-174 Sales to Non-U.S. Citizens

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

History

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

Ariz. Admin. Code § R15-5-175 Expired

History

• Adopted effective August 9, 1993 (Supp. 93-3). Adopted effective August 9, 1993 (Supp. 93-3). Section expired under A.R.S. § 41-1056(J) at 22 A.A.R. 2054, effective March 31, 2016 (Supp. 16-3).

Ariz. Admin. Code § R15-5-176 Expired

History

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

Ariz. Admin. Code § R15-5-177 Reserved

Ariz. Admin. Code § R15-5-178 Reserved

Ariz. Admin. Code § R15-5-179 Reserved

Ariz. Admin. Code § R15-5-180 Sales by Businesses in Federal Areas

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

History

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

Ariz. Admin. Code § R15-5-181 Governmental Organizations

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

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

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

History

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

Ariz. Admin. Code § R15-5-182 Nonprofit Organizations

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

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

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

History

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

Ariz. Admin. Code § R15-5-183 Exempt Sales to Health Organizations

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

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

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

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

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

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

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

History

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

Article 2 RENUMBERED AND REPEALED

Ariz. Admin. Code § R15-5-201 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-202 Renumbered

History

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

Ariz. Admin. Code § R15-5-203 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-204 Renumbered

History

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

Ariz. Admin. Code § R15-5-205 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-206 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-207 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-208 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-209 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-210 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-211 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-212 Renumbered

History

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

Article 3 REPEALED

Ariz. Admin. Code § R15-5-301 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-302 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-303 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-304 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-305 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-306 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-307 [REPEALED]

History

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

Article 4 AMUSEMENT CLASSIFICATION

Ariz. Admin. Code § R15-5-401 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-402 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-403 Amusement Devices

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

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

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

History

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

Ariz. Admin. Code § R15-5-404 Other Income

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

History

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

Ariz. Admin. Code § R15-5-405 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-406 Health or Fitness Establishments and Private Recreational Establishments

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

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

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-407 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-408 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-409 [REPEALED]

History

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

Article 5 REPEALED

Ariz. Admin. Code § R15-5-501 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-502 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-503 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-504 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-505 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-506 [REPEALED]

History

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

Article 6 PRIME CONTRACTING CLASSIFICATION

Ariz. Admin. Code § R15-5-601 Taxpayer Bonds for Contractors

A. For the purpose of this rule:

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

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

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

1. Two thousand dollars for:

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

b. Operative builders;

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

d. Painting, paper hanging;

e. Decorating;

f. Electrical work;

g. Masonry stonework and other stonework;

h. Plastering, drywall, acoustical and insulation work;

i. Terrazzo, tile, marble and mosaic work;

j. Carpentry;

k. Floor laying and other floor work;

l. Roofing and sheet metal work;

m. Concrete work;

n. Water well drilling;

o. Structural steel erection;

p. Glass and glazing work;

q. Excavating and foundation work;

r. Wrecking and demolition work;

s. Installation and erection of building equipment;

t. Special trade contractors; and

u. Manufacturers of mobile homes.

2. Seven thousand dollars for:

a. General contractors of single family housing;

b. Water, sewer, pipeline, communication and powerline construction.

3. Seventeen thousand dollars for:

a. General contractors of industrial buildings and warehouses;

b. General contractors of nonresidential buildings other than single family;

c. Highways and street construction except elevated highways.

Twenty-two thousand dollars for:

a. Heavy construction;

b. Bridge construction;

c. Tunnel construction; and

d. Elevated highway construction.

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

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

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

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

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

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

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

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

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

History

• Former Section R15-5-601 repealed effective August 13, 1987 (Supp. 87-3). New Section R15-5-601 renumbered from R15-10-202 (Supp. 94-1). Amended by final rulemaking at 24 A.A.R. 742, effective 5/13/2018.

Ariz. Admin. Code § R15-5-602 Expired

History

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

Ariz. Admin. Code § R15-5-603 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-604 Expired

History

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

Ariz. Admin. Code § R15-5-605 Expired

History

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

Ariz. Admin. Code § R15-5-606 Expired

History

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

Ariz. Admin. Code § R15-5-607 Expired

History

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

Ariz. Admin. Code § R15-5-608 Expired

History

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

Ariz. Admin. Code § R15-5-609 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-610 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-611 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-612 Expired

History

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

Ariz. Admin. Code § R15-5-613 Expired

History

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

Ariz. Admin. Code § R15-5-614 Expired

History

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

Ariz. Admin. Code § R15-5-615 Expired

History

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

Ariz. Admin. Code § R15-5-616 Expired

History

• Amended effective June 18, 1987 (Supp. 87-2). Historical Note Amended effective November 7, 1978 (Supp. 78-6). Section expired under A.R.S. 41-1056(E) at 17 A.A.R. 2692, effective September 28, 2011 (Supp. 11-4).

Ariz. Admin. Code § R15-5-617 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-618 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-619 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-620 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-621 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-622 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-623 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-624 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-625 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-626 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-627 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-628 Expired

History

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

Ariz. Admin. Code § R15-5-629 Expired

History

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

Article 7 REPEALED

Ariz. Admin. Code § R15-5-701 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-702 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-703 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-704 [REPEALED]

History

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

Article 8 REPEALED

Ariz. Admin. Code § R15-5-801 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-802 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-803 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-804 [REPEALED]

History

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

Article 9 MINING CLASSIFICATION

Ariz. Admin. Code § R15-5-901 Definitions

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

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

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

History

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

Ariz. Admin. Code § R15-5-902 General

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-903 Renumbered

History

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

Ariz. Admin. Code § R15-5-904 Manufacturing or Processing Service Charges

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

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

History

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

Ariz. Admin. Code § R15-5-905 Products Shipped Out of Arizona

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

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

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

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

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

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-906 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-907 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-908 Actual Freight Paid

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

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

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

History

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

Ariz. Admin. Code § R15-5-909 [REPEALED]

History

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

Article 10 TRANSACTION PRIVILEGE TAX - TRANSIENT LODGING CLASSIFICATION

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

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

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

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

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

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

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

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-1002 Activities in Addition to Providing Lodging

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

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

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

History

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

Ariz. Admin. Code § R15-5-1003 Providing Lodging to Government Agencies

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

History

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

Article 11 TRANSACTION PRIVILEGE TAX - JOB PRINTING CLASSIFICATION

Ariz. Admin. Code § R15-5-1101 Definitions

For purposes of this Article, the following definitions apply:

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

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

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

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-1102 Printer's Sale of Printing

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

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

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

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

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

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

3. A parcel post receipt;

4. An export declaration;

5. A receipt from a licensed broker; or

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

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

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

History

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

Ariz. Admin. Code § R15-5-1103 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1104 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1105 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1106 Sale of Materials to a Printer

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

History

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

Ariz. Admin. Code § R15-5-1107 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1108 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1109 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1110 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1111 Miscellaneous Costs of a Printer Are Not Deductions

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

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

History

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

Ariz. Admin. Code § R15-5-1112 Sale of Image Developing

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

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

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

History

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

Article 12 REPEALED

Ariz. Admin. Code § R15-5-1201 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1202 [REPEALED]

History

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

Article 13 SALES TAX - PUBLISHING CLASSIFICATION

Ariz. Admin. Code § R15-5-1301 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1302 General

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

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-1303 Definitions

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

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

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

Ariz. Admin. Code § R15-5-1304 Printing Costs

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

Ariz. Admin. Code § R15-5-1305 Out-of-state Distribution

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

Ariz. Admin. Code § R15-5-1306 [REPEALED]

History

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

Article 14 TRANSPORTING CLASSIFICATION

Ariz. Admin. Code § R15-5-1401 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1402 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1403 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1404 Excess Baggage Charges

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

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

History

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

Ariz. Admin. Code § R15-5-1405 Demurrage Charges

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

History

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

Ariz. Admin. Code § R15-5-1406 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1407 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1408 Rental of Aircraft

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

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

History

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

Article 15 PERSONAL PROPERTY RENTAL CLASSIFICATION

Ariz. Admin. Code § R15-5-1501 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1502 General

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-1503 Sourcing of Leased Tangible Personal Property

A. In this Section:

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

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

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

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

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

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-1504 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1505 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1506 Rental of Tangible Personal Property to Government Agencies

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

History

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

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

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

History

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

Ariz. Admin. Code § R15-5-1508 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1509 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1510 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1511 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1512 Lease - Purchase Agreements

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

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

History

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

Ariz. Admin. Code § R15-5-1513 [REPEALED]

History

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

Article 16 COMMERCIAL LEASE CLASSIFICATION

Ariz. Admin. Code § R15-5-1601 Definitions

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

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

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

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

4. "Rental" means renting or leasing

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

History

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

Ariz. Admin. Code § R15-5-1602 Casual Leasing Activity

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-1603 Renumbered

History

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

Ariz. Admin. Code § R15-5-1604 Gross Income

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

1. Rent;

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

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

4. Common area maintenance charges paid by the lessee;

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

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

7. Utility connect/disconnect charges;

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

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

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

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-1605 Rental to Government Agencies

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-1606 Nonprofit Organizations

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

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

History

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

Ariz. Admin. Code § R15-5-1607 Renumbered

History

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

Ariz. Admin. Code § R15-5-1608 Commercial Property - Storage Facilities

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

Ariz. Admin. Code § R15-5-1609 Commercial Property - Licensee Agreements

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

Ariz. Admin. Code § R15-5-1610 Expired

History

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

Ariz. Admin. Code § R15-5-1611 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1612 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1613 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1614 Renumbered

History

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

Ariz. Admin. Code § R15-5-1615 Renumbered

History

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

Ariz. Admin. Code § R15-5-1616 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1617 [REPEALED]

History

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

Article 17 RESTAURANT CLASSIFICATION

Ariz. Admin. Code § R15-5-1701 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1702 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1703 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1704 Providing Food or Drink to Government Agencies

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

History

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

Ariz. Admin. Code § R15-5-1705 Amusement Devices

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

History

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

Ariz. Admin. Code § R15-5-1706 Cover Charges

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

History

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

Ariz. Admin. Code § R15-5-1707 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1708 Gratuities (Tips)

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

1. The exact amount charged on a check or bill for gratuities and any amounts attributable to credit card fees for gratuities, are segregated on the seller's records for the account of the employees actually providing the services; and

2. The amounts so segregated less any amounts attributable to credit card fees for gratuities, are distributed directly to the employees providing the services for which the charges were made;

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

History

• Amended effective December 16, 1997 (Supp. 97-4). Amended by final rulemaking at 26 A.A.R. 2894, effective 11/6/2020.

Ariz. Admin. Code § R15-5-1709 Coupon Redemption

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

History

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

Article 18 [REPEALED]

Ariz. Admin. Code § R15-5-1801 [Repealed]

History

• Repealed effective July 23, 1985 (Supp. 85-4). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1802 [Repealed]

History

• Repealed effective April 13, 1987 (Supp. 87-2). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1803 [Repealed]

History

• Renumbered to R15-5-181 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1804 [Repealed]

History

• Renumbered to R15-5-182 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1805 [Repealed]

History

• Renumbered to R15-5-104 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1806 [Repealed]

History

• Amended effective November 7, 1978 (Supp. 78-6). Repealed effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1807 [Repealed]

History

• Repealed effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1808 [Repealed]

History

• Renumbered to R15-5-111 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1809 [Repealed]

History

• Renumbered to R15-5-110 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1810 [Repealed]

History

• Repealed effective April 13, 1987 (Supp. 87-2). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1811 [Repealed]

History

• Amended effective November 7, 1978 (Supp. 78-6). Renumbered to R15-5-101 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1812 [Repealed]

History

• Repealed effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.
• The information about casual sales that formerly was contained in R15-5-1812, and which is referenced in subsection R15-5-151(C)(1), now appears in R15-5-2001 .

Ariz. Admin. Code § R15-5-1813 [Repealed]

History

• Renumbered to R15-5-2011 effective October 14, 1993 (Supp. 93-4). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1814 [Repealed]

History

• Amended subsections (A) and (B) effective March 18, 1981 (Supp. 81-2). Renumbered to R15-5-170 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1815 [Repealed]

History

• Renumbered to R15-5-105 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1816 [Repealed]

History

• Repealed effective April 13, 1987 (Supp. 87-2). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1817 [Repealed]

History

• Renumbered to R15-5-103 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1818 [Repealed]

History

• Renumbered to R15-5-132 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1819 [Repealed]

History

• Amended effective November 7, 1978, unless otherwise noted (Supp. 78-6). Amended subsection (B), paragraph (1) effective March 18, 1981 (Supp. 81-2). Renumbered to R15-5-156 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1820 [Repealed]

History

• Renumbered to R15-5-133 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1821 [Repealed]

History

• Amended effective November 7, 1978, unless otherwise noted (Supp. 78-6). Amended subsection (B) effective March 18, 1981 (Supp. 81-2). Renumbered to R15-5-183 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1822 [Repealed]

History

• Amended effective November 7, 1978, unless otherwise noted (Supp. 78-6). Amended paragraphs (9) and (10) effective March 18, 1981 (Supp. 81-2). Renumbered to R15-5-120 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1823 [Repealed]

History

• Repealed effective April 13, 1987 (Supp. 87-2). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1824 [Repealed]

History

• Repealed effective April 13, 1987 (Supp. 87-2). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1825 [Repealed]

History

• Renumbered to R15-5-180 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1826 [Repealed]

History

• Repealed effective April 13, 1987 (Supp. 87-2). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1827 [Repealed]

History

• Repealed effective April 13, 1987 (Supp. 87-2). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1828 [Repealed]

History

• Repealed effective April 13, 1987 (Supp. 87-2). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1829 [Repealed]

History

• Renumbered to R15-5-134 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1830 [Repealed]

History

• Renumbered to R15-5-121 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1831 [Repealed]

History

• Repealed effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1832 [Repealed]

History

• Former Section R15-5-1832 repealed, new Section R15-5-1832 adopted effective September 3, 1978 (Supp. 78-6). Repealed effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1833 [Repealed]

History

• Former Section R15-5-1833 repealed, new Section R15-5-1833 adopted effective March 18, 1981 (Supp. 81-2). Renumbered to R15-5-136 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1834 [Repealed]

History

• Renumbered to R15-5-112 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1835 [Repealed]

History

• Repealed effective April 13, 1987 (Supp. 87-2). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1836 [Repealed]

History

• Renumbered to R15-5-150 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1837 [Repealed]

History

• Repealed effective April 15, 1993 (Supp. 93-2). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1838 [Repealed]

History

• Repealed effective April 13, 1987 (Supp. 87-2). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1839 [Repealed]

History

• Renumbered to R15-5-129 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1840 [Repealed]

History

• Renumbered to R15-5-122 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1841 [Repealed]

History

• Repealed effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1842 [Repealed]

History

• Repealed effective April 13, 1987 (Supp. 87-2). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1843 [Repealed]

History

• Repealed effective April 13, 1987 (Supp. 87-2). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1844 [Repealed]

History

• Repealed effective April 13, 1987 (Supp. 87-2). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1845 [Repealed]

History

• Repealed effective April 13, 1987 (Supp. 87-2). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1846 [Repealed]

History

• Renumbered to R15-5-3004 effective July 23, 1985 (Supp. 85-4). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1847 [Repealed]

History

• Repealed effective April 13, 1987 (Supp. 87-2). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1848 [Repealed]

History

• Renumbered to R15-5-126 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1849 [Repealed]

History

• Renumbered to R15-5-123 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1850 [Repealed]

History

• Former Section R15-5-1850 repealed, new Section R15-5-1850 adopted effective June 18, 1987 (Supp. 87-2). Section R15-5-1850 renumbered to R15-5-2010 effective October 14, 1993 (Supp. 93-4). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1851 [Repealed]

History

• Repealed effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1852 [Repealed]

History

• Repealed effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-1853 [Repealed]

History

• Adopted effective November 7, 1978 (Supp. 78-6). Amended effective June 16, 1987 (Supp. 87-2). Renumbered to R15-5-154 effective August 9, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Article 18.1 SALES OF FOOD

Ariz. Admin. Code § R15-5-1860 Definitions

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

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

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

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

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

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

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

7. "Food"

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

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

i. Pet food and supplies

ii. Cosmetics and grooming items

iii. Tobacco products

iv. Soaps and paper products and household supplies

v. Dietary supplements such as vitamins or protein supplements

vi. Medicines

vii. Fertilizer

8. "Food for consumption on the premises"

a. "Food for consumption on the premises" means the following:

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

ii. Hot or cold sandwiches including frozen sandwiches.

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

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

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

vi. Food sold by caterers.

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

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

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

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

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

12. "Qualified retailer"

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

b. Qualified retailers are:

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

(1) Grocery stores;

(2) Convenience stores;

(3) Butcher shops;

(4) Bakeries;

(5) Dairy stores;

(6) Cheese stores;

(7) Farmer's markets.

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

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

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

v. A retailer who is a street or sidewalk vendor who uses a pushcart.

(1) Snackmobile;

(2) Chuck wagon;

(3) Mobile hot dog stands.

vi. Vending machines and other automatic retailers.

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

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

15. Tax-exempt foods

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

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

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

bread and flour products

vegetables and vegetable products

candy and confectionery

sugar, sugar products and substitutes

cereal and cereal products

butter, oleomargarine, shortening and cooking oils

cocoa and cocoa products

coffee and coffee substitutes

milk and milk products

eggs and egg products

tea

meat and meat products

spices, condiments, extracts and food colorings

fish and fish products

frozen foods

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

fruit and fruit products

packaged ice cream products

dietary substitutes

ice cubes and bottled water including carbonated and mineral water

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

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

History

• Adopted as an emergency effective June 30, 1980, pursuant to A.R.S. § 41-1003, valid for only 90 days (Supp. 80-3). Former emergency adoption now amended and adopted effective October 15, 1980 (Supp. 80-5). Amended by final expedited rulemaking at 25 A.A.R. 327, effective 1/14/2019.

Ariz. Admin. Code § R15-5-1861 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1862 Restaurant Food Sales

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

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

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

History

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

Ariz. Admin. Code § R15-5-1863 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1864 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1864.01 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1864.02 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1864.03 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1864.04 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1865 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1866 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1867 [REPEALED]

History

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

Article 19 REPEALED

Ariz. Admin. Code § R15-5-1901 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1902 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1903 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1904 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1905 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-1906 [REPEALED]

History

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

Article 20 GENERAL ADMINISTRATION

Ariz. Admin. Code § R15-5-2001 Renumbered

History

• Repealed effective August 13, 1987 (Supp. 87-3). New Section R15-5-2001 renumbered from R15-5-202 and amended effective October 14, 1993 (Supp. 93-4). R15-5-2001(4)corrected to reflect an updated citation reference to Arizona Revised Statutes (Supp. 06-4). Renumbered to R15-5-101 by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-2002 Liability for Transaction Privilege Tax

A. The transaction privilege tax is imposed directly on the person engaged in a taxable business in or within Arizona, including a retailer located outside the state who is engaging or continuing in business in this state as a remote seller or marketplace facilitator and who meets the threshold requirements in A.R.S. § 42-5044. The vendor shall be liable for the tax, regardless of whether or not the vendor passes on the economic burden of the tax to the customer.

B. A retailer establishes its physical presence within Arizona by activities performed in this state on its behalf that are significantly associated with the retailer's ability to establish and maintain a market in this state for its sales. Activities and factors that, by themselves or in conjunction with others, establish a retailer's physical presence within Arizona include the following:

1. The retailer maintains an office or other place of business in Arizona, regardless of whether such location performs a sales-related or other business function.

2. The retailer owns or leases real or personal property in Arizona.

The retailer maintains an inventory of products in Arizona at its own direction and control.

4. The retailer's merchandise or goods are delivered into Arizona on vehicles owned or leased by the retailer and the retailer makes such deliveries into Arizona on an ongoing basis.

5. Other local activities performed by the retailer's employees, agents, representatives, contractors, or affiliated persons in Arizona that enable the retailer to maintain and improve its name recognition, market share or sales volume, goodwill, and individual customer relations may establish physical presence if the activities are not of a transitory nature, as described in subsections (D) and (E). Such activities may include: soliciting sales through an ongoing local marketing contract; delivering, installing or repairing property sold to customers through an ongoing contract with either the customer or a local partner; or conducting training or similar support services for customers or for employees or representatives of the retailer on an ongoing basis.

C. A retailer having a physical presence within Arizona as described in subsection (B) of this Section shall be considered liable for transaction privilege tax as a taxpayer located within Arizona.

D. A retailer's activities in Arizona are not of a transitory nature if such activities generate gross receipts, are ongoing, and are regularly conducted from within the state. Alternately, a retailer's activities in Arizona are not of a transitory nature if such activities generate gross receipts and the retailer regularly conducts the same business activities outside of Arizona.

1. Example: Employees who travel to Arizona for a business meeting, conference, or similar event and who do not otherwise engage in a taxable business activity during their time within the state would not establish physical presence in Arizona, regardless of the duration of their stay. Such stays would not be considered ongoing, even though the events take place in Arizona.

2. Example: A retailer that provides remote one-time assistance to a customer who has a specific problem installing or using a product purchased remotely would not establish physical presence. The retailer's assistance does not appear ongoing and the activity is conducted from outside the state.

3. Example: A retailer that sells WiFi-enabled (IoT) appliances also offers a service contract that allows its technicians to remotely access its customers' appliances to regularly update, maintain, or troubleshoot firmware. The provision of services through such contracts with Arizona customers would not establish physical presence for the retailer. The retailer's services, while ongoing, are conducted from outside the state.

4. Example: A retailer that has a salesperson who regularly travels to Arizona for the purposes of selling goods and services and supporting previously sold goods and services may have physical presence, even if the salesperson is a resident of California and only present in Arizona temporarily throughout the calendar year. The retailer's sales activities, as conducted through its salesperson, are ongoing and conducted from within the state.

5. Example: A retailer's employee who is a Nevada resident but is working remotely from Arizona while on vacation, performing bookkeeping and other routine business functions, does not establish physical presence in Arizona for the business. The employee's in-state activities are not significantly associated with a retailer's ability to establish and maintain a market in Arizona for its sales.

6. Example: A new Utah-based retailer that has never made any sales to Arizona purchasers brings an inventory of crystals to sell at a two-day mineral and fossil show in Arizona. Over the two-day period, the retailer makes $3,000 in sales. As an out-of-state retailer making sales from within Arizona who has not met the threshold requirements in A.R.S. § 42-5044, the retailer will incur an Arizona transaction privilege tax liability on the sales it makes at the show. Such Arizona-based sales are not considered for purposes of meeting the threshold requirements for a remote seller, pursuant to A.R.S. § 42-5044. If the retailer does not anticipate conducting additional sales from within Arizona on an ongoing basis, it should apply for a seasonal license to participate in the show.

7. Example: At the same mineral and fossil show described in subsection (D)(6), an new Arizona-based retailer of semi-precious gems also brings an inventory to sell at the show for the first time. As a retail business located in Arizona, the retailer must be licensed and must report and remit Arizona transaction privilege tax on its sales made at the show.

E. Effective October 1, 2019, a retailer that establishes physical presence in Arizona pursuant to this rule shall continue to be responsible for reporting and remitting transaction privilege tax for the duration of such physical presence. If the retailer terminates its physical presence in the state, it shall report and remit transaction privilege tax for all transactions occurring on or before the last day of the month in which the vendor terminates its physical presence.

History

• Repealed effective April 13, 1987 (Supp. 87-2). New Section R15-5-2002 renumbered from R15-5-204 and amended effective October 14, 1993 (Supp. 93-4). Amended by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-2003 Applicability of Provisions to Marketplace Facilitators and Remote Sellers

Articles 1, 20, and 22 of this Chapter apply to any marketplace facilitator or remote seller who meets the threshold requirements in A.R.S. § 42-5044.

