EXHIBIT 4





EXHIBIT 5
ORDINANCE NO. 3046

i~ (,r Ch)n~U<;::f

City Clerk

Oifidal File Copy

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF CHANDLER,

ARIZONA, RENUMBERING AND AMENDING APPENDIX C TO BECOME

CHAPTER 62,TAX CODE IN THE REVISED CHANDLER CITY CODE

WHEREAS, the City is in the process of revising 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 of the Code revisions will be

made effective as ofthat date; and

WHEREAS, the following renumbering of Appendix C represents part ofsuch code revisions.

WHEREAS, certain updates are necessary to conform the city's tax code with newly adopted state

law and with recommendations by the Municipal Tax Code Commission; and

NOW, THEREFORE, BE IT ORDAINED by the City Council ofthe City of Chandler, Arizona,

as follows;

SECTION 1. Because this Ordinance is but one segment ofthe planned re-codification of the 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 of the Ordinance and may be

modified to achieve the best possible organization ofthe Code.

SECTION 2. Appendix C as amended by Ordinance 3029 ofthe City Code is hereby renumbered to

become Chapter 62 and amended to read as set forth in Exhibit A attached hereto and made a part

hereof by reference..

SECTION 3. This ordinance is the next phase in the consistency revisions to the City Code. It also

contains the annual amendments necessary to conform the City'S tax code to newly adopted state law

and with recommendations by the Municipal Tax Code Commission. The following is a summary of

the changes contained in this amendment.

Sec. 62-110. Definitions: Income-producing capital equipment.

1. Expands the definition of income-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

Communication Commission (FCC) mandate.

2. Expands the exemptions to include parts used in operating pipes and valves.

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 and bookbinding.

4. Amends the income-producing capital equipment exemption to include all railroad rolling

stock and signaling equipment.

5. Amends the definition of expendable materials.
Sec. 62-415.

Sec. 62-416.

Sec. 62-417.

builders.

Sec. 62-418

Ordinance No. 3046

Page 2

Construction contracting: construction contractors.

Construction contracting: speculative builders.

Construction contracting: owner-builders who are not speculative

(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, equipment or other personal property that is exempt under the retail 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

retroactive to January 1, 1999.)

3. Provides a deduction from the construction contracting, speculative builder and owner-builder

sections for proceeds from the installation, assembly, repair or maintenance ofincome-producing

capital equipment that does not become permanently attached.

4. Under prescribed conditions, exempts construction contracts for agricultural pollution control

equipment, environmental control machinery and equipment, environmental remediation

activities, cleanrooms and egg production facilities.

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 licensing for use of real property.

Adds a deduction for gross receipts derived from incarcerating or detaining inmates. Cities are

required by state law to make this change.

Sec. 62 -450. Rental, leasing, and licensing for use of tangible personal property.

Exempts from tax the rental, leasing and licensing of alternative fuel vehicles. Cities are required

by state law to make this change.

Sec. 62 -460. Retail sales: measure of tax; burden of proof; exclusions.

Clarifies that the sale of a telephone calling card is taxable under the retail classification and

exempt from tax under the telecommunications classification.

Sec. 62 -465. Retail sales: exemptions.

1. Makes a technical correction, for those cities/towns that tax food, to clarify a reference to

the United States Code.

2. Exempts from tax the sale of food to a nonprofit charitable organization that has qualified

under section 501(c)(3) of the Internal Revenue Code and that regularly serves meals to the

needy and indigent on a continuing basis at no cost.

3. Exempts from tax gas used to fuel compressor equipment used to pressurize the gas

pipeline.

4. Exempts from tax the sale of alternative fuel vehicles. Cities are required by state law to

make this change.
Ordinance No. 3046

Page 3

Sec. 62 -470. Telecommunication services.

Confonning change on pre-paid calling cards. See Section 62-460.

Sec. 62 -475. Transporting for hire.

Exempts from tax the transporting of persons or goods on short-line railroads.

Sec. 62 -575. Judicial review.

Places the burden of proof, when detennining a factual issue relevant to the taxpayer's tax

liability, on the city.

Sec. 62-660. Use tax: exemptions.

See Section 62-465 for an explanation ofthe exemptions.

