# EXHIBIT 4

# EXHIBIT 5

### ORDINANCENO. 3046**i~** 

### (,r**Ch)n~U<;::f** City

### Clerk OifidalFileCopy


### AN ORDINANCE OFTHE CITY COUNCIL OFTHE CITY OF CHANDLER, ARIZONA, RENUMBERINGAND AMENDINGAPPENDIX C TO BECOME CHAPTER62,TAX CODEINTHE REVISED CHANDLERCITY CODE

WHEREAS, the City is in the process ofrevising and re-codifying the City Code to correct any inconsistencies with state and federal law, to resolve any internal inconsistencies and to reorganize the City Code; and
WHEREAS, Council determines that the entire code can be reviewed and revised by January 1, 2000, and for that reason finds that all ordinances adopting segments ofthe Code revisions will be made effective as ofthatdate; and
WHEREAS, the following renumbering ofAppendix Crepresentspartofsuch coderevisions.
WHEREAS, certain updates are necessary to conform the city's tax code with newly adopted state law andwithrecommendations bytheMunicipalTax Code Commission; and
NOW, THEREFORE,BE IT ORDAINEDbythe CityCouncil oftheCityofChandler, Arizona,
as follows;
SECTION 1. 

### Becausethis Ordinanceisbut one segment ofthe plannedre-codification ofthe entire City Code, it may be necessary to re-order certain sections or chapters contained in this Ordinance, therefore the chapter numbers and section numbers are not a part ofthe Ordinance and may be modifiedto achievethebestpossible organization ofthe Code.
SECTION 2. Appendix C as amendedby Ordinance 3029 ofthe City Code is herebyrenumberedto become Chapter 62 and amended to read as set forth in Exhibit A attached hereto and made a part hereofbyreference

.. SECTION 3. This ordinance is the next phase in the consistencyrevisions to the City Code. It also contains the annual amendments necessaryto conform the City'S tax code to newly adopted state law andwithrecommendations bytheMunicipal Tax Code Commission. The following is a summary of the changes containedinthis amendment.
Sec. 62-110. Definitions: Income-producing capital equipment. 1. Expands the definition ofincome-producing capital equipment to include the purchase and installation of agricultural pollution control equipment, environmental control machinery and equipment, property used for environmental remediation activities, cleanroom contracting activities, egg production facilities and equipment purchased to comply with a recent Federal CommunicationCommission(FCC) mandate. 2. Expands the exemptions to includeparts usedinoperatingpipes andvalves. 3. Expands the exemptions for liquid, solid or gaseous chemicals to include those used in printing. "Printing" is defined as a commercial printing operation and includes job printing, engraving, embossing, copying andbookbinding. 4. Amends the income-producing capital equipment exemption to include all railroad rolling stockand signaling equipment. 5. Amends thedefinition ofexpendablematerials.

### Sec. 62-415. Sec. 62-416. 

### Sec. 62-417. builders. Sec. 62-418 OrdinanceNo. 3046 Page2


### Construction contracting: construction contractors. Construction contracting: speculativebuilders. Construction contracting: owner-builders who are notspeculative (RESERVED)
1. Section 62-418 is deleted and the provisions currently found in that section are moved to sections 62-415, 62-416 and 62-417. 2. Adds a deduction under the construction contracting classifications for the purchase of machinery, equipmentorotherpersonalpropertythatis exemptundertheretail classification and adds a new regulation consistent with the state change that eliminates the need to enter into an agency agreement with a construction contractor to avoid paying privilege tax on tangible personal property included in a construction contract. The change impacts purchases made by hospitals and various income producing capital equipment purchases. (This change will be retroactiveto January 1, 1999.) 3. Provides adeduction from the constructioncontracting, speculativebuilderand owner-builder sections forproceeds from theinstallation, assembly, repairormaintenance ofincome-producing capital equipmentthatdoes notbecomepermanentlyattached. 4. Underprescribed conditions, exempts constructioncontracts for agricultural pollution control equipment, environmental control machinery and equipment, environmental remediation activities, cleanrooms and eggproductionfacilities. 5. Clarifies and simplifies the deductions and tax credits which apply to owner-builders and speculative builders by moving them from Section 62--418 to Sections 62--416 and 62--417 respectively.


### Sec. 62-444. Hotels. Sec. 62-445. Rental,leasing, and licensingfor use ofreal property. Adds a deduction for gross receipts derived from incarcerating or detaining inmates. Cities are requiredby statelawto makethis change.


### Sec. 62 -450. Rental, leasing, and licensingfor useoftangible personal property. Exempts from tax therental, leasing and licensing ofalternative fuel vehicles. Cities arerequired by statelawto makethis change.


### Sec. 62 -460. Retailsales: measure oftax; burden ofproof; exclusions. Clarifies that the sale ofa telephone calling card is taxable under the retail classification and exemptfrom taxunderthetelecommunications classification.


### Sec. 62 -465. Retailsales: exemptions. 1. Makes atechnicalcorrection, forthosecities/townsthattax food, to clarify areferenceto theUnited States Code. 2. Exempts from tax the sale offood to anonprofitcharitable organizationthathas qualified under section 501(c)(3) ofthe Internal Revenue Code and that regularly serves meals to the needy andindigenton acontinuingbasis atno cost. 3. Exempts from tax gas usedto fuel compressorequipmentusedtopressurizethe gas pipeline. 4. Exempts fromtax the saleofalternative fuel vehicles. Cities arerequiredby statelawto makethis change.

### OrdinanceNo. 3046 Page 3
Sec. 62 -470. Telecommunication services. Confonningchangeonpre-paidcalling cards. See Section62-460.
Sec. 62 -475. Transportingforhire. Exempts fromtaxthetransporting ofpersons orgoods on short-linerailroads.
Sec. 62 -575. Judicial review. Places the burden ofproof, when detennining a factual issue relevant to the taxpayer's tax liability, onthe city.
Sec. 62-660. Usetax: exemptions. See Section 62-465 for anexplanationofthe exemptions. Reg. 62-100.4. Out-of-City/Out-of-State Sales: Sales to Indians NATIVE AMERICANS. Replaces thetenn "Indian" with "NativeAmerican".
SECTION 5. This ordinance shall takeeffectJanuary 1,2000.
INTRODUCED AND TENTATIVELYAPPROVEDbythe CityCouncilofthe CityofChandler,

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# . ? MAYOR CER**TIFICATIO}>~** 

### I HEREBY CERTIFY that the above and foregoing Ordinance No. 3046 was duly passed and adopted by the City Council ofthe City ofChandler, Arizona, at aregular meeting held on the 18th 

### day ofNovember 1999, andthat aquorumwas presentthereat.

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### CITYCLERK APPROVED AS TOFORM:

PUBLISHED:

### EXHIBITA TO ORDINANCE 3046
CHAPTER 62 TAX CODE

Article I - General Conditions and Definitions

Sec. 62- 100. General definitions.
Forthe purposes ofthis Chapter, thefollowing definitions apply: Assemblermeans a person who unites orcombines J)roducts, wares, or articles of manufacture so as to produce a change in form or substance of such items without changing or altering component parts. Broker means any person engaged or continuing in business who acts for another for a consideration in the conduct of a business activitytaxable underthis Chapter, and who receives forhis principal all orpartofthe gross incomefrom thetaxable activity. Business means all activities or acts; personal or corporate. engaged in and caused to be enga,ged in with the object of gain, benefit, oradvantage. eitherdirector indirect, but not castlal actiVities orsales. Business Daymeans any dayofthe weekwhen the TaxCollector's office is open forthe public to conductthe Tax Collector's business. CasualActivityorSale means atransaction ofan isolated nature made by a person who neither represents himselfto be noris engaged in a business subjectto atax imposed bythis Chapter. However, no sale, rental. license for use. or lease transaction concerning real property nor any activity entered into by a business taxable by this Chapter shall be treated. or be exempt, as casual. This definition shall include sales of used capital assets! provided thatthe volume and frequency of such sales .<:fo not indicate that the seller regu arly engages in selling such property.

. Combined Taxes meansthe sum ofall applicable Arizona Transaction Privilege and Use Taxes; all applicable transportation taxes imposed upon gross income by this County as authorized by Chapter 8.3, Title 42. Arizona ReVised Statutes; and atl applicable taxes imposed by this Chapter. Commercial Property is any real property. or portion of such property, used for any purpose other than lodging or lodging space. including structures built for lodging but used otherwise j such as model homes, apartments used as office, etc. (Note: thiS definition was addea effective 2/1/95.) Communications Channel means any line, wire, cable, microwave. radio signal, light beam, telephone, telegraph. oranyotherelectromagnetic means ofmoving a message. Construction Contractingrefers to the activityofa construction contractor.

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### OrdinanceNo. 3046

Construction Contractor means a person who undertakes to or offers to undertake to, or purports to have the capacity to undertake to, or submits a bid to, or does himself or by or through others, construct, alter, repair, add to, subtractfrom, improve, move, wreck, ordemolish any building, highway, road, railroad, excavation, or other structure, project, development, or improvement to real property, or to do any part thereof. "Construction contractor' includes subcontractors, specialty contractors, prime contractors, and any person receiving consideration for the general supervision and/or coordination of such a construction project except for remediation contracting. This definition shall govern without regard to whether or not the construction contractor IS acting in fulfillmentofacontract. Delivery(ofNotice) bythe Tax Collectormeans "receipt (ofnotice) bythe taxpayer". Delivery, Installation, or OtherDirect Customer Services means services or labor, excluding repair rabor, provided by a taxpayer to or for his customer at the time of transfer of tangible personal property; proviaed furtherthat the charge forsuch labororservice is separately billed to the customerand maintained separately inthe taxpayer's books and records. Engaging, when used with reference to engaging or continuing in business, includes the exercise ofcorporate orfranchise powers. EqUivalentExcise Taxmeans either: (1) A Privilege or Use Tax levied by another Arizona municipality upon the transaction in question, and paid eitherto such Arizona municipalityairectly orto thevendor; or (2) An excise tax levied by a political subdivision of a state otherthan Arizona upon the transaction in question, and paid eitherto such jurisdiction directly or to the vendor. (3) An excise tax levied by a NativeAmerican governmentorganized underthe laws of the federal government upon the transaction in question, and paid either to such jurisdiction directly orto the vendor. (This subsection was added effective 

### 2/1/95.)

. Federal Governmentmeans the United States Government, its departments and agencies; but not including national banks or federally chartered or insured banks, savings and loan institutions, orcredit unions.
Food means any items intended for human consumption as defined by rules and regulations adopted bythe Department of Revenue, State ofArizona, pursuantto A.R.S. Section 

### 42-1387. Under no circumstances shall ''food'' include alcoholic beverages or tobacco, or food items purchased for use in conversion to any form of alcohol by distillation, fermentation, brewing, or other process. Hotel means any public or private hotel

## i inn, hostelry, tourist home, house, motel, rooming house, apartment house, trailer, orother odging place within the City offering lodging, wherein the owner thereof, for compensation, furnishes lodging to any transient, except foster homes, rest homes, sheltered care homes, nursing homes, orprimary health care facilities.
JetFuelmeansjetfuel as defined inA.R.S. Section 

### 42-1571. (Note: Definition effective April 1, 

### 1992J

. .. .

......**~.** ... Job Printing means the activity of copying or reproducing an article by any means, process, or method. "Job printing" Includes engraving of printing plates, embossing, copying, micrographics, and photo reproduction.

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### OrdinanceNo. 3046

Lessee includes the equivalent person in a rental or licensing agreementforall purposes of this Chapter. Lessorincludes the equivalent person in a rental or licensing agreementfor all purposes ofthis Chapter. Ucensing (forUse) means any agreement between the user ("licenseej and the owner or the owner's agent ("licensor") for the use of the licensor's p-roperty whereby the licensor receives consideration, where such agreement does not qualify as a "sale" or "lease" or "rental" agreement. Lodging (Lodging Space) means any room or apartment in a hotel or any other provider of rooms, trailer spaces, or other residential dwelling spaces; or the furnishings or services and accommodations accompanying the use and possession of said dwelling space, including storage orparking space forthe propertyofsaid tenant ManufacturedBuildings means a manufactured home, mobile home orfactory built building, as defined in A.R.S. Section 41-2142. Manufacturermeans a person engaged orcontinuing in the business of fabricating, prodUcing

### j or manufacturing products, wares, or articles for use from other forms of tangible persona property, imparting to such newforms, qualities, properties, and combinations. Mining and Metallurgical Supplies means all tangible personal property**a~uired** by persons engaged in activities defined in Section 432forsuch use. This definition shall not include: 

# l 1j janitorial equipmentand supplies. 2 office equipment, office furniture, and office supplies. 3 motorvehIcles licensed foruse upon the highways ofthe State. Modifiermeans a person who reworks, changes, or adds to products, wares, or articles of manufacture. NonprofitEntitymeans anyentityorganized and operated exclusivelyforcharitable purposes, or operated bythe Federal Government, the State, orany political subdivision ofthe State. Occupancy(ofRealProperty) means any occupancy or use, orany right to occupy or use, real property inclUding any improvements, rights, or Interests in such property. Out-o(-City Sale means the sale of tangible personal property and job printing if all of the**fOIlOWJn~** occur. 1) transference oftitle and possession occurwithoutthe City; and 2) the stock from which such personal property was taken was not within the corporate limits ofthe City; and (3) the order is received at a permanent business location of the seller located outside the City; which location is used forthe substantial and regular conduct of such business sales activity. In no eventshall the place of business ofthe buyer be determinative ofthe situsofthe receiptof

### the order. Forthe purpose ofthis definition itdoes notmatterthatall otherindicia of business occurwithin the City, inCluding, but not limited 

### to, accounting, invoicing, payments, centralized purchasing, and supply to out-of-CitY storehouses and out-of-City retail branch outlets from a primary storehousewithin the City. Out-o(-State Sale means the sale of tangible personal property and job printing if all of the follOWing occur.