History

• Repealed effective April 13, 1987 (Supp. 87-2). Adopted by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-2004 Multi-Location and Multi-Business Taxpayers

A. A taxpayer with multiple licenses for separate businesses shall maintain separate records for each licensed business, including details relating to the computation of taxes and exempt sales and digital or hard copies of applicable exemption certificates, as provided in subsection (B).

B. The Department may request that records required to be maintained under this Section be made accessible for inspection or copying. To the extent reasonable or possible, the taxpayer shall make these records available to the Department in an electronic format, if requested.

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

D. Except as provided in subsection (E), a marketplace facilitator shall maintain records that separately show sales made on its own behalf and sales made on behalf of marketplace sellers. Such records shall include details relating to the computation of taxes and exempt sales and also include digital or hard copies of applicable exemption certificates, as provided in subsection (B).

E. If a marketplace facilitator reported through non-amended returns and remitted transaction privilege tax on sales made on its own behalf and sales made on behalf of marketplace sellers for tax periods on or before August 27, 2019, the marketplace facilitator shall maintain records that show details relating to the computation of taxes and exempt sales, and also include copies of applicable exemption certificates for both sales made on their own behalf and on behalf of a marketplace seller. A marketplace facilitator shall have an alternate method to demonstrate the portion of sales made on behalf of marketplace sellers if under audit or for the purposes of claiming liability relief under A.R.S. § 42-5043 and R15-5-2216.

F. A remote seller shall maintain records that separately show sales made directly to its own customers and sales made on its behalf through a marketplace facilitator. Such records shall include details relating to the computation of taxes and exempt sales and also include digital or hard copies of applicable exemption certificates, as provided in subsection (B).

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

History

• Repealed effective April 13, 1987 (Supp. 87-2). New Section R15-5-2004 renumbered from R15-5-2215 and amended effective October 14, 1993 (Supp. 93-4). Amended by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-2005 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2006 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2007 Credit for Accounting and Reporting Expenses

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

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

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

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

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

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

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

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

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

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

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

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

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

2. The taxpayer's check is dishonored.

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

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

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

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

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

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

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

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

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

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

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

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

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

History

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

Ariz. Admin. Code § R15-5-2008 Reserved

Ariz. Admin. Code § R15-5-2009 Transactions Between Affiliated Persons Who Are Marketplace Facilitators, Marketplace Sellers, or Remote Sellers

A. In this Section, "affiliated person" has the same meaning as prescribed in A.R.S. § 42-5043.

B. For the purposes of determining whether a remote seller or marketplace facilitator meets the threshold requirements in A.R.S. § 42-5044, the sales of marketplace facilitators and remote sellers who are affiliated persons shall be aggregated. If the threshold is met after aggregation of such sales, then all affiliated marketplace facilitators and remote sellers shall register with the Department for the filing and remission of retail transaction privilege tax. Marketplace facilitators and remote sellers who are affiliated persons are required to register with the Department and obtain a transaction privilege tax license under this Section for each affiliated person even if some or none of the affiliated persons would meet the threshold on an individual basis.

C. A marketplace facilitator or remote seller with affiliated persons who meets the threshold requirements in A.R.S. § 42-5044 are not required to file consolidated returns.

D. For the purposes of determining whether a remote seller meets the threshold requirements in A.R.S. § 42-5044, only the remote seller's sales that are not facilitated on a marketplace shall be counted towards its threshold.

History

• Amended by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-2010 Transactions between Affiliated Persons

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

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

2. "Affiliated persons" means members of the individual's family or persons who have ownership or control of a business entity.

"Constructive purchase price" means the fair market value or, if the fair market value cannot be determined, the value established by expert appraisal that takes into consideration all factors relevant to the transaction.

4. "Control of a business entity" means direct or indirect ownership or control of more than 50% of the business entity. The following guidelines, as to indirect ownership, shall apply for purposes of determining control of a business entity.

a. A corporation, partnership, estate, or trust shall be considered as being owned proportionately by or for its shareholders, partners, or beneficiaries.

b. An individual shall be considered as owning directly or indirectly that portion which is owned by or for members of the individual's family.

c. The ownership of stock by a corporation, partnership, estate, or trust shall be considered actual ownership to its shareholders, partners, or beneficiaries for purposes of making another individual a constructive owner.

d. Ownership based on a family relationship shall not be treated as actual ownership by the related party for the purpose of making another individual a constructive owner.

5. "Fair market value" means the gross receipts that the transaction would have brought in the open market at a time and location similar to that of the affiliated party transaction and between a willing purchaser and a willing seller, who are not affiliated and have reasonable knowledge of the relevant facts.

6. "Members of the individual's family" means the relationship of spouse, brothers, and sisters, whether by whole or half blood and including adopted persons, ancestors, and lineal descendants.

B. The tax shall be computed upon the constructive purchase price when:

1. The transaction is between affiliated persons, and

2. The facts and circumstances indicate that the reported gross receipts from the transaction are not indicative of the fair market value of the transaction.

History

• Renumbered from Section R15-5-1850 and amended effective October 14, 1993 (Supp. 93-4). Corrected typographical error to reflect what was filed with the Office of Secretary of State October 14, 1993; changed "owner" to "owned" in subsection (A)(4)(a) (Supp. 97-1).

Ariz. Admin. Code § R15-5-2011 Bad Debts

A. The deduction of a bad debt shall be allowed from gross receipts if the following conditions apply:

1. The gross receipts from the transaction on which the bad debt deduction is being taken have been reported as taxable;

2. The debt arose from a debtor-creditor relationship based upon a valid and enforceable obligation to pay a fixed or determinable sum of money; and

3. All or part of the debt is worthless.

B. A debt shall be considered worthless if:

1. The surrounding circumstances indicate that the debt is uncollectible; and

2. Legal action to enforce payment has not or, in all probability, would not result in the satisfaction of the debt.

C. The bad debt deduction shall be computed by subtracting the amounts received on the debt from the amount originally reported as taxable. The portion of the amounts received on the debt representing carrying charges, interest, and repossession expenses, which have not been reported as taxable, shall not be allowed as a bad debt deduction.

D. A bad debt deduction shall be taken in the month in which the conditions of subsection (A) apply.

E. A bad debt deduction shall be allowed, pursuant to the provisions in this rule, on conditional or installment sales if:

1. The tax liability is paid on the full sales price of the tangible personal property at the time of the sale; or

2. A contract or other financial obligation is sold to a third party as a sale with recourse and principal payments are made by the vendor to the third party, pursuant to the default of the original payor. Such principal payments may be taken as a bad debt deduction if the tax was paid by the vendor on the original sale of the tangible personal property or on the subsequent sale of the financing contract.

3. For purposes of the bad debt deduction in situations of default on conditional or installment sales, a "sale with recourse" means that a vendor sells a contract or other financial obligation to a third party but retains liability for payment upon default of the original payor.

F. Any recovery of a bad debt subsequent to a bad debt deduction shall be reported as taxable gross receipts when received.

History

• Renumbered from Section R15-5-1813 and amended effective October 14, 1993 (Supp. 93-4). Corrected misspelling in subsection (E)(3) from "retails" to "retains" (Supp. 94-2).

Article 21 UTILITIES CLASSIFICATION

Ariz. Admin. Code § R15-5-2101 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2102 Renumbered

History

• Renumbered to R15-5-3024 (Supp. 86-6).

Ariz. Admin. Code § R15-5-2103 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2104 Interstate and Foreign Sales

A person engaged in business under the utilities classification may deduct from the tax base gross receipts from sales of electricity, gas, or water, delivered through transmission lines or pipelines to a point in another state or country, from a point in this state and used outside this state.

History

• Amended effective October 17, 1997 (Supp. 97-4).

Ariz. Admin. Code § R15-5-2105 Locally Delivered Utilities

A person engaged in business under the utilities classification is subject to tax on the gross receipts from sales of electricity, gas, or water, produced outside this state that is delivered through transmission lines or pipelines to a point in this state, for use in this state unless an exemption applies.

History

• Amended effective October 17, 1997 (Supp. 97-4).

Ariz. Admin. Code § R15-5-2106 Compressed and Bottled Liquids

The gross receipts from sales of bottled gases and bottled water are subject to tax under the retail classification unless otherwise exempt.

History

• Amended effective March 18, 1981 (Supp. 81-2). Amended effective October 17, 1997 (Supp. 97-4).

Ariz. Admin. Code § R15-5-2107 Sales to Irrigation Districts

A person engaged in business under the utilities classification is subject to tax on the gross receipts from producing and furnishing or furnishing electricity or gas to an irrigation district for the purpose of producing water for irrigation of farm lands or of lands subdivided for residential purposes which are entitled to irrigation water unless an exemption applies.

History

• Amended effective October 17, 1997 (Supp. 97-4).

Ariz. Admin. Code § R15-5-2108 [REPEALED]

History

• Repealed effective October 17, 1997 (Supp. 97-4).

Ariz. Admin. Code § R15-5-2109 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2110 Security Deposits

Gross receipts from customer deposits that are held as security for payment of utility billings are not subject to tax until recognized as income. A deposit that is not applied to a customer's bill or refunded to a customer when utility services are discontinued shall be presumed to be abandoned property if the customer does not claim it within the period established under A.R.S. Title 44, Chapter 3. Customer deposits that are presumed to be abandoned property under A.R.S. Title 44, Chapter 3, shall be reported and delivered to the Department as unclaimed property. Amounts delivered to the Department as unclaimed property are not included in the tax base. For example:

1. A utility company requires a new customer to deposit $150 before it provides utility service. The customer moves and notifies the utility company to discontinue service. The customer's final bill is $130. The utility applies the deposit to the final bill and refunds $20 to the customer. The amount applied to the utility bill is recognized as income and subject to tax. The amount refunded to the customer is not recognized by the utility as income and is not subject to tax.

2. A utility company requires a new customer to deposit $150 before it provides utility service. The customer notifies the utility company to discontinue service. The customer's final bill is $130. The utility applies the deposit to the final bill. The customer does not provide a forwarding address to the utility. Therefore, the utility company is not able to refund the remaining $20 to the customer. The amount applied to the utility bill is recognized as income and subject to tax. The remaining $20 is presumed to be abandoned property if not claimed under A.R.S. Title 44, Chapter 3. The amount presumed to be abandoned property shall be reported and delivered to the Department as unclaimed property under A.R.S. Title 44, Chapter 3. The amount delivered to the Department as unclaimed property is not recognized as income by the utility and is not subject to tax.

History

• Amended effective October 17, 1997 (Supp. 97-4).

Article 22 TRANSACTION PRIVILEGE TAX - ADMINISTRATION

Ariz. Admin. Code § R15-5-2201 Display and Issuance of License

A. A person maintaining a public place of business in Arizona shall display the transaction privilege tax license in a location conspicuous to the public. For the purposes of this subsection, a remote seller or marketplace facilitator who lacks an in-state physical presence as provided in R15-5-2002 is not considered to maintain a public place of business in Arizona.

B. If a person maintains more than one place of business in Arizona, a transaction privilege tax license shall be displayed at each location.

C. For lessors engaged in the business of commercial leasing, a transaction privilege tax license shall be displayed in each location from which the lessor engages in business transactions.

D. The Department may issue a transaction privilege tax license to a licensee in either a hard copy format or digitally, including through AZTaxes.gov. Licensees shall maintain copies or equivalent documentation of their transaction privilege tax licenses for the record retention period prescribed in A.R.S. Title 42, Chapter 1.

E. A transaction privilege tax license issued by the Department is for administering and collecting transaction privilege tax and is not issued for the purpose of authorizing a business to operate in this state, pursuant to A.R.S. § 41-1080 and except as otherwise required by law.

History

• Amended effective November 7, 1978, unless otherwise noted (Supp. 78-6). Amended effective October 15, 1980 (Supp. 80-5). Repealed effective February 22, 1989 (Supp. 89-1). Section R15-5-2201 renumbered from R15-5-2203 and amended effective October 14, 1993 (Supp. 93-4). Amended by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-2202 Change in Ownership

A. A transaction privilege tax or use tax license is issued to a specific person. The license shall not be transferred to the new owner when selling a business. The new owner shall apply to the state for a new license before engaging in business transactions.

B. Court-appointed trustees, receivers, and others in cases of liquidation or operational bankruptcies shall obtain a transaction privilege tax or use tax license.

C. If a licensee has any change in ownership, the licensee shall apply for a new license.

History

• Repealed effective February 22, 1989 (Supp. 89-1). Section R15-5-2202 renumbered from R15-5-2205 and amended effective October 14, 1993 (Supp. 93-4). Amended by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-2203 Change of Name or Trade Name

If a change is made in the name or trade name under which the business is operating and the ownership remains the same, the taxpayer shall apply for a new license.

History

• Section R15-5-2203 renumbered to R15-5-2201, new Section R15-5-2203 renumbered from R15-5-2206 and amended effective October 14, 1993 (Supp. 93-4).

Ariz. Admin. Code § R15-5-2204 [Repealed]

History

• Amended effective October 15, 1980 (Supp. 80-5). Section R15-5-2204 repealed, new Section R15-5-2204 renumbered from R15-5-2207 and amended effective October 14, 1993 (Supp. 93-4). Amended by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019. Repealed by final rulemaking at 26 A.A.R. 2894, effective 11/6/2020.

Ariz. Admin. Code § R15-5-2205 Surrender of License upon Sale or Termination of Business

A. If a business is sold or terminated, the taxpayer shall notify the Department of the date of sale or termination by submitting a form prescribed by the Department or through AZTaxes.gov and shall surrender the transaction privilege tax or use tax license to the Department.

B. For the purposes of A.R.S. § 42-5005 and this Section, the Department shall consider a license surrendered if the licensee submits a request to cancel its license by submitting a form prescribed by the Department or through AZTaxes.gov.

History

• Amended effective November 7, 1978 (Supp. 78-6). Section R15-5-2205 renumbered to R15-5-2202, new Section R15-5-2205 renumbered from R15-5-2209 effective October 14, 1993 (Supp. 93-4). Amended by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-2206 Cancellation of License

A. In this Section, "affiliated person" has the same meaning as prescribed in A.R.S. § 42-5043.

A. B. The Department may cancel a license if:

1. During any consecutive 12-month period, the licensee reports no taxable transaction; and

2. The licensee is not a subcontractor or wholesaler.

B. C. The Department shall notify a licensee in writing of its intention to cancel the license. The notice shall explain the action the licensee may take to contest cancellation of the license and when cancellation is final.

C. D. The Department shall cancel a license 30 days after the notice of intention to cancel is mailed unless, within 30 days, the licensee objects to the cancellation in writing and produces documentation that the licensee is actively engaged in a taxable business. Suitable documentation includes, but is not limited to, the following:

1. Evidence that the licensee holds an inventory of raw or finished tangible personal property for sale or resale;

2. Evidence that the licensee maintains segregated bank accounts for the purpose of transacting business;

3. Bona fide contracts for future sale or resale of tangible personal property;

4. Profit and loss statements for federal or state income tax purposes; or

Evidence that the licensee otherwise actually engages in bona fide business activities.

D. E. Within 30 days of receipt of the licensee's objections and documentation, the Department shall notify the licensee in writing of its decision to cancel or retain the license. If the decision is to cancel the license, the licensee may request an administrative hearing.

F. Except as provided in subsection (G), a marketplace facilitator or remote seller may choose not to renew a license or cancel a license for the following calendar year if the sales of the marketplace facilitator or remote seller to Arizona purchasers fall below the current year threshold in A.R.S. § 42-5044 in the prior year.

G. A marketplace facilitator or remote seller may choose not to renew a license or cancel a license for the following calendar year if the current year sales of the marketplace facilitator or remote seller, together with the aggregated sales of all affiliated persons of the marketplace facilitator or remote seller to Arizona purchasers, fall below the current year threshold in A.R.S. § 42-5044 in the prior year.

History

• Section R15-5-2206 renumbered to R15-5-2203, new Section R15-5-2206 renumbered from R15-5-3018 effective October 14, 1993 (Supp. 93-4). Amended by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-2207 Taxpayer Bonds

A. The amount of the bond required under A.R.S. § 42-1102 shall be the greater of five hundred dollars, or:

1. For licensees reporting monthly, four times the average monthly liability;

2. For licensees reporting quarterly, six times the average monthly tax liability; or

3. For licensees reporting annually, fourteen times the average monthly tax liability.

B. For purposes of determining the bond amount, the average monthly tax liability is equal to the average monthly tax due from the licensee for the preceding six consecutive months. If an applicant does not have a six-month payment history, the bond amount shall be a minimum of five hundred dollars.

C. If a licensee provides a surety bond and the bond lapses, the licensee must deposit with the Department cash or other security in an amount equal to the lapsed surety bond within five business days of the licensee's receipt of written notification by the Department.

D. The bond amount may be increased or decreased as necessary based upon a change in the licensee's previous filing period, filing compliance record, or payment history. If the bond amount has been increased above the amount computed under subsection (B) of this rule, the licensee may request a hearing pursuant to A.R.S. § 42-1102 to show why the order increasing the bond amount is in error.

E. Except as required under A.R.S. § 42-1102, this Section shall not be construed to require a bond under A.R.S. § 42-5006 for any license issued pursuant to the criteria established in A.R.S. § 42-5044.

History

• Former Section R15-5-2207 renumbered to R15-5-2204 effective October 14, 1993 (Supp. 93-4). New Section R15-5-2207 renumbered from R15-10-201 (Supp. 94-1). Amended by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-2208 Expired

History

• Repealed effective October 14, 1993 (Supp. 93-4). New Section made by exempt rulemaking at 16 A.A.R. 1226, effective June 15, 2010; Section number corrected at request of Department, Office File No. M11-118, filed March 31, 2011 (Supp. 10-2). Section expired under A.R.S. § 41-1056(E) at 18 A.A.R. 1652, effective March 31, 2012 (Supp. 12-2).

Ariz. Admin. Code § R15-5-2209 Renumbered

History

• Section R15-5-2209 renumbered to R15-5-2205 effective October 14, 1993 (Supp. 93-4).

Ariz. Admin. Code § R15-5-2210 Collection of Tax by the Vendor

A. The vendor may pass on the economic burden of the transaction privilege tax, either as an unspecified portion of the overall selling price or as a separate and distinct item of charge.

1. If a vendor elects to pass on the economic burden of the tax as a separate and distinct item of charge, the vendor's tax base shall not include any collected state, county, city, or town taxes.

2. If the vendor does not pass on the tax as a separate and distinct item of charge, the vendor may factor out the tax. See R15-5-2210.01.

3. The amount of tax on a transaction shall be the same whether the tax is stated as a separate and distinct item of charge or the tax is calculated using the factoring method.

4. Calculation of the amount of the tax using the separate and distinct item of charge method shall be as follows:

Price of tangible personal property $100

Multiply the price by the applicable tax rate

$100 times 5% equals the tax as calculated $5

Total cost to the consumer $105

B. All taxes collected shall be remitted to the Department and applicable taxing jurisdictions. If a vendor has collected tax in excess of the tax liability for the reporting period, the excess tax shall also be remitted.

History

• Repealed effective April 13, 1987 (Supp. 87-2). New Section adopted effective October 14, 1993 (Supp. 93-4). Reference correction (Supp. 95-2).

Ariz. Admin. Code § R15-5-2210.01 Factoring

"Factoring" means a method by which the taxpayer may determine the amount of the tax when the tax is collected as an unspecified part of the selling price.

1. The taxpayer may use any factoring method resulting in a tax amount equal to the tax as calculated using the separate and distinct item of charge method.

2. The following factoring method is approved and recommended by the Department.

To calculate the tax under the factoring method, the total cost to the consumer is divided by one plus the cumulative amount of the state and applicable county, city, and town tax rates, stated as a decimal. The result of this calculation is then multiplied by the cumulative tax rate to arrive at the amount of the tax on the sale. The gross receipts subject to tax, plus the cumulative tax on that amount, shall equal the total cost to the consumer.

To factor:

Total cost to the consumer $105

Divide the total cost to the

consumer by 1 plus the tax

rate (1.00 plus .05)

$105 divided by 1.05 equals the

price of tangible personal property $100

Tax as calculated ($100 times 5%) $5

History

• New Section adopted effective October 14, 1993 (Supp. 93-4).

Ariz. Admin. Code § R15-5-2211 Election of Basis to Report and Pay Taxes

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

1. "Accrual method" means that a sale is reported in the reporting period in which the sale occurs regardless of when payment is received.

2. "Cash receipts method" means that a sale is reported in the reporting period in which payment is received.

3. "Method of reporting" means a method to report and pay transaction privilege tax.

4. "Payment" means all consideration received including cash, credit, property, and services.

5. "Reporting period" means a calendar month or as prescribed by A.R.S. § 42-5014.

B. A taxpayer shall elect a method of reporting based on either the accrual or the cash receipts method at the time of making the application for a transaction privilege tax license or use tax registration.

C. A taxpayer shall report allowable exclusions, deductions, and exemptions in a manner consistent with the method of reporting elected under subsection (B).

D. A taxpayer shall provide written notification to the Department prior to changing its method of reporting elected under subsection (B). The Department may audit the books of the taxpayer to adjust any tax liability resulting from the change in the method of reporting.

History

• Repealed effective July 23, 1985 (Supp. 85-4). New Section renumbered from R15-5-2213 and amended effective October 14, 1993 (Supp. 93-4). Amended by final rulemaking at 14 A.A.R. 3616, effective November 8, 2008 (Supp. 08-3).

Ariz. Admin. Code § R15-5-2212 Reporting by Marketplace Facilitators and Remote Sellers

Marketplace facilitators and remote sellers registered with the Department shall report and remit the applicable taxes payable pursuant to A.R.S. § 42-5044 in aggregate total amounts for each applicable jurisdiction designated by AZTaxes.gov. A marketplace facilitator shall not be required to list or otherwise identify any individual marketplace seller on any return or attachment to a return.

History

• Repealed effective July 23, 1987 (Supp. 85-4). New Section R15-5-2212 renumbered from Section R15-5-3005 and amended effective October 14, 1993 (Supp. 93-4). Section expired under A.R.S. § 41-1056(J) at 23 A.A.R. 2207, effective March 30, 2017 (Supp. 17-3). New Section made by exempt rulemaking at 25 A.A.R. 3010, effective October 1, 2019 (Supp. 19-3).

Ariz. Admin. Code § R15-5-2213 [Repealed]

History

• Former Section R15-5-2213 renumbered to R15-5-2211, new Section R15-5-2213 adopted effective October 14, 1993 (Supp. 93-4). Amended by final rulemaking at 7 A.A.R. 5065, effective October 5, 2001 (Supp. 01-4). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

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

A. The vendor is responsible for the payment of tax and therefore shall provide sufficient documentation in support of all deductions.

B. The vendor may establish a deduction or exclusion from the tax base pursuant to A.R.S. § 42-1316 or 42-1328.

1. If the purchaser does not have a valid license number, the purchaser shall indicate the reason on any certificate.

2. Marking an invoice may be done either by recording the purchaser's transaction privilege tax license number on the invoice or by cross referencing the specific transaction to the specific exemption certificate of the specific purchaser.

3. The Department has prescribed a certificate for establishing entitlement to statutory deductions. Reproductions of the blank prescribed original certificate shall be acceptable for use.

4. The appropriate certificate shall be accurately and fully completed by the purchaser.

5. If the vendor has reason to believe that the information contained in the certificate is not accurate, complete, or applicable to the transaction, the vendor may refuse to accept the certificate.

6. If at any time the vendor has reason to believe that the certificate is not applicable to a transaction, the vendor may refuse to honor the certificate for that transaction.

7. The Department may challenge the certificate as accepted by the vendor if the Department has reason to believe that the information in the certificate is incomplete, inaccurate, or if the exemption claimed is not based on statutory provisions. The burden of proof lies with the Department when a vendor accepts a completed departmental certificate and marks the applicable invoice pursuant to statute.

C. A blanket certificate may be accepted if the vendor and purchaser agree. The blanket certificate may continue in force, for applicable transactions, for a period of time as set forth on the certificate. For purposes of this rule, a blanket certificate is one which covers the indicated type of transaction over a specified period of time.

1. The vendor may refuse to honor a blanket certificate and shall cancel such a certificate if, at any time, the vendor has reason to believe that the information contained in the certificate is no longer accurate or complete or no longer applies.

2. A new, accurate, and complete certificate may then be accepted.

D. Documentation, including a certificate other than a departmental certificate, may be accepted by the vendor to establish the right to a deduction.

1. If the vendor accepts a form of documentation other than a completed departmental certificate, the burden of proof remains with the vendor to establish the right to the deduction.

2. Other documentation necessary to establish a deduction from the tax base shall contain the information required by A.R.S. § 42-1316(A).

E. Documentation or a certificate to establish a deduction from the tax base shall be provided for each transaction or if a blanket certificate is used for each different exemption category.

F. The vendor shall retain all documentation for the required statutory period pursuant to A.R.S. § 42-113.

History

• Repealed effective April 13, 1987 (Supp. 87-2). New Section R15-5-2214 adopted effective October 14, 1993 (Supp. 93-4).

Ariz. Admin. Code § R15-5-2215 Return and Payment of Estimated Tax

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

1. "Annual estimated tax payment" means 1/2 of the total tax liability for the entire month of May or the total tax liability for the first 15 days of the month of June.

2. "Annual tax liability" means a total tax liability of in the preceding calendar or a reasonable anticipation of a total tax liability in the current year as follows:

$1,000,000 in 2019

$1,600,000 in 2020

$2,300,000 in 2021

$3,100,000 in 2022

$4,100,000 in 2023 and thereafter.

3. "Taxpayer" has the meaning set forth in A.R.S. § 42-5014(S). The following are considered a single taxpayer:

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

b. Corporations in a unitary business filing a combined corporate income tax return under R15-2D-401;

c. Married taxpayers operating separate sole proprietorships and filing a joint income tax return; or

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

4. "Total tax liability" means the combined total of the transaction privilege tax, telecommunications services excise tax, and county excise tax liabilities.

B. The requirement to make an annual estimated tax payment is based on the annual tax liability. Use tax and severance tax are not subject to the estimated tax provisions.

1. A taxpayer shall make an annual estimated tax payment if during the current calendar year the taxpayer, through use of ordinary business care and prudence, can anticipate incurring the annual tax liability. For example:

ABC Company has been selling home electronics for several years. Its tax liability for previous calendar years has averaged between $600,000 and $700,000. In February of the current year, ABC Company begins selling computers and accessories as well. Early sales reports show an increase in total sales of approximately 50%. Based on these facts, ABC Company can reasonably anticipate incurring the annual tax liability.

2. Taxpayers with multiple locations shall make the annual estimated tax payment based on the combined actual or anticipated annual tax liability from all locations. Taxpayers with multiple locations, shall make a single estimated payment each June.

C. A taxpayer shall not amend an annual estimated tax payment except to increase the amount of the payment.

D. The annual estimated tax payment shall not be applied, credited, or refunded until a Transaction Privilege, Use, and Severance Tax Return for the month of June is filed.

E. Late payment, underpayment, or non-payment of the annual estimated tax payment shall result in the following:

1. Application of the penalty provisions under A.R.S. § 42-1125;

2. Accrual of interest beginning from the due date of the annual estimated tax payment as prescribed in A.R.S. § 42-5014(D); and

3. Loss of the accounting credit, as defined in A.R.S. § 42-5017 for the June reporting period.

F. Taxpayers who are not required to make the annual estimated tax payment but make a voluntary annual estimated payment are not subject to subsection (E).

History

• Former Section R15-5-2215 renumbered to R15-5-2004, new Section R15-5-2215 renumbered from R15-5-212 effective October 14, 1993 (Supp. 93-4). Amended effective April 8, 1997 (Supp. 97-2). Amended by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-2216 Liability Relief for Marketplace Facilitators and Remote Sellers

A. In this Section:

1. "Affiliated person" has the same meaning as prescribed in A.R.S. § 42-5043.

2. "Incorrect information" means any information that was given to the marketplace facilitator by the marketplace seller and that is not accurate. Incorrect information does not include any of the following:

a. Mistakes related to the process of filing a return, such as the frequency, non-filing, or manner of filing;

b. Mistakes related to the manner of remitting tax liability to the Department;

c. Failure to remit all amounts collected and represented as tax.

"Errors other than sourcing" means errors related to the details of a sale and errors related to tax rates. "Errors other than sourcing" does not include any of the following:

a. Mistakes related to the process of filing a return, such as the frequency, non-filing, or manner of filing.

b. Mistakes related to the manner of remitting tax liability to the Department.

c. Failure to remit all amounts collected and represented as tax.

"Taxable sales" means gross sales sourced to this state less any allowable deductions or exemptions.

B. A marketplace facilitator or remote seller may apply for liability relief pursuant to A.R.S. § 42-5043 as outlined by Department-issued procedure.

C. A marketplace facilitator or remote seller may not obtain liability relief under A.R.S. § 42-5043 if the marketplace facilitator or remote seller does not act in good faith. "Good faith" means acting with honesty and with no knowledge of circumstances that would render the marketplace facilitator or remote seller ineligible for liability relief.

D. In processing an application for liability relief pursuant to A.R.S. § 42-5043, the Department will waive penalties and interest when reasonable cause exists. Whether reasonable cause exists is based on the facts and circumstances of the specific request for relief, which may include whether the marketplace facilitator should have known that the information provided by the marketplace seller was incorrect; whether the marketplace facilitator or remote seller applied for liability relief for the same errors other than the sourcing in the prior 12 months; and other relevant factors.

E. The liability relief limitations provided in A.R.S. § 42-5043 for a marketplace facilitator shall be applied in relation to the total tax liability of all the marketplace sellers selling on the marketplace facilitator's marketplace. Nothing in this rule shall be construed as allowing any liability relief for a marketplace facilitator in relation to its own sales or sales on behalf of any of its affiliates.

1. Example: ABC, a marketplace facilitator, applies for liability relief based on a filing error in 2019 because it applied a lower tax rate to all of one of its marketplace seller's sales. The total tax due for all taxable Arizona sales for all marketplace sellers' sales in 2019 is $63,000. Liability relief may be granted to ABC for up to $3,150 (5% × 63,000).

2. Example: Assume the same facts as in the example found in subsection (E)(1). Besides sales that ABC facilitated on behalf of third-party marketplace sellers, ABC also made its own sales through its marketplace. These direct sales by ABC resulted in an actual combined tax liability of $10,000 that ABC erroneously reported to the Department as $5,000. ABC will not be granted liability relief for errors resulting from these direct sales.

3. Example: In 2020, ABC, a marketplace facilitator, files an amended return based on incorrect information provided to it by one of its marketplace sellers. ABC applies for liability relief as soon as possible after discovering the error. The evidence shows that ABC acted in good faith and could not have known that the information was incorrect. This constitutes an error under A.R.S. § 42-5043(A)(1). This statutory provision authorizes the Department to grant relief, and there is no limitation on the amount of relief that can be granted. The Department may grant relief that is reasonable under the circumstances.

4. Example: In 2020, XYZ, a remote seller, deducted amounts for sales that it thought were exempt, but after further research, realized were in fact taxable. XYZ's total tax due from its gross sales for the period under consideration is $31,500. Pursuant to A.R.S. § 42-5043(B)(2), liability relief for XYZ's non-sourcing related error may be granted in any amount up to $945 (3% × $31,500).

5. Example: In 2022, ABC, a marketplace facilitator, files an amended return based on incorrect information provided to it by one of its marketplace sellers. In the same year, ABC also makes a filing error by using the incorrect tax rate on a sale. ABC applies for liability relief in both instances. The Department may grant liability relief under A.R.S. § 42-5043(A)(1) for errors resulting from the incorrect information provided to ABC by its seller. However, no liability relief is available for ABC's filing error, pursuant to A.R.S. § 42-5043(B).

6. Example: XYZ, a remote seller, files a paper tax return late and also pays late. Consequently, XYZ accrues penalties for late filing, late payment, and filing in an inappropriate manner (i.e., not electronically through AZTaxes.gov). The Department may grant penalty relief in all instances if XYZ shows reasonable cause.

History

• Repealed effective February 22, 1989 (Supp. 89-1). Adopted by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-2217 Reasonable Cause for Waiver of Civil Penalties

A. Pursuant to A.R.S. 42-1125, the Department shall not apply specified civil penalties for failure to pay a required amount of transaction privilege tax or file a required transaction privilege return if reasonable cause exists and the failure to pay was not due to willful neglect or fraud. Generally, reasonable cause exists whenever a taxpayer uses prudent and timely business practices but nonetheless fails to fully comply with its tax remittance and reporting requirements due to circumstances beyond the taxpayer's control.

B. The Department must consider a taxpayer requesting waiver of civil penalties to have reasonable cause if a failure to pay transaction privilege tax due or file a required transaction privilege tax return was due to a system outage or other system unavailability- whether scheduled or unscheduled-of AZTaxes.gov that prevents or substantially interferes with a taxpayer's ability to access, submit, or otherwise complete a required return or payment and submit the return or payment in the time required by law.

C. The Department must consider a taxpayer requesting waiver of civil penalties to have reasonable cause if a failure to pay the full and correct amount of transaction privilege tax due or file a complete and correct transaction privilege tax return was due to a software- or application-based error by either AZTaxes.gov or a Department-approved vendor's software to calculate and file a transaction privilege tax return, if the error demonstrably results in the incorrect calculation or payment of any taxes due.

D. Except as provided in subsection (E), a taxpayer requesting waiver of civil penalties for reasonable cause shall notify the Department of the issue or error in writing within a reasonable time after becoming aware of the issue or error.

E. The Department may waive civil penalties without requiring a written taxpayer request for any system outage, system unavailability, or other event or anomaly as described in subsections (B) and (C) if it becomes aware of the event or anomaly before issuing a penalty assessment.

History

• Repealed effective September 24, 1986 (Supp. 86-5). Adopted by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-2218 [REPEALED]

History

• Repealed effective September 24, 1986 (Supp. 86-5).

Ariz. Admin. Code § R15-5-2219 Renumbered

History

• Renumbered to R15-5-3005 effective July 23, 1985 (Supp. 85-4).

Ariz. Admin. Code § R15-5-2220 [Repealed]

History

• Repealed effective July 23, 1985 (Supp. 85-4). New Section R15-5-2220 renumbered from R15-5-2363 and amended effective October 14, 1993 (Supp. 93-4). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-2221 Remittal of Use Tax on Purchases from Unlicensed Retailers

A. Arizona purchasers regularly making purchases from unlicensed vendors, where the purchases are subject to use tax, shall obtain a use tax license and remit payments directly to the Department.

B. An Arizona purchaser who is licensed in Arizona shall remit the use tax to the Department on the purchaser's Sales, Use, and Severance Tax Return (ST-1) if tangible personal property is purchased from an out-of-state retailer who is not licensed to collect the use tax.

C. An Arizona purchaser who is not licensed in Arizona shall remit the use tax to the Department under a cover letter if tangible personal property is purchased from an out-of-state retailer who is not licensed to collect the use tax.

History

• Amended effective March 18, 1981 (Supp. 81-2). Repealed effective February 22, 1989 (Supp. 89-1). New Section adopted effective October 14, 1993 (Supp. 93-4).

Ariz. Admin. Code § R15-5-2222 Record Retention

A vendor collecting use tax from a purchaser shall keep and preserve suitable records and other books and accounts necessary to determine the tax collected for the statutorily prescribed limitation period. For purposes of this rule, the limitation period is the period of time for which the Department may assess tax, penalties, or interest pursuant to A.R.S. § 42-113. Records, books, and accounts shall be open for inspection at any reasonable time by the Department or its authorized agent.

History

• Repealed effective February 22, 1989 (Supp. 89-1). New Section adopted effective October 14, 1993 (Supp. 93-4).

Ariz. Admin. Code § R15-5-2223 [REPEALED]

History

• Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-5-2224 [REPEALED]

History

• Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-5-2225 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2226 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2227 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2228 [REPEALED]

History

• Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-5-2229 [REPEALED]

History

• Repealed effective September 24, 1986 (Supp. 86-5).

Ariz. Admin. Code § R15-5-2230 [REPEALED]

History

• Repealed effective September 24, 1986 (Supp. 86-5).

Ariz. Admin. Code § R15-5-2231 [REPEALED]

History

• Repealed effective September 24, 1986 (Supp. 86-5).

Ariz. Admin. Code § R15-5-2232 [REPEALED]

History

• Repealed effective September 24, 1986 (Supp. 86-5).

Ariz. Admin. Code § R15-5-2233 [REPEALED]

History

• Repealed effective September 24, 1986 (Supp. 86-5).

Ariz. Admin. Code § R15-5-2234 [REPEALED]

History

• Repealed effective September 24, 1986 (Supp. 86-5).

Ariz. Admin. Code § R15-5-2235 [REPEALED]

History

• Repealed effective September 24, 1986 (Supp. 86-5).

Ariz. Admin. Code § R15-5-2236 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2237 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2238 Reserved

Ariz. Admin. Code § R15-5-2239 Reserved

Ariz. Admin. Code § R15-5-2240 [REPEALED]

History

• Adopted effective April 21, 1994 (Supp. 94-2). Section repealed by final rulemaking at 9 A.A.R. 5042, effective January 3, 2004 (Supp. 03-4).

Ariz. Admin. Code § R15-5-2241 [REPEALED]

History

• Adopted effective April 21, 1994 (Supp. 94-2). Section repealed by final rulemaking at 11 A.A.R. 5214, effective November 10, 2005 (Supp. 05-4).

Ariz. Admin. Code § R15-5-2242 [REPEALED]

History

• Adopted effective April 21, 1994 (Supp. 94-2). Section repealed by final rulemaking at 11 A.A.R. 5214, effective November 10, 2005 (Supp. 05-4).

Article 23 USE TAX

Ariz. Admin. Code § R15-5-2301 Definitions

In this Article:

1. "Mail order retailer" means a retailer who solicits orders by mail, notwithstanding the fact that orders may be received by telephone or by mail or that goods may be delivered by mail or by private delivery system.

2.

1. "Purchases" means purchase for storage, use, or consumption in Arizona.

3. 2. "Retailer" has the same meaning as prescribed in A.R.S. § 42-5151, but does not include a marketplace facilitator or remote seller who meets the threshold requirements in A.R.S. § 42-5044.

3. "Utility business" has the same meaning as prescribed in A.R.S. § 42-5151.

History

• Repealed effective July 23, 1985 (Supp. 85-4). New Section R15-5-2301 adopted effective December 6, 1990 (Supp. 90-4). Amended effective September 29, 1993 (Supp. 93-3). Amended by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-2302 General

A. In this Section, "retailer" and "utility business" have the same meanings as prescribed in A.R.S. § 42-5151 .

B.

A. A.R.S. § 42-5155 imposes Arizona use tax upon a purchaser that purchases tangible personal property from an out-of-state retailer or utility business if the retailer or utility business's gross receipts from the sale have not already been included in the measure of Arizona transaction privilege tax. Because Arizona transaction privilege tax and Arizona use tax are complementary taxes, only one of the taxes is imposed on a given transaction.

C. B. Arizona use tax generally applies to the use, storage, or consumption in this state of tangible personal property purchased from an out-of-state retailer or utility business.

D. C. If a purchaser pays to an out-of-state retailer or utility business a tax of another state levied on the sale or use of tangible personal property that is subject to Arizona use tax, the purchaser may apply the amount of tax paid to the other state against the purchaser's use tax liability.

E. D. A purchaser that purchases tangible personal property exempt from tax because the property is purchased for resale in the ordinary course of business but subsequently uses or consumes the tangible personal property shall pay Arizona use tax.

History

• Amended by final rulemaking at 11 A.A.R. 2293, effective August 6, 2005 (Supp. 05-2). Amended by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-2303 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2304 Presumption of Taxability of Property Brought into Arizona

A. If tangible personal property is purchased outside Arizona and is subsequently brought into this state for use, storage, or consumption, the purchaser of such property shall be subject to the Arizona use tax unless the purchaser establishes to the satisfaction of the Department:

1. That the property is not used in conducting a business in Arizona; and

2. That the property was purchased for bona fide use or consumption outside Arizona. Unless shown otherwise, it shall be presumed that the property was purchased for bona fide use or consumption outside of Arizona if the property was purchased at least three months prior to its initial entry into Arizona; or

3. If the property was purchased by a nonresident individual, that the first actual use or consumption of the property occurred outside Arizona.

B. It shall be presumed that property brought into the state is subject to the use tax. The burden of proof that a purchase is not subject to use tax rests upon the purchaser.

History

• Former Section R15-5-2311 repealed, new Section R15-5-2311 adopted effective August 7, 1985 (Supp. 85-4). Former Section R15-5-2304 repealed, new Section R15-5-2304 renumbered from R15-5-2311 and amended effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-2305 Expired

History

• Section expired under A.R.S. § 41-1056(E) at 13 A.A.R. 1744, effective March 31, 2007 (Supp. 07-2).

Ariz. Admin. Code § R15-5-2306 [REPEALED]

History

• Section repealed by final rulemaking at 11 A.A.R. 2293, effective August 6, 2005 (Supp. 05-2).

Ariz. Admin. Code § R15-5-2307 [REPEALED]

History

• Section repealed by final rulemaking at 11 A.A.R. 2293, effective August 6, 2005 (Supp. 05-2).

Ariz. Admin. Code § R15-5-2308 [REPEALED]

History

• Section repealed by final rulemaking at 11 A.A.R. 2293, effective August 6, 2005 (Supp. 05-2).

Ariz. Admin. Code § R15-5-2309 Exemptions - Purchases for Resale or Lease

A. Purchases of tangible personal property from a retailer for resale in the ordinary course of the purchaser's business are not subject to use tax.

B. Purchases of tangible personal property from a retailer for subsequent leasing or renting in the ordinary course of the purchaser's business are not subject to use tax.

History

• Former Section R15-5-2309 renumbered to R15-5-2363, new Section R15-5-2309 renumbered from R15-5-2322 and amended effective September 29, 1993 (Supp. 93-3). Amended by final rulemaking at 12 A.A.R. 4099, effective December 4, 2006 (Supp. 06-4).

Ariz. Admin. Code § R15-5-2310 Payment of Use Tax by Purchaser

A. Use tax must be paid to:

1. An out-of-state vendor holding a certificate of authority for the collection of use tax, or

2. The Department, in cases where the vendor is not a marketplace facilitator or remote seller liable for transaction privilege tax under A.R.S. § 42-5044 or is not registered for the collection of use tax.

B. A one-time, nonrecurring payment of use tax may be remitted to the Department under a cover letter rather than on a standard report form.

B. C. Arizona purchasers making recurring purchases from out of state may apply to the Department for a registration certificate and remit payment directly to the state on a monthly report form in lieu of making payment to the vendor.

C. D. The purchaser will be relieved of his liability for the tax when payment is made directly to the out-of-state vendor registered and a receipt of the tax paid is obtained by him.

History

• Amended by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-2311 Renumbered

History

• Former Section R15-5-2311 repealed, new Section R15-5-2311 adopted effective August 7, 1985 (Supp. 85-4). Former Section R15-5-2311 renumbered to R15-5-2304 effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-2312 Casual Sales

Tangible personal property purchased in a casual sale, as defined in R15-5-2001, is not taxable.

History

• Former Section R15-5-2312 repealed, new Section R15-5-2312 adopted effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-2313 Expired

History

• Former Section R15-5-2313 repealed, new Section R15-5-2313 adopted effective September 29, 1993 (Supp. 93-3). Amended by final rulemaking at 12 A.A.R. 4099, effective December 4, 2006 (Supp. 06-4). Former Section R15-5-2313 repealed, new Section R15- 5-2313 adopted effective September 29, 1993 (Supp. 93- 3). Amended by final rulemaking at 12 A.A.R. 4099, effective December 4, 2006 (Supp. 06-4). Section expired under A.R.S. § 41-1056(J) at 23 A.A.R. 2207, effective March 30, 2017 (Supp. 17-3).

Ariz. Admin. Code § R15-5-2314 Purchases from Trustees, Receivers, and Assignees

A. Tangible personal property purchased for storage, use, or consumption in Arizona from a trustee, receiver, or assignee is subject to use tax if the purchase of the tangible personal property in the hands of the owner would be subject to use tax.

B. Tangible personal property purchased for storage, use, or consumption in Arizona from a trustee, receiver, or assignee is not subject to use tax if the purchase of the property from the owner would not be subject to use tax.

History

• Former Section R15-5-2314 renumbered to R15-5-2321, new Section adopted effective September 29, 1993 (Supp. 93-3). Amended by final rulemaking at 12 A.A.R. 4099, effective December 4, 2006 (Supp. 06-4).

Ariz. Admin. Code § R15-5-2315 Renumbered

History

• Former Section R15-5-2315 renumbered to R15-5-3006 effective July 23, 1985 (Supp. 85-4).

Ariz. Admin. Code § R15-5-2316 [REPEALED]

History

• Repealed effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-2317 Renumbered

History

• Former Section R15-5-2317 renumbered to R15-5-2352 effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-2318 [REPEALED]

History

• Repealed effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-2319 Renumbered

History

• Former Section R15-5-2319 renumbered to R15-5-2353 effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-2320 Exemptions - Machinery or Equipment

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

B. Purchase of repair or replacement parts for exempt machinery or equipment is not subject to the use tax. Repair or replacement parts are defined as those individual component and constituent items which, together, comprise exempt machinery or equipment.

History

• Amended effective November 7, 1978, unless otherwise noted (Supp. 78-6). Amended subsection (B) effective March 18, 1981 (Supp. 81-2). Former Section R15-5-2320 renumbered to R15-5-2362, new Section R15-5-2320 renumbered from R15-5-2321 and amended effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-2321 Expired

History

• Amended effective November 7, 1978, unless otherwise noted (Supp. 78-6). Amended paragraphs (9) and (10) effective March 18, 1981 (Supp. 81-2). Former Section R15-5-2321 renumbered to R15-5-2320, new Section R15-5-2321 renumbered from R15-5-2314 effective September 29, 1993 (Supp. 93-3). Section expired under A.R.S. § 41-1056(J) at 23 A.A.R. 2207, effective March 30, 2017 (Supp. 17-3).

Ariz. Admin. Code § R15-5-2322 Renumbered

History

• Former Section R15-5-2322 renumbered to R15-5-2309 effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-2323 [REPEALED]

History

• Amended effective November 7, 1978 (Supp. 78-6). Repealed effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-2324 [REPEALED]

History

• Repealed effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-2325 [REPEALED]

History

• Repealed effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-2326 Manufacturing Labor

The cost of labor employed in the manufacturing, processing, or fabricating of tangible personal property shall not be allowed as a deduction from the sales price on a purchase of such property.

History

• Former Section R15-5-2326 repealed, new Section R15-5-2326 adopted effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-2327 Fuels

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

B. Except as provided in subsection (D), a purchase of use fuel is subject to use tax under A.R.S. § 42-5155 on the date the consumer is issued a refund because the use fuel is not subject to the use fuel tax under A.R.S. § 28-5606.

C. Dyed diesel fuel is subject to use tax if transaction privilege tax is not imposed by the Department.

D. Liquefied petroleum gas or natural gas used to propel a motor vehicle is exempt from use tax.

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

F. A purchase of jet fuel is subject to the jet fuel excise and use tax under A.R.S. § 42-5352.

History

• Former Section R15-5-2327 renumbered to R15-5-2360, new Section R15-5-2327 renumbered from R15-5-3006 and amended effective September 29, 1993 (Supp. 93-3). Section amended by final rulemaking at 10 A.A.R. 4480, effective December 4, 2004 (Supp. 04-4).