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### OrdinanceNo. 3046

the orderis placed from withoutthe State ofArizona; and the order is placed by other than a resident of the State to be determined in a mannersimilarto "resides within the City"; and the property is delivered to the buyerata location outside the State; and the property is purchased for use outside the State. Owner-Buildermeans an owner or lessor of real property who, by himself or by or through others, constructs or has constructed or reconstructs or has reconstructed any improvement to real property. Person means an individual, firm, partnership, joint venture, association, corporation, estate, trust, receiver, syndicate, broker, the Federal Govemment, this State, or any political subdivision or agency of this State. For the purposes of this Chapter, a person shall be considered a distinct and separate person from any general or limIted partnership or joint venture or otherassociation WIth which such person is affiliated. A subsidiary corporation shall be considered a separate person from its parent corporation for purposes of taxation of transactions with its parentcorporation. Prostheticmeans any ofthe following tangible personal property if such items are prescribed or recommended by a IJcensed podiatrist, cftiropractor, dentist, pnysician or surgeon, naturopath, optometrist, osteopathic physician or surgeon, psychologist, hearing aid dispenser, physician assistant, nurse practitionerorveterinarian: (1) any man-made device for support or replacement of a part of the body, or to increase acuity of one of the senses. Such items. include: prescription eyeglasses; contact lenses; hearing aids; artificial limbs or teeth; neck, back, arm, leg, orsimilarbraces. (2) insulin, insulin syringes, and glucose test strips sold with or without a prescription. (3) hospital beds, crutches, wheelchairs, similar home health aids, or corrective shoes. (4 5) drugs ormedicine, including oxygen. ( ) equipment used to generate, monitor, orprovide health support systems, such as respiratory equipment, oxygen concentrator, dialysis machine. (6) durable medical equipment which has a federal health care financing administration common procedure code, is designated reimbursable by Medicare can withstand repeated use, is primarily and customarily used to serve a medical purpose, is generally notuseful to a person in the absence of illness or injury and IS appropriate for use in the home. (Note: Paragraphs 2 and 6 ofthis definition were changed effective January 1, 1997) Qualifying Community Health Centermeans an entity that is recognized as nonprofit under 501 (c}(3) ofthe United States Internal Revenue Code, that is a community-based, primary care clinicthat has a community-based board ofdirectors and that is either: (1) the sole providerofprimary care in the community. (2) a non-hospital affiliated clinic that is located in a federally designated medically underserved area in this state. Qualifying Health

# care Organization means an entity that is recognized as nonprofit under Section 501(c) of the Unitea States Internal Revenue Gode and that uses at least eighty per cent ofall moniesthat it receives from all sources each yearonlyfor health and medical related educational and charitable services, as documented by annual financial audits prepared by an independent certified public accountant, performed accordinqto generally accepted accounting standards and filed annuallywith the Anzona Department

### OfRevenue. QualifyingHospitalmeans:

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(3) (2) 

### OrdinanceNo. 3046

A licensed hospital which is organized and operated exclusively for charitable purposes, no part ofthe netearnings ofwhich Inures to the benefit ofany private shareholderor individual. A licensed nursing care institution or a licensed residential care institution or a residential care facility operated in conjunction with a licensed nursing care institution or a Iicense<:J kidney dialysis center, which provides medical services, nursing services orhealth related services and is notused orheld for profit. A hospital, nursing care institution or residential care institution which is operated by the federal government, this state ora political subdivision ofthis state. Receipt (ofNotice) bythe Taxpayermeans the earlier of adual receipt or the first attempted delivery by certified United States mail to the taxpayer's address of record with the Tax Collector. Remediation means those actions that are reasonable, necessary, cost-effective and technically feasible in the event ofthe release orthreat of release of hazardous substances into the environment such that the waters of the state are or may be affected, such actions as ma]' be necessary to monitor assess and evaluate such release or threat of release, actions of remediation, removal or disposal ofhazardous substances ortaking such other actions as may be necessary to prevent, minimize or mitigate damage to the public health orwelfare or to the waters of the state which may otherwise result from a release or threat of release of a hazardous substance that will or may affect the waters of the state. Remediation activities include the use of biostimulation with indigenous microbes and bioaugmentation using microbes that are nonpathogenic, nonopportunistic and that are naturally occurring. Remediation activities may include .community information and participation costs and providing an alternative drinkingwatersupply. Rental Equipment means tangible personal property solC!.L rented, leased, or licensed to customers to the extent that tfte item is actually used by me customer for rental, lease, or licenseto others; provided that (1) (Reserved) (2) the vendee is regularly engaged in the business of renting, leasing, or licensing such propertyfora consideration; and (3) the item so claimed as "rental eqUipment" is not used by the person claiming the exemption for any purpose otherthan rental, lease, or license for compensation, to an extent greaterthan fifteen percent (15%) ofits actual use. Rental Supply means an expendable or nonexpendable repair or replacement part sold to become partof"rental equipment", provided that (1) the documentation relating to each purchased item so claimed specifically itemizes to the vendor·the actual item of "rental equipment" to which the purchased item is intended to be attached as a repc!irorreplacement part; and (2) the vendee is regularly engaged in the business of renting, leasing, or licensing such propertyfora consideration; and (3) the item so claimed as "rental equipment" is not used by the person claiming the exemption for any purpose otherthan rental} lease, or license for compensation, to an extent greaterthan fifteen percent**(15~o)** ofits actual use. Repairermeans a person who restores or renews products, wares, orarticles of manufacture. Resides within the City means in cases other than individuals, whose legal addresses are

. determinative of residence, the engaging, continuing, or conducting of regular business activity within the City.

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### OrdinanceNo. 3046

Restaurant means any business activity where articles of food, drink, or condiment are customarily prepared orserved to patrons forconsumption on oroffthe premises, also including bars, cocktail lounges, the dining rooms of hotels, and all caterers. For the purposes of this Chapter, a "fast food" business, which includes street vendors and mobile vendors selling in public areas or at entertainment orsports orsimilar events, who prepares orsells food or drink for consumption on oroffthe premises is considered a "restaurant", and nota "retailer". Retail Sale (Sale at Retail) means the sale of tangible personal property, except the sale of tangible personal property to a person regularly engaged in the business of selling such property. RetaJ1ermeans any person engaged or continuing in the business of sales of tangible personal property at retail. Sale means any transfer of title or possession, or both, eXchange, barter, conditional or otherwise, in any mannerorby any meanswhatsoever, including consignmenttransactions and auctions} of property for a consideration. "Sale" includes any transaction whereby the possession of such property is transferred but the seller retains the title as security for the payment of the price. "Sale" also includes the fabrication of tangible personal property for consumers who, In whole orin part, furnish eitherdirectlyorindirectlythe materials used in such fabrication work. Speculative Buildermeans either: (1) An owner-builder who sells or contracts to sell, at anytime, improved real property (as provided in Section

### 416) consisting of: (A) custom, model, or inventory nomes, regardless ofthe stage ofcompletion ofsuch homes; or (B) imprOVed residential orcommercial lotswithoutastructure; or (2) An owner-builderwho sells orcontracts to sell improved real property, otherthan imfroved real property specified in Subsection (1) above: (A priorto completion; or (B beforethe expiration oftwenty-four (24) months afterthe improvements of the real propertysold are substantially complete. SubstantiallyCompletemeansthe construction contracting orreconstruction contracting: 

# [ 11 has passed final inspection orits equivalent; or 2 certificate ofoccupancy orits equivalenthas been issued; or 3 is readyforimmediate occupancyoruse. Suppliermeans any person who rents, leases, licenses, or makes sales of tangible personal property within the City, eitherdirectly to the consumer or customer orto wholesalers, jobbers, fabricators, manufacturers, modifiers, assemblers, repairers, orthose engaged in the cusiness of providing services which involve the use, sale, rental, lease, or license of tangible personal property. Tax Collector means the Management Services Director or his designee or agent for all purposes underthis Chapter. Taxpayer**m~~ns** anyperson liable,for**an~** taxunderthis**Chapte~.** TaxpayerProblem Resolution Officermeansthe individual designated bythe Cityto perfonn the duties identified in Sections 

### 515 and 

### 516. In cities with a population of 50,000 or more, the Taxpayer Problem Resolution Officer shall 

### be an emplo...Yee of the City. In cities with a population of less than 50,000, the Taxpayer Problem Resolution Officer need not be an employee of the City. Regardless ofwhetherthe Taxpayer Problem Resolution Officer is or is

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### OrdinanceNo. 3046

not an employee of the City, the Taxpayer Problem Resolution Officer shall have substantive knowledge of taxation. The identity of and telephone number for the Taxpayer Problem Resolution Officercan be obtained from theTaxCollector. (Note: This definition was added effectiveJanuary 

### 1, 1997) Telecommunication Service 

### means any service or activity connected with the transmission or relay of sound, visual image" data,**informatio~L** 

### images, or material over a communications channel oranycombination OT

### communications cnannels. UtilityService 

### means the producing, providing, orfumishing of electricity, electric lights, current, power, gas (natural orartificial), orwaterto consumers or rate-payers. Sec. 

### 62-110. Definitions: Income-producing capital equipment. (a) 

### The following tangible personal property, other than items excluded in subsection (d) below, shall be 

### deemed "income-prOducing capital equipment" for the purposes of this Chapter: (1) 

### Machinery or eguipment used directly in manufacturing, processing.**fabricatin~,** 

### iob printing. refining or metallurgical operations. The terms "manufacturing', 1'processing", ''fabi1cating'', "job printing". "refining", and "metallurgical" as used in this paragraph referto and include those operations commonly understood within their ordinary meaning. "Metallurgical operations" includes leaching. milling, precipitating, smelting and refining. (2) Mining machinery, or equipment, used directly in the process of extracting ores or minerals from the earth for commercial purposes, including equipment required to prepare the materials for

.extraction and handling, loading or transporting such

.extracted material to the surface. "Mining" includes underground, surface and open pitoperationsforextracting ores and minerals. (3) Tangible personal property, sold to person engaged in business classified under the telecommunications classification consisting of central office switching equipment; switchboards; private branch exchange equipment; microwave radio equipment. and carrierequipmentincluding optical fiber, coaxial cable; and other transmission mediawhich are components ofcarriersystems. (4) Machinery, equipment, or transmission lines used directly in producing or transmitting electrical power, but not including distribution. Transformers and control equipment used at transmission substation sites constitute equipment used in producing ortransmitting electrical power. (5) Pipes or valves four inches (4") 

### in diameter or larger and related equipment, used to transport oil, natural gas, artificial gas, water, or coal slurry. Forthe purpose of this section, related equipmentincludes: compressorunits, regulators, machineryand equipment, fittings, seals and any otherpartsthatare used in operating the pipes orvalves. (6) Aircraft. navigational and communication instruments, and otheraccessories and related equipmentsoldto: (A) A person holding afederal certificate ofpUblic convenience and necessity or foreign air carrier permit for air transportation for use as or in conjunction with or becoming a part of aircraft to be used to transport persons, property or United States mail in intrastate. interstate orforeign commerce. (8) Any foreign govemment for used by such govemment outside of this state.

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(8) (9) (10)

(11)

(12) (13) (14) (15) (16)

.

(17)

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### OrdinanceNo. 3046

(C) Persons who are not residents of this state and who will not use such property in this state otherthan in removing such propertyfrom this state. This subdivision also applies to corporations that are not incorporated in this state, regardless of maintaining a place ofbusiness in this state, ifthe principle corporate office is located outside this state and the property will not be used in this state other than in removing the property from this state. Machinery, tools, equipment and related supplies used or consumed directly in repairing, remodeling or maintaining aircraft, aircraft engines or aircraft component parts by oron behalfof a certificated or licensed carrierof persons or property. Railroad rolling stock, rails, ties and signal control equipment used directly to transport persons orproperty. Machinery orequipment used directly to drill for oil orgas or used directly in the process ofextracting oil orgas from the earth forcommercial purposes. Buses or other urban mass transit vehicles which are used directly to transport persons or property for hire or pursuant to a govemmentally adopted and controlled urban mass transportation program and which are sold to bus companies holding afederal certificate of convenience and necessity oroperated by a city, town or other govemmental entity or by any person contracting with such govemmental entity as part of a govemmentally adopted and controlled program to provide urban masstransportation. Metering, monitoring, receiving, and transmitting equipment acquired by persons engaged in the business of providing utility services or telecommunications services; but only to the extent that such equipment is to be used by the customers of such persons and such persons separately charge or bill their customers for use of such equipment Groundwatermeasuring devices required underA.R.S. 45-604. (Reserved) (Reserved) (Reserved) Cleanrooms that are used for manufacturing, processing or fabrication of semiconductorproducts. For purposes ofthis paragraph, "cleanroom" means all property that comprises or creates an environmentwhere humidity, temperature, particulate matter and contamination are precisely controlled within specified parameters, without regard to whether the property is actually contained within that environment orwhether any of the property is affixed to or incorporated into real property. Cleanroom: (A) includes the integrated systems, fIXtures, piping, movable partitions, lighting and all property that is necessary or adapted to reduce contamination orto control airflow, temperature, humidity, chemical purity or otherenvironmental conditions or manufacturing tolerances, as well as the production machineryand equipmentoperating in conjunction with the c1eanroom environment (B) does not include the building or other permanent, nonremovable componentofthe building that housesthe cfeanroom environment

. Machinery and equipmentthat are purchased by oron behalf of the owners of a soundstage complex and primarily used for motion picture, multimedia or interactive video production in the complex. This paragraph applies only if the initial construction of the soundstage complex begins after June 30, 1996 and before January 1, 2002 and the machinery and equipment are purchased before

8(18)

(19)

(20)

(21)

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### OrdinanceNo. 3046

the expiration offive years afterthe start of initial construction. For purposes of this paragraph: (A) Motion picture, multimedia or interactive video production includes products for theatrical and television release\ educational presentations, electronic retailing. documentaries. music videos, industrial films, CDROM. video game production, commercial advertising and television episode production and. other genres that are introduced through developingtechnology. (8) Soundstage complex means a facility of multiple stages inclUding production offices. construction shops and related areas, prop and costume shops, storage areas, parking for production vehicles and areas that are leased to bUSinesses that complementthe production needs and orientation ofthe overall facility. Tangible personal property that is used by either of the following to receive, store, convert, produce, generate, decOde, encode, control or transmit telecommunications information: (A) any direct broadcast satellite television or data transmission service that operates pursuantto 47 Code 

### OfFederal Regulations Parts25 and 100. (8) any satellite television ordata transmission facility, if both ofthe following conditions are met (i) Over two-thirds of the transmissions, measured in megabytes, transmitted by the facility during the test period were transmitted to oron behalf of one or more c!irect broadcast satellite television ordatatransmission services that operate pursuantto 47 Code Of Federal RegUlations Parts25And 100. (ii) Over two-tftirds of the transmissions, measured in megabytes, transmitted by oron behalf ofthose direct broadcast television or datatransmission services during the test period were transmitted bythe facilityto oron behalfofthose services. For purposes ofsubdivision (b) of this paragraph, testreriod means the three**hun~red** sixty-five day**pe~od** beginning on the later 0 .the date. on which the tangible personal property IS purcnased orthe date on which the directbroadcast satellite television or data transmission service first transmits information to its customers.

. . Machinery and equipment that is used directly in the feeding of poultry, the environmental control of housing for poultry, the movement of eggs within a production and packaging facility orthe sorting orcooling of eggs. this exemption does notapplytovehicles used fortransporting eggs. Machinery or equipment, including related structural components, that is employed in connection with manufacturing, processing, fabricating, job printing, refining, mining, natural gas pipelines, metallurgical operations, telecommunications, producing or transmitting electricity or research and developmentthatis used directlyto meet or exceed rules or regulations adopted by the federal energy regulatory commission, the United States Environmental Protection Agency. The United States Nuclear Regulatory Commission, the Arizona Department of Environmental Quality or a political subdivision of this state to prevent, monitor, control or reduce land, waterorairpollution. Machinery or equipment that enables a television station to originate and broadcast or to receive and broadcast digital television signals and that was purchased to facilitate compliance with the Telecommunications Act of 1996 (p.1. 104-104; 110 stat 56; 

## 47 united states code section 336) and the Federal

9

# !Il (b)

(c)

(d)

(e) 

### OrdinanceNo. 3046

Communications Commission Order issued April 21, 1997, 47 Code of Federal Regulations Part73. This paragraph does notexemptany ofthe following: (A) Repair or replacement parts purchased for the machinery or equipment described in this paragraph. (8) Machinery orequipment purchased to replace machinery orequipment forwhich an exemption was previously claimed and taken underthis paragraph. (C) Any machinery or equipment purchased after the television station has ceased analog broadcasting, or purchased after November 1, 2009, whichever occurs first. The term "income-producing capital equipment" shall further include ancillary machinery and equipment used for the treatment of waste products created by the business activities which are allowed to purchase "income-producing capital equipment" defined in subsection (a) above.
The term "income-producing capital equipment" shall further include repair and replacement parts, other than the items in subsection (d) below, where the property is acquired to become an integral part of another item itemized in subsections (a) or (b) above.
The tangible personal property defined as income-producing capital equipment in this Section shall not include: (1) Expendable materials. For purposes of this paragraph, expendable materials do

.. not include any of the categories of tangible personal property specified in

subsections (a), (b) or (c) of this section regardless of the cost or useful life of that property. Janitorial equipmentand hand tools. Office equipment, furniture, and supplies. Tangible personal**pro~rty** used in selling ordistributing activities.