Ariz. Admin. Code § R15-5-2328 Electric Power Transmission and Distribution

Purchases of machinery, equipment, or transmission lines for direct use in producing or transmitting power but not including distribution are subject to use tax based on the same definitions as in R15-5-128.

History

• Former Section R15-5-2328 renumbered to R15-5-2361, new Section R15-5-2328 adopted effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-2329 [REPEALED]

History

• Former Section R15-5-2329 repealed effective September 29, 1993 (Supp. 93-3).

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

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

"Covered" means covered as defined in R15-5-138 for tangible personal property under a warranty or service contract, or covered as defined in R15-5-137 for tangible personal property under a warranty or service provision.

B. A warrantor or service person is subject to use tax on the cost of covered tangible personal property that is purchased for resale but subsequently taken out of inventory and used in the servicing of a warranty or service contract.

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

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

History

• Adopted effective September 3, 1978 (Supp. 78-6). Former Section R15-5-2330 renumbered to R15-5-2343, new Section R15-5-2330 adopted effective September 29, 1993 (Supp. 93-3). Amended by final rulemaking at 13 A.A.R. 679, effective April 7, 2007 (Supp. 07-1).

Ariz. Admin. Code § R15-5-2331 [REPEALED]

History

• Adopted as an emergency effective July 1, 1980, pursuant to A.R.S. § 41-1003, valid for only 90 days (Supp. 80-3). Former emergency adoption now adopted effective October 15, 1980 (Supp. 80-5). Repealed effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-2332 Delivery Charges

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

History

• Adopted effective December 6, 1990 (Supp. 90-4). Former Section R15-5-2332 renumbered to R15-5-2350, new Section R15-5-2332 adopted effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-2333 Reserved

Ariz. Admin. Code § R15-5-2334 Purchases of Restaurant Accessories

A. If a person engaged in the restaurant business purchases disposable containers, paper napkins, and other similar food accessories and, transfers these accessories in the regular course of business to facilitate the consumption of the food, drink, or condiment provided, the purchases are considered purchases for resale.

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

History

• Adopted effective September 29, 1993 (Supp. 93-3). Amended by final rulemaking at 13 A.A.R. 679, effective April 7, 2007 (Supp. 07-1).

Ariz. Admin. Code § R15-5-2335 Reserved

Ariz. Admin. Code § R15-5-2336 Reserved

Ariz. Admin. Code § R15-5-2337 Reserved

Ariz. Admin. Code § R15-5-2338 Reserved

Ariz. Admin. Code § R15-5-2339 Reserved

Ariz. Admin. Code § R15-5-2340 Tangible Personal Property Used in Soil Remediation Activities

The purchase of tangible personal property for incorporation or fabrication into any real property, structure, project, development or improvement under a contract specified in A.R.S. § 42-5075(B)(6) is exempt from tax. The purchase of tangible personal property used in soil remediation activities but not incorporated or fabricated into any real property, structure, project, development or improvement is taxable.

History

• Adopted effective December 11, 1998 (Supp. 98-4). R15-5-2340 corrected to reflect updated citation reference to Arizona Revised Statutes (Supp. 07-2).

Ariz. Admin. Code § R15-5-2341 Four-inch Pipes or Valves

Purchases of pipes, valves, or fire hydrants with an inside diameter of four inches or more are not taxable if the pipes, valves, or fire hydrants are to be used to transport oil, natural gas, artificial gas, water, or coal slurry.

History

• Adopted effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-2342 Computer Hardware and Software

Purchases of computer hardware and software are subject to the use tax based on the same provisions as delineated in R15-5-154.

History

• Adopted effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-2343 Purchases of Prescription Drugs and Prosthetic Appliances

A. In this Section:

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

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

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

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

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

2. "Drug on a prescription" means a prescription drug.

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

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

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

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

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

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

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

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

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

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

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

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

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

B. The storage, use, or consumption in this state of the following kinds of tangible personal property is not subject to tax:

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

2. Medical oxygen, pursuant to A.R.S. § 42-5159(A)(16);

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

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

5. Durable medical equipment, pursuant to A.R.S. § 42-5159(A)(21);

6. Prescription eyeglasses and contact lenses; and

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

C. The purchase of component and repair parts for any tangible personal property that is exempt under either subsection (B) or (F) is not subject to tax.

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

E. Purchases by a final consumer of nonprescription products and those medical supplies or appliances not provided for under subsection (B) are subject to tax.

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

History

• Renumbered from R15-5-2330 and amended effective September 29, 1993 (Supp. 93-3). Amended by final rulemaking at 11 A.A.R. 2952, effective September 10, 2005 (Supp. 05-3).

Ariz. Admin. Code § R15-5-2344 Postage Stamps

A. The purchase of postage stamps is not subject to use tax if the stamps are purchased for the purpose of transporting mail.

B. The purchase of postage stamps is subject to use tax if the stamps are purchased for any purpose other than transporting mail.

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

D. The purchase of cancelled postage stamps is subject to use tax.

History

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

Ariz. Admin. Code § R15-5-2345 Reserved

Ariz. Admin. Code § R15-5-2346 Reserved

Ariz. Admin. Code § R15-5-2347 Reserved

Ariz. Admin. Code § R15-5-2348 Reserved

Ariz. Admin. Code § R15-5-2349 Reserved

Ariz. Admin. Code § R15-5-2350 [Repealed]

History

• Adopted effective December 6, 1990 (Supp. 90-4). Renumbered from R15-5-2332 effective September 29, 1993 (Supp. 93-3). Repealed by exempt rulemaking at 25 A.A.R. 3010, effective 10/1/2019.

Ariz. Admin. Code § R15-5-2351 Purchases by Non-U.S. Citizens

Purchases of tangible personal property by non-U.S. citizens shall be subject to the use tax unless otherwise exempt.

History

• Adopted effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-2352 Expired

History

• Section R15-5-2352 renumbered from R15-5-2317 and amended effective September 29, 1993 (Supp. 93-3). Section expired under A.R.S. § 41-1056(E) at 18 A.A.R. 1652, effective March 31, 2012 (Supp. 12-2).

Ariz. Admin. Code § R15-5-2353 Property Purchased outside of the United States

A. Tangible personal property purchased outside of the United States is taxable when purchased for business use.

B. In any one calendar month, tangible personal property purchases with a cumulative purchase price of $200 or less are not taxable if purchased for nonbusiness use. Purchases in excess of the $200 exemption are taxable on the excess amount.

History

• Section R15-5-2353 renumbered from R15-5-2319 and amended effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-2354 Reserved

Ariz. Admin. Code § R15-5-2355 Reserved

Ariz. Admin. Code § R15-5-2356 Reserved

Ariz. Admin. Code § R15-5-2357 Reserved

Ariz. Admin. Code § R15-5-2358 Reserved

Ariz. Admin. Code § R15-5-2359 Reserved

Ariz. Admin. Code § R15-5-2360 Government Purchases

A. Purchases of tangible personal property by any state or its political subdivisions are taxable.

B. Purchases by the Federal Government are not taxable.

History

• Section R15-5-2360 renumbered from R15-5-2327 and amended effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-2361 Nonprofit Organizations

A. Purchases of tangible personal property by nonprofit churches, schools, and other nonprofit organizations are taxable unless otherwise exempt.

B. Purchases of tangible personal property from a charitable nonprofit organization recognized as having tax-exempt status for income tax purposes with the Internal Revenue Service and the Department are not taxable.

C. If an organization wishes to obtain tax-exempt status by being recognized by the Department as a nonprofit charitable organization, it shall submit a letter to the Department requesting tax-exempt status and shall include a copy of its Internal Revenue Service recognition.

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

History

• Section R15-5-2361 renumbered from R15-5-2328 and amended effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-2362 Exempt Purchases by Health Organizations

A. Purchases by qualifying hospitals, nursing care institutions, qualifying health care organizations, rehabilitation programs for mentally or physically handicapped persons, and qualifying community health centers are exempt from tax pursuant to statutory provisions.

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

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

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

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

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

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

History

• Section R15-5-2362 renumbered from R15-5-2310 and amended effective September 29, 1993 (Supp. 93-3). Amended effective April 21, 1995 (Supp. 95-2).

Ariz. Admin. Code § R15-5-2363 Renumbered

History

• Renumbered from R15-5-2309 effective September 29, 1993 (Supp. 93-3). Renumbered to R15-5-2220 effective October 14, 1993 (Supp. 93-4).

Article 24 REPEALED

Ariz. Admin. Code § R15-5-2401 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2402 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2403 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2404 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2405 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2406 [REPEALED]

History

• Amended effective March 18, 1981 (Supp. 81-2). Repealed effective October 14, 1993 (Supp. 93-4).

Ariz. Admin. Code § R15-5-2407 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2408 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2409 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2410 [REPEALED]

History

• Repealed effective September 24, 1986 (Supp. 86-5).

Ariz. Admin. Code § R15-5-2411 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2412 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2413 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2414 [REPEALED]

History

• Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-5-2415 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2416 [REPEALED]

History

• Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-5-2417 [REPEALED]

History

• Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-5-2418 [REPEALED]

History

• Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-5-2419 [REPEALED]

History

• Repealed effective September 24, 1986 (Supp. 86-5).

Ariz. Admin. Code § R15-5-2420 [REPEALED]

History

• Repealed effective September 24, 1986 (Supp. 86-5).

Ariz. Admin. Code § R15-5-2421 [REPEALED]

History

• Repealed effective September 24, 1986 (Supp. 86-5).

Ariz. Admin. Code § R15-5-2422 [REPEALED]

History

• Repealed effective September 24, 1986 (Supp. 86-5).

Ariz. Admin. Code § R15-5-2423 [REPEALED]

History

• Repealed effective September 24, 1986 (Supp. 86-5).

Ariz. Admin. Code § R15-5-2424 [REPEALED]

History

• Repealed effective September 24, 1986 (Supp. 86-5).

Ariz. Admin. Code § R15-5-2425 [REPEALED]

History

• Repealed effective September 24, 1986 (Supp. 86-5).

Ariz. Admin. Code § R15-5-2426 [REPEALED]

History

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

Article 25 REPEALED

Ariz. Admin. Code § R15-5-2501 [REPEALED]

History

• Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

Ariz. Admin. Code § R15-5-2502 [REPEALED]

History

• Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

Ariz. Admin. Code § R15-5-2503 [REPEALED]

History

• Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

Ariz. Admin. Code § R15-5-2504 [REPEALED]

History

• Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

Ariz. Admin. Code § R15-5-2505 [REPEALED]

History

• Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

Ariz. Admin. Code § R15-5-2506 [REPEALED]

History

• Amended effective November 7, 1978, unless otherwise noted (Supp. 78-6). Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

Ariz. Admin. Code § R15-5-2507 [REPEALED]

History

• Amended effective March 18, 1981 (Supp. 81-2). Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

Article 26 REPEALED

Ariz. Admin. Code § R15-5-2601 [REPEALED]

History

• Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

Ariz. Admin. Code § R15-5-2602 [REPEALED]

History

• Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

Ariz. Admin. Code § R15-5-2603 [REPEALED]

History

• Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

Ariz. Admin. Code § R15-5-2604 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2605 [REPEALED]

History

• Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-5-2606 [REPEALED]

History

• Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-5-2607 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2608 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2609 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2610 [REPEALED]

History

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

Ariz. Admin. Code § R15-5-2611 [REPEALED]

History

• Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-5-2612 [REPEALED]

History

• Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-5-2613 [REPEALED]

History

• Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-5-2614 [REPEALED]

History

• Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

Ariz. Admin. Code § R15-5-2615 [REPEALED]

History

• Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-5-2616 [REPEALED]

History

• Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

Ariz. Admin. Code § R15-5-2617 [REPEALED]

History

• Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-5-2618 [REPEALED]

History

• Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-5-2619 [REPEALED]

History

• Repealed effective February 22, 1989 (Supp. 89-1).

Ariz. Admin. Code § R15-5-2620 [REPEALED]

History

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

Article 30 EXPIRED

Ariz. Admin. Code § R15-5-3001 Reserved

Ariz. Admin. Code § R15-5-3002 Reserved

Ariz. Admin. Code § R15-5-3003 Reserved

Ariz. Admin. Code § R15-5-3004 Renumbered

History

• (A.R.S. § 1321) Former Section R15-5-1846 renumbered as Section R15-5-3004 and amended effective July 23, 1985 (Supp. 85-4). Renumbered to R15-5-127 effective August 9, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-3005 Renumbered

History

• (A.R.S. § 42-1451) Former Section R15-5-2219 renumbered as Section R15-5-3005 and amended effective July 23, 1985 (Supp. 85-4). Former Section R15-5-3005 renumbered to R15-5-2212 effective October 14, 1993 (Supp. 93-4).

Ariz. Admin. Code § R15-5-3006 Renumbered

History

• (A.R.S. § 42-1409) Former Section R15-5-2315 renumbered as Section R15-5-3006 and amended effective July 23, 1985 (Supp. 85-4). Former Section R15-5-3006 renumbered to R15-5-2327 effective September 29, 1993 (Supp. 93-3).

Ariz. Admin. Code § R15-5-3007 Reserved

Ariz. Admin. Code § R15-5-3008 Reserved

Ariz. Admin. Code § R15-5-3009 Reserved

Ariz. Admin. Code § R15-5-3010 Reserved

Ariz. Admin. Code § R15-5-3011 Reserved

Ariz. Admin. Code § R15-5-3012 Reserved

Ariz. Admin. Code § R15-5-3013 Reserved

Ariz. Admin. Code § R15-5-3014 Reserved

Ariz. Admin. Code § R15-5-3015 Reserved

Ariz. Admin. Code § R15-5-3016 [REPEALED]

History

• (A.R.S. §§ 42-1313, 42-1317) Adopted effective October 1, 1986 (Supp. 86-5). Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

Ariz. Admin. Code § R15-5-3017 Reserved

Ariz. Admin. Code § R15-5-3018 Renumbered

History

• (A.R.S. § 42-1305) Adopted effective September 3, 1986 (Supp. 86-5). Renumbered to R15-5-2206 effective October 14, 1993 (Supp. 93-4).

Ariz. Admin. Code § R15-5-3019 Reserved

Ariz. Admin. Code § R15-5-3020 Reserved

Ariz. Admin. Code § R15-5-3021 [REPEALED]

History

• Adopted effective August 13, 1987 (Supp. 87-3). Repealed effective October 14, 1993 (Supp. 93-4).

Ariz. Admin. Code § R15-5-3022 [REPEALED]

History

• Adopted effective August 13, 1987 (Supp. 87-3). Repealed effective October 14, 1993 (Supp. 93-4).

Ariz. Admin. Code § R15-5-3023 Renumbered

History

• (A.R.S. § 42-1302) Former Section R15-5-209 renumbered and amended as Section R15-5-3023 effective August 26, 1987 (Supp. 87-3). Section R15-5-209 renumbered as Section R15-5-3023 and amended in error, see Section R15-5-209 (Supp. 88-3).

Ariz. Admin. Code § R15-5-3024 [REPEALED]

History

• (A.R.S. § 42-1307) Former Section R15-5-2102 renumbered and amended as Section R15-5-3024 (Supp. 86-6). Correction, effective date of last amendment to read: "effective December 31, 1986" (Supp. 87-3). Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

Ariz. Admin. Code § R15-5-3025 Renumbered

History

• (A.R.S. § 42-1322.01) Adopted effective September 24, 1986 (Supp. 86-5). Renumbered to R15-5-2007 (Supp. 94-2).

Ariz. Admin. Code § R15-5-3026 Reserved

Ariz. Admin. Code § R15-5-3027 Reserved

Ariz. Admin. Code § R15-5-3028 Reserved

Ariz. Admin. Code § R15-5-3029 Reserved

Ariz. Admin. Code § R15-5-3030 Reserved

Ariz. Admin. Code § R15-5-3031 Reserved

Ariz. Admin. Code § R15-5-3032 [REPEALED]

History

• (A.R.S. § 42-1472) Adopted effective September 24, 1986 (Supp. 86-5). Repealed by final rulemaking at 6 A.A.R. 956, effective February 15, 2000 (Supp. 00-1).

Ariz. Admin. Code § R15-5-3033 Reserved

Ariz. Admin. Code § R15-5-3034 Reserved

Ariz. Admin. Code § R15-5-3035 Expired

History

• Adopted effective September 16, 1987 (Supp. 87-3). Section expired under A.R.S. § 41-1056(J) at 23 A.A.R. 2207, effective March 3 0, 2017 (Supp. 17-3).

Ariz. Admin. Code § R15-5-3036 Renumbered

History

• Adopted effective August 7, 1987 (Supp. 87-3). Renumbered to R15-5-157 effective August 9, 1993 (Supp. 93-3).

Chapter 7 Department of Revenue - Bingo Section

Article 1 REPEALED

Ariz. Admin. Code § R15-7-101 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Repealed effective January 16, 1997 (Supp. 97-1).

Ariz. Admin. Code § R15-7-102 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective April 25, 1986 (Supp. 86-2). Amended effective December 22, 1989 (Supp. 89-4). Repealed effective January 16, 1997 (Supp. 97-1).

Article 2 GENERAL PROVISIONS

Ariz. Admin. Code § R15-7-201 Definitions

In addition to the definitions provided in A.R.S. § 5-401, unless the context requires otherwise, the following definitions apply to this Chapter and to A.R.S. Title 5, Chapter 4:

"Bingo" means a game of chance in which a prize is awarded to a player who obtains a designated pattern or sequence of numbers or symbols on a card that are the same as the pattern or sequence of numbers or symbols selected at random. When placed in quotation marks, "bingo" means the designated pattern or sequence of numbers or symbols needed to win a bingo game.

"Bingo worker" means a manager, supervisor, proceeds coordinator, or assistant who is participating in any manner in the holding, operating, or conducting of the bingo occasion.

"Books and records" means documents relating to the financial affairs of an organization kept in the organization's regular course of business and include the following:

Bank account records,

Journals and ledgers,

Receipts and invoices,

Winner signature sheets,

Verification reports required under R15-7-225 ,

Game programs, and

Any other documents used in connection with bingo operations.

"Calendar week" means seven days, beginning at 12:00:01 a.m. Sunday and ending midnight Saturday, Arizona time.

"Caller" means the person calling the bingo balls at an occasion.

"Card" means a device of bingo play such as a sheet of paper that is provided by a licensee to a player before the start of a game, that bears parallel rows of spaces with each space, except a designated "free" space, containing numbers or symbols, and that is part of a deck, group, or series of cards, no two of which are alike. A space on a card may contain a preprinted pattern in addition to a number or symbol.

"Cover-all" means a bingo game in which the designated bingo pattern is all spaces on a card.

"Day" means a 24-hour period beginning at 12:00:01 a.m. Arizona time and ending at 12:00:00 p.m.

"Department" means the Arizona Department of Revenue.

"Door prize" means a type of inducement in which a prize is given to an individual, selected at random, who is present on the premises during a bingo occasion.

"Inducement" means:

Anything of value given to a person at a bingo occasion, other than a prize awarded for obtaining "bingo"; or

The sale of anything to a person at a bingo occasion for less than its fair market value.

"Player" means an individual, 18 years of age or older, who pays the admission fee, if any, to be admitted to the premises and who plays one or more cards.

"Proprietary, equitable, or credit interest" includes any arrangement in which a person has:

A security interest or lien that is attached to any property of a licensee,

A right to sell or lease to a licensee, or

A right to reacquire property sold to a licensee.

"Receptacle" means a container, such as a blower and cage, that holds the bingo balls or objects used in bingo games.

"Special bonus game" means a series of bingo games, played on the same day of each week during a calendar quarter, with a quarterly prize limit of $12,000.

"Split-the-pot" means a bingo game in which the prize is a portion of the money received from card sales.

"Wild number bingo" means a game of bingo in which a ball is drawn from a receptacle or selected using another random method to determine all wild numbers for a game and all wild numbers are deemed called.

"Winner-take-all" means a game of bingo in which the prize is all money received from card sales.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective April 25, 1986 (Supp. 86-2). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-202 Special Bonus Game

A. A Class B or C licensee may hold only one special bonus game on the same respective day of each calendar week. A licensee shall continue a special bonus game throughout the calendar quarter in which the special bonus game begins or until the total prize amount awarded for the game reaches $12,000.00 in the aggregate per quarter. The licensee shall not carry over any unused portion of the $12,000.00 limit into any other quarter. A licensee may conduct no more than five different special bonus games per quarter.

B. A licensee wishing to conduct a special bonus game shall submit the application provided by the Department and receive written approval before initiating the special bonus game. A manager of the licensee shall attest to the accuracy of the application by signing the application. Each special bonus game application shall include the following:

1. The licensee's name, address, and license number;

2. The day of the week the special bonus game will be played;

3. A description of the manner in which the special bonus game will be conducted and the total amount of prize money to be offered each quarter;

4. The pattern that will be required to win the bingo game;

5. The number of calls within which the pattern must be accomplished to win the prize, if applicable;

6. The dollar value of each designated prize;

7. The type of card to be used; and

8. The cost per card to the player.

C. The Department shall approve only a special bonus game application that is complete and that describes a special bonus game that complies with A.R.S. Title 5, Chapter 4, and this Chapter. The Department shall return the application to the licensee with either an approval or an explanation for the disapproval within 14 days of the receipt of the application. The licensee may amend the application and resubmit it for the Department's approval.

D. A licensee may cancel a special bonus game by sending written notice to the Department before the beginning of a quarter. The licensee shall submit a special bonus game application before changing any aspect of the special bonus game as described in the application under subsection (B). A change of a special bonus game may take effect only on the first day of a quarter. The approval to hold special bonus games shall be conspicuously displayed at the place where the games of bingo are to be conducted at all times during any game.

History

• Adopted effective April 25, 1986 (Supp. 86-2). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-203 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Repealed effective December 22, 1989 (Supp. 89-4).

Ariz. Admin. Code § R15-7-204 Affidavits

A person submitting an affidavit required under A.R.S. § 5-404 shall use a form provided by the Department and sign the affidavit under penalty of perjury.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-205 Reserved

Ariz. Admin. Code § R15-7-206 Monitoring

A licensee shall prohibit any unauthorized person from conducting a bingo game.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-207 Equipment Verification and Replacement

A. Before beginning a bingo occasion, the supervisor for the occasion shall:

1. Verify that all equipment is in sound working condition;

2. Verify that the use of the equipment and the methods of play provide each player an equal opportunity to win; and

3. Verify, in the presence of one or more players, that all bingo balls are present and that there are no duplicate balls.

B. The supervisor for a bingo occasion shall immediately replace all defective bingo balls before continuing with the game, regardless of the time of discovery.

C. An authorized representative of the Department may order that any defective equipment be repaired or replaced.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-208 Conduct of Game - Official Comparison

A. A supervisor shall use the bingo balls that are placed on the master board for the official comparison to the designated bingo pattern or sequence, rather than a lighted number display board.

B. Wild number bingo balls need not be pulled from the receptacle or placed on the master board to be recognized as valid bingo balls called.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-209 Method of Call and Announcement of "Bingo" by a Player

A. Once a caller has initiated a call, the caller shall complete the call. A call is initiated when the caller begins to vocally announce the letter designation on the bingo ball.

B. A caller shall allow a reasonable length of time for a player to announce "bingo" before proceeding with the next call.

C. A caller shall not remove more than one bingo ball at any time from the receptacle.

D. A caller shall not declare a player as the winner of a bingo game, unless the player has obtained "bingo" on the last called number and has announced the "bingo" to a bingo worker before initiation of the next call.

E. A caller may turn off the machine used to select the bingo balls during a game if the next bingo ball can be secured so that it does not fall into the receptacle. The caller shall call the number of the secured ball unless a valid bingo is declared on the prior number called.

History

• Adopted effective June 5, 1984. Amended effective June 20, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-210 Multiple Winners

If it is necessary to share a designated prize because there are multiple winners on the last called number, the following provisions apply:

1. If the designated prize consists of cash or check, a licensee shall divide the total amount of the prize equally between the verified winners. The licensee may round prize amounts up to the next higher dollar.

2. If the designated prize is an item of merchandise that cannot be divided, the bingo licensee shall do either of the following:

a. Award to each verified winner an identical prize or substitute merchandise prize closely approximate or equal in value to the other prizes awarded with the aggregate value of all prizes awarded not exceeding the value of the designated prize; or

b. Award to each verified winner an identical amount of money by check or cash with the total value of the amount awarded equaling the value of the designated prize.

3. Subject to subsections (1) and (2), a licensee may establish minimum prizes.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-211 Declaration of a Completed Game; Prize Award

A. After a bingo worker verifies the existence of a winner of a bingo game, the caller shall identify the verified winner and ask if there are other winners. After the verification of each "bingo", the caller shall provide all other players with a reasonable opportunity to claim "bingo" on the same call. If no other players claim "bingo", the caller shall declare the game over and a bingo worker shall award the designated prize. If there are multiple winners, a bingo worker shall award prizes in accordance with R15-7-210.

B. A player shall not receive or share the designated prize unless the player obtains "bingo" and informs the caller of this fact before the caller declares that the game is over.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-212 Erroneous Calls

A. If a caller makes an error calling the number on a bingo ball or identifying the number of bingo balls called, the caller shall immediately correct the error before proceeding with the game. The caller shall not correct the error calling the number on the bingo ball or identifying the number of bingo balls called after the game is completed in accordance with R15-7-211.

B. If, as the result of correcting an error, a player would have obtained "bingo" on the correct number or another number already called, the licensee shall award the game prize to the winning player as if the correct number had been the last number called.

C. If a player obtains "bingo" as a result of an erroneously called number, the licensee shall declare the bingo invalid. A licensee shall not award a prize based on an erroneous call.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective April 25, 1986 (Supp. 86-2). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-213 Verification of Winning Cards

A. After a player has announced "bingo" during a bingo game, a bingo worker shall verify whether the player's card has a winning bingo pattern in the presence of a disinterested player. Except as provided in subsections (A)(1) and (A)(2), the bingo worker shall verify a winning bingo pattern by announcing the numbers from the player's card.

1. If a licensee's bingo equipment is manufactured to automatically verify winning bingo patterns, a bingo worker shall verify a winning bingo pattern by announcing the card identification number.

2. For the cover-all bingo pattern, the bingo worker may announce the numbers not called during the bingo game.

B. A bingo worker shall verify only one winning bingo pattern on a card per game.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective April 25, 1986 (Supp. 86-2). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 7 A.A.R. 3467, effective July 17, 2001 (Supp. 01-3).

Ariz. Admin. Code § R15-7-214 Arizona State Lottery Tickets

A licensee may sell, or give as prizes, tickets or other chances to participate in the Arizona State Lottery.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-215 Sale of Bingo Cards

A. A licensee shall sell bingo cards on the premises where the game of bingo is to be played.

B. A licensee shall not reserve cards for a player.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective April 25, 1986 (Supp. 86-2). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-216 Duplicate Cards

A. A licensee shall not use duplicate cards during a bingo game.

B. If a licensee determines that there are multiple winners in a single game with duplicate cards, the licensee shall notify the Department's Bingo Section within seven days from the date of occurrence.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective April 25, 1986 (Supp. 86-2). Amended subsection B. effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-217 Same-day Requirements for Play

Any licensee conducting a bingo occasion shall sell cards, determine winners, and award all prizes within the same day. A bingo occasion begins when persons are admitted to the building or premises for the purpose of playing bingo.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-218 Notice of Charges

A bingo licensee shall, before the sale of cards for a bingo occasion, post a notice in a conspicuous place on the premises listing the charges for admission and cards. The licensee shall charge all players the publicly posted rates.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective April 25, 1986 (Supp. 86-2). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-219 Notice of Prizes

A. Before the sale of cards for an occasion, a licensee shall post a notice in a conspicuous place on the premises, describing the nature and dollar value of each prize, including the method of determining any substitute prize for multiple winners.

B. If a licensee conducts a "split-the-pot" or "winner-take-all" special game, the licensee shall announce the dollar value of the minimum prize before the first number is called. The licensee shall announce the actual dollar value of the prize before the game is over.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-220 Alternate Prize for Winning within a Specified Number of Calls

A. Within the dollar limits prescribed by A.R.S. § 5-406(P), a licensee may offer an alternate prize based on the number of calls within which a successful "bingo" is obtained, provided the licensee announces before the start of the game:

1. The number of calls within which the "bingo" must be obtained, and

2. The type or dollar value of any alternate prize.

B. In a bingo game offering an alternate prize for winning within a specified number of calls, the licensee shall have a disinterested player verify the number of balls called before the licensee awards any prize.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective April 25, 1986 (Supp. 86-2). Amended subsection A effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-221 Availability of Rules and Statutes for Players

A licensee shall have, on the premises during an occasion, a copy of this Chapter and A.R.S. Title 5, Chapter 4, available for inspection by any player upon request. The licensee shall post a notice in a prominent place on the premises stating that copies are available.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-222 Inducements

A. A licensee that offers an inducement shall offer the inducement to all players on a nondiscriminatory basis.

B. The value of an inducement in the form of tangible property is the difference between the property's fair market value and the discounted price. A licensee shall not offer or give away inducements with an aggregate value of more than $250 per occasion.

C. If a licensee wishes to offer a door prize as an inducement, the licensee shall comply with A.R.S. § 5-406(X) regarding the manner in which the licensee determines the winner of the door prize.

D. A card given to a player at a reduced price, or without charge, in connection with the purchase of a card or cards is not an inducement.

E. A card given away with no purchase required is an inducement and is valued at the rate posted under R15-7-218.

History

• Adopted effective April 25, 1986 (Supp. 86-2). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-223 Minors Prohibited from Play

No bingo card shall be sold or bingo prize awarded to any person under 18 years of age.

History

• Adopted effective June 5, 1984 (Supp. 84-3).

Ariz. Admin. Code § R15-7-224 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Repealed effective December 22, 1989 (Supp. 89-4).

Ariz. Admin. Code § R15-7-225 Verification of Gross Receipts and Purchases

A. The supervisor for an occasion shall accurately complete a verification report form prescribed by the Department for the occasion. The verification report form shall include the following:

1. The licensee's name and license number,

2. The number of players,

3. The name of the supervisor,

4. The total number and dollar value of cards sold,

5. The total income from cards sold,

Itemization of bingo supplies sold,

7. Itemization of inducements provided,

8. A cash reconciliation,

9. The computation of adjusted gross receipts, and

A bingo game worksheet for tracking the income and prizes for each game.

B. A licensee shall obtain invoices for all bingo supplies purchased by the licensee for resale to bingo patrons. The licensee shall retain these invoices with other records maintained under this Chapter.

History

• Adopted effective April 25, 1986 (Supp. 86-2). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-226 Legal Debts

A licensee shall pay all expenses of bingo games when due. If a licensee incurs debt in violation of this Section, the licensee shall not enter into any arrangement or agreement to forgive the debt, unless otherwise authorized by law.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-227 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective April 25, 1986 (Supp. 86-2). Repealed effective December 22, 1989 (Supp. 89-4).

Ariz. Admin. Code § R15-7-228 Conditions for Deducting Mortgage Payments

A. A licensee may deduct mortgage payments from adjusted gross receipts for only one premises if the mortgage payments are a reasonable and bona fide expense under A.R.S. § 5-107(G). If there are multiple owners conducting games on the same premises, the owners shall prorate the mortgage payment deduction among themselves, based on the owners' percentage of use of the premises.

B. If no mortgage exists, taxes and insurance are considered on-going expenses of the organization and the licensee shall not deduct taxes and insurance from bingo adjusted gross receipts. The licensee may deduct taxes and insurance from bingo net proceeds.

C. A licensee shall purchase any premises on which the licensee intends to conduct bingo for a commercially reasonable purchase price. If the Department questions the reasonableness of the purchase price, the Department shall obtain an appraisal of the premises. The licensee may obtain and submit an independent appraisal by a certified appraiser that the Department shall consider in conjunction with the Department's appraisal.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-229 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective April 25, 1986 (Supp. 86-2). Repealed effective December 22, 1989 (Supp. 89-4).

Ariz. Admin. Code § R15-7-230 Financial Report

A. The financial report required under A.R.S. § 5-407 is due even if no occasions were held during the reporting period. A licensee may file the financial report in advance if the licensee knows that no occasions will be held and no bingo funds will be expended during the reporting period.

B. A licensee shall report all interest earned on the licensee's special checking account or additional interest-bearing accounts required under A.R.S. § 5-407 as gross receipts during the reporting period in which the interest is received. The Department considers interest received when the financial institution credits the interest to the licensee's account.

C. Financial reports that are filed in person are delinquent if received by the Department after the due date. If a licensee files a financial report by mail, the report is timely only if the financial report is postmarked on or before the due date. If a due date falls on Saturday, Sunday, or a legal holiday, the due date for filing is the business day following the Saturday, Sunday, or holiday.

D. A licensee that makes an expenditure, other than a prize paid to a bingo winner, of $300 or more during the reporting period shall include in the financial report the name and address of each person to whom $300 or more was paid and the purpose of the expenditure.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective April 25, 1986 (Supp. 86-2). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-231 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Section repealed by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-232 Bingo Bank Accounts

A. A licensee shall maintain only one, federally insured checking account for bingo purposes. The licensee shall maintain sufficient funds in the bingo checking account to cover all checks written. A licensee shall not stop payment on any prize check without first notifying the Department.

B. A licensee may establish interest-bearing accounts that are federally insured. If the licensee transfers funds from an interest bearing account, the licensee shall directly transfer the funds into the bingo checking account before making any expenditure.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective April 25, 1986 (Supp. 86-2). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-233 Persons Permitted to Conduct Games; Compensation Allowed

A. A member or new member of a parent organization may work at a bingo occasion held by the parent organization's auxiliary. A member or new member of an auxiliary organization may work at a bingo occasion held by the auxiliary's parent organization.

B. A licensee shall not pay and a bingo worker shall not accept a commission, salary, tips, or other compensation for rendering services related to bingo except as provided in A.R.S. § 5-407(G)(8). The term "compensation" includes discount dinners or other functions conducted specifically for bingo workers.

C. A licensee shall ensure that persons who participate in the conduct of bingo games satisfy membership requirements under A.R.S. § 5-413 on and after the submission date of the affidavit required by R15-7-204.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective April 25, 1986 (Supp. 86-2). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-234 Informal Resolution after Investigation or Complaint

A. If, as the result of an investigation by the Department, the Department finds that an error or violation of a rule or statute has occurred, Department personnel shall direct the licensee to rectify the error or violation and discontinue any practice causing the error or violation. The Department shall send written confirmation of the directive to the licensee and to the complainant, if applicable, by certified mail.

B. If the licensee disagrees with the Department's directive, the licensee may, within 10 days of the directive, request in writing an informal meeting with the Department's bingo administrator. Within 30 days after receipt of the request, the Department shall send written notice of the Department's final decision to the licensee by certified mail.

C. If a licensee fails to comply with a directive of the Department, the Department may institute suspension or revocation procedures, based on the severity of the violation. The licensee may appeal a suspension or revocation decision under A.R.S. Title 41, Chapter 6, Article 10.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Article 3 LICENSING PROVISIONS

Ariz. Admin. Code § R15-7-301 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective April 25, 1986 (Supp. 86-2). Amended effective December 22, 1989 (Supp. 89-4). Section repealed by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-302 Change in Ownership for Class a License

If a Class A licensee is not a natural person, the manager shall notify the Department of any change in licensee ownership or control within 30 days after the effective date of the change.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-303 Change of Name

A licensee shall notify the Department of a change in the name under which the licensee is operating within seven days of the effective date of the change.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-304 Changes to the License

A licensee shall conduct bingo occasions on days, at times, and with personnel listed on the license approved by the Department. The licensee shall obtain prior written consent of the Department before making any changes from information stated on its licensee.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective April 25, 1986 (Supp. 86-2). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-305 Change of Mailing Address

A licensee shall notify the Department in writing of any change in mailing address within seven days of the effective date of the change. The licensee shall specify whether the change is for mailing purposes only.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-306 Termination of License

Upon termination of bingo operations, the licensee shall surrender its bingo license to the Department, accompanied by a written statement that provides the date operations terminated. The surrender of the license is effective as of the date on the Department's written acceptance of the surrender. The Department may withhold its acceptance of the surrender if the licensee is being investigated or if suspension or revocation procedures are pending.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-307 Cancellation of an Occasion

A licensee may cancel a bingo occasion after providing written notice to and obtaining approval from the Department, except that, in the case of an emergency, the licensee shall notify the Department in writing within three days after the scheduled date of the occasion and provide the reason for the cancellation.

History

• Adopted effective April 25, 1986 (Supp. 86-2). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-308 Initial License Application Time-frames

A. For an initial license, the overall time-frame described in A.R.S. § 41-1072(2) is 60 calendar days.

B. For an initial license, the administrative completeness review time-frame described in A.R.S. § 41-1072(1) is 30 calendar days and begins on the date the Department receives the license application package required by A.R.S. §§ 5-403(B) and 5-404.

1. The Department shall notify the applicant if the package is incomplete. The notice shall specify what information is missing. If the Department does not provide notice to the applicant, the license application package shall be deemed complete at the end of the administrative completeness review time-frame.

2. An applicant with an incomplete license application package shall supply the missing information within 30 calendar days from the date of the notice. The 30-calendar-day time-frame for the Department to finish the administrative review is suspended from the date the Department notifies the applicant of missing information until the date the Department receives the information.

3. If an applicant fails to submit a complete license application package within 30 calendar days from the notice, the Department shall close the file. An applicant whose file has been closed and who later wishes to obtain a license shall submit a new application.

C. For an initial license, the substantive review time-frame described in A.R.S. § 41-1072(3) is 30 calendar days and begins at the end of the administrative completeness review time-frame.

1. As part of the substantive review, the Department may schedule a visit to the premises.

2. At the end of the substantive review time-frame, the Department shall issue a license if the applicant and the premises meet the requirements of A.R.S. § 5-401 et seq. and these rules, or a written notice of denial if the applicant or the premises do not meet requirements of A.R.S. § 5-401 et seq. and these rules.

D. For the purposes of this Section, if the last day of the time-frame falls on a Saturday, Sunday, or legal holiday, the time-frame shall end on the next calendar day which is not a Saturday, Sunday, or legal holiday.

History

• Adopted effective November 19, 1997 (Supp. 97-4).

Article 4 TAX PROVISIONS

Ariz. Admin. Code § R15-7-401 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22. 1989 (Supp. 89-4). Section repealed by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-402 Excess Payments

If, after examination of a financial report, the Department determines that the licensee has paid more than the tax lawfully due, the Department shall refund the excess payment or, at the option of the licensee, issue credit equivalent to the excess payment against future tax liability.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22. 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-403 Payment under Protest

If a licensee pays any tax, penalty, or interest under protest, the licensee shall submit the protest in writing. The licensee may pursue a protest under A.R.S. Title 41, Chapter 6, Article 10.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-404 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Repealed effective December 22, 1989 (Supp. 89-4).

Ariz. Admin. Code § R15-7-405 Deficiencies; Payment; Appeal

A. If the Department determines that additional tax is due, the Department shall issue an assessment for the additional tax due plus any applicable penalty and interest. In any assessment the Department shall indicate the taxable income for the period of the audit, the tax that should have been paid, the tax actually paid, the additional tax due, and the amount of any penalty and interest owed. The Department shall mail an assessment by certified mail to the last known address of the licensee.

B. If a licensee fails to make a report as required under A.R.S. § 5-407, the Department shall obtain facts upon which to base an assessment. The Department may issue a subpoena requiring the licensee, its employees, and its agents to testify under oath.

C. A licensee may, within 30 days of receipt of an additional assessment or tax determination, file a petition for a hearing, correction, or redetermination of the Department's assessment. The licensee shall file the petition under A.R.S. Title 41, Chapter 6, Article 10.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Article 5 SUSPENSION; REVOCATION; APPEALS

Ariz. Admin. Code § R15-7-501 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Section repealed by final rulemaking at 6 A.A.R. 75, effective December 9, 1999 (Supp. 99-4).

Ariz. Admin. Code § R15-7-502 Suspension of License and Right of Appeal

A. The Department shall issue any notice of suspension under A.R.S. § 41-1092.11 and this Chapter.

B. Except as provided in subsection (C), the Department shall send a written suspension notice by certified mail. The Department shall include grounds for suspension and duration of the suspension in the notice, and indicate either:

1. That the suspension takes effect only after public hearing. The licensee may, within 30 days after receiving the notice of suspension, request in writing the modification or vacation of the notice of suspension. The licensee shall state with particularity the licensee's objections to the notice of suspension; or

2. That summary suspension is necessary for public health, safety, or welfare and that the Department has ordered summary suspension of the license pending proceedings for revocation or other action.

C. The Department may give notice of summary suspension orally or in writing, based on considerations of public health, safety, or welfare. If given orally, the Department shall send a written confirmation of the oral notice that contains the same information required in subsection (B) within three work days.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-503 Revocation of License and Right of Appeal

The Department shall notify a licensee in writing, under A.R.S. § 41-1092.11, of license revocation. The Department shall specify the grounds for revocation in the notice. The licensee may, within 30 days after receiving the notice, request in writing modification or vacation of the revocation decision. The appellant shall state with particularity the appellant's objections to the notice of revocation.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Ariz. Admin. Code § R15-7-504 Injunction against Conducting a Bingo Game after Suspension or Revocation

If a licensee conducts or attempts to conduct any bingo game after license suspension or revocation, the Department shall request that the Attorney General's Office initiate legal action to enjoin the activity.

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Amended by final rulemaking at 9 A.A.R. 4186, effective November 8, 2003 (Supp. 03-3).

Article 6 REPEALED

Ariz. Admin. Code § R15-7-601 Reserved

Ariz. Admin. Code § R15-7-602 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Section repealed by final rulemaking at 13 A.A.R. 1125, effective May 5, 2007 (Supp. 07-1).

Ariz. Admin. Code § R15-7-603 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Section repealed by final rulemaking at 13 A.A.R. 1125, effective May 5, 2007 (Supp. 07-1).

Ariz. Admin. Code § R15-7-604 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Section repealed by final rulemaking at 13 A.A.R. 1125, effective May 5, 2007 (Supp. 07-1).

Ariz. Admin. Code § R15-7-605 Reserved

Ariz. Admin. Code § R15-7-606 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Section repealed by final rulemaking at 13 A.A.R. 1125, effective May 5, 2007 (Supp. 07-1).

Ariz. Admin. Code § R15-7-607 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Section repealed by final rulemaking at 6 A.A.R. 75, effective December 9, 1999 (Supp. 99-4).

Ariz. Admin. Code § R15-7-608 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Section repealed by final rulemaking at 13 A.A.R. 1125, effective May 5, 2007 (Supp. 07-1).

Ariz. Admin. Code § R15-7-609 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Section repealed by final rulemaking at 6 A.A.R. 75, effective December 9, 1999 (Supp. 99-4).

Ariz. Admin. Code § R15-7-610 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Section repealed by final rulemaking at 6 A.A.R. 75, effective December 9, 1999 (Supp. 99-4).

Ariz. Admin. Code § R15-7-611 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Repealed effective December 22, 1989 (Supp. 89-4).

Ariz. Admin. Code § R15-7-612 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Repealed effective December 22, 1989 (Supp. 89-4).

Ariz. Admin. Code § R15-7-613 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Section repealed by final rulemaking at 6 A.A.R. 75, effective December 9, 1999 (Supp. 99-4).

Ariz. Admin. Code § R15-7-614 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Section repealed by final rulemaking at 6 A.A.R. 75, effective December 9, 1999 (Supp. 99-4).

Ariz. Admin. Code § R15-7-615 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Section repealed by final rulemaking at 6 A.A.R. 75, effective December 9, 1999 (Supp. 99-4).

Ariz. Admin. Code § R15-7-616 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Section repealed by final rulemaking at 6 A.A.R. 75, effective December 9, 1999 (Supp. 99-4).

Ariz. Admin. Code § R15-7-617 Reserved

Ariz. Admin. Code § R15-7-618 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Section repealed by final rulemaking at 6 A.A.R. 75, effective December 9, 1999 (Supp. 99-4).

Ariz. Admin. Code § R15-7-619 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Section repealed by final rulemaking at 6 A.A.R. 75, effective December 9, 1999 (Supp. 99-4).

Ariz. Admin. Code § R15-7-620 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Section repealed by final rulemaking at 6 A.A.R. 75, effective December 9, 1999 (Supp. 99-4).

Ariz. Admin. Code § R15-7-621 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Section repealed by final rulemaking at 13 A.A.R. 1125, effective May 5, 2007 (Supp. 07-1).

Ariz. Admin. Code § R15-7-622 [REPEALED]

History

• Adopted effective June 5, 1984 (Supp. 84-3). Amended effective December 22, 1989 (Supp. 89-4). Section repealed by final rulemaking at 13 A.A.R. 1125, effective May 5, 2007 (Supp. 07-1).

Chapter 10 Department of Revenue - General Administration

Article 1 APPEAL PROCEDURES

Ariz. Admin. Code § R15-10-101 Definitions

For purposes of this Article:

1. "ALJ" means an administrative law judge who issues decisions on behalf of the Office of Administrative Hearings established by A.R.S. § 41-1092.01.

2. "Day" means a calendar day. If the last day for filing a document under the provisions of this Article falls on a Saturday, Sunday, or legal holiday, the document is considered timely if filed on the following business day.

3. "Department" means the Arizona Department of Revenue as represented by personnel of the applicable section or area.

4. "Notice" means a written notification, issued by the Department, of a tax assessment, refund denial, or any other action taken or proposed to be taken that is subject to appeal as a contested case or an appealable agency action under A.R.S Title 41, Chapter 6.

5. "Petition" means a written request for hearing, correction, or redetermination, including all applicable attachments.

6. "Petitioner" means the taxpayer or the representative of the taxpayer who files a petition.

7. "Refund denial" means a taxpayer's claim for a refund of tax, penalty, interest, or refundable credit that has been denied by the Department.

8. "Tax assessment" means any tax issue whether associated with a proposed amount due or the application of penalties and interest.

History

• Adopted effective June 22, 1981 (Supp. 81-3). Section repealed, new Section adopted effective December 23, 1993 (Supp. 93-4). Amended effective January 20, 1998 (Supp. 98-1).

Ariz. Admin. Code § R15-10-102 Scope of Article 1

A Department hearing officer shall conduct all hearings regarding the taxes under A.R.S. § 42-1101, unless A.R.S. § 41-1092.02 requires that an ALJ hear the matter.

History

• Adopted effective June 22, 1981 (Supp. 81-3). Section repealed, new Section adopted effective December 23, 1993 (Supp. 93-4). Section repealed, new Section adopted effective January 20, 1998 (Supp. 98-1). Amended by final rulemaking at 7 A.A.R. 2900, effective June 13, 2001 (Supp. 01-2).

Ariz. Admin. Code § R15-10-103 Taxpayer Hearing Rights

With respect to a protest hearing, the taxpayer has the right, subject to confidentiality laws, to:

1. Review documents applicable to the protest, or

2. Obtain from the Department copies of documents relevant to the taxpayer at the discretion of the Hearing Officer.

History

• Adopted effective June 22, 1981 (Supp. 81-3). Former Section R15-10-103 renumbered to R15-10-105, new Section R15-10-103 adopted effective December 23, 1993 (Supp. 93-4).