. Motor vehicles required to be licensed 

## oy the State ofArizona except buses or other urban mass transit vehicles specifically exempted pursuant to subsection (a) (10) abovewithout regard to the useof suCh motorvehIcles. Shops, bUildings, docks, depo!; and all other materials of whatever kind or characternotspecifically includea as exempt Motors and pumps used in drip irrigation systems. Liquid, solid, or gaseous chemicals used or consumed in manufacturing processing, fabricating orresearch and development.
For purposes ofthis Section: (1) Aircraftincludes: (A) An airplane flight simulator that is approved by the Federal Aviation Administration for use as a Phase II or higher flight simulator under AppendiX H, 14 Code ofthe Federal Regulations Part 121. (8) Tangible personal property that is permanently affIXed or attached as a component part of an aircraft that is owned or operated by a certificated orlicensed carrierofpersons orproper:tY. (2) Other accessories and related equipment includes aircraft accessories and equipment such as ground service equipment that physically**~(>ntact** aircraft at some pointduring the overall carrieroperation.

Sec. 62-115. Definitions: computersoftware; custom computer programming.

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### OrdinanceNo. 3046

(a) Computer Software means any computer program, part of such a program, or any sequence of instructions for automatic data processing equipment. Computer software which is not "custom computer programming" is deemed to be tangible personal property forthe purposes ofthis Chapter, regardless of the method by which title, possession, or right to use the software is transferred to the user. (b) Custom ComputerProgramming means any computer software which is written or prepared exclusively for a customer and includes those services represented by separately stated charges forthe modification of existing prewritten programs when the modifications are written or prepared exclusivelyfora customer. (1) The term does not include a prewritten program which is held or existing for general or repeated sale, lease, or license, even if the program was initially developed on a custom basis for in-house, or for a single customer's, use. (2) Modification to an existing prewritten program to meetthe customer's needs is custom computer programming only to the extent of the modification, and onlyto the extentthat the actual amount charged forthe modification is separately stated on invoices, statements, and other billing documents supplied tothe customer. Sec. 

### 62-120. Definitions: food forhome consumption. (a) Forthe purposes ofthis Section only, the following definitions shall be applicable: (1) Eligible grocerybusiness means an establishmentwhose sales of food are such that it is eligible to participate in the food stamp program established bythe Food Stamp Act of 

### 1977 {PL 

### 95-113; 91 Stat. 

### 958.7 U.S.C. Section 

### 2011 et seq.), according to regulations in effect on January 

### 1, 1979. An establishment IS deemed eligible to participate in the Food Stamp Program if it is authorized to participate in the I?r09[am byJhe United States Department of Agriculture Food and Nutrition ServiceHeld Office on the effective date ofthis Section, or if, prior to a reporting period for which the return is filed, such retailer proves to the satisfaction of the Tax Collector that the establishment, based on the nature of the retailer's food sales, could be eligible to participate in the food stamp program established by the Food Stamp Act of 

### 1977 according to regulations in effect on January 1, 1979. (2) Facilities for the consumption offood means tables, chairs, benches, booths, stools, counters, and similar conveniences, trays, glasses, dishes, or other tableware and parking areas forthe convenience of in-carconsumption offood in oron the premises on which the retailerconducts business. Foodforconsumption on thepremises means anyofthe following: 

# ! A! Hotpreparedfoodas defined below. B Hotorcold sandwiches. C Food served by an attendant to be eaten at tables, chairs, benches, booths, stools, counters, and similar conveniences and within parking areasforthe convenience ofin-carconsumption offood.

# !~ Food servedwith trays, glasses, dishes, orothertableware. Beverages sold in cups, glasses, oropen containers. Food sold by caterers.

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### OrdinanceNo. 3046

(H) 

### (G)

(3) Food sold within the premises of theaters, movies, operas, shows of any type or nature, exhibitions, concerts, carnivals, circuses, amusement parks, fairs, races, contests, games, athletic events, rodeos, billiard and pool parlors, bowling alleys, public dances, dance halls, boxing, wrestling and other matches and any business which charges admission, entrance, or cover fees for exhibition, amusement, entertainment, or instruction. Any items contained in subsections (a)(3)(Al through (G) above even though they are sold on a "take-out" or to go' basis, and whether or not the item is packaged, wrapped, or is actually taken from the premises. Hotpreparedfood means those products, items, or ingredients of food which are prepared and intended for consumption in a heated condition. "Hot rrepared food" includes a combination of hot and cold food items or ingredients 

### i a single price has been established. (5) Premises means the total space and facilities in or on which a vendor conducts business and which are owned or controlled, in whole or in part, by a vendor or which are made available for the use of customers of the vendor or group of vendors, including any bUilding orpartofa building, parking lot, orgrounds.

(3) (4) (b) Food for home consumption means all food, except food for consumption on the premises, if sold by any ofthe following: (1) An eligible grocerybusiness. (2) A person who conducts 'a business whose primary business is not the sale of food butwho sells food which is displayed, packaged, and sold in similar manner as an eligible grocery business. A person who sells food and does not provide or make available any facilities for the consumption offood on the premises. A person who conducts a delicatessen business either from a counter which is separate from the place and cash registerwhere taxable sales are made orfrom a counterwhich hastwo cash registers and which are used to record taxable and tax exempt sales, ora retailerwho conducts a delicatessen business who uses a cash registerwhich has at leasttwo tax computing keys which are used to record taxable and tax exemptsales. (Reserved) Vending machines and othertypes ofautomatic retailers. Sales of food, drink and condiment for consumption within the premises of any**~rison,** jail or other institution under the jurisdiction of the State DeRartment Of Corrections, the Department Of Public Safety, the Department Of Juvenile Corrections ora County Sheriff. (Editor's note: Section 

### 120 was added effective July 

### 1, 1991, to distinguish retail food from restaurant activities which are taxed at differing rates. Subsection b(6) was further modified effective February 

### 1, 1995 to repeal "provided that there are no facilities for the consumption of food on the premises where the automatic retailer is located" after "retailers". Subsection b(7) was added effective July 

### 11, 1998.)

Article II

- Determination ofGross Income
Sec. 62-200. 

### Determination ofGross Income: in general. (a) Gross income includes:

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### (4) OrdinanceNo. 3046

the value proceeding oraccruing from the sale of property, the providing ofservice, orboth. the total amount ofthe sale, lease, license for use, or rental price at the time ofsuch sale, rental, lease, orlicense. all receipts, cash, credits, barter, exchange, reduction oforforgiveness of indebtedness, and property of every kind or nature derived from a sale, lease, licenseforuse, rental, orothertaxable activity. all other receipts whether payment is advanced prior to, contemporaneous with, or deferred in whole or in part SUbsequentto the activityortransaction. (b) Barter, exchange, trade-outs, or similar transactions are includable in gross income atthefair marketvalue ofthe service rendered orpropertytransferred, whichever is higher, asthey representconsideration given forconsideration received. (c) No deduction orexclusion is allowed from gross incomeon accountofthe costofthe property sold, the time value of money, expense of any kind or nature, losses, materials used, labororservice performed, interestpaid, orcredits granted. Sec. 62-210. Determination ofgross income: transactions between affiliated companies orpersons. In transactions between affiliated companies or persons, or in other circumstances where the relationship between the parties is such that the gross income from the transaction is not indicative of the market value of the subject matter of the transaction, the Tax Collector shall determine the "market value" upon which the City Privilege and Use Taxes shall be levied. "Market value" shall correspond as nearty as possible to the gross income from similar transactions of like quality or character by other taxpayers where no common interest exists between the parties, butotherwise undersimilarcircumstances and conditions. Sec. 62-220. Determination ofgross income: artificially contrived transactions.
The Tax Collector may examine anytransaction, reported or unreported, if, in his opinion, there has been or may be an evasion of the taxes imposed by this Chapter and to estimate the amountsubjectto tax in cases where such evasion has occurred.
The Tax Collector shall disregard any transaction which has been undertaken in an artificial mannerin orderto evadethe taxes imposed bythis Chapter. Sec. 62-230. Determination ofgross income based upon method of reporting.
The method of reporting chosen by a taxpayer, as provided in Section 520, necessitates the following adjustmentsto gross incomeforall purposes underthis Chapter: (a) 

### Cash basis When a person elects to report and pay taxes on a cash basis, gross incomeforthe reporting period shall include: (1) the total amounts received on "paid in full" transactions, againstwhich are allowed all applicable deductions and exclusions; and

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### OrdinanceNo. 3046

(2) all amounts received on accounts receivable, conditional sales contract, or other similar transactions, against which no deductions and no exclusions from gross income are allowed. Interest on finance contracts may be deducted ifseparately itemized on all books and records. (b) Accrual basis When a person elects to report and pay taxes on an accrual basis, gross income shall include all gross income for the applicable period regardless of whether receipts are for cash, credit, conditional, or partially deferred transactions, and regardless ofwhetheror not any securitydocument or instrument is sold, assigned, or otherwise transferred to another. Persons reporting on the accrual basis may deductbad debts, provided that (1) the amount deducted for the bad debt must be deducted from gross income ofthe month inwhich the actual charge-offwas made, and only to the extentthat such amountwas actually charged-off, and also onlyto the extentthat such amountis orwas included as taxable gross income; and (2) if any amount is subsequently collected on such charged-off account, it shall be included in gross income forthe month in which itwas collected, withoutdeduction forexpense ofcollection. Sec. 62-240. Exclusion of cash discounts, returns, refunds, trade-in values, vendorissued coupons, and rebates from gross income

.. (a) The following items are notincluded in gross income: (1) Cash discounts allowed by the vendor for timely payment, but only discounts allowed againsttaxable gross income. (2) The value of property returned by customers to the extent ofthe amount actually refunded eitherin cash orby creditand the amount refunded was included in taxable gross income. (3) The trade-in allowance for tangible personal property accepted as payment, not to exceed the full sales price for any tangible personal property sold, when the full sales price is included in taxable gross income. Trade-in allowances are not allowed for manufactured buildings taxable underSection 427. (4) When coupons issued by avendor are lateraccepted by the vendoras a discount against the transaction, the discount may be excluded from gross income as a cash discount Amounts credited or refunded by a vendor for redemption of coupons issued by any person other than the vendor may notbe excludedfrom gross income. (5) Rebates issued by the vendor to a customer as a discount against the transaction may be excluded from gross income as a cash discount. Rebates issued by a person otherthanth-e vendor may not be excluded from gross income, even when the vendee assigns his rightto the rebate to the vendor. (6) In computing the tax base, gross proceeds of sales or gross income does not include a manufacturer's cash rebate on the sales price of a

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### OrdinanceNo. 3046

motor vehicle if the buyer assigns the buyer's right in the rebate to the retailer. (b) If the amount specified in subsection (a) above is credited by a vendor subsequentto the reporting period in which the original transaction occurs, such amount may be excluded from the taxable gross income of that sUbsequent reporting period, but onlyto the extent that the excludable amount was reported as taxable gross income in that priorreporting period.

Sec. 62-250. Exclusion of combined taxes from gross income; itemization; notice; limitations. (a) When tax is separately charged and/or collected. The total amount of gross income shall be exclusive of combined taxes only when the person upon whom the taxis imposed shall establish tothe satisfaction ofthe TaxCollectorthatsuch tax has been added to the total price of the transaction. The taxpayer must provide to his customerand also keep a reliable record ofthe actual tax charged or collected, shown by cash register tapes, sales tickets, or other accurate record, separating nettransaction price and combined tax. Ifatanytime the Tax Collector cannot ascertain from the records kept by the taxpayer the total or amounts billed or collected on account of combined taxes, the claimed taxes collected may not be excluded from gross income, unless such records are completed and/orclarified tothe satisfaction ofthe TaxCollector. (1) Remittance ofall taxcharged and/orcollected. When an added charge is made to cover City (or combined) Privilege and Use Taxes, the person upon whom the tax is imposed shall paythe full amountofthe Citytaxes due, whether collected by him or not, and in the event he collects more than the amount due he shall remit the excess to the Tax Collector. In the eventthe TaxCollectorcannotascertainfrom the records kept bythe taxpayer the total or amounts of taxes collected by him, and the Tax Collectoris satisfied thatthe taxpayer has collected taxes in an amount in excess of the tax, assessed under this Chapter, the Tax Collector may determine the amount collected and collect the tax so determined in the mannerprovided in this Chapter. (2) Itemization. A taxpayer, in orderto be entitled to exclude from his gross income any amounts paid to him by customers for combined taxes passed on to the customer, must prove that he has provided his customerwith a written record of the transaction showing at a minimum the price before thetax, the combined taxes, and the total cost. This shall be addition to the record required to be keptundersubsection (a) above. (b) When tax has been neither**sepa~** charged nor separately collected. When the person upon whom the tax is imposed shall establish by means of invoices, sales tickets, orotherreliable evidence, thatnoadded charge was made to cover combined taxes, the taxpayer may exclude tax collected from such income by

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### OrdinanceNo. 3046

dividing such taxable gross income by 1.00 plus a decimal figure representing the effective combined tax rate expressed as afraction of 1.00. Sec. 62-260. Exclusion offees and taxes from gross income; limitations. (a) There shall be excluded from gross income of vendors of motor vehicles those motor vehicle registration fees, license fees and taxes, and lieu taxes imposed pursuant to Title 28, Arizona Revised Statutes in connection with the initial purchase ofa motorvehicle, butonlyto the extentthat such taxes orfees orboth have been separately itemized and collected from the purchaser of the motor vehicle by the vendor, actually remitted to the proper registering, licensing, and taxing authorities, and the provisions of Article III, regarding recordkeeping, are met. Forthe purpose ofthe exclusion provided bythis subsection only, the terms vendor and vendee shall also apply to a lessor and lessee respectively, of a motorvehicle if, in addition to all other requirements ofthis subsection, the lease agreement specifically requires the lessee to pay such fees or taxes, and such amounts are separately itemized in the documentation provided to the lessee. (b) There shall be excluded from gross income of vendors at retail of heavy trucks and trailers, the amount attributable to Federal Excise Taxes imposed by 26 U.S.C. Section 4051, but only to the extent that the provisions of Article III,

. relating to recordkeeping, have been met (c) There shall be excluded from gross income the following fees, taxes, and lieu taxes, but only to the extent that such taxes or fees or both have been separately itemized and collected from the purchaser by the vendor, actually remitted to the proper registering, licensing, and taxing authorities, and the provisions ofarticle iii, regarding recordkeeping, are met: (1) emergency telecommunication services excise tax imposed pursuant to A.R.S. Section 42-1472. "Emergency telecommunication services" means telecommunication services or systems that use number 911 or a similarly designated telephone numberforemergency calls; (2) the telecommunication devices for the deaf and the severely hearing and speech impaired excise tax imposed pursuant to A.R.S. Section 42-1472; (3) federal excise taxes on communications services as imposed by 26 U.S.C. §4251; (4) car rental surcharge imposed pursuanttoA.R.S. Section 48-4234; (5) federal excise taxes on passenger vehicles as imposed by 26 U.S.C. §4001(.01); (6) waste tire disposal fees, imposed pursuant to A.R.S. Section 44-1302; lead acid batteryfees, imposed pursuanttoA.R.S. Section 44-1323; and used oil fees imposed pursuanttoA.R.S. Section 49-814(b), (c).