Ariz. Admin. Code § R15-10-104 [REPEALED]

History

• Adopted effective June 22, 1981 (Supp. 81-3). Repealed effective December 23, 1993 (Supp. 93-4).

Ariz. Admin. Code § R15-10-105 Petition

A. A taxpayer may protest a tax assessment or a refund denial by filing a petition that includes the following:

1. The taxpayer's name, address, federal identification number, and all applicable state identification numbers;

2. An explanation of the difference between the taxpayer's name in the notice and the taxpayer's name in the petition, if applicable;

3. The last known name and address of both individuals if the petition concerns a married-filing-joint return;

4. A copy of the notice or a statement that references the:

a. Tax type,

b. Tax period involved,

c. The amount of the tax assessment or refund claimed including tax, penalties, interest, and refundable credits and

d. The jurisdiction or jurisdictions to which the tax assessment or refund denial relates.

5. A statement of the amount of the tax assessment or refund denial being protested;

6. A statement of any alleged error committed by the Department in determining the tax assessment or refund denial being protested;

7. A statement of facts and legal arguments upon which the taxpayer relies to support the petition;

8. The relief sought;

9. The payment for all unprotested amounts of tax, interest, and penalties; and

10. The petitioner's signature.

B. A taxpayer may protest a matter other than a tax assessment or refund denial by filing a petition that includes the following:

1. The taxpayer's name, address, federal identification number, and all applicable state identification numbers;

2. An explanation of the difference between the taxpayer's name in the notice and the taxpayer's name in the petition, if applicable;

3. A copy of the notice or a statement describing the Department's action, proposed action, or determination for which a hearing is sought;

4. A statement of any alleged error committed by the Department in its action, including the jurisdiction or jurisdictions to which the alleged error relates;

5. A statement of facts and legal arguments upon which the taxpayer relies to support the petition;

6. The relief sought; and

7. The petitioner's signature.

C. The petitioner shall file the petition by:

1. Mailing the petition to the applicable section at the Department of Revenue headquarters in Phoenix, Arizona; or

2. Hand-delivering the petition to the applicable section at the Department of Revenue headquarters in Phoenix, Arizona. A petitioner who hand-delivers a petition shall clearly mark the envelope to indicate that it is a petition. The Department shall provide a receipt to a petitioner who hand-delivers a petition.

D. The Department shall not charge a fee for filing a petition or any supporting documents.

History

• Adopted effective June 22, 1981 (Supp. 81-3). Former Section R15-10-105 renumbered to R15-10-107, new Section R15-10-105 renumbered from R15-10-103 and amended effective December 23, 1993 (Supp. 93-4). Amended effective January 20, 1998 (Supp. 98-1). Amended by final rulemaking at 7 A.A.R. 2900, effective June 13, 2001 (Supp. 01-2). Amended by exempt rulemaking at 22 A.A.R. 116, effective 1/7/2016.

Ariz. Admin. Code § R15-10-106 Incomplete Petition

A. The Department hearing officer may dismiss a petition for a hearing that does not contain all of the information required by R15-10-105, unless the petitioner completes the petition within the time allowed to file the petition under R15-10-107, including any extension.

B. The Department hearing officer may, on a showing of good cause by the petitioner, grant additional time to complete a timely-filed petition.

History

• Adopted effective June 22, 1981 (Supp. 81-3). Section repealed, new Section adopted effective December 23, 1993 (Supp. 93-4). Amended by final rulemaking at 7 A.A.R. 2900, effective June 13, 2001 (Supp. 01-2).

Ariz. Admin. Code § R15-10-107 Timeliness of Petition

A. A petition regarding taxes other than individual income tax is timely filed with the Department if it is filed as prescribed by R15-10-105(A) within 45 days after the taxpayer receives the tax assessment or refund denial from the Department.

B. A petition for an individual income tax assessment or refund denial is timely filed with the Department if it is filed as prescribed by R15-10-105(A) within 90 days after the Department mails a notice to the taxpayer.

C. A petition or an extension request filed by mail is considered filed on the date shown by its U.S. Postal Service postmark.

D. A taxpayer or the taxpayer's representative may request that the Hearing Office grant an extension of time to file a petition.

1. The taxpayer or the taxpayer's representative shall submit an extension request before the expiration of the time allowed for filing the petition in subsection (A) or subsection (B). The request shall be in writing and shall show good cause for the extension. The Department may grant additional time not to exceed 60 days at the discretion of the Hearing Office or on stipulation of the parties.

2. If the Hearing Office does not grant the request for an extension in writing, the petition is due on the date specified in subsection (A) or (B).

E. The Hearing Office shall dismiss a petition which the Hearing Office determines is not timely filed.

F. If the taxpayer does not file a petition protesting a deficiency assessment within the time prescribed, the taxpayer may, after paying the tax assessment in full, apply for a refund pursuant to statutory provisions.

History

• Adopted effective June 22, 1981 (Supp. 81-3). Former Section R15-10-107 renumbered to R15-10-109, new Section R15-10-107 renumbered from R15-10-105 and amended effective December 23, 1993 (Supp. 93-4). Amended effective January 20, 1998 (Supp. 98-1).

Ariz. Admin. Code § R15-10-108 Expired

History

• Adopted effective June 22, 1981 (Supp. 81-3). Former Section R15-10-108 renumbered to R15-10-110, new Section R15-10-108 adopted effective December 23, 1993 (Supp. 93-4). Section expired under A.R.S. § 41- 1056(J) at 21 A.A.R. 1197, effective July 7, 2015 (Supp. 15-3).

Ariz. Admin. Code § R15-10-109 Expired

History

• Adopted effective June 22, 1981 (Supp. 81-3). Former Section R15-10-109 renumbered to R15-10-115, new Section R15-10-109 renumbered from R15-10-107 and amended effective December 23, 1993 (Supp. 93-4). Amended effective January 20, 1998 (Supp. 98-1). Section expired under A.R.S. § 41-1056(J) at 21 A.A.R. 1197, effective July 7, 2015 (Supp. 15-3).

Ariz. Admin. Code § R15-10-110 Withdrawal of Petition

A. The petitioner may submit a written request to withdraw a petition at any time before the Department hearing officer issues a written decision.

B. If the Department and the petitioner resolve the matters protested before the hearing, the parties shall submit a written agreement or stipulation to the hearing officer, and the hearing officer shall deem the petition withdrawn.

C. The hearing officer shall issue an order that the petition is withdrawn and that the matter is closed at the hearing office.

History

• Adopted effective June 22, 1981 (Supp. 81-3). Former Section R15-10-110 repealed, new Section R15-10-110 renumbered from R15-10-108 and amended effective December 23, 1993 (Supp. 93-4). Amended by final rulemaking at 7 A.A.R. 2900, effective June 13, 2001 (Supp. 01-2).

Ariz. Admin. Code § R15-10-111 [REPEALED]

History

• Adopted effective June 22, 1981 (Supp. 81-3). Section repealed effective December 23, 1993 (Supp. 93-4).

Ariz. Admin. Code § R15-10-112 Renumbered

History

• Adopted effective June 22, 1981 (Supp. 81-3). Former Section R15-10-112 renumbered to R15-10-116 effective December 23, 1993 (Supp. 93-4).

Ariz. Admin. Code § R15-10-113 Renumbered

History

• Adopted effective June 22, 1981 (Supp. 81-3). Former Section R15-10-113 renumbered to R15-10-119 effective December 23, 1993 (Supp. 93-4).

Ariz. Admin. Code § R15-10-114 Renumbered

History

• Adopted effective June 22, 1981 (Supp. 81-3). Former Section R15-10-114 renumbered to R15-10-117 effective December 23, 1993 (Supp. 93-4).

Ariz. Admin. Code § R15-10-115 Request for Hearings; Waiver

A. The hearing officer shall schedule an oral hearing upon request of the petitioner or the Department. If neither the petitioner nor the Department requests an oral hearing, the hearing officer shall:

Consider the petition submitted for decision based on the petition and any memoranda filed, or

2. Schedule an oral hearing.

B. The hearing officer may, for good cause shown by any party to the hearing, postpone, recess, or continue an oral hearing to a specified date, time, and place. The hearing officer shall notify all the parties regarding a rescheduled hearing.

C. If any party to the hearing fails to appear at the oral hearing without good cause, the hearing officer may:

1. Proceed with the hearing,

2. Reschedule the hearing, or

3. Issue a decision based on the petition and memoranda provided.

History

• Adopted effective June 22, 1981 (Supp. 81-3). Former Section R15-10-115 renumbered to R15-10-120, new Section R15-10-115 renumbered from R15-10-109 and amended effective December 23, 1993 (Supp. 93-4). Amended by final rulemaking at 7 A.A.R. 2900, effective June 13, 2001 (Supp. 01-2).

Ariz. Admin. Code § R15-10-116 Hearing Procedure

A. The hearing officer may hold hearings:

1. In person,

2. By telephone,

3. By the submission of memoranda, or

4. By a combination of these methods.

B. For hearings by memoranda, the hearing officer shall prescribe a schedule for the submission of the memoranda.

C. The hearing officer may:

1. Conduct the hearing in an informal manner,

2. Accept a stipulation of facts,

3. Allow any party in the hearing to make an opening statement,

4. Allow each party to state its position and present evidence,

5. Allow each party to reply to any statements or arguments, and

6. Allow any party to make closing statements or arguments.

D. The hearing officer may remand any matter to the applicable section of the Department at the request of either party or at the hearing officer's discretion.

History

• Adopted effective June 22, 1981 (Supp. 81-3). Former Section R15-10-116 renumbered to R15-10-121, new Section R15-10-116 renumbered from R15-10-112 and amended effective December 23, 1993 (Supp. 93-4). Amended by final rulemaking at 7 A.A.R. 2900, effective June 13, 2001 (Supp. 01-2).

Ariz. Admin. Code § R15-10-117 Evidence

A. Each party to a hearing may:

1. Call and examine witnesses,

2. Introduce exhibits,

3. Cross-examine opposing witnesses on any matter relevant to the issues even though the matter was not covered in the direct examination,

4. Dispute the testimony of any witness regardless of which party first called the witness to testify, and

5. Challenge the evidence presented.

B. The Hearing Officer shall admit any relevant evidence, but shall consider objections to the admission of and comments on the weakness of evidence in assigning weight to the evidence. The Hearing Officer may deny admission of evidence that the Hearing Officer considers irrelevant, immaterial, or unduly repetitious.

C. A party may substitute an exact copy of an original exhibit.

D. The Hearing Officer may call anyone at the hearing to testify.

History

• Adopted effective June 22, 1981 (Supp. 81-3). Former Section R15-10-117 renumbered to R15-10-118, new Section R15-10-117 renumbered from R15-10-114 and amended effective December 23, 1993 (Supp. 93-4). Amended effective January 20, 1998 (Supp. 98-1).

Ariz. Admin. Code § R15-10-118 Expired

History

• Adopted effective June 22, 1981 (Supp. 81-3). Former Section R15-10-118 renumbered to R15-10-122, new Section R15-10-118 renumbered from R15-10-117 and amended effective December 23, 1993 (Supp. 93-4). Adopted effective June 22, 1981 (Supp. 81-3). Former Section R15-10-118 renumbered to R15-10-122, new Section R15-10-118 renumbered from R15-10-117 and amended effective December 23, 1993 (Supp. 93-4). Section expired under A.R.S. § 41-1056(J) at 21 A.A.R. 1197, effective July 7, 2015 (Supp. 15-3).

Ariz. Admin. Code § R15-10-119 Stipulation of Facts

The petitioner and the Department may file a stipulation of facts stating:

1. The facts upon which they agree,

2. The facts that are in dispute, and

3. The reasons for the dispute.

History

• Adopted effective June 22, 1981 (Supp. 81-3). Amended effective July 24, 1986 (Supp. 86-4). Former Section R15-10-119 renumbered to R15-10-130, new Section R15-10-119 renumbered from R15-10-113 and amended effective December 23, 1993 (Supp. 93-4). Amended by final rulemaking at 7 A.A.R. 2900, effective June 13, 2001 (Supp. 01-2).

Ariz. Admin. Code § R15-10-120 Official Notice

The Department hearing officer may take official notice of the following:

1. The records that the Department maintains,

2. Tax returns filed with the Department for or on behalf of the taxpayer or any affiliated person together with related records on file with the Department, or

3. A fact that is generally known in this state or that is capable of accurate and ready determination by reference to a source whose accuracy cannot reasonably be questioned.

History

• Adopted effective June 22, 1981 (Supp. 81-3). Former Section R15-10-120 repealed, new Section R15-10-120 adopted effective July 24, 1986 (Supp. 86-4). Former Section R15-10-120 renumbered to R15-10-131, new Section R15-10-120 renumbered from R15-10-115 and amended effective December 23, 1993 (Supp. 93-4). Amended by final rulemaking at 7 A.A.R. 2900, effective June 13, 2001 (Supp. 01-2).

Ariz. Admin. Code § R15-10-121 Subpoena by Petitioner

A. A petitioner requesting a subpoena shall apply, to the Hearing Officer submitting a proposed subpoena at least 10 days before the hearing.

B. The Hearing Office shall not issue a subpoena for confidential or privileged information.

History

• Adopted effective June 22, 1981 (Supp. 81-3). Former Section R15-10-121 repealed, new Section R15-10-121 adopted effective July 24, 1986 (Supp. 86-4). Former Section R15-10-121 renumbered to Section R15-10-132, new Section R15-10-121 renumbered from R15-10-116 and amended effective December 23, 1993 (Supp. 93-4). Amended effective January 20, 1998 (Supp. 98-1).

Ariz. Admin. Code § R15-10-122 Transcripts and Records

A. The hearing officer shall record all oral hearings. Upon request of any party to the hearing, the hearing office shall provide a copy of the recording of the hearing, without charge, to the requesting party.

B. A party to an oral hearing may:

1. Transcribe the hearing at the party's own expense; and

2. Cite a transcript in any proceeding, if the party provides a full copy of the transcript to the opposing party and the hearing officer.

C. The petitioner shall not remove the records and files of the Department from the Department for use as evidence or other purposes. The Department shall, as permitted by law, provide a certified copy of Department records and files as requested by the petitioner for use in the proceedings. The Department shall provide the copy at a reasonable charge not to exceed the commercial rate for the service.

History

• Renumbered from R15-10-118 and amended effective December 23, 1993 (Supp. 93-4). Amended by final rulemaking at 7 A.A.R. 2900, effective June 13, 2001 (Supp. 01-2). Amended by final rulemaking at 15 A.A.R. 2140, effective January 30, 2010 (Supp. 09-4).

Ariz. Admin. Code § R15-10-123 Reserved

Ariz. Admin. Code § R15-10-124 Reserved

Ariz. Admin. Code § R15-10-125 Reserved

Ariz. Admin. Code § R15-10-126 Reserved

Ariz. Admin. Code § R15-10-127 Reserved

Ariz. Admin. Code § R15-10-128 Reserved

Ariz. Admin. Code § R15-10-129 Reserved

Ariz. Admin. Code § R15-10-130 Decisions and Orders

A. The Hearing Officer shall issue a written decision, which sets forth the reasons for the decision, after reviewing the evidence submitted by the petitioner and the Department.

B. A decision dismissing a petition as incomplete or not timely filed shall be based on the Hearing Officer's review of the petition, documents available, and any information officially noticed.

C. The Hearing Office shall mail the decision of the Hearing Officer, by certified mail, to the last known address of the taxpayer. The Hearing Office shall immediately forward a copy of the decision to the applicable section in the Department of Revenue and to the Director.

History

• Renumbered from R15-10-119 and amended effective December 23, 1993 (Supp. 93-4). Amended effective January 20, 1998 (Supp. 98-1).

Ariz. Admin. Code § R15-10-131 Review of Decision of the Hearing Officer or ALJ

A. The decision of the Hearing Officer or ALJ is the final order of the Department of Revenue 30 days after the taxpayer receives the decision unless prior to that time:

1. The petitioner or the Department petitions the Director to review the decision, or

2. The Director independently determines that the decision requires review.

B. The Director may grant an extension of time for filing a petition for review on a showing of good cause, if the request for an extension is in writing and is filed with the Director before the expiration of the 30-day period prescribed in subsection (A).

C. A petition or an extension request filed by mail is considered filed on the date shown by the U.S. Postal Service postmark.

D. The Director may grant a review of the decision of the Hearing Officer or ALJ if one of the parties asserts that any of the following causes has materially affected the party's rights:

1. The findings of fact, conclusions of law, order, or decision are not supported by the evidence or are contrary to law;

2. The party seeking review was deprived of a fair hearing due to irregularity in the proceedings, abuse of discretion, or misconduct of the prevailing party;

3. Accident or surprise which could not have been prevented by ordinary prudence;

4. Material evidence which has been newly discovered;

5. Error in admission or rejection of evidence or other errors of law occurring at the hearing or during the progress of the action; or

6. That the decision is the result of bias or prejudice.

E. The Director may independently determine to review a decision of the Hearing Officer or ALJ if it appears that any of the causes listed in subsection (D) may have materially affected a party's rights.

F. The petition for review of the Hearing Officer's or ALJ's decision shall be in writing, shall state the grounds upon which the petition is based, and the Director may grant leave to amend the petition at any time before it is ruled upon by the Director. At the time of filing, the petitioning party shall also serve a copy of the petition on the other party.

G. If the Director has independently determined that the decision requires review, the Director shall send, by certified mail, notification of intent to review to the taxpayer, not more than 30 days after the taxpayer's receipt of the Hearing Officer's or ALJ's decision.

H. On petition for review, or on the Director's independent review:

1. The Director may open the decision of the Hearing Officer or ALJ, take additional evidence, amend findings of fact and conclusions of law, or make new findings and conclusions, and issue a new decision;

2. The Director may issue a decision that summarily affirms the decision of the Hearing Officer or ALJ; or

3. The Director may remand any matter to the Hearing Office, the Office of Administrative Hearings, or the appropriate section or area of the Department at the request of either party or at the Director's discretion.

I. The Director's decision shall be sent by certified mail to the taxpayer, at the taxpayer's last known address.

J. The taxpayer may appeal a Director's decision or a decision that is final pursuant to subsection (A) to the State Board of Tax Appeals or tax court under R15-10-132.

History

• Renumbered from R15-10-120 and amended effective December 23, 1993 (Supp. 93-4). Amended effective October 11, 1995 (Supp. 95-4). Amended effective January 20, 1998 (Supp. 98-1).

Ariz. Admin. Code § R15-10-132 Appeal of the Final Order of the Department of Revenue

A. Within 30 days of the date an order of the Department becomes final, a taxpayer disputing the final order of the Department of Revenue may:

1. File an appeal with the State Board of Tax Appeals, or

2. Bring an action in tax court, unless the case involves an individual income tax dispute of less than $5,000.

B. If the Director is reviewing the Hearing Officer's or ALJ's decision under R15-10-131, such review by the Director shall be completed before an appeal can be taken to the State Board of Tax Appeals or an action can be brought in tax court.

History

• Renumbered from R15-10-121 and amended effective December 23, 1993 (Supp. 93-4). Amended effective January 20, 1998 (Supp. 98-1).

Article 2 ADMINISTRATION

Ariz. Admin. Code § R15-10-201 Closing Agreements Relating to Tax Liability

A. A closing agreement under A.R.S. § 42-1113 or A.R.S. § 42-2056 may relate to any taxable period.

1. The Department and a taxpayer may enter into a closing agreement for:

a. A taxable period that ends before the date of the agreement that:

i. Relates to one or more separate items affecting the liability of the taxpayer, or

ii. Relates to the total liability of the taxpayer.

b. A taxable period that ends after the date of the agreement only if the agreement relates to one or more separate items affecting the liability of the taxpayer.

2. The Department and the taxpayer may enter into a closing agreement even if under the agreement the taxpayer is not liable for any tax for the period to which the agreement relates.

3. The Department and a taxpayer may enter into more than one closing agreement for a taxable period relating to the liability of the taxpayer.

B. A closing agreement shall be in writing and shall state the conditions of the agreement.

C. A closing agreement is not effective until it is signed by the taxpayer or an authorized representative of the taxpayer and by an authorized representative of the Department.

History

• Adopted effective September 16, 1987 (Supp. 87-3). Former Section R15-10-201 renumbered to R15-5-2207 (Supp. 94-1).New Section R15-10-201 renumbered from R15-2-231 (Supp. 94-1). Amended effective January 20, 1998 (Supp. 98-1). Amended by final rulemaking at 7 A.A.R. 2900, effective June 13, 2001 (Supp. 01-2).

Ariz. Admin. Code § R15-10-202 Expired

History

• Adopted effective April 26, 1989 (Supp. 89-2). Section R15-10-202 renumbered to R15-5-601 (Supp. 94-1). New Section R15-10-202 renumbered from R15-2-326 at 5 A.A.R. 1619, May 28, 1999 (Supp. 99-2). Section expired under A.R.S. § 41- 1056(J) at 21 A.A.R. 1197, effective July 7, 2015 (Supp. 15-3).

Article 3 AUTHORIZED TRANSMISSION OF FUNDS

Ariz. Admin. Code § R15-10-301 Definitions

In this Article:

"ACH" means an automated clearing house that is a central distribution and settlement point for the electronic clearing of debits and credits between financial institutions.

2. "ACH credit" means an electronic funds transfer generated by a payor, cleared through an ACH for deposit to the Department account.

3. "ACH debit" means an electronic transfer of funds from a payor's account, as indicated on a signed authorization agreement, that is generated at a payor's instruction on AZTaxes.gov and cleared through an ACH for deposit to the Department account.

4. "Addenda record" means the information required by the Department in an ACH credit transfer or wire transfer, in the approved electronic format prescribed in R15-10-306(B).

5. "ALTO" is the Arizona Luxury Tax Online web site, luxury.aztaxes.gov or such other web site as the Department may determine from time to time, and means the Department's luxury taxpayer service center web site that provides luxury taxpayers with the ability to conduct transactions, make electronic funds transfer payments and review tax account information over the internet.

"Authorized means of transmission" means the deposit of funds into the Department account by electronic funds transfer.

7. "AZTaxes.gov" means the Department's taxpayer service center web site, or such other web site as the Department may determine from time to time, that provides taxpayers with the ability to conduct transactions, make electronic funds transfer payments and review tax account information over the internet.

8. "Cash Concentration or Disbursement plus" or "CCD plus" means the standardized data format approved by the National Automated Clearing House Association for remitting tax payments electronically.

9. "Department" means the Arizona Department of Revenue.

10. "EFT Program" means the payment of taxes by electronic funds transfer as specified by this Article.

11. "Electronic Funds Transfer" or "EFT" means the electronic transfer of funds from one bank account to another via computer based systems, where the person initiating the transfer orders, instructs, or authorizes a financial institution to debit or credit an account using the methods specified in these rules.

12. "Financial institution" means a state or national bank, a trust company, a state or federal savings and loan association, a mutual savings bank, or a state or federal credit union.

13. "Marketplace facilitator" has the same meaning as prescribed in A.R.S. § 42-5001.

13. 14. "Payment information" means the data that the Department requires of a payor making an electronic funds transfer payment.

14. 15. "Payor" means a taxpayer or payroll service.

15. 16. "Payroll service" means a third party, under contract with a taxpayer to provide tax payment services on behalf of the taxpayer.

17. "Remote seller" has the same meaning as prescribed in A.R.S. § 42-5001.

16. 18. "State Servicing Bank" means a bank designated under A.R.S. Title 35, Chapter 2, Article 2.

17. 19. "Tax type" means a tax that is subject to electronic funds transfer, each of which shall be considered a separate category of payment.

18. 20. "Wire transfer" or "Fedwire" means an instantaneous electronic funds transfer initiated by a payor.