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### OrdinanceNo. 3046
(d) There shall be excluded from gross income of vendors of motorvehicles dealer documentation fees. butonly to the extent that such fees have been separately itemized and collected from the purchaserofthe motorvehicle by the vendor.
Sec. 62-265. (Reserved)
Sec. 62-266. Exclusion of motorcarrier revenues from gross income.
There shall be excluded from gross income the gross proceeds of sale orgross income derived from any ofthe following: (a)
(b)
(c)

(d) A motorcarrier's use on the public highways in this State ifthe motorcarrier is subject to a fee prescribed in AR.S. Title 28. Chapter 16. Leasing, renting orlicensinga motorvehicle subjectto and upon which the fee has been paid underA.R.S. Title 28. Chapter 16.
The sale of a motorvehicle and any repair and replacement parts and tangible personal property becomin9.-apart ofsuch motorvehicle, to a motorcarrierwho is subjectto a fee**pre~cribed.in A~.S.**  Title 28. Chapter 16 and who is engaged in the business of leasing, renting or licenSing such property. for the purposes of these exclusions, motor carrier includes a motor vehicle weighing 26,000 pounds or more, a lightweight motor vehicle which weighs 12,001 pounas to 26,000 pounds and a light motorvehicle weighing 12.000 pounds or less, which pay the fee prescribed in AR.S. Title 28, Chapter 16.
Sec. 62-270. Exclusion ofgross income of persons deemed notengaged in business. (a) Forthe purposes ofthis Section, the following definitions shall apply: (1) Federally Exempt Organization means an organization which has received a determination of exemption, or qualifies for such exemption, under 26 U.S.C. Section 501 (c) and rules and regulations of the' Commissionerof Internal Revenue pertaining to same, but not including a "governmental entity", "proprietary club", or"publiceducational entity". (2) Governmental Entity means the Federal Government. the State of Arizona, any other state, or any political subdivision, department, or agency of any of the foregoing; provided further that persons contracting with such a governmental entity to operate any part of a governmentally adopted and controlled program to provide urban mass transportation shall be deemed a governmental entity in all activities such person performs when engaged in said contract. (3) Non-Ucensed Business means any person conducting any business actiVityforgain orprofit, whetheror not actually realized. which person is not required to 

### be licensed for the conduct or transaction of activities subjectto thetax imposed underthis Chapter. (4) Proprietary Club means any club which has qualified orwould otherwise qualify as an exempt club under the provisions of 26 U.S.C. Section 501 (c)(7), (8). and (9), notwithstanding the fact that some or all of the

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### OrdinanceNo. 3046

members may own a proprietary interest in the property and assets ofthe club. (5) Public Educational Entity" means any educational entity operated pursuantto any provisions ofTitle 15, Arizona Revised Statutes. (b) Transactions which, if conducted by any other person, would produce gross income SUbjectto taxunderthis Chaptershall notbe subjecttothe imposition of such tax if conducted entirely by a public educational entity; governmental entity, except "proprietary activities" of municipalities as provided by Regulation; or nonlicensed businesses. (c) Transactions which, if conducted by any other entity, would produce gross income SUbjectto the tax underthis Chaptershall notbe subjectto the imposition of such tax if conducted entirely by a federally exempt organization or proprietary club with the following exceptions: (1) Transactions involving proprietary clubs and organizations exempt under 26 U.S.C. Section 501 (c)(7), (8), and (9), where the gross revenue of the activity received from persons otherthan members and bona fide guests of members is in an amount in excess of fifteen percent (15%) of total gross revenue, as prescribed by RegUlation. In the event this fifteen percent (15%) limit is exceeded, the entire gross income of such entity shall be subjectto the applicable tax. (2) Gross income from unrelated business income as that term is defined in 26 U.S.C. Section 512, including all statutory definitions and determinations, the rules and regulations of the Commissionerof Internal Revenue, and his administrative interpretations and guidelines. (3) (Reserved) (d) Exceptas may be provided elsewhere in this Chapter, transactionswhere customers are exempt organizations, proprietary clubs, public educational entities, governmental entities, or non-licensed businesses shall be deemed taxable transactions for the purpose of the imposition of taxes under this Chapter, notwithstanding that property so acquired may in fact be resold or leased by the acquiring person to others. In the case of sales, rentals, leases, or licenses to proprietary clubs or exempt organizations, the vendor may be relieved from the responsibility for reporting and paying tax on such income only by obtaining from its vendee averified statementthat includes: (1) a statementthat when the property so acquired is resold, rented, leased, or licensed, that the otherwise exempt vendee chooses, or is required, to pay City Privilege Tax oran equivalent excise tax on its gross income from such transactions and does in factfile returns on same; and (2) the Privilege License numberofthe otherwiseexemptvendee; and (3) such otherinformation asthe TaxColledormay require. (e) Franchisees orconcessionaires operating businessesfororon behalfofany exempt organization, governmental entity, public educational entity, proprietary club, or

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### OrdinanceNo. 3046
non-licensed business shall not be considered to be such an exempt organization, club, entity, or non-licensed business, but shall be deemed to be a taxpayer sUbject to the provisions of this Chapter, except as provided in the definition ofgovemmental entity, regarding urban mass transit. (f) In any case, if a federally exempt organization, proprietary club, or non-licensed business rents, leases, licenses, or purchases any tangible personal property for its own storage or use, and no City Privilege or Use Tax orequivalent excise tax has been paid on such transaction, said organization, dub, or business shall be liable forthe Use Taxupon such acquisitions oruse ofsuch property.

Sec. 62-280. (Reserved)
Sec. 62-285. (Reserved)
Sec. 62-290. (Reserved)

Article III

- Licensing and Recordkeeping

Sec. 62-300. Licensing requirements.

every person desiring to engage or continue in business activities within the City uponwhich a Privilege Tax is imposed bythis Chapter. every person, engaging or continuing in business within the City, storing or usingtangible personal property in this City upon which a Use Tax is imposed bythis Chapter. (3) (Reserved) (a) The following persons shall make application to the Tax Collector for a Privilege License, accompanied by a nonrefundable fee of fifteen dollars ($15.00), and no person shall engage orcontinue in business orengage in such activities until he shall have such a license: (1) 

### (2)

(b) A person engaged in morethan one activity subjectto City Privilege and Use Taxes at anyone business location is not required to obtain a separate license for each activity; provided that, at the time such person makes application for a license, he shall list on such application each category of activity in which he is engaged. The licensee shall inform the Tax Collector of any changes in his business activities, location, or mailing address within thirty (30) days.

. (c) Limitation. The issuance of a Privilege License by the Tax Collector shall in no way be construed as permission to operate a business activity in violation of any other law or regUlation to which such activity maybe subject.

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### OrdinanceNo. 3046

Sec. 62-305. Special licensing requirements. (a) Partnerships. Application for a Privilege License for a partnership engaging or continuing in business in the City shall provide, as a minimum, the names and addresses of all general partners. Licenses issued to persons engaged in business as partners, limited orgeneral, shall be in the name ofthe partnership. (b) Corporations. Application for a Privilege License for a corporation engaging or continuing in business in the City shall provide, as a minimum, the names and addresses of both the Chief Executive Officer and Chief Financial Officer of the corporation. Licenses issued to persons engaged in business as corporations shall be in the name of the corporation. (c) Multiple Locations or Multiple Business Names. A person engaged in or conducting one or more businesses at two (2) or more locations or under two (2) or more business names shall procure a license for each such location orbusiness name. A "location" is a place ofa separate business establishment. (Editors note: Two ormore business nameswas effective May 1, 1988.) (d) Licenses shall not be issued until all legal requirements are met. It shall be a condition precedentto the issuance of a license that all statutes, ordinances, regulations, and other requirements affecting the public, peace, health, and safety be complied with in total. Sec. 62-310. Licensing: annual license fee; transferability; display; penalties; residential property provisions; cancellation; renewal; late application provisions; actions. (a) The Privilege License shall be valid unless canceled or revoked underthe provisions of Section 320 orbysurrenderofthe license bythe licensee orexpiration through cessation bythe licensee ofthe business activityforwhich itwas issued orthrough failure ofthe licensee to paythe annual license fee imposed hereunder. (b) The Privilege License shall be nontransferable between owners or locations, and shall be on displayto the public in the licensee's place of business. (c) Any licensee who permits his license to expire through cancellation as provided in Section 320, by his request for cancellation, by surrender of the license, or by the cessation of the business activity for which the license was issued, and who thereafter applies for a license, shall be granted a new license as an original applicant, shall paythe application license fee imposed by Section 300, and the annual license fee imposed herein. Any licensee who loses or misplaces his Privilege Ucense which is still in effect shall be charged the currentapplication licensefee foreach reissuance ofa license. 

# .
. (d) In addition to the license application fee imposed under Section 300, and excepting those persons paying the annual' license fee imposed under 

### (f) and (g) of this Section, each person licensed underthis chapter shall pay an annual license fee of ten dollars

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### 20

## . . OrdinanceNo. 3046
($10.00) for each license held by such person. Such fee shall be due and payable on or before February 1 of each year. Such annual fee must be paid to and received bythe tax collector bythe due date and shall be nonrefundable. (e) Any licensee who fails to renew his license on orbefore the date provided in (d) above shall be deemed to be operating without a license following such due date, and shall be subjectto all penalties imposed underthis chapteragainstpersons required to be licensed and operating withouta license. The non-licensed status may be removed by payment of an annual license fee in the amount of one hundred fifty percent 

### (150%) of the fee imposed under (d) above, and the payment of a nonrefundable application fee required underSection 

### 300. (f) Notwithstanding the provisions of (d) above, a person who is engaged in the rental of residential real property, other than transient lodging, shall pay an annual license fee of two dollars 

### ($2.00) per residential unit, (excluding units primarily used for transient lodging) per year not to exceed maximum of twenty-five dollars 

### ($25.00) per license. The due date for such fees shall be as set forth in (d) above, and such fee shall be nonrefundable. Any licensee required to pay an annual fee under this subsection, who fails to pay same by said due date shall be deemed to be operating without a license after such date, and sUbject to all penalties imposed under this chapter against persons required to be licensed and operating without a license. The non-licensed status may be removed by payment of a penalty of an additional one dollar 

### ($1.00) per residential unit per year notto exceed twelve dollars and 

### 50/100 cents 

### ($12.50) per location, the annual license fee, and the payment of a non-refundable application fee required under Section 

### 300. (g) (Reserved). (h) Ifany person required to be licensed underthis chapterfails to obtain a license on or before the conducting ofany business activity requiring such license, such person shall be subject to a penalty in the amount ofone hundred fifty percent 

### (150%) of the applicable fee·for each event or period of time for which such fee would have been imposed from and afterthe date on which such activity commenced until paid. This penalty shall be in addition to any other penalty imposed under this chapter and must be paid prior to the issuance ofany license. (i) Notwithstanding the failure of any person to apply for a license and to remit all fees and penalties, if any, imposed herein, such person conducting a business activity subject to licensing withoutobtaining a license, shall be liableto the cityfor all applicable fees and shall be subject to the provisions of Sections 

### 580 and 

### 590, to the same extent as if said fees and penalties were taxes and, penalties undersuch sections. (j) (Reserved) Sec. 

### 62-315. (Reserved)
Sec. 

### 62-320. Licensing: cancellation; revocation.

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## . . OrdinanceNo. 3046

(a) Cancellation. The Tax Collector shall be authorized to cancel the City Privilege License ofany licensee as "inactive" ifthe taxpayer, required to report monthlyto the City, has neitherfiled any return nor remitted to the City any taxes imposed bythis Chapterfor a period of six (6) consecutive months; or, if required to report quarterly, has neitherfiled any return nor remitted any taxes imposed by this Chapter for two (2) consecutive quarters; or, if required to report annually, has neither filed any return nor remitted any taxes imposed by this Chapterwhen such annual report and tax are due to be filed with and remitted to the Tax Collector. (b) Revocation. If any licensee fails to pay any tax, interest, penalty, fee, or sum required to be paid to the City underthis Chapter, or ifsuch licensee fails to comply with any other provisions of this Chapter, the Tax Collector shall be authorized to revoke the City Privilege License of said licensee. (c) Notice and Hearing. The Tax Colledor shall deliver notice to such licensee of cancellation or revocation ofthe Privilege License. Ifwithin twenty (20) days the licensee so notified requests a hearing, he shall be granted a hearing beforetheTaxColledor. (d) After cancellation or revocation of a taxpayer's license, the taxpayer shall not be relicensed until all reports have been filed; all fees, taxes, interest, and penalties due have been paid; and he is in compliancewith the provisions ofthis Chapter.

. Sec. 62-330. Operating without a license.

It shall be unlawful forany person who is required bythis Chapterto obtain a Privilege License to engage in or continue in business within the Citywithout a license. The Tax Collector shall assess any delinquencies in tax, interest, and penalties which may apply against such person upon anytransactions subjectto the taxes imposed bythis Chapter

.. Sec. 62-350. Recordkeeping requirements. (a) It shall be the duty of every person subject to the tax imposed by this Chapter to keep and preserve suitable records and such other books and accounts as may be necessary to determine the amount of tax forwhich he is liable under this Chapter. The books and records must contain, at a minimum, such detail and summary information as may be required by RegUlation; or when records are maintained within an electronic data processing (EDP) system, the requirements established by the Arizona Department of Revenue for privilege tax filings 

### will be accepted. It shall be the duty of every person to keep and preserve such books and records for a period equal to the applicable limitation pertod for assessment oftax, and all such books and records shall be open for

_ inspection bythe TaxCollectorduring any business day. (b) The Tax Collector may direct, by letter, a specific taxpayer to keep specific otherbooks, records, and documents. Such letterdirective shall apply:

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### OrdinanceNo. 3046
(1) onlyforfuture reporting periods, and (2) only by express determination of the Tax Collector that such specific recordkeeping is necessary due to the inability of the City to conduct an adequate examination of the past activities of the taxpayer, which inability resulted from inaccurate or inadequate books, records, or documentation maintained bythe taxpayer.

Sec. 62-360. Recordkeeping: claim of exclusion, exemption, deduction, or credit; documentation; liability. (a) All deductions, exclusions, exemptions, and credits provided in this Chapter are conditional upon adequate proof and documentation of such as may be required either by this Chapteror Regulation. (b) Any person who claims and receives an exemption, deduction, exclusion, or creditto which he is not entitled underthis Chapter, shall be subjectto, liable for, and paythe 

### tax on the transaction as if the vendor subject to the tax had passed the burden of the payment of the tax to the person wrongfully claiming the exemption. A person who wrongfully claimed such exemption shall be treated as if he is delinquent in the payment of the tax and shall be subject to interest and penalties upon such delinquency. However, if the tax is collected from the vendor on such transaction it shall not again be collected from the person claiming the exemption, or ifcollected from the person claiming the exemption itshall notalso be collected from the vendor.
Sec. 62-370. Inadequate orunsuitable records.
In the event the records provided by the taxpayerare considered by the Tax Collector to be inadequate or unsuitable to determine the amount of the tax for which such taxpayer is liable underthe provisions of this Chapter, itisthe responsibility ofthe taxpayereither: (1) to provide such other records required bythis Chapteror Regulation; or (2) to correct orto reconstruct his records, tothe satisfaction ofthe TaxCollector.

Article IV

- Privilege Taxes

Sec. 62-400. Imposition of Privilege Taxes; presumption. (a) There are hereby levied and imposed, subject to all other provisions of this Chapter, the following Privilege Taxes for the purpose of raising revenue to be used in defraying the necessary expenses ofthe City, such taxes to be collected by the TaxCollector: (1) a Privilege Tax upon persons on account of their business activities, to the extent 'provided elsewhere in this Article, to be measured by the gross

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### 23

### OrdinanceNo. 3046

income of persons, whether derived from residents of the City or not, or whetherderived from within the Cityorfrom without. (2) (Reserved) (3) A privilege tax upon persons for the privilege of selling jet fuel, whether derived from residents of the city of not, or whether derived from within the city orfrom without, in accordancewith provisions ofSection 422. (Editors Note: 400.3, orJet Fuel Amendment, effectiveApril 1, 1992.) (b) Taxes imposed by this Chapter are in addition to others. Except as specifically designated elsewhere in this Chapter, each ofthe taxes imposed bythis Chapter shall be in addition to all other licenses, fees, and taxes levied by law, including othertaxes imposed bythis Chapter. (c) Presumption. Forthe purpose of properadministration ofthis Chapterand to prevent evasion ofthe taxes imposed bythis Chapter, it shall be presumed thatall gross income, or gallons sold, is subject to the tax until the contrary is established by the taxpayer. (d) Limitation of exemptions, deductions, and credits allowed against the measure of taxes imposed bythis'Chapter. All exemptions, deductions, and credits setforth in this Chaptershall be limited to the specificactivityortransaction described and notextended to include anyotheractivityortransaction subjectto the tax. Sec. 62-405. Advertising. (a) The tax rate shall be at an amount equal to one and one-half percent (1.5%) of the gross income from the business activity upon every person engaging or continuing in the business of "local advertising" by billboards, direct mail, radio, teleVision, or by any other means. However, commission and fees retained by an advertising agency shall not be incluciable in gross income from "local advertising". 'All delivery or disseminating of information directly to the public or any portion thereof for a consideration shall be considered "Local Advertising", exceptthe following:

Ch 62 taxcode 10121/99 11789(93101I.doc) Pg. 24 of 116 (1) the advertising of a product or service which is sold or provided both within and without the State by more than one "commonly designated business entity" within the State, and in which the advertisement names eitherno "commonly designated business entity" within the State or more than one "commonly designated business entity". "Commonly Designated Business Entity" means any person selling or providing any product or service to its customers under a common business name or style, even though there may be more than one legal entity conducting business functions using the same or substantially the same business name or style byvirtue ofafranchise, license, orsimilaragreement.

24(6) (2)

(3) 

### (4) (5) 

### OrdinanceNo. 3046

the advertising of a facility or of a service or activity in which neither the facility nor a business site carrying on such service or activity is located within the State. the advertising ofa productwhich may only be purchased from an out-ofstate supplier. political advertising for United States Presidential and Vice Presidential candidates only. advertising by means of product purchase coupons redeemable at any retail establishment carrying such product but not product coupons redeemable onlyata single commonly designated business entity. advertising transportation services where a substantial portion of the transportation activity ofthe business entity advertised involves interstate orforeign carriage. (Editor's note: this rate was effective May 1, 1994; the previous rate was 1%.) (b) (Reserved)
Sec. 62-407. (Reserved)
Sec. 62-410. Amusements, exhibitions, and similaractivities. (a) The tax rate shall be at an amount equal to one and one-half percent (1.5%) of the gross income from the business activity upon every person engaging or continuing in thefollowing type ornature ofbusinesses: (1) operating or conducting theaters, movies, operas, shows of any type or nature, exhibitions, concerts, carnivals, circuses, amusement parks, menageries, fairs,: races, contests, games, billiard orpool panors, bowling alleys, skating rinks, tennis courts, golf courses, video games, pinball machines, public dances, dancehalls, sports events, jukeboxes, batting and driving ranges, animal rides, or any other business charging admission forexhibition, amusement, orentertainment. (2) health spas, fitness centers, dance studios, orother persons who charge for the use of premises for sports, athletic, other health-related activities, or instruction, whether on a per-event use, or for long-term usage, such as membership fees. (b) (Reserved) (Editor's note: this rate was effective May 1, 1994; the previous rate was 1%.)
Sec. 62-415. Construction contracting: prime contractors. (a) The 

### tax rate shall be at an amount equal to one and one-half percent (1.5%) of the gross income from the business upon every construction contractor engaging or continuing in the business activityofconstruction contracting within the City.

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### OrdinanceNo. 3046

(1) However, gross income from construction contracting shall not include charges related to groundwater measuring devices required by A.R.S. Section 45-604. (2) (Reserved) (3) Gross income from construction contracting shall not include gross income from the sale of manufactured buildings taxable under Section 

### 427. (b) Deductions and**Exemptions~** (1) Gross income derived from acting as a "subcontractor" shall be exemptfrom the taximposed bythis Section. (2) All construction contracting gross income subject to the tax and not deductible herein shall be allowed a deduction of thirty-five percent (35%). (3) The gross proceeds ofsales orgross income attributable to the purchase of machinery, equipment or other tangible personal property that is exempt from or deductible from privilege orusetaxunder: (A) Section 62-465, Subsections (g) and (p) (B) Section 62-660, Subsections (g) and (p) Shall be exemptordeductible, respectively, from thetaximposed bythissection. (4) The gross proceeds ofsales orgross income that is derived from acontract entered into for the installation. assembly, repair or maintenance of income-producing capital equipment. as defined in section -110, that does not become a permanent attachmentto a building, highway, road, railroad, excavation or manufactured building or other structure, project, development orimprovement shall be deducted from the tax imposed by this section. If the ownership of the realty is separate from the ownership of the income-producing capital equipment, the determination asto permanentattachmentshall be made as ifthe ownership was the same. The deduction provided in this paragraph does not include gross proceeds of sales or gross income from that portion of any contracting activitywhich consists ofthe developmentof, ormodification to, real property in order to facilitate the installation, assembly. repair, maintenance or removal of the income-producing capital equipment. For purposes of this paragraph, "permanent attachment" means at least one ofthe following: (A) To be incorporated into real property. (8) To become so affIXed to real propertythat it becomes part ofthe real property. (C) To be so attached to real propertythat removal would cause substantial damage tothe real propertyfrom which it is removed. (5) The gross proceeds of sales or gross income received from a contract for the construction of an environmentally controlled facility for the raising of poultry for the production of eggs and the sorting, or cooling and packaging of eggs shall be exempt from the taximposed underthis section. (6) The gross proceeds of sales or gross income that is derived from the installation, assembly, repairormaintenance ofclean rooms that are deducted from the tax base of the retail classification pursuant to Section 62-465, Subsection (g) shall be exempt from the tax imposed underthissection. (l) The gross proceeds ofsales orgross income that is derived from acontract entered into with a person who is engaged in the commercial production of livestock, livestock products or agricultural, horticultural, viticultural or floricultural crops or products in this

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state for the construction, alteration, repair, improvement, movement, wrecking or demolition or addition to or subtraction from any building, highway, road, excavation, manufactured building or other structure, project, development or improvement used directly and primarily to prevent, monitor, control or reduce air, water or land pollution shall be exemptfrom thetaximposed underthissection. (c) 

### Subcontradormeans aconstruction contractorperforming workforeither. (1) a construction contractor who has provided the subcontractor with a written declaration that he is liable for the tax for the project and has provided the subcontractorhis City Privilege License number. (2) an owner-builder who has provided the subcontractor with a written declaration that (A) the owner-builderis improving the propertyforsale; and (8) the owner-builder is liable for the 

### tax for such construction contracting activity; and (C) the owner-builder has provided the contractor his City Privilege License number.

. (3) a person selling new manufactured building who has provided the subcontractorwith awritten declaration that he is liable for the taxforthe site preparation and set-up; and provided the subcontractor his city privilege license number. Subcontractor also includes a Construction Contractor performing work for another Subcontractoras defined above. (Editor's note: this ratewas effective May 1,1994; ·the previous rate was 1%.)

Sec. 62-416. Construction contracting: speculative builders. (a) The tax shall be equal 

### to one and one-half percent (1.5%) of the gross income from the business activity upon every person engaging orcontinuing in business as a speculative builderwithin the City. (1)

(2)

(3)

Ch 62 tax code 10/21/99 11789(93101I.doc) Pg. 27 of 116 The gross income of a speculative builder considered taxable shall include the total selling price from the sale of improved real property at the time ofclosing ofescrowortransferoftitle. Improved

### RealPropertymeans any real property: (A) upon

### which astructure has been constructed; or (8) where improvements have been made to land containing no structure (such as paving orlandscaping); or (C) which has been reconstructed as provided by Regulation; or (0) where water, power, and streets have been constructed to the property line. 

### Sale ofImproved

### RealPropertyincludes anyform oftransaction, whether characterized as a lease orotherwise, which in substance is a transferof title of, orequitable ownership in. improved real propertyand includes any lease of the property for a term of thirty (30) years or more (with all options for renewal being included as a part of the term). In the case of

27(4)

(b) Exclusions:. (1)

(2)

(3) (4) 

### OrdinanceNo. 3046

multiple unit projects, "sale" refers to the sale ofthe entire project orto the sale ofany individual parcel or unit. Partially Improved Residential Real Property as used in this Section, means any improved real property, as defined in subsection (a)(2) above, being developed for sale to individual homeowners, where the construction of the residence upon such property is not substantially complete atthe time ofthe sale.

In cases involving reconstruction contracting, the speculative builder may exclude from gross income the prior value allowed for reconstruction contracting in determining his taxable gross income, as provided by Regulation. Neither the cost nor the fair market value of the land which constitutes part ofthe improved real property sold may

### be excluded ordeducted from gross income subjectto the tax imposed bythis Section. (Reserved) A speculative builder may exclude gross income from the sale of partially improved residential real property as defined in (a)(4) above to another speculative builderonly ifall ofthe following conditions are satisfied: (A)

.The speculative builder. purchasing

. the partially improved residential real property has a valid City privilege license for

. construction contracting as a speculative builder; and (B) At the time of the transaction" the purchaser provides the seller with a properly completed written declaration that the purchaser assumes the liability for and will pay all privilege taxes which would otherwise be due the City atthe time of sale ofthe partially improved residential real property; and (C) The selleralso: (i) maintains proper records of such transactions in a manner

. similarto the requirements provided in this chapter relating

to sales for resale; and (ii) retains a copy of the written declaration provided by the buyerforthe transaction; and (iii) is properly licensed with the City as a speculative builder and provides the City with the written declaration attached to the City privilege tax return where he claims the exclusion.

(c) Tax liability for speculative builders occurs at dose of escrow or transfer of title, whichever occurs earlier, and is subject to the following provisions relating to exemptions, deductions and taxcredits: (1) Exemptions. (A) The gross proceeds of sales orgross income attributable to the purchase of machinery, equipment or other tangible personal property that is exemptfrom ordeductible from privilege oruse tax under:

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### OrdinanceNo. 3046

(i) Section 62-465, subsections (g) and (p) (ii) Section 62-e60, subsections (g) and (p) Shall be exempt ordeductible, respectively, from the tax imposed by this section. (8) The gross proceeds ofsales orgross income received from a contractfor the construction ofan environmentally controlled facility for the raising of poultry for the production of eggs and the sorting, or cooling and packaging of eggs shall be exempt from the tax imposed under this section. (C) The gross proceeds of sales or gross income that is derived from the installation, assembly, repair or maintenance of clean rooms that are deducted from the 

### tax base ofthe retail classification pursuant to Section 62-465, subsection (g) shall be exempt from the tax imposed under this section. (D) The gross proceeds of sales or gross income that is derived from a contract entered into with a person who is engaged in the commercial production of livestock, livestock products or agricultural, horticultural, viticultural or floricultural crops or products in this state for the construction, alteration, repair, improvement, movement, wrecking or demolition or addition to or subtraction from any building, highway, road, excavation, manufactured building or other structure, project, development or improvement used directly and primarily to prevent, monitor, control orreduce air, waterorland pollution shall be exemptfrom the taximposed underthis section. (2) Deductions. (A) All amounts subjectto the taxshall be allowed a deduction in the amount ofthirty-five percent(35%). (8) The gross proceeds of sales or gross income that is derived from the installation, assembly, repairor maintenance of income-producing capital equipment, as defined in Section 62-110, that does not become a permanent attachment to a building, highway, road, railroad, excavation or manufactured building or other structure, project, development or improvement shall be deducted from the tax imposed by this section. If the ownership ofthe realty is separate from the ownership ofthe incomeproducing capital equipment, the determination as to permanent attachment shall be made as if the ownership was the same. The deduction provided in this paragraph does not include gross proceeds of sales or gross income from that portion of any contracting activity which consists ofthe developmentof, ormodification to, real property in orderto facilitate the installation, assembly, repair, maintenance or removal ofthe income-producing capital equipment. For purposes of this paragraph, "permanentattachment" means at leastone ofthe following: (i) to be incorporated into real property. (ii) to become so affixed to real property that it becomes part of the real property.**~~~~e** 10/21199 11789(93101I.doc) Pg.29 of 116

### OrdinanceNo. 3046

(iii) to be so attached to real property that removal would cause substantial damage to the real propertyfrom which itis removed. (3) Tax Credits. The following tax credits are available to owner-builders or speculative builders, not to exceed the tax liability against which such credits apply, provided such credits are documented to the satisfaction ofthe taxcollector: (A) A tax credit equal to the amount of city privilege or use tax, or the equivalent excise tax, paid directly to a taxing jurisdiction or as a separately itemized charge paid directly to the vendorwith respect to the tangible personal property incorporated into the said structure or improvement to real property undertaken by the owner-builder or speculative builder. 