History

• Adopted effective July 30, 1993 (Supp. 93-3). Amended effective June 15, 1998 (Supp. 98-2). Amended by final rulemaking at 23 A.A.R. 1899, effective 7/1/2017. Amended by exempt rulemaking at 25 A.A.R. 3023, effective 10/1/2019.

Ariz. Admin. Code § R15-10-302 General Requirements

A. For tax periods beginning on or after January 1, 1997, corporations that had an Arizona income tax liability during the prior tax year of $20,000 or more shall remit Arizona estimated income tax payments by an authorized means of transmission.

B. For tax periods beginning on or after July 1, 2017, taxpayers who, under A.R.S. Title 43, Chapter 4, had an average Arizona quarterly withholding tax liability during the prior tax year of $5,000 or more shall remit Arizona withholding tax payments by an authorized means of transmission.

C. The average Arizona quarterly withholding tax liability is determined by dividing the taxpayer's total Arizona withholding tax liability for the calendar year by 4.

D. For tax periods beginning on and after July 1, 2017, any taxpayer who under A.R.S. Title 42 Chapter 5 and Chapter 6, Articles 1 and 3, had an annual tax liability during the prior calendar year of $20,000 or more shall remit these tax payments by an authorized means of transmission.

E. For tax periods after July 1, 2015, tobacco tax taxpayers are required to remit tobacco tax payments by an authorized means of transmission.

F. Unless otherwise waived pursuant to A.R.S. § 42-1129, for tax periods beginning on or after the following tax years, any taxpayer, other than an individual income taxpayer, that had a tax liability equal to or more than the following amounts during the prior tax year or that can reasonably anticipate tax liability in the current tax year exceeding the following amounts, shall remit tax payments to the Department by an authorized means of transmission. For periods on or after:

1. January 1, 2018, prior tax year or expected current year tax liability of $20,000;

2. January 1, 2019, prior tax year or expected current year tax liability of $10,000;

3. January 1, 2020, prior tax year or expected current year tax liability of $5,000;

4. January 1, 2021, prior tax year or expected current year tax liability of $500.

G. For tax periods beginning on and after October 1, 2019, marketplace facilitators and remote sellers who, at the time of registering for a transaction privilege tax license, can reasonably anticipate their tax liability will exceed the thresholds detailed in subsection (F) above are required to remit any applicable taxes to the Department by an authorized means of transmission, unless granted a waiver pursuant to A.R.S. § 42-1129.

History

• Adopted effective July 30, 1993 (Supp. 93-3). Amended effective December 17, 1993 (Supp. 93-4). Amended effective October 4, 1996 (Supp. 96-4). Amended by final rulemaking at 23 A.A.R. 1899, effective 7/1/2017. Amended by final rulemaking at 23 A.A.R. 3308, effective 1/1/2018. Amended by exempt rulemaking at 25 A.A.R. 3023, effective 10/1/2019.

Ariz. Admin. Code § R15-10-303 Voluntary Participation

A. For tax periods beginning on or after January 1, 1997, a taxpayer who, during the prior tax year, had a corporate income tax liability of less than $20,000 may elect to participate in the EFT Program by submitting to the Department an electronic funds transfer authorization agreement that complies with by R15-10-304.

B. For tax periods beginning on or after July 1, 2017, a taxpayer who, during the prior tax year, had an average quarterly withholding tax liability of less than $5,000 may elect to participate in the EFT Program by submitting to the Department an electronic funds transfer authorization agreement that complies with by R15-10-304.

C. For tax periods beginning on and after July 1, 2017, any taxpayer who has a liquor tax liability may elect to participate in the EFT Program by submitting to the Department an electronic funds transfer authorization agreement that complies with R15-10-304.

D. For tax periods beginning on and after July 1, 2017, any taxpayer who under Title 42 Chapter 5 and Chapter 6, Articles 1 and 3, had an annual tax liability of less than $20,000 during the prior calendar year may elect to participate in the EFT Program by submitting to the Department an electronic funds transfer authorization agreement that complies with R15-10-304.

E. For tax periods beginning on or after January 1, 2018, any taxpayer, other than an individual income taxpayer, that does not meet the statutory requirements under A.R.S. § 42-1129 and A.A.C. R15-10-302(F) to remit tax payments to the Department electronically, may elect to participate in the EFT Program by submitting to the Department an electronic funds transfer authorization agreement that complies with R15-10-304.

E. F. A taxpayer authorized to participate in the EFT Program shall provide at least 30 days prior written notice to the Department if the taxpayer elects to cease voluntary participation in the EFT Program.

History

• Adopted effective July 30, 1993 (Supp. 93-3). Amended effective December 17, 1993 (Supp. 93-4). Amended effective October 4, 1996 (Supp. 96-4). Amended effective June 15, 1998 (Supp. 98-2). Amended by final rulemaking at 23 A.A.R. 1899, effective 7/1/2017. Amended by final rulemaking at 23 A.A.R. 3308, effective 1/1/2018.

Ariz. Admin. Code § R15-10-304 Authorization Agreement

A. The payor shall register for an account and complete an electronic funds transfer authorization agreement on AZTaxes.gov, ALTO or ACH Credit Form prescribed by the Department, as applicable, or such other form prescribed by the Department at least 30 days prior to initiation of the first applicable transaction. The form shall include the following information:

1. Name and address of the taxpayer;

2. The taxpayer's tax identification number including a federal identification number, withholding tax identification number, transaction privilege tax identification number or other tax identification number, as appropriate;

2. Federal identification number of the taxpayer;

3. Withholding number of the taxpayer, if applicable;

4. Transaction privilege tax license number of taxpayer, if applicable;

5. Type of action being taken;

6. Tax type;

7. Method of payment;

8. 3. Name and phone number of taxpayer's EFT contact person;

9. 4. Name and address of any payroll service, if applicable;

10.5. Name and phone number of the payroll service's EFT contact person;, if applicable;

11. Financial institution name and address;

12. Type of bank account;

13. Name on bank account;

14. Bank account number; and,

15. Bank routing transit number.

6. For payments initiated on AZTaxes.gov or ALTO, the information must include the type of bank account, the bank account number and the bank routing transit number.

B. A payor shall submit a revised authorization agreement to the Department at least 30 days prior to any change in the information required in subsection (A).

History

• Adopted effective July 30, 1993 (Supp. 93-3). Amended effective June 15, 1998 (Supp. 98-2). Amended by final rulemaking at 23 A.A.R. 1899, effective 7/1/2017.

Ariz. Admin. Code § R15-10-305 Methods of Electronic Funds Transfer

A. Payors shall use the ACH debit transfer method available through registration on AZTaxes.gov or ALTO to remit payment by electronic funds transfer unless the Department grants permission to use the ACH credit method.

B. The Department may authorize under a form prescribed by the Department in R15-10-304 the use of the ACH credit method for pay-ors desiring to use this method. A payor that chooses to use the ACH credit method shall provide the payment information required in R15-10-306(B)(2).

C. The Department may withdraw permission to use the ACH credit method of payment if the payor shows disregard for the requirements and specifications of these rules by failing to:

1. Make timely electronic funds transfer payments,

2. Provide timely payment information,

3. Provide the required addenda record with the electronic funds transfer payment, or

4. Make correct payment.

D. Payors who are unable to use their established method of payment may request that the Department accept deposits to the Department account via wire transfer in accordance with the following:

1. The payor shall contact the Department, and obtain verbal approval to wire transfer the tax payment to the Department account prior to initiating the transmission.

2. Approved wire transfers shall be accompanied by an addenda record, that includes the same information required for ACH credit transfers under R15-10-306(B)(2).

History

• Adopted effective July 30, 1993 (Supp. 93-3). Amended effective June 15, 1998 (Supp. 98-2). Amended by final rulemaking at 23 A.A.R. 1899, effective 7/1/2017.

Ariz. Admin. Code § R15-10-306 Procedures for Payment

A. Payors using the ACH Debit Method shall log in to their account on AZTaxes.gov or ALTO as appropriate and, unless registering for the first time, shall arrange for electronic payment of the applicable taxes no later than the time prescribed by the AZTaxes.gov or ALTO on the last business day before the due date of the payment.

1. Payment information shall be communicated automatically to the Department through AZTaxes.gov or ALTO, as applicable, once payment arrangements have been made by payors and accepted by AZTaxes.gov or ALTO.

a. Operator-assisted communication of payment information made orally by rotary or touch-tone telephone,

b. Touch-tone communication of payment information made by entering data via key pad of a touch-tone telephone, or

c. Computer terminal linked with the Data Collection Center.

2. Payors shall communicate the following payment information to the Data Collection Center:

a. Payor information number,

b. Taxpayer identification number,

c. Tax type,

d. Payment amount,

e. Tax period,

f. Payment due date, and

g. Payment sequence number.

B. Payors authorized to use the ACH credit method shall initiate payment transactions directly with a financial institution in a timely manner to ensure that the payment is deposited to the Department account on or before the payment due date.

1. All ACH credit transfers shall be in the CCD-plus addenda format. Payments not in this format may be rejected.

2. The addenda format, as specified in subsection (B)(1), shall include the following information:

a. Taxpayer identification number,

b. Tax type,

c. Payment amount,

d. Tax period,

e. e. Taxpayer verification number,

g. f. Department account number, and

h. g. American Bank Association 9-digit number of the receiving bank.

History

• Adopted effective July 30, 1993 (Supp. 93-3). Amended effective June 15, 1998 (Supp. 98-2). Amended by final rulemaking at 23 A.A.R. 1899, effective 7/1/2017.

Ariz. Admin. Code § R15-10-307 Timely Payment

A. A taxpayer remitting a tax payment through an electronic funds transfer shall initiate the transfer so that the payment is deposited to the Department account on or before the payment due date.

B. If a tax due date falls on a Saturday, Sunday, or legal holiday, the deposit by an electronic funds transfer shall be made no later than 5:00 p.m. on the next banking day.

C. A taxpayer required to, or who voluntarily elects to, participate in the EFT Program is subject to the penalty prescribed by A.R.S. § 42-1125(D) if the payment is not deposited to the Department account on or before the payment due date.

History

• Adopted effective July 30, 1993 (Supp. 93-3). Amended effective June 15, 1998 (Supp. 98-2). Amended by final rulemaking at 7 A.A.R. 2900, effective June 13, 2001 (Supp. 01-2).

Article 4 REIMBURSEMENT OF FEES AND OTHER COSTS RELATED TO AN ADMINISTRATIVE PROCEEDING

Ariz. Admin. Code § R15-10-401 Application for Reimbursement of Fees and Other Costs Related to an Administrative Proceeding

A. To apply for reimbursement of reasonable fees and other costs, as provided in A.R.S. § 42-2064, a taxpayer shall file a written application with the Department's problem resolution officer.

B. An application shall include the following:

Taxpayer's name, address, and identification number;

2. Identification of the tax type and the administrative proceeding for which reimbursement is sought;

3. An explanation of why the taxpayer alleges that the position of the Department in the administrative proceeding was not substantially justified;

4. If multiple issues were presented in the administrative proceeding and the taxpayer did not prevail on all issues, an explanation of:

a. The issue or set of issues on which the taxpayer prevailed,

b. The issue or set of issues on which the taxpayer did not prevail, and

c. The issue or set of issues on which the taxpayer prevailed and why the issue or set of issues presented in the administrative proceeding is the most significant.

5. A statement that the taxpayer did not unduly and unreasonably protract the administrative proceeding for which reimbursement is sought;

6. A statement that the reason the taxpayer prevailed is not due to an intervening change in the applicable law; and

7. A detailed explanation of the nature and amount of each specific item for which reimbursement is sought.

C. An application may also include any other matters that the taxpayer wishes the Department's problem resolution officer to consider in determining whether and in what amount reimbursement should be made.

D. The taxpayer shall sign the application and verify under penalty of perjury that the information provided in the application and any accompanying material is accurate and complete.

E. If a paid representative of the taxpayer prepares the application, the representative shall also sign the application and verify under penalty of perjury that the information provided in the application and all accompanying material is accurate and complete.

F. Fees and costs incurred in making application for reimbursement or regarding an appeal of a decision for reimbursement do not relate to an administrative proceeding in connection with an assessment, determination, collection, or refund of tax and are not reimbursable.

History

• Adopted effective March 13, 1998 (Supp. 98-1). Amended by final rulemaking at 7 A.A.R. 2900, effective June 13, 2001 (Supp. 01-2).

Ariz. Admin. Code § R15-10-402 Documentation of Payment of Fees and Other Costs

The taxpayer shall submit with the application documentation which shows payment of the fees and costs for which the taxpayer seeks reimbursement. The taxpayer shall submit a separate itemized statement for each firm or individual that provided services covered by the application. The itemized statement shall show the hours spent in connection with the administrative proceeding by each individual, a description of the specific services performed, and the rates used in computing each fee. Each statement shall reflect payment or the taxpayer shall attach proof of payment to the statement. Separate, itemized statements of any other costs incurred by the taxpayer, together with proof of payment, shall also accompany an application.

History

• Adopted effective March 13, 1998 (Supp. 98-1).

Ariz. Admin. Code § R15-10-403 Filing an Application

A. A taxpayer shall file an application for reimbursement of fees and other costs only after the conclusion of administrative proceedings, but not later than 30 days after the conclusion of administrative proceedings.

B. For purposes of this rule, the conclusion of administrative proceedings is determined as follows:

1. For a decision of a hearing officer or administrative law judge, the conclusion of administrative proceedings occurs 30 days after the taxpayer receives the decision unless, within the 30-day period, one of the following occurs:

a. The taxpayer appeals the decision, or any part of the decision, to the State Board of Tax Appeals;

b. The taxpayer or the Department petitions the Director to review the decision, or any part of the decision;

c. The Director independently determines that the decision, or any part of the decision, requires review.

2. When a decision of a hearing officer or administrative law judge is subject to a review by the Director, the conclusion of administrative proceedings occurs 30 days after the taxpayer receives the Director's decision unless, within the 30-day period, the taxpayer appeals the decision, or any part of the decision to the State Board of Tax Appeals.

3. When a taxpayer appeals a decision, or any part of a decision, to the State Board of Tax Appeals, the conclusion of administrative proceedings occurs 30 days after the taxpayer receives the decision of the State Board of Tax Appeals.

History

• Adopted effective March 13, 1998 (Supp. 98-1).

Ariz. Admin. Code § R15-10-404 Decisions

A. The Departments's problem resolution officer shall issue a written decision on each application for reimbursement of fees and other costs. The problem resolution officer shall issue the decision within 30 days after receipt of the application and shall set forth the reason for the decision.

B. The problem resolution officer's decision is issued when mailed to the taxpayer's address furnished in the application.

History

• Adopted effective March 13, 1998 (Supp. 98-1).

Article 5 ELECTRONIC FILING PROGRAM

Ariz. Admin. Code § R15-10-501 Definitions

In addition to the definitions provided in A.R.S. §§ 42-1101.01, 42-1103.01, 42-1103.02, 42-1103.03, and 42-1105.02, unless the context provides otherwise, the following definitions apply to this Article and to A.R.S. Title 42, Chapter 2:

1. "AZTaxes.gov" means the Department's taxpayer service center web site that provides taxpayers with the ability to conduct transactions and review tax account information over the internet.

2. "Authorized user" means an individual, primary user, or delegate user, including a return preparer or electronic return preparer, who has been granted authority by the taxpayer, an owner of the taxpayer or an authorized officer of the taxpayer to access taxpayer information available on AZTaxes.gov.

3. "Bulk Transmitter" is an electronic return transmitter that submits multiple electronic returns, statements or other documents to the Department for filing or processing at one time.

4. "Delegate user" means a registered customer of AZTaxes.gov, other than a primary user, who is authorized by a taxpayer, an owner of the taxpayer or an authorized officer of the taxpayer to access the taxpayer's account information on AZTaxes.gov. A Delegate user who uses a PIN to sign and file transaction privilege or use tax returns on behalf of a taxpayer shall be presumed to be authorized by that taxpayer to take such action on behalf of the taxpayer.

5. "Department" means the Arizona Department of Revenue.

6. "Electronic return preparer" has the same meaning as prescribed in A.R.S. § 42-1101.01.

7. "Electronic return, statement or other document" means all data entered into a return, statement, or other document that is prepared using computer software and transmitted electronically to the Department.

8. "Electronic return transmitter" includes a person who is part of the chain of transmission of an electronic return, statement, or other document from the taxpayer or from an electronic return preparer to the Department even though the person did not receive the transmitted return, statement, or other document directly from the taxpayer or electronic return preparer.

9. "Electronic signature" has the same meaning as prescribed in A.R.S. § 18-106.

10. "License" means one or more transaction privilege, use, or withholding tax licenses or registrations obtained from the Department by completing and submitting a mail-in paper application or by completing the AZTaxes.gov registration process and, where applicable, submitting an executed AZTaxes.gov Registration Signature Card.

11. "Marketplace facilitator" has the same meaning as prescribed in A.R.S. § 42-5001.

12. "PIN" means a user-created personal identification number made up of a prescribed number of characters and used as an electronic signature to sign returns, statements or other documents submitted to the Department through AZTaxes.gov or by any other electronic means.

13. "Primary user" means the taxpayer, an owner of the taxpayer or any authorized officer of the taxpayer who registers to use AZTaxes.gov. A primary user has the unlimited ability to access the taxpayer's online accounts, conduct online transactions for the taxpayer, designate delegate users, specify the level of access granted to a delegate user and modify or terminate the access of any delegate user.

14. "Registered customer" means any individual who has, by means of providing specific information requested by the Department through the AZTaxes.gov registration process, selected a username and password entitling that individual to conduct transactions and access information through AZTaxes.gov.

15. "Remote seller" has the same meaning as prescribed in A.R.S. § 42-5001.

16. "Return preparer" has the same meaning as prescribed in A.R.S. § 42-1101.01.

History

• New Section made by final rulemaking at 7 A.A.R. 5383, effective November 8, 2001 (Supp. 01-4). Amended by final rulemaking at 9 A.A.R. 5044, effective November 4, 2003 (Supp. 03-4). Amended by exempt rulemaking at 22 A.A.R. 116, effective 1/7/2016. Amended by final rulemaking at 22 A.A.R. 1852, effective 6/24/2016. Amended by exempt rulemaking at 25 A.A.R. 3023, effective 10/1/2019.

Ariz. Admin. Code § R15-10-502 Recordkeeping Requirements

For each electronic return of income tax or withholding tax filed with the Department, the electronic return preparer shall keep the documents listed in A.R.S. § 42-1105(F) for four years following the later of the date on which the return was due to be filed with the Department or was presented to the taxpayer for signature.

History

• New Section made by final rulemaking at 7 A.A.R. 5383, effective November 8, 2001 (Supp. 01-4). Amended by final rulemaking at 9 A.A.R. 5044, effective November 4, 2003 (Supp. 03-4). Amended by exempt rulemaking at 22 A.A.R. 116, effective 1/7/2016. Amended by final rulemaking at 25 A.A.R. 3057, effective 12/1/2019.

Ariz. Admin. Code § R15-10-503 Electronic Signatures for Income Tax Returns

A. If a taxpayer electronically signs the taxpayer's federal income tax return, the taxpayer may elect to use the electronic signature from the federal return to sign the taxpayer's Arizona income tax return. By electing to use the federal electronic signature for the Arizona electronic return, the taxpayer is declaring, under penalties of perjury, that the electronic return is, to the best of the taxpayer's knowledge and belief, true, correct, and complete.

B. A taxpayer makes an election under subsection (A) by doing the following:

1. If the taxpayer is preparing the taxpayer's Arizona electronic return, the taxpayer makes the election by signifying the election during the electronic filing process.

2. If the taxpayer uses an electronic return preparer to prepare the taxpayer's Arizona electronic return, the taxpayer makes the election by:

a. Signifying the election during the electronic filing process, or

b. Authorizing, in writing on a form prescribed by the Department, the electronic return preparer to make the election on behalf of the taxpayer.

C. A taxpayer that does not elect to electronically sign the taxpayer's electronic federal income tax return shall not electronically sign the taxpayer's electronic Arizona income tax return.

History

• New Section made by final rulemaking at 7 A.A.R. 5383, effective November 8, 2001 (Supp. 01-4). Amended by final rulemaking at 25 A.A.R. 3057, effective 12/1/2019.

Ariz. Admin. Code § R15-10-504 Electronic Signatures for Withholding Tax.

A. A taxpayer that has obtained a withholding tax license from the Department shall do the following to become a registered customer of the AZTaxes.gov web site:

Provide the following information during the AZTaxes.gov web site registration process:

a. The legal name of the registrant and any one of the following numbers:

i. The registrant's federal employer identification number, and

ii. The registrant's social security number, if the registrant is a sole proprietor, or

iii. Any other identification number assigned to the registrant by the Department or the Internal Revenue Service for the purpose of electronic filing.

b. The registrant's e-mail address

c. Agree to the Department's Terms of Service, and

2. Submit to the Department an executed AZTaxes.gov Registration Signature Card as evidence of the following:

a. If submitted during web site registration, the information provided during the AZTaxes.gov registration process is true and correct,

b. If previously submitted, the information contained in the Arizona Joint Tax Application or submitted during the online business registration is true and correct, and

c. The signatory is duly authorized to act on behalf of the business, receive confidential information, and waive any rights of confidentiality

B. A taxpayer that has not obtained a withholding tax license from the Department shall do the following to become a registered customer of the AZTaxes.gov web site:

1. Obtain a withholding tax license by completing either the mail-in Arizona Joint Tax Application or the online business registration,

2. Provide the following information during the AZTaxes.gov web site registration process:

a. The legal name of the registrant and any one of the following numbers:

i. The registrant's federal employer identification number,

ii. The registrant's social security number, if the registrant is a sole proprietor, or

iii. Any other identification number assigned to the registrant by the Department or the Internal Revenue Service for the purposes of electronic filing.

3. Submit to the Department either the executed, mail-in Arizona Joint Tax Application or the AZTaxes.gov Registration Signature Card as evidence of the following:

a. If submitted during web site registration, the information provided during the AZTaxes.gov registration process is true and correct,

b. The information contained in the Arizona Joint Tax Application or submitted during the online business registration is true and correct, and

c. The signatory is duly authorized to act on behalf of the business, receive confidential information, and waive any rights of confidentiality

C. A taxpayer or authorized user shall use the taxpayer's signature on the document submitted under subsection (B)(3) to electronically sign a taxpayer's electronic withholding tax returns. Use of the taxpayer's signature is the taxpayer's declaration, under penalties of perjury that the electronic return is, to the best of the taxpayer's knowledge and belief, true, correct, and complete.

D. To file an electronic withholding tax return under subsection (C):

1. If the taxpayer is preparing the taxpayer's electronic return, the taxpayer, shall access the AZTaxes.gov web site and electronically file the return.

2. If the taxpayer's authorized user is preparing the taxpayer's electronic return, the taxpayer shall:

a. Access the AZTaxes.gov web site and electronically file the return, or

b. Authorize, in writing on a form prescribed by the Department, the authorized user to access the taxpayer's account on the AZTaxes.gov web site and electronically file the return on behalf of the taxpayer.

History

• New Section made by final rulemaking at 9 A.A.R. 5044, effective November 4, 2003 (Supp. 03-4). Amended by exempt rulemaking at 22 A.A.R. 116, effective 1/7/2016.

Ariz. Admin. Code § R15-10-505 Electronic Signatures for Transaction Privilege and Use Tax

A. As a registrant for AZTaxes.gov, a taxpayer, primary user or delegate user shall do the following to become a registered customer of AZTaxes.gov for transaction privilege and use tax purposes:

1. Provide the registrant's legal name and e-mail address,

2. Create a unique username and password entitling the registrant access to AZTaxes.gov,

b. 3. Select a prescribed number of security questions and submit their answers,

c. 4. Create a PIN, and

d. 5. Agree to the Department's Terms of Service.