### lID A tax credit equal to the amount of privilege taxes paid to this city, or charged separately to the speculative builder, by a construction contractor, on the gross income derived by said person from the construction ofany improvementto the real property. (C) No credits provided herein may be claimed until such time that the gross income againstwhich said credits apply is reported. Sec. 62-417. Construction contracting: owner-builders who are notspeculative builders. (a) At the expiration of twenty-four (24) months after improvement to the property is substantially complete, the tax liability for an owner-builder who is not a speculative buildershall 

### beatan amountequal to one and one-halfpercent (1.5%)

## ot (1) the gross income from the activity of construction contracting upon the real property in question which was realized by those construction contractors to whom the owner-builder provided written declaration that they were not responsible for the taxes as prescribed in Subsection 415(c)(2); and (2) the purchase of tangible personal property for incorporation into :my improvementto real property, computed on the sales price. (b) The tax liability of this Section is subject to the provisions relating to exemptions, deductions and taxcredits. (1) Exemptions. (A) The gross proceeds of sales or gross income attributable to the purchase of machinery, equipment or othertangible personal property that is exempt from or deductible from privilege orusetax under: (i) Section 62-465, subsections (g) and (p) (ii) Section 62-660, subsections (g) and (p) Shall be exempt ordeductible, respectively, from the tax imposed bythis section. (B) The gross. proceeds of sales or gross income received from a contract for the construction of an environmentally controlled facility forthe raising of poultry for the production ofeggs and the sorting, orcooling and packaging of eggs shall be exemptfrom thetax imposed underthis section. (C) The gross proceeds ofsales orgross incomethat is derived from the installation, assembly, repair or maintenance of clean rooms that are deducted from the tax

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### OrdinanceNo. 3046

base ofthe retail classification pursuant to Section 62-465, Subsedion (g) shall be exemptfrom thetaximposed underthis sedion. (D) The gross proceeds of sales or gross income that is derived from a contract entered into with a person who is engaged in the commercial production of livestock, livestock products oragricultural, horticultural, viticultural orfloricultural crops or products in this state for the construction, alteration, repair, improvement, movement, wrecking or demolition or addition to or subtraction from any building, highway, road, excavation, manufactured building or other structure, project, development or improvement used directly and primarily to prevent, monitor, control or reduce air, water or land pollution shall be exempt from the tax imposed underthis sedion. (2) Deductions. (A) All amounts subject to the tax shall be allowed a deduction in the amount of thirty-fIVe percent (35%). (8) The gross proceeds ofsales orgross incomethat is derived from the installation, assembly. repair or maintenance of income-producing capital equipment, as defined in Section 62-110, that does not become a permanent attachment to a building, highway, road, railroad, excavation or manufactured building or other structure, project, development or improvement shall be deducted from the tax imposed by this section. If the ownership of the realty is separate from the ownership of the income-producing capital equipment. the determination as to permanent attachment shall be made as if the ownership was the same. The deduction provided inthis paragraph does not indude gross proceeds ofsales or gross income from that portion of any contracting activity which consists of the development of, or modification to, real property in order to facilitate the installation, assembly, repair, maintenance or removal of the income-producing capital equipment For purposes of this paragraph. ·permanent attachment" means at leastone ofthefollowing: (i) to be incorporated into real property. (ii) to become so affixed to real property that it becomes part of the real property. (iii) to be so attached to real property that removal would cause substantial damagetothe real propertyfrom wtlich itis removed. (3) Tax Credits. The following tax credits are available to owner-builders and speculative builders, not to exceed the tax liability against which such credits apply, provided such credits are documented to the satisfaction ofthetaxcollector: (a) A tax credit equal to the amount of city privilege or use tax, or the equivalent excisetax. paid directlyto ataxingjurisdiction oras aseparately itemized charge paid directly to the vendor with respect to the tangible personal property incorporated into the said structure or improvement to real property undertaken bythe owner-builderorspeculative builder. (b) A tax credit equal to the amount of priVilege taxes paid to this city, or charged separately to the speculative builder, by a construction contractor, on the gross income derived by said person from the construction of any improvement to the real property. ' (c) No credits provided herein may be daimed until such time thatthe gross income againstwhich said credits apply is reported.

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(c) The limitation period forthe assessment oftaxes imposed bythis Section is measured based upon when such liability is reportable, that is, in the reporting period that encompasses the twenty-fifth (25th) month after said unit or project was substantially complete. Interestand penalties, as provided in Section 540, will be based on reportable date. (d) (Reserved)

Sec. 62-418. {Reserved} Sec. 62-420. (Reserved) Sec. 62-422. Jet Fuel Sales. (a) The tax rate shall be at an amount of 2.3 cents ($.023) per gallon sold from the business activity upon every person engaging or continuing in the business of sellingjetfuel. (1) Gallons Sold includes all gallons sold, bartered, exchanged, included as part orwhole of a trade-out, or similartransactions regardless of the type or form ofpayment. (2) For purposes of this section the following terms are substitutable in Articles III and Vofthis chapterand corresponding regulations: (A) "gallons" for "gross income" (B) "gallon(s)" for"amount{s)". (b) The burden of proving that a sale ofjet fuel is not a taxable sale shall be upon the person who madethe sale. (c) Except as provided in Section 567, when this city and another Arizona city or town with an equivalent excise tax could claim nexus fortaxing ajetfuel sale, the city or town where the permanent business location of the seller at which the order was received shall be deemed to have precedence, and forthe purposes of this chaptersuch cityortown has sole and exclusive rightto such tax.

(d) The appropriate tax liability for any jet fuel sale where the order is received at a permanentbusiness location ofthe sellerlocated in this city orin anyArizona city oftown that levies an equivalentexcise tax shall be atthe rate ofthe city ortown ofsuch seller's location. (e) Exemptions. Notwithstanding Section 400(d), The exemptions in Section 465(a), (b) and (d) through (z) will applyto sales ofjetfuel taxed underthis Section. (Editor's Note: Section 422 was effective April 1, 1992, with a rate of 1.8 cents per gallon; the current rate is effective May 1, 1994.)

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Sec. 62-425. Job printing. (a)

(b) The tax rate shall be at an amount equal to one and one-half percent (1.5%) of the gross income from the business activity upon every person engaging or continuing in the business ofjob printing, which indudes engraving of printing plates, embossing, copying, micrographics, and photo reproduction. The tax imposed bythis Section shall notapplyto: (1) lob printing purchased for the purpose of resale by the purchaser in the form supplied bythejob printer.**2l** out-of-C1ty sales. 3 out-of-state sales. 4 job printing of newspapers, magazines, or other periodicals or publications foraperson who is subjectto the tax imposed by subsection 435(a) or an equivalent excise tax; provided further that said person is properly licensed by

### thetaxingjurisdiction atthe location ofpublication. (5) sales ofjob printing to a quafifying hospital, qualifying community health center ora qualifying health care organization, exceptwhen the property sold is for use In activities resulting in gross income from unrelatea business income asthatterm is defined in 26 U.S.C. Section 512. (6) (Reserved) (Editor's note: this rate was effective May 1, 1994; the previous ratewas 1%.) Sec. 62-427. Manufactured buildings. (Note: this section added effective February 1, 1995.) (a) The tax rate shall be at an amount equal to one and one-half percent (1.5%) of the gross income, induding site preparation, moving to the side, and/orset-up, upon every person

.engaging or continuing in the business activity of selling manufactured buildings within the city. Such business activity is deemed to occuratthe business location ofthe sellerwhere the purchaserfirst entered into the contractto purchasethe manufactured building. (b) The sales ofused manufactured buildings are nottaxable. (c) The sales price of furniture, furnishing fIXtures, appliances, and attachments that are not incorporated as component parts of or attached to a manufactured building are exempt from the tax imposed by this Section. The sale of such items is subjectto the tax underSection 460. (d) Underthis Section, a trade-in will not be allowed for the purpose of reducing the tax liability. Sec. 62-430. Timbering and otherextraction. (a) The 

### tax rate shall be at an amount equal to one and one-half percent (1.5%) of the gross income from the business activity upon every person engaging or continuing in thefollowing businesses:

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### OrdinanceNo. 3046

(1) felling, producing, or preparing timber or any product of the forest for sale, profit, orcommercial use. (2) extracting, refining, or producing any oil or natural gas for sale, profit, or commercial use. (b) The rate specified in subsection (a) above shall be applied to the value of the entire product extracted, refined, produced, or prepared for sale, profit, or commercial use, when such activity occurs within the City, regardless ofthe place of sale of the product or the fact that delivery may be made to a point without the City or withoutthe State. (c) If any person engaging in any business classified in this Section ships or transports prOducts, or any part thereof, out of the State without making sale of such products, orships his products outside ofthe State in an unfinished condition, the value of the products or articles in the condition or form in which they existed when transported out-of-state and before theyenterinterstate commerce shall be the basisforassessmentofthe tax imposed bythis Section. (d) (Reserved) (Editor's note: this ratewas effective May 1, 1994; the previous rate was 1

### %.) Sec. 62-432. Mining (a) The tax rate shall be at an amount equal to one tenth of one percent (.1%), not to exceed one tenth of one percent, ofthe gross income from the business activity upon every person engaging orcontinuing in the business of mining, smelting, or producing for sale, profit, or commercial use any copper, gold, silver, or other mineral product, compound, orcombination ofmineral products; butnot inclUding the extraction, removal, orprodudionofsand, gravel, or rockfrom the ground for sale, profit, orcommercial use. (b) The rate specified in subsection (a) above shall be applied to the value of the entire product mined, smelted or produced for sale, profit, or commercial use, when such activity occurs within the city, regardless ofthe place of sale ofthe product or the fact that delivery may be made to a point without the city or without the state. (c) If any person engaging in any business classified in this Section ships ortransports products, orany partthereof, outofthe statewithoutmaking sale ofsuch products, or ships his products outside of the state in an unfinished condition, the value of the products or articles in the condition orform in which they existed when transported out-of-state and before they enter interstate commerce shall be the basis for assessmentofthe tax imposed bythis Section. (Editor's note: this rate was effective 2/1/95; the previous rate was 1.5% effective 5/1/94; the previous rate was 1%.)

Ch 62taxcode 10121/99 11789(93101I.doc) Pg. 34 of 116 34

### OrdinanceNo. 3046

Sec. 62-435. Publishing and periodicalsdistribution. (a)

(b)

(c)

(d)

(e)



### (f) The tax rate shall be at an amount equal to one and one-half percent (1.5%) of the gross income from the business activity upon every person engaging or continuing in the business activityof: (1) pliblication of newsgapers,**magazine~L** or other periodicals when published within the City, measured by tIle gross income derived from notices, subscriptions, and local advertising as defined in Section 405. In cases where the location of publication is both within and without this State, gross income subject to the 

### tax shall refer only to gross income derivecffrom residents ofthis State or generated by permanent business locations within this State. (2) distribution ordeliverywithin the City of newspapers, magazines, orother periodicals not published within the City, measured by the gross income derived from subscriptions. Location ofPublication is determined by: (1) location ofthe editorial offices ofthe publisher, when the physical printing is not performed bythe publisher; or (2) location of either the editorial offices or the printing facilities, if the pUblisherperforms his own physical printing. Subscription income shall indude all circulation revenue of the publisher except amounts retained byorcredited to carriers or othervendors as compensation for deliverywithin the State by such carriers orvendors, and further except sales of published items, directly, or through distributors, for the purpose of resale, to retailers subjectto the Privil8ge Taxon such resale. Circulation for the purpose of measurement of gross income subject to the 

### tax, shall be considered to occuratthe place ofdelivery ofthe published items to the subscriber or intended readerirrespective ofthe location ofthephysical facilities or personnel ofthe publisher. However, delivery by the United States mails shall be considered to haveoccurred at

### the location of publication. Allocation of taxes between cities and towns. In cases where publication or distribution occurs in more than one city or town, the measurement of gross income subjectto tax bythe Cityshall incfude: (1) that portion ofthe gross Incomefrom publication which reflects the ratio of circulation within thiS Cityto circulation in all incorporated cities and towns in this State having substantially similar**~rovisions;** plus (2) onlywhen publication occurs Within the City, that portion ofthe remaining gross income from rublication which reflects the ratio of circulation within this City to the tota circulation of all incorporated cities or towns in this State within which cities the taxpayermaintains a location ofpublication.
The tax imposed by this section shall not apply to sales of newspapers, magazines or other periodicals to a qualifying hospital, qualifying community health center or a qualifying health care organization, except when the property sold is for use in activities resulting in gross income from unrelated bUSiness income as thatterm is defined in 26 U.S.C. Section 512. (Editor's note: this rate was effective May 1, 1994; the previous ratewas 1%.)

Ch 62tax code 10/21199 11789(93101 !.doc) Pg. 35 of 116 35

### OrdinanceNo. 3046

Sec. 62-440. (Reserved)
Sec. 62-444. Hotels.
The tax rate shall be at an amount equal to one and one-half percent (1.5%) of the gross income from the business activity upon every person engaging orcontinuing in the business of operating a hotel charging for lodging and/orlodging space furnished to any: (a) Person. (b) (Reserved) (c) Income derived from incarcerating or detaining prisoners who are under the jurisdiction of the United States, this state or any other state or a political subdivision ofthis state orofany otherstate in a privately operated prison, jail or detention facility is exemptfrom the

### tax imposed bythis section.

Sec. 62-445. Rental, leasing, and licensing for use of real property.

(2) (3) (a)

(b)

(c)

(d)

(e)

Ch 62tax code 10/21199 11789(93101 !.doc) Pg. 36 of 116 The.tax rate shall be at an amount equal to one and one-half percent (1.5%) of the gross income from the business**activi~** upon every person engaging or continuing in the business of leasing or renting real property located within the City for a consideration, to the tenant in actual possession, or the licensing for use of real propertyto the final licensee locatedwithin the Cityfora consideration including any improvements, rights, or interest in such property; provided further that: (1) Payments made by the lessee to, oron behalf of, the lessorfor property taxes,.repairs, or improvements are considered to be part of the taxable gross Income. Charges for such items as telecommunications, utilities, pet fees, or mainfenance are considered to be partofthetaxable gross income. However, if the lessor engages in telecommumcation activity, as evidenced by installing individual metering equipment and by billing each tenant based upon actual usage, such activity is taxable under Section 

### 470.
If individual utility meters have been installed for each tenant and the lessor separately charges each single tenant for the exact billing from the utility company, such Charges are exempt. Charges by a qualifying hospital, qualifying community health center or a qualifying health care organization to patients of such faCilities for use of rooms or other real property during the course of their treatment by such facilities are exempt.

. Charges forjoint pole usage by a person engaged in the business of providir'lg or furnishing utility ortelecommunication services to anotherperson engaged in the business of providing or furnishing utility or telecommunication services are exemptfrom the

### tax imposed by this Section. (Reserved)

36(f) (g) (h) (i) U)
(k) (I) (m) (n)

{o) 

### OrdinanceNo. 3046

(Reserved (Reserved) (Reserved) (Reserved) Exempt from the 

### tax imposed by this Section is gross income derived from the activitIestaxable underSection 444 ofthis Code. (Reserved) (Reserved) (Reserved) Notwithstanding the provisions ofSection 200(b), the fair marketvalue of one (1) apartment, in an apartment complex provided rent free to an employee of the apartment complex is not subject to the 

### tax imposed by this Section. For an apartment complex with more than 

### fifty (50) units, an additional apartment provided rent free to an employee for every additional fifty (50) units is not subjectto the tax imposed bythis section.
Income derivedfrom incarcerating ordetaining prisoners who are underthejUrisdiction of the United States, this state orany otherstate ora political subdivision ofthis state orof any otherstate in a privately operated prison, jailordetention facility is exempt from the tax imposed bythissedion.

Sec. 62-446. (Reserved)
Sec. 62-447. Rental, leasing, and licensing for use of real property: additional tax upon transient lodging.
In addition to the taxes levied as prOVided in Section 444, there is hereby levied and shall be collected an additional tax in an amount equal to two and nine-tenths percent (2.9%) of the gross income from the business activity of any hotel engaging or continuing within the City in the business of charging for lodging and/or lodging space furnished to any transient. Transient means any person who, for any period of not more than thirty (30) consecutive days, either at his own expense oratthe expense of another, obtains lodging orthe use of any lodging space in any hotel forwhich lodging oruse of lodging space a charge is made. (Editor's Note: The rate is effective July 1, 1991; the previous rate was 2%.)
Sec. 62-450. Rental, leasing, and licensing for use oftangible personal property. (a)

Ch 62taxcode 10121199 11789(93101 I.doc) Pg. 37 of 116 The tax rate shall be at an amount equal to one and one-half percent (1.5%) of the gross income from the business activity upon every person engaging or

37

### OrdinanceNo. 3046

continuing in the business of leasing, licensing for use, or renting tangible personal propertyfora consideration, including thatwhich is semi-permanently or permanently installed within the City as provided by Regulation. (b) Special provisions relating to long-term motorvehicle leases. A lease transaction involving a motorvehicle for a minimum period oftwenty-four (24) months shall be considered to have occurred at the location ofthe motor vehicle dealership, ratherthan the location ofthe place of business ofthe lessor, even ifthe lessor's interest in the lease and its proceeds are sold, transferred, orotherwise assigned to a lease financing institution; provided furtherthatthe city or town where such motorvehicle dealership is located levies a Privilege Tax oran equivalent excise tax upon the transaction. (c) Gross income derived from the following transactions shall be exempt from PrivilegeTaxes imposed bythis Section: (1) rental, leasing, or licensing for use of tangible personal property to persons engaged or continuing in the business of leasing, licensing for use, orrental ofsuch property. (2) rental, leasing, or licensing for use of tangible personal property that is semi-permanentlyorpermanently installedwithin anothercity ortown that levies an equivalentexcise taxon the transaction. (3) rental, leasing, or licensing for use offilm, tape, or slides to a theater or other person taxed under Section 410, or to a radio station, television station, orsubscription television system. (4) rental, leasing, orlicensingforuse ofthefollowing: (A) prosthetics. (B) income-producing capital equipment (C) mining and metallurgical supplies. These exemptions include the rental, leasing, or licensing for use of tangible personal property which, if it had been purchased instead of leased, rented, or licensed by the lessee or licensee, would qualify as income-producing capital equipmentormining and metallurgical supplies.

. (5) rental, leasing, or licensing for use of tangible personal property to a qualifying hospital, qualifying community health center or a qualifying health care organization, exceptwhen the property so rented, leased, or licensed is for use in activities resulting in gross income from unrelated business income as that term is defined in 26 U.S.C. Section 512 or rental, leasing, or licensing for use of tangible personal property in this state by a nonprofit charitable organization that has qualified under Section 501(c)(3) of the United States Internal Revenue Code and that engages in and uses such property exclusivelyfortraining, job placement or rehabilitation programs or testing for mentally or physically handicapped persons. (6) ,separately billed charges for delivery, installation, repair, and/or maintenance as provided by Regulation. (7) charges for joint pole usage by a person engaged in the business of providing or furnishing utility or telecommunication services to another person engaged in the business of providing or furnishing utility or telecommunication services.

Ch 62tax code 10/21/99 11789(93101I.doc) Pg. 38 of 116 38

### OrdinanceNo. 3046 (8) (Reserved) (9) rental, leasing or licensing of aircraft that would qualify as aircraft acquired for used outside the state, as prescribed by Regulation, if such rental, leasing, orlicensing had been asale. (10) rental, leasing and licensing for use of motorvehicles that use alternative fuel as defined inA.RS. section 43-1086 on orafterMay5,1999.

Sec. 62-452. (Reserved)

Sec. 62-455. Restaurants and Bars. (a)

(b)

(c) The tax rate shall be at an amount equal to one and eight-tenths percent (1.8%) of the gross income from the business activity upon every person engaging or continuing in the business of preparing or serving food or beverage in a bar, cocktail lounge, restaurant, or similar establishment where articles of food or drink are prepared or served for consumption on or off the premises, including also the activity of catering. Cover charges and minimum charges must be included in the gross income ofthis business activity. Caterers and other taxpayers subject to the tax who deliver food and/or serve such food off**premise~1** shall also be allowed to exclude separately charged delivery, set-up, and Clean-up charges, provided that the charges are also maintained separately in the books and records. VVhen a taxpayer delivers food and/or serves such fOod off premises, his regular business location shall still be deemed the location of the transaction for tfte purposes of the tax imposed by this section. The tax imposed bythis Section shall not apply to sales to a qualifying hospital, qualifying community health center or a qualifying health care organization, except When sold for use in activities resulting in gross income from unrelated business income asthatterm is defined in 26 V.S.C. Section 512.

(f) (e) (d) the tax imposed by this Section shall not apply to sales of food, beverages, condiments and accessories used for serving food and beverages to a commercial airline, as defined in A.R.S. 

### § 42-1310.01(a)(48), thatservesthe food and beverages to its passengers, without additional charge, for consumption in flight. The tax imposed by this Section shall not apply to sales of prepared food, beverages, condiments oraccessories to a public educational entity, pursuant to any ofthe provisions of Title 15, Arizona Revised Statutes, to the extent such items are to be prepared or served to individuals for consumption on the premises ofa publiceducational entityduring school hours. forthe purposes ofthis Section, accessories means paper plates, plastic eating utensils, napkins, paper cups, drinking straws, paper sacks or other disposable containers, orotheritemswhich facilitate the consumption ofthefood. (Note: This rate is effective May 1, 1994; previous rate was 1.3%, effective July 1, 1991; the previous rate was 1%.)

Ch 62tax code 10/21199 11789(93101 !.doc) Pg. 39 of 116 39

### OrdinanceNo. 3046

Sec. 62-460. Retail sales: measure oftax; burden of proof; exclusions. (a) The tax rate shall be at an amount equal to one and one-half percent (1.5%) of the gross income from the business activity upon every person engaging or continuing in the business ofselling tangible personal property at retail. (b) The burden of proving that a sale oftangible personal property is not a taxable retail sale shall be upon the person who made the sale. (c) Exclusions. For the purposes of this Chapter, sales of tangible personal property shall not include: (1) sales ofstocks, bonds, options, orothersimilarmaterials. (2) sales of lottery tickets orshares pursuantto Article I, Chapter 5, Title 5, Arizona Revised Statutes. (3) sales of platinum, bullion, or monetized bullion, except minted or manufactured coins transferred or acquired primarily for their numismaticvalue as prescribed by Regulation. (4) gross income derived from the transfer of tangible personal property which is specifically included as the gross income of a business activity upon which another Section of this Article imposes a tax. shall be considered gross income of that business activity. and are not includable as gross income subjectto the tax imposed bythis Section. (5) sales by professional or personal service occupations where such sales are inconsequential elements ofthe service provided. (d) (Reserved) (e) When this City and anotherArizona city ortown with an equivalent excise tax could claim nexus fortaxing a retail sale, the city ortown where the permanent business location ofthe selleratwhich the orderwas received shall be deemed to have precedence, and forthe purposes ofthis Chaptersuch city ortown has sole and exclusive rightto such tax. (f) The appropriate tax liability for any retail sale where the order is received at a permanent business location of the seller located in this City or in an Arizona city or town that levies an equivalent excise tax shall be at the tax rate of the city ortown ofsuch seller's location. (g) Retail sales of prepaid calling cards or prepaid authorization numbers for telecommunications services. including sales of reauthorization ofa prepaid card orauthorization number, are subjecttotax underthis section.

Sec.62-465. Retail sales: exemptions.

Ch 62 taxcode 10/21199 11789(93101I.doc) Pg. 40 of 116 40

### OrdinanceNo. 3046

Income derived from the following sources is exemptfrom the tax imposed bySection 460: (a)
(b) (c)
(d)
(e)

(f) (g) (h) (i) G)

(k)

(I)



## (m)

(n)

Ch 62taxcode 10/21/99 11789{931 01 !.doc} Pg.41 of 116 sales**~f** tangible personal propertyto a person regularly engaged in the business of seiling suCh property. out-of-City sales orout-of-state sales. charges for delivery, installation, orother direct customer services as prescribed by Regulation. charges for repair services as prescribed by Regulation, when separately charged and separately maintained in the books and records ofthe taxpayer. sales ofwarranty, maintenance, and service contracts, when separately charged and separately maintained in the books and records ofthe taxpayer. (Note: This subsectionwas added effective January 

### 1, 1997.)
sales ofprosthetics.
sales of income-producing capital equipment
sales of rental equipment'and rental supplies.
sales of mining and metailurgical supplies.
sales of motorvehicle fuel and usefuel which are SUbjectto a

### tax imposed under the provisions ofArticle I or II, Chapter 

### 16, Title 28, Arizona Revised Statutes; or sales of usefuel to a holderof a valid single trip use fuel tax permit issued under A.R.S. Section 

### 28-5739, or sales of natural gas or liquefied petroleum gas used to**pro~1** a motorvehicle. (Note: This subsectionwas**~mended** effective January 

### 1, 1997.)

, . sales oftangible personal propertyto a construction contractorwho holds a valid Privilege Tax License for engaging or continuing in the business of construction contracting where the tangiole personal property sold is incorporated into any structure or improvement to real property as part of construction contracting activity.
sales of motorvehicles to nonresidents of this State for use outside this State if the vendorships ordelivers the motorvehicle to a destination outside this State. (Note: This subsection was added effective January 

### 1, 1997.)
sales of tangible personal property which directly enters into and becomes an ingredient or component part of a product sold in the regular course of the business of job printing, manufacturing, or publication of newspapers, magazines, orother periOdicals. Tangible personal property which is consumed or usec:t up il'1 a manUfacturing, job pnnting, publishing, or production process is notan IngredIentnorcomponent partofa product. . - sales made directlyto the Federal.governmentto the extent of: (1) one hundred percent (100%) ofthe gross income derived from retail sales made by a**manufa~rer,** mOdifier, assembler, or repairer.

41(0)

(p)

(q)

(r)

(s) (t) (u)
(v)

Ch 62taxcode 10121199 11789(93101I.doc) Pg. 42 of 116 

### OrdinanceNo. 3046
(2) fifty percent (50%) ofthe gross income derived from retail sales made by anyotherperson. sales to hotels, bars, restaurants, dining cars, lunchrooms, boarding houses, or similar establishments of articles consumed as food, drink, or condiment, whether simple, mixed, or compounded, where such articles are customarily prepared orserved to patrons forconsumption on oroffthe premises, where the purchaser is properly licensed and payIng a tax under Section 455 or the equivalentexcIse tax upon such income. sales oftangible personal propertyto a qualifying hospital, qualifying community health center or a qualifying health care organization, except when the property sold is for use in activities resulting in gross income from unrelated business income as that term is defined in 26 U.S.C. Section 512 or sales of tangible personal property purchased in this state by a nonprofit charitable organization that has qualified underSection 501 (C)(3) ofthe United States Internal Revenue Code and that engages in and uses such property exclusively for training, job placement or rehaotlitation programs or testing for mentally or physically handicapped persons.
food purchased with food stamps provided through the food stamp program established bythe Food Stamp Act of 1977 (P.L. 95-113; 91 Stat 958.7 U.S.C. Section 2011 et seq.) or purchased with food instruments issued under Section 17 of the Child Nutrition Act (P.L. 95-627; 92 Stat. 3603; and P.L. 99-669; Section 4302; 42 United States Code Section 1786) but onlyto the extent that food stamps orfood instruments were actually used to purchase such food. sales of the following to persons engaging or continuing in the business of farming, ranching, orfeeding livestock,.poultryorratites: (1) seed, fertilizer, fungicides, seed treating chemicals, and other similar chemicals. (2) feed for livestock, poultry or ratites, including salt, vitamins, and other additives to such feed. (3) livestock, poultry or ratites purchased or raised for slaughter, but not including livestoCkpurchased orraised forproduction oruse, such as milk cows, breeding bulls, laying hens, riding orworkhorses. (4) (Reserved) This exemption shall not be construed to include machinery, equipment, fuels, lubricants, pharmaceuticals, repairand replacement parts, orotheritems used or consumed in the running, maintenance, or repair of machinery, equipment, buildings, or structures used or consumed in the business of farming, ranching, orfeeding oflivestock, poultryorratites. sales ofgroundwatermeasuring devices required byA.R.S. Section 45-604. (Reserved) sales of aircraft acquired for use outside the state, as prescribed by Regulation. (Note: This subsection**~s** added effectiveJuly 1, 1995.) sales offood products by producers as provided forbyA.R.S. Sections 3-561, 3- 562 and 3-563. (Note: This subsection was added effectiveJanuary 1, 1997.)

42(w) (x) (y) 

### (z) (aa)
(bb)

(cc)

(dd)

(ee)

(ff)



### (gg)

Ch 62tax code 10121199 11789(93101I.doc) Pg. 43 of 116 

### OrdinanceNo. 3046 (Reserved) (Reserved) (Reserved) (Reserved) the sale oftangible personal property used in remediation contracting as defined in Section 100 and Regulation 100.5. sales of materials that are purchased by orfor publicly funded libraries including school district libraries; charterschool libraries, community college libraries, state university libraries or lederal, state, county or municipal libraries for use by the public asfollows: (1) printed orphotographic materials. (2) 

### electronicordigital media materials. sales offood, beverages, condiments and accessories used forserving food and beverages to a commercial airline, as defined in AR.S. 

### § 42-5061(A)(50) 

### that serves the food and beverages to its passengers, without additional charge, for consumption in flight Forthe purposes of this Subsection, accessories means paper plates, plastic.eating utensils, napkins, paper cups, drinking straws, paper sacks or other disposable containers, or other items which facilitate the consumption ofthefood. In computing the tax base in the case of the sale or transfer of wireless telecommunication equipment as an inducement to a customer to enter into or continue a contract for telecommunication services that are taxable under Section 470, gross proceeds ofsales orgross income does notinclude anysales commissions or other compensation received by the retailer as a result of the**cust~mer** 

### entering into or continuing a contract for the telecommunications services. 

### forthe purposes ofthis Section, asale ofwireless telecommunication equipment to a person who holds the equipment for sale or transfer to a customer as an inducement to enter into or continue a contract for telecommunication services that are taxable under Section 470 is considered to be a sale for resale in the regularcourse ofbusiness. sales of alternative fuel as defined in AR.S. 