2. B. By becoming a registered customer of AZTaxes.gov and continuing to use AZTaxes.gov, the registrant declares that:

a.

1. The information provided during the AZTaxes.gov registration process is accurate and complete, and

b. 2. If a mail-in paper application was previously submitted, the information contained in the application is accurate and complete.

B. C. A taxpayer that has not obtained a transaction privilege or use tax license from the Department shall obtain a license by completing either the mail-in paper application or the AZTaxes.gov online application. From and after January 9, 2016, a taxpayer, primary user or delegate user may use the PIN created pursuant to subsection (A)(4) to electronically sign the taxpayer's online application.

C. D. A delegate user shall do the following to become associated with a taxpayer on the AZTaxes.gov web site:

1. Provide answers to prescribed questions about the taxpayer if the taxpayer has a license, or

2. Complete the online or mail-in paper application and provide answers to prescribed questions about the taxpayer.

D. E. If filing a taxpayer's transaction privilege or use tax return by electronic means, an authorized user shall, from and after July 5, 2016, use the authorized user's PIN to electronically sign a taxpayer's electronic transaction privilege tax or use tax returns. By using the PIN, the authorized user declares under penalties of perjury that the electronic return is, to the best of the authorized user's knowledge and belief, true, correct, and complete.

E. F. To file an electronic transaction privilege or use tax return under subsection (E) above, a taxpayer, primary user, or delegate user preparing the electronic return may access AZTaxes.gov and electronically file the return after signing the return with the PIN created under subsection (A)(4).

F. G. From and after July 5, 2016, unless otherwise required by Article 3 of this Title and Chapter, an authorized user may pay its transaction privilege and use tax liability by electronic check.

G. H. For tax periods beginning on or after the following years, any taxpayer that, under A.R.S. Title 42 Chapters 5 and 6, had total annual tax liability of at least the following amounts during the prior tax year or can reasonably anticipate that its current year tax liability will exceed the following amounts, shall, unless otherwise waived pursuant to A.R.S. § 42-5014, file the required return using an electronic filing program established by the Department. For periods on or after:

January 1, 2018, prior tax year or expected current year total tax liability of $20,000;

2. January 1, 2019, prior tax year or expected current year total tax liability of $10,000;

3. January 1, 2020, prior tax year or expected current year total tax liability of $5,000;

4. January 1, 2021, prior tax year or expected current year total tax liability of $500.

I. For tax periods beginning on and after October 1, 2019, marketplace facilitators and remote sellers who, at the time of registering for a transaction privilege tax license, can reasonably anticipate their tax liability will exceed the thresholds detailed in subsection (G) above shall, unless granted a waiver or if instructed to file by paper by the Department pursuant to A.R.S. § 42-5014, file the required return using an electronic program established by the Department.

H. J. Any taxpayer that, under A.R.S. Title 42 Chapters 5 and 6, was required to file a return using an electronic filing program pursuant to subsection (H) or (I) of this rule and that fails to do so after notice and demand by the Department shall, unless reasonable cause exists, be subject to the penalty imposed under A.R.S. § 42-1125(X) and (Y).

History

• New section made by exempt rulemaking at 22 A.A.R. 116, effective 1/7/2016. Amended by final rulemaking at 22 A.A.R. 1852, effective 6/24/2016. Amended by final rulemaking at 23 A.A.R. 3091, effective 1/1/2018. Amended by exempt rulemaking at 25 A.A.R. 3023, effective 10/1/2019.

Ariz. Admin. Code § R15-10-506 Transaction Privilege and Use Tax Electronic File Bulk Transmitters

A. A transaction privilege and use tax Bulk Transmitter shall complete and submit to the Department an application to participate in the Department's bulk electronic filing program as a direct transmitter of transaction privilege or use tax returns. The application shall contain the following information:

1. The company name;

2. The product name, software ID and specifications;

3. The company's website address and IP address or addresses;

4. Contact name and information; and

5. Such other information as the Department may require to be completed from time to time in its application form.

B. As part of the application process the Bulk Transmitter shall sign a memorandum of understanding with the Department outlining the terms under which it will be allowed to transmit electronic returns directly to the Department.

C. After the application is reviewed by the Department, the Bulk Transmitter shall submit any software it created or will use for the transmittal process to the Department for testing and certification.

D. Upon certification by the Department, the Department shall issue authorization codes to the Bulk Transmitter for the purpose of accessing its servers.

History

• Adopted by final rulemaking at 22 A.A.R. 1852, effective 6/24/2016.

Article 6 EMERGENCY EXPIRED

Ariz. Admin. Code § R15-10-601 Emergency Expired

History

• Section reserved by emergency rulemaking at 9 A.A.R. 4443, effective September 22, 2003 for a period of 180 days (Supp. 03-3). Emergency expired, effective March 20, 2004 (Supp. 09-2). New Section reserved by emergency rulemaking at 15 A.A.R. 825, effective April 30, 2009 for a period of 180 days (Supp. 09-2). Emergency expired, effective October 27, 2009 (Supp. 09-4).

Ariz. Admin. Code § R15-10-602 Emergency Expired

History

• New Section made by emergency rulemaking at 9 A.A.R. 4443, effective September 22, 2003 for a period of 180 days (Supp. 03-3). Emergency expired, effective March 20, 2004 (Supp. 09-2). New Section made by emergency rulemaking at 15 A.A.R. 825, effective April 30, 2009 for a period of 180 days (Supp. 09-2). Emergency expired, effective October 27, 2009 (Supp. 09-4).

Ariz. Admin. Code § R15-10-603 Emergency Expired

History

• New Section made by emergency rulemaking at 9 A.A.R. 4443, effective September 22, 2003 for a period of 180 days (Supp. 03-3). Emergency expired, effective March 20, 2004 (Supp. 09-2). New Section made by emergency rulemaking at 15 A.A.R. 825, effective April 30, 2009 for a period of 180 days (Supp. 09-2). Emergency expired, effective October 27, 2009 (Supp. 09-4).

Ariz. Admin. Code § R15-10-604 Emergency Expired

History

• New Section made by emergency rulemaking at 9 A.A.R. 4443, effective September 22, 2003 for a period of 180 days (Supp. 03-3). Emergency expired, effective March 20, 2004 (Supp. 09-2). New Section made by emergency rulemaking at 15 A.A.R. 825, effective April 30, 2009 for a period of 180 days (Supp. 09-2). Emergency expired, effective October 27, 2009 (Supp. 09-4).

Ariz. Admin. Code § R15-10-605 Emergency Expired

History

• New Section made by emergency rulemaking at 9 A.A.R. 4443, effective September 22, 2003 for a period of 180 days (Supp. 03-3). Emergency expired, effective March 20, 2004 (Supp. 09-2). New Section made by emergency rulemaking at 15 A.A.R. 825, effective April 30, 2009 for a period of 180 days (Supp. 09-2). Emergency expired, effective October 27, 2009 (Supp. 09-4).

Ariz. Admin. Code § R15-10-606 Emergency Expired

History

• New Section made by emergency rulemaking at 9 A.A.R. 4443, effective September 22, 2003 for a period of 180 days (Supp. 03-3). Emergency expired, effective March 20, 2004 (Supp. 09-2). New Section made by emergency rulemaking at 15 A.A.R. 825, effective April 30, 2009 for a period of 180 days (Supp. 09-2). Emergency expired, effective October 27, 2009 (Supp. 09-4).

Ariz. Admin. Code § R15-10-607 Emergency Expired

History

• New Section made by emergency rulemaking at 9 A.A.R. 4443, effective September 22, 2003 for a period of 180 days (Supp. 03-3). Emergency expired, effective March 20, 2004 (Supp. 09-2). New Section made by emergency rulemaking at 15 A.A.R. 825, effective April 30, 2009 for a period of 180 days (Supp. 09-2). Emergency expired, effective October 27, 2009 (Supp. 09-4). EMERGENCY RULEMAKING ARTICLE 7. TAX RECOVERY PROGRAM

Article 7 EMERGENCY EXPIRED

Ariz. Admin. Code § R15-10-701 Reserved

Ariz. Admin. Code § R15-10-702 Emergency Expired

History

• Emergency expired February 27, 2012. New Section made by emergency rulemaking at 21 A.A.R. 1830, effective August 19, 2015 for 180 days (Supp. 15-3). Emergency expired February 11, 2016 (Supp. 16-1). New Section made by emergency rulemaking at 21 A.A.R. 2621, effective August 29, 2016 for 180 days (Supp. 16-3). Emergency expired February 25, 2017 (Supp. 17-2).

Ariz. Admin. Code § R15-10-703 Emergency Expired

History

• Emergency expired February 27, 2012. New Section made by emergency rulemaking at 21 A.A.R. 1830, effective August 19, 2015 for 180 days (Supp. 15-3). Emergency expired February 11, 2016 (Supp. 16-1). New Section made by emergency rulemaking at 21 A.A.R. 2621, effective August 29, 2016 for 180 days (Supp. 16-3). Emergency expired February 25, 2017 (Supp. 17-2).

Ariz. Admin. Code § R15-10-704 Emergency Expired

History

• Emergency expired February 27, 2012. New Section made by emergency rulemaking at 21 A.A.R. 1830, effective August 19, 2015 for 180 days (Supp. 15-3). Emergency expired February 11, 2016 (Supp. 16-1). New Section made by emergency rulemaking at 21 A.A.R. 2621, effective August 29, 2016 for 180 days (Supp. 16-3). Emergency expired February 25, 2017 (Supp. 17-2).

Ariz. Admin. Code § R15-10-705 Emergency Expired

History

• Emergency expired February 27, 2012 (Supp. 15-3). New Section made by emergency rulemaking at 21 A.A.R. 2621, effective August 29, 2016 for 180 days (Supp. 16-3). Emergency expired February 25, 2017 (Supp. 17-2).

Ariz. Admin. Code § R15-10-706 Emergency Expired

History

• Emergency expired February 27, 2012. New Section made by emergency rulemaking at 21 A.A.R. 1830, effective August 19, 2015 for 180 days (Supp. 15-3). Emergency expired February 11, 2016 (Supp. 16-1).

Chapter 12 Department of Revenue - Property Tax Oversight Commission

Article 1 GENERAL PROVISIONS

Ariz. Admin. Code § R15-12-101 Definitions

Unless the context requires otherwise, the following definitions shall apply:

1. "Excess collections" means the amount collected during the previous fiscal year in excess of the previous fiscal year's maximum allowable primary property tax levy.

2. "Excess expenditures" means the amount under A.R.S. § 42-17051(C) that is certified by the Auditor General's office.

3. "Quorum" means a majority of the members of the Commission.

History

• Adopted effective September 14, 1990 (Supp. 90-3). Amended by final rulemaking at 6 A.A.R. 4114, effective October 4, 2000 (Supp. 00-4). Amended by final rulemaking at 12 A.A.R. 1096, effective May 13, 2006 (Supp. 06-1).

Ariz. Admin. Code § R15-12-102 Principal Office of the Property Tax Oversight Commission

The principal office of the Property Tax Oversight Commission shall be the Department of Revenue Building, 1600 West Monroe, Phoenix, Arizona 85007. All inquiries, correspondence, and filings shall be delivered to the Property Tax Oversight Commission at this location. All meetings and hearings shall be held at this location unless designated in writing by the Commission.

History

• Adopted effective September 14, 1990 (Supp. 90-3).

Ariz. Admin. Code § R15-12-103 Quorum

The Commission shall have a quorum for making orders and decisions or transacting other official business, as delineated in A.R.S. § 42-17003.

History

• Adopted effective September 14, 1990 (Supp. 90-3). Amended by final rulemaking at 6 A.A.R. 4114, effective October 4, 2000 (Supp. 00-4).

Ariz. Admin. Code § R15-12-104 Hearings

A quorum of the Commission shall directly conduct all hearings regarding contested cases before the Commission.

History

• Adopted effective September 14, 1990 (Supp. 90-3). Section repealed; new Section adopted effective October 10, 1997 (Supp. 97-4).

Ariz. Admin. Code § R15-12-105 Voting

A. A Commission member may vote on decisions if:

1. The member was present at all hearings during which the matter being voted on was discussed;

2. The member was not present at all hearings but the member reviewed the evidence submitted at the hearings and attended or listened to tape recordings of all hearings during which the matter being voted on was discussed; or

3. The parties submitted the matter for a decision based on a joint stipulation of facts.

B. Any member who dissents may state the reasons for the member's dissent.

History

• Adopted effective September 14, 1990 (Supp. 90-3). Section amended effective October 10, 1997 (Supp. 97-4).

Ariz. Admin. Code § R15-12-106 Decisions

A. A Commission decision is rendered when signed by the Chairman.

B. Decisions of the Commission shall be sent to the affected political subdivision and the affected County Board of Supervisors.

History

• Adopted effective September 14, 1990 (Supp. 90-3).

Ariz. Admin. Code § R15-12-107 Copying and Recording Costs

A. The costs of copying shall be paid by the person making the request.

B. Court reporting arrangements and costs shall be the responsibility of the person employing the court reporter.

History

• Adopted effective September 14, 1990 (Supp. 90-3).

Article 2 PROPERTY TAX LEVY LIMITS

Ariz. Admin. Code § R15-12-201 Primary Property Tax Calculations

A. The Commission shall calculate the maximum allowable primary property tax levy limits for political subdivisions as follows:

1. The maximum allowable primary property tax rate shall equal the resulting value of the following rounded to four decimal places:

a. 102% of the sum of the previous fiscal year's maximum primary property tax levy divided by;

b. the sum of the values provided by the County Assessor's office and the Department for the current year's value of the previous year's centrally assessed, locally assessed real, locally assessed secured personal, and locally assessed unsecured personal property, divided by 100.

2. The maximum allowable primary property tax levy limit shall equal the sum of the current value of the current year's property as provided by the County Assessor and the Department including centrally assessed, locally real, locally assessed secured personal, and locally assessed unsecured personal property, divided by 100 and multiplied by the maximum allowable primary property tax rate.

3. Political subdivisions may request that a specific alternative methodology be considered by the Commission. If the Commission determines the alternative methodology will more accurately calculate the levy limit of the political subdivision, such alternative methodology shall be used.

B. The Commission shall calculate the allowable primary property tax levy limit by reducing the maximum allowable primary property tax levy limit by the sum of the amount of excess levies, excess collections and excess expenditures.

History

• Adopted effective September 14, 1990 (Supp. 90-3).

Ariz. Admin. Code § R15-12-202 Involuntary Tort Judgments

A. A political subdivision that paid an involuntary tort judgment may only use the judgment to:

1. Offset excess collections from the previous fiscal year; or

2. Justify a primary property tax levy limit being set above the maximum allowable rate in the current fiscal year.

B. The Commission shall recognize an involuntary tort judgment if:

1. The judgment is pursuant to a court order or settlement agreement;

2. The judgment is approved for payment by the political subdivision's governing board;

3. The Attorney General certifies that the judgment is an involuntary tort judgment; and

4. The political subdivision submits copies of the court order or settlement agreement and the minutes of the governing board's pay approval to the Commission on or before the 1st Monday of July.

History

• Adopted effective September 14, 1990 (Supp. 90-3). Spelling of the word "tort" in subsection (A) corrected (Supp. 94-3). Amended effective October 10, 1997 (Supp. 97-4).

Ariz. Admin. Code § R15-12-203 Levy Limit Worksheets

A. The counties shall simultaneously submit copies of the final levy limit worksheets for all political subdivisions in their respective counties to the Commission and the affected political subdivision. The County Assessor shall verify that the copies are true and correct and, if so, certify the copies.

B. The counties shall deliver the worksheets to affected political subdivisions and the Commission on or before the 2nd Monday of August.

History

• Adopted effective September 14, 1990 (Supp. 90-3). Amended effective October 10, 1997 (Supp. 97-4).

Ariz. Admin. Code § R15-12-204 Political Subdivision Agreement

A. If a political subdivision disagrees with the county's final levy limit worksheet calculations, the political subdivision shall, within 10 days of receipt of the county's calculations, file in writing with the Commission a statement of disagreement and the figures it deems appropriate. Failure to act within the 10 days shall be deemed agreement by the political subdivision.

B. Upon timely petition of the political subdivision for good cause shown, or on its own motion, the Commission may permit the political subdivision to present objections to specific items at a later date.

History

• Adopted effective September 14, 1990 (Supp. 90-3). Amended by final rulemaking at 12 A.A.R. 1096, effective May 13, 2006 (Supp. 06-1).

Ariz. Admin. Code § R15-12-205 Actual Levies

The chief county fiscal officers shall certify and submit to the Commission the amount of the primary property tax levied for each political subdivision within their counties within three days after each levy is determined.

History

• Adopted effective September 14, 1990 (Supp. 90-3).

Article 3 HEARING AND APPEAL PROCEDURE

Ariz. Admin. Code § R15-12-301 Notice of Violation

The notice of violation shall specify the violations found and the monetary amount in dispute. The notice shall inform the political subdivision of the right to petition on or before October 1 for a hearing on the Commission's finding of violation.

History

• Adopted effective September 14, 1990 (Supp. 90-3).

Ariz. Admin. Code § R15-12-302 Petition

A. All objections to the Commission's notice of violation shall be by written petition to the Commission. The petition shall include the following information:

1. Name, title, address, and phone number of the political subdivision's contact person;

2. A particularized statement of the errors allegedly committed by the Commission in its findings;

3. A statement of facts upon which the political subdivision relies to support the assignment of errors alleged to have been committed by the Commission;

4. The relief sought; and

5. Whether an oral hearing is requested.

B. The petition shall be addressed to the Chairman of the Commission.

C. The petition shall be in a form that can readily be duplicated on standard office equipment.

History

• Adopted effective September 14, 1990 (Supp. 90-3).

Ariz. Admin. Code § R15-12-303 Grounds for Petition

A. Objections to notices of violation shall be limited to disputing the factual findings and conclusions of law of the Commission.

B. The Commission shall refuse all petitions not based on a dispute of its factual findings or conclusions of law. Financial impacts on the political subdivision shall not be considered by the Commission in its decision-making.

History

• Adopted effective September 14, 1990 (Supp. 90-3).

Ariz. Admin. Code § R15-12-304 Manner of Filing

A. An original and six copies of the petition and any supporting memoranda shall be filed with the Chairman.

B. No fee shall be charged for the filing of any petition or supporting memoranda.

C. Upon receipt of a petition, the Commission staff shall record the filing of the petition and supporting memoranda.

History

• Adopted effective September 14, 1990 (Supp. 90-3).

Ariz. Admin. Code § R15-12-305 Supplementing the Petition

The Commission may grant a political subdivision's request for an additional period of time, not to exceed 15 days, within which to supplement a timely filed petition. The Commission shall not consider a supplement to the petition that the political subdivision files after the additional period of time granted.

History

• Adopted effective September 14, 1990 (Supp. 90-3). Amended effective October 10, 1997 (Supp. 97-4).

Ariz. Admin. Code § R15-12-306 Withdrawal of Petition

A. The petition may be withdrawn at the written request of the political subdivision before a final decision by the Commission is issued.

B. When the petition is withdrawn, the Commission's finding shall be deemed final and shall not be subject to any further appeal.

History

• Adopted effective September 14, 1990 (Supp. 90-3).

Ariz. Admin. Code § R15-12-307 Rescheduling of Hearing

The Commission may postpone or recess the hearing for good cause shown. The Commission shall specify the date, time, and place for the hearing to continue.

History

• Adopted effective September 14, 1990 (Supp. 90-3).

Ariz. Admin. Code § R15-12-308 Evidence

A. The political subdivision and the Commission may:

1. Call and examine witnesses,

2. Introduce exhibits,

3. Cross-examine opposing witnesses on any matter relevant to the issues, even though the matter was not covered in the direct examination,

4. Impeach any witness regardless of which party first called the witness to testify,

5. Rebut the evidence against it, and

6. Call and examine as if under cross-examination a party or its employees, agents, or officers.

B. The Commission shall be liberal in admitting evidence, but the Commission shall consider objections to the admission of and comments on the weakness of evidence in assigning weight to the evidence.

C. The Commission shall take oral evidence only on oath or affirmation.

D. Legible copies may be admitted into evidence or substituted in place of the original documents.

E. The original records and files of the Commission or the Department of Revenue shall not be removed from their offices for use as evidence or for other purposes.

F. The Commission may take official notice of the records maintained by the Department of Revenue.

History

• Adopted effective September 14, 1990 (Supp. 90-3). Amended effective October 10, 1997 (Supp. 97-4).

Ariz. Admin. Code § R15-12-309 Subpoena

The Commission may, on request of a party or on its own initiative, issue subpoenas.

History

• Adopted effective September 14, 1990 (Supp. 90-3). Amended effective October 10, 1997 (Supp. 97-4).

Ariz. Admin. Code § R15-12-310 Post-Hearing Memoranda

If the Commission desires the submission of post-hearing memoranda or information, the Commission shall, at the time of the hearing, direct the parties to submit the post-hearing memoranda or information within a period of time set by the Commission.

History

• Adopted effective September 14, 1990 (Supp. 90-3). Amended effective October 10, 1997 (Supp. 97-4).

Ariz. Admin. Code § R15-12-311 Prehearing Issue Resolution

If the Commission and a political subdivision agree as to the resolution of some or all of the issues prior to the hearing, the Commission shall stipulate to the agreed issues in the record and shall consider those issues withdrawn. The Commission shall then issue an order of partial resolution that becomes part of the Commission's record. The Commission shall forward copies of the order to the political subdivision, County Assessor and the Department of Revenue.

History

• Adopted effective September 14, 1990 (Supp. 90-3). Amended effective October 10, 1997 (Supp. 97-4).

Ariz. Admin. Code § R15-12-312 Rehearing

A. Any party in a contested case before the Commission may file a petition for rehearing or review with the Commission within 30 days after receiving the final decision. The party shall attach a supporting memorandum, specifying the grounds for the petition.

B. The party who filed the petition for rehearing or review may amend it at any time before the Commission rules. Any other party to the original hearing may file a response within 5 days after the Commission's receipt of the petition for rehearing or review. The party shall support the response with a memorandum discussing the legal and factual issues. Either party or the Commission may request oral argument.

C. The Commission may grant a rehearing or review of the decision for any of the following causes that materially affect a party's rights:

Irregularity in the administrative proceedings, or any order or abuse of discretion which deprived a party of a fair hearing;

2. Misconduct of the Commission, its staff, or the prevailing party;

Accident or surprise which could not have been prevented by ordinary prudence;

4. Newly discovered material evidence which could not with reasonable diligence have been discovered and produced at the original hearing;

5. Error in the admission or rejection of evidence or other errors of law occurring at the hearing or during the progress of the proceeding; or

6. The decision is not justified by the evidence or is contrary to law.

D. The Commission shall not consider the financial impact to the political subdivision as a cause for rehearing.

E. The Commission may grant a rehearing or review within 15 days after its receipt of the petition for rehearing or review. The Commission may grant a petition for rehearing or review for a reason not stated in the petition. An order modifying a decision or granting a rehearing shall specify the ground or grounds for the order, and any rehearing shall only cover those matters. If the Commission fails to take action on a petition for rehearing or review within 15 days of the Commission's receipt of the petition, the petition shall be deemed denied.

F. The Commission may on its own initiative order a rehearing or review within 15 days after its decision is rendered for any reason set forth in subsection (C) of this rule. The order shall specify the grounds for rehearing or review.

G. The petitioner shall include all affidavits with the petition for rehearing or review when the petition for rehearing is based upon affidavits. An opposing party may, within 5 days after the petition for rehearing or review is filed, submit opposing affidavits. The Commission may extend this period for an additional period of time not to exceed 5 days for good cause shown. Reply affidavits may be permitted.

History

• Adopted effective September 14, 1990 (Supp. 90-3). Amended effective October 10, 1997 (Supp. 97-4).