### § 1-215, to a used oil fuel burner who has received a DeJJartmentof Environmental Quality permitto bum used oil orused oil fuel underAR.S. 

### § 49-426 or

### § 49-480. sales of food, beverages, condiments and accessories to a pUblic educational entity, pursuantto anyofthe provisions ofTitle 15, Arizona Revised Statutes; to the extentsuch items areto be prepared orserved to individuals 

### forconsumption on the premises of a public educational entity during school hours. For the purposes of this subsection, accessories means paper plates, plastic eating utensils, napkins,**~per** 

### cups, drinking straws, paper sacks or other disposable containers, orotheritemswhich facilitatethe consumption ofthe food.

43(hh)

(ii)

(jj) 

### OrdinanceNo. 3046**sal~s** of personal hygien.e items to a. person. engaged. in the business of and subject to 

### tax under Sedlon 444 of this code If the tangible personal property is furnished without additional charge to and intended to be consumed by the person during his occupancy. Forthe purposes ofthis section, the diversion of gas from a pipeline by a person engaged in the business of operating a natural or artificial gas pipeline, for the sole purpose offueling compressor equipmentto pressurize the pipeline, is not a sale ofthe gas to the operatorofthe pipeline.
Sales of food, beverages, condiments and accessories to a nonprofit charitable organization that has qualified as an exempt organization under 26 U.S.C Section 501 (c)(3) and regularly serves meals to the needy and indigent on a continuing basis at no cost. for the purposes of this subsection, "accessories" means paperplates, plasticeating utensils, napkins, papercups, drinking straws, paper sacks or other disposable containers, or other items which facilitate the consumption ofthe food.
(kk) Sales of motorvehides that use alternative fuel as defined in A.R.S. section 43- 1086 on oraftermay5, 1999. Sec. 62-470. Telecommunication services. (a) The tax rate shall be at an amount equal to two and seventy-five one-hundredths percent (2.75%) of the 'gross income from the business activity upon every person engaging or continuing in the business,of providing telecommunication services to consumerswithin this City. ; (1 ) Telecommunication services shall include: (A) two-way voice, sound, and/or video communication over a communications channel. (B) one-way voiCe, sound, and/or video transmission or relay over a communications channel. (C) facsimile transmissions. (D) providing relay or repeaterservice. (E) providing computer interface services over a communications channel. (F) time-sharing activities with a computeraccomplished through the use ofa communications channel. (2) Gross income from the business activity of providing telecommunication services to consumers within this Cityshall include: (A) all feesforconnection to atelecommunication system. (B) toll charges, charges for transmissions, and charges for other telecommunications services; provided that such charges relate to transmissions originating in the Cityand terminating in this State. (C) fees charged for access to or subscription to or membership in a telecommunication system ornetwork.

Ch 62tax code 44 10/21199 11789(931011.doc) Pg. 44 of 116

### OrdinanceNo. 3046
(0) charges for monitoring services relating to a security or burglar alarm system located within the City where such system transmits or receives signals ordata overa communications channel. (b) Resale telecommunication services. Gross income from sales of telecommunication services to another provider of telecommunication services forthe purpose ofproviding the purchaser's customers with such service shall be exempt from the 

### tax imposed by this Section; provided, however, that such purchaseris properly licensed bythe Cityto engage in such business. (c) Interstate transmissions. Charges by a provider of telecommunication services for transmissions originating in the City and terminating outside the State are exemptfrom the 

### tax imposed bythis Section. (d) (Reserved) (e) (Reserved) (f) Prepaid Calling Cards. Telecommunications services purchased with a prepaid calling card that are taxable undersedion 62-460 are exemptfrom the taximposed underthis section.
(Editor's Note: This rate is effective May 

### 1, 1994; previous rate was 2.25%, effective August 

### 1, 1990; the previous ratewas 

### 1%.)

Sec. 62-475. Transporting for hire.
The tax rate shall be at an amount equal to one and one-half percent (1.5%) of the gross income from the business activity upon every person engaging or continuing in the business of providing the following forms oftransportatior. for hire from this City to another point within the State: (a) transporting of persons orproperty by railroad:.; provided, however, that the tax imposed by this subsection shall not applyto transporting freight or property for hire by a railroad operating exdusively in this state if the transportation comprises a portion of a single shipment of freight or property, involving more than one railroad, either from a point in this state to a point outside this state orfrom a point outside this state to a point in this state. For purposes ofthis paragraph, "a single shipment" means the transportation that begins at the point at which one of the railroads first takes possession of the freight or property and continues until the point at which one of the railroads relinquishes possession ofthefreightorproperty to a partyotherthan one ofthe railroads. (b) transporting ofoil or natural orartificial gas through pipe orconduit. (c) transporting ofproperty byaircraft.

Ch 62 tax code 10/21199 11789(93101 !.doc) Pg. 45 of 116 45

### OrdinanceNo. 3046

(d) (Reserved) Sec. 62-480. Utility services. (a)

(b)

(c)

(d) (e)

(f)
(9)

Ch 62 tax code 10/21199 11789(93101I.doc) Pg.46 of 116 The tax rate shall be atan amountequal to 

### two and seventy-five one-hundredths percent (2.75%) of the gross income from the business activity upon every person engaging or continuing in the business of producing, providing, or furnishing utility services, including electricity, electric lights, current, power, gas 

# ! natural orartificial), orwater

### to: 1) consumers orratepayerswho residewithin the City. 2) consumers orratepayers ofthis City, whetherwithin the City orwithout, to the extent that this City provides such persons utility services, excluding consumers or ratepayers who are residents of anothercity ortown which levies an equivalent excise tax upon this City for providing such utility services to such persons. Exclusion of certain sales of natural gas to a public utility. Notwithstanding the provisions of subsection (a) above, the gross income cferived from the sale of natural gas to a public utility for the purpose of generation of power to be transferred by the utility to its rate**~yers** shall be considered a retail sale of tangible personal property subjectto Sections 460 and 465, and not considered

.gross incometaxable underthis Section.

Resale utility services. Sales of utility services to another provider of the same utility services forthe purpose of providing such utility services·eitherto another properly licensed utility provider or directly to such purchaser's customers or ratepayers shall 

### be exempt and deductible from the gross income·subjectto the tax Imposed by this Section, provided that the purchaser is J)roperly licensed by all applicable taxing jurisdictions to engage or continue in the business of proviclng utility services, and further provided that the seller maintains proper documentation, in a manner similar to that for sales for resale, of such transactions. (Reserved) The tax imposed by this Section shall not apply to sales of utility services to a qualifying hospital, qualifying community health center oraqualifying health care orgamzation, exceptwhen sold foruse In activities resulting In gross Incomefrom unrelated business income as thatterm is defined in 26. U.S.C. Section 512. The tax imposed by this Section shall not apply to sales of natural gas or liquefied petroleum gas used to propel a motorvehicle. The tax imposed bythis Section shall notapplyto: (1) revenues received by a municipally owned utility in the form of fees charged to persons constructing· residential, commercial or industrial developments or connecting residential, commercial or industrial developments to a municipal utility system or systems if the fees are segregated and used only for capital expansion, system enlargement or dectservice ofthe utilitysystem orsystems. (2) revenues received by any person or persons owning a utility system in the form of reimbursement orcontribution compensation for property and equipment installed to provide utility access to, on or across the land of an actual utility consumer if the property and equipment become the

46(h) 

### OrdinanceNo. 3046
property of the utility. This exclusion shall not exceed the value of such propertyand equipment The tax imposed by this section shall not apply to sales of alternative fuel as defined in A.R.S. 

### § 1-215, to a used oil fuel burner who has received a Department of Environmental Quality permit to burn used oil or used oil fuel underA.R.S. § 49-426 OR § 49-480. (Editor's Note: This rate is effective May 1, 1994; previous rate was 2.25%, effective August 1, 1990; the previous ratewas 1%. Subsection (h) was added effectiveJuly 11, 1998.) Sec. 62-485. (Reserved)
Article V -Administration

Sec. 62-500. Administration ofthis Chapter; rule making. (a) The administration of this Chapter is vested in the Tax Collector, except as otherwise specifically provided, and all payments shall be made to the Tax Collector (b) The Tax Collector shall prescribe the forms and procedures necessary for the administration ofthe taxes imposed bythis Chapter. (c) Except as provided in this Section, no rule or regulation shall be adopted until approved byformal action ofthe City Council. (d) (Reserved)
Sec. 62-510. Divulging ofinformation prohibited; exceptions allowing disclosure. (a) Except as specifically provided, it shall be unlawful forany official oremployee of the Cityto make known information obtained pursuantto this Chapterconcerning the businessfinancial affairs oroperations ofany person. (b) The City Council may authorize an examination of any return or audit of a specific taxpayer made pursuant to this Chapter by authorized agents of the Federal Government, the State ofArizona, orany political subdivisions. (c) The Tax Collector may provide to an Arizona county, city, or town any information concerning any taxes imposed by this Chapter relative to the taxing ordinances ofthat county, city, ortown. (d) Successors, receivers, trustees, personal representatives, executors, guardians, administrators, and assignees, ifdirectly interested, may be given information by

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### OrdinanceNo. 3046

the Tax Collector as to the items included in the measure and amounts of any unpaid tax, interest, and penalties required to be paid. (e) Upon a written direction by the City Attorney or other legal advisor to the City designated bythe City Council, officials oremployees ofthe City may divulge the amount and source of income, profits, leases, orexpenditures disclosed in any return or report, and the amount of such delinquent and unpaid tax, penalty, or interest, to a private collection agency having awritten collection agreementwith the City. (f) The Tax Collector may provide information to appropriate representatives of any Arizona city or town to comply with the provisions of A.R.S. Section 42-1452 relating to the assessmentand collection of intermunicipal taxes. (g) The Tax Collector may provide information to authorized agents of any other Arizona governmental.agency involving the allocation of taxes imposed by Section 435 upon publishing and distribution ofperiodicals. (h) The Tax Collector may provide information regarding the enforcement and collection of taxes imposed by this Chapter to any governmental agency with which the City has an agreement. Sec. 62-515. Duties ofthe Taxpayer Problem Resolution Officer. (a) The TaxpayerProblem Resolution Officershall assisttaxpayers in: (1) obtaining easily understandable tax information and information on audits, corrections and appeals procedures ofthe City. (2) answering questions regarding preparing and filing the returns required underthis chapter. (3) locating documents filed with or payments submitted to the Tax Collectorbythe taxpayer. (b) The Taxpayer Problem Resolution Officershall also: (1) receive and evaluate complaints of improper, abusive or inefficient service by the tax collector or any of his designees, employees, or agents and recommend to the City Manager or, for a city without a City Manager, the Chief Administrative Officer appropriate action to correct such service. (2) identify policies and practices of the Tax Collector or any of his designees, employees, oragents that might be barriers to the equitable treatment oftaxpayers and recommend alternatives to the City Manager or, fora citywithout a City Manager, the ChiefAdministrative Officer. (3) provide expeditious service to taxpayers whose problems are not resolved through normal channels. (4) negotiatewith the Tax Collector, his designees, employees, oragents to resolve the mostcomplexand sensitivetaxpayerproblems.

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(5) take action to stop or prohibit the Tax Collector from taking an action againstataxpayer. (6) participate and present taxpayers' interests and concerns in meetings formulating the City's policies and procedures under and interpretation ofthis chapter. (7) compile data each year on the numberand type oftaxpayer complaints and evaluate the actionstaken to resolve those complaints. (8) survey taxpayers each year to obtain their evaluation of the quality of service provided by the 

### tax collector, his designees, employees, and agents. (9) perform other functions which relate to taxpayer assistance as prescribed bythe City Manageror, fora citywithout a City Manager, the ChiefAdministrative Officer. (c) Actions taken by the Taxpayer Problem Resolution Officer may be reviewed and/or modified only by the City Manager or, for a city without a City Manager, the Chief'Administrative Officer upon request of the Tax Collectorora taxpayer. (d) The Mayor and Council of the City shall be provided with a report quarterly which identifies: (1) any complaints of improper, abusive or inefficient service received by the Taxpayer Problem Resolution Officer since the date of the. last report. (2) any recommendations made, action taken or surveys obtained by the Taxpayer Problem Resolution Officer pursuant to subsection (b)(1)- 

### (9), above, since the date ofthe last report. Sec. 

### 62-516. Taxpayerassistance orders. (a) The Taxpayer Problem Resolution Officer, with or without a formal written request from a taxpayer, may issue a Taxpayer Assistance Order that suspends or stays an action or proposed action by the Tax Collector if, in the Problem Resolution Officer's determination, ataxpayer is suffering orwill suffer a significant hardship due to the manner in which the Tax Collector is administering the tax laws. (b) A Taxpayer Assistance Order may require the tax collector to release any lien perfected under this chapter, or cease any action or refrain from taking any action to enforce against the taxpayer any section of this chapter pending resolution ofthe issue giving risetothe TaxpayerAssistance Order. (c) The Taxpayer Problem Resolution Officer, City Manageror, for a city without a City Manager, the ChiefAdministrative Officer may modify, reverse or rescind a**~~~~e** 10/21199 11789(93101 !.doc) Pg. 49 of 116

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Taxpayer Assistance Order. A Taxpayer Assistance Order is binding on the Tax Collectoruntil it is reversed or rescinded. (d) The running of the applicable statute of limitations for any action that is the subject of a Taxpayer Assistance Order is suspended from the date the taxpayer applies for the order or the date the order is issued, whichever is earlier, until the order's expiration date, modification date or recision date, 

### if any. Interest that would otherwise accrue on an outstanding tax obligation is not affectedbythe issuance ofaTaxpayerAssistance Order. (e) aTaxpayerAssistance Ordermay not be used: (1) to contestthe merits ofa

### tax liability. (2) to substitute for informal protest procedures or administrative orjudicial proceedings to review a deficiency assessment, collection action or denial ofa refund claim. Sec. 62-517. Basis forevaluating employee performance. (a) The Tax Collector shall solicit evaluations from taxpayers and include such evaluations in the performance appraisals of his employees, where applicable. (b) The Tax Collector shall not evaluate an employee on the basis of taxes assessed orcollected bythat employee. Sec. 62-520. Reporting and payment oftax. (a) Returns. The returns required under this Chapter shall be made upon forms prescribed or approved by the Tax Collector, and shall be considered filed only when the accuracy of the return has been attested to, by signature upon the form, by an authorized agent of the taxpayer, and when such form has been received bythe Tax Collector. (b) Payment. If payment is made in any form otherthan United States legal tender, the tax obligation shall not be satisfied until the paymenthas been honored in funds. (c) Requirement of Security. If a taxpayer has remitted payment in the form of a check or other form of draw upon a bank or third party and such remittance has not been honored with funds, the Tax Collector may demand security for future payments. (d) Method of Reporting. Each taxpayer shall elect to report on either a cash receipts basis or an accrual basis and shall indicate the choice on the Privilege License application. A taxpayer shall not change his reporting method without receiving priorwritten approval bythe TaxCollector. (1) Taxpayers must report all gross income subject to the tax using the same basis of reporting.

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