Reg. 62-100.4. Out-of-City/Out-of-State Sales: Sales to Indians NATIVE AMERICANS.

Replaces the tenn "Indian" with "Native American".

SECTION 5. This ordinance shall take effect January 1,2000.

INTRODUCED AND TENTATIVELY APPROVED by the City Council ofthe City ofChandler, . I~JI'tIlIl"""I" Anzona, ~~\t!..~!i{4:rRctober 1999.

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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 of the City of Chandler, Arizona, at a regular meeting held on the 18th

day of November 1999, and that a quorum was present thereat.

;: ) f, ' ..... ;~. t

CITY CLERK

APPROVED AS TO FORM:

PUBLISHED:
EXHIBIT A TO ORDINANCE 3046

CHAPTER 62 TAX CODE

Article I - General Conditions and Definitions

Sec. 62- 100. General definitions.

For the purposes of this Chapter, the following definitions apply:

Assembler means a person who unites or combines 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 activity taxable under this Chapter, and who receives

for his principal all or part of the gross income from the taxable 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, or advantage. either direct or indirect, but not castlal

actiVities or sales.

Business Day means any day of the week when the Tax Collector's office is open for the public

to conduct the Tax Collector's business.

Casual Activity or Sale means a transaction of an isolated nature made by a person who neither

represents himself to be nor is engaged in a business subject to a tax imposed by this 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 that the volume and

frequency of such sales .<:fo not indicate that the seller regu arly engages in selling such

property. .

Combined Taxes means the sum of all 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 otherwisej

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. or any other electromagnetic means of moving a message.

Construction Contracting refers to the activity of a construction contractor.

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Ordinance No. 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, subtract from, improve, move, wreck, or demolish

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 fulfillment of a contract.

Delivery (of Notice) by the Tax Collector means "receipt (of notice) by the taxpayer".

Delivery, Installation, or Other Direct 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 further that the charge for such labor or service is separately billed

to the customer and maintained separately in the taxpayer's books and records.

Engaging, when used with reference to engaging or continuing in business, includes the

exercise of corporate or franchise powers.

EqUivalent Excise Tax means either:

(1) A Privilege or Use Tax levied by another Arizona municipality upon the

transaction in question, and paid either to such Arizona municipality airectly or to

the vendor; or

(2) An excise tax levied by a political subdivision of a state other than Arizona upon the transaction in question, and paid either to such jurisdiction directly or to the

vendor.

(3) An excise tax levied by a Native American government organized under the laws

of the federal government upon the transaction in question, and paid either to

such jurisdiction directly or to the vendor. (This subsection was added effective

2/1/95.) .

Federal Government means the United States Government, its departments and agencies; but

not including national banks or federally chartered or insured banks, savings and loan

institutions, or credit unions.

Food means any items intended for human consumption as defined by rules and regulations adopted by the Department of Revenue, State of Arizona, pursuant to 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 hoteliinn, hostelry, tourist home, house, motel, rooming house, apartment house, trailer, or other 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, or primary health care facilities.

Jet Fuel means jet fuel as defined in A.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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Ordinance No. 3046

Lessee includes the equivalent person in a rental or licensing agreement for all purposes of this

Chapter.

Lessor includes the equivalent person in a rental or licensing agreement for all purposes of this

Chapter.

Ucensing (for Use) 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 or parking space for the property of said tenant

Manufactured Buildings means a manufactured home, mobile home or factory built building, as

defined in A.R.S. Section 41-2142.

Manufacturer means a person engaged or continuing in the business of fabricating, prodUcing

or manufacturing products, wares, or articles j for use from other forms of tangible persona

property, imparting to such new forms, qualities, properties, and combinations.

Mining and Metallurgical Supplies means all tangible personal property a~uired by persons

engaged in activities defined in Section 432 for such use. This definition shall not include:

l

1j janitorial equipment and supplies. 2 office equipment, office furniture, and office supplies.

3 motor vehIcles licensed for use upon the highways of the State.

Modifier means a person who reworks, changes, or adds to products, wares, or articles of

manufacture.

Nonprofit Entity means any entity organized and operated exclusively for charitable purposes, or

operated by the Federal Government, the State, or any political subdivision of the State.

Occupancy (of Real Property) means any occupancy or use, or any 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 of title and possession occur without the City; and

2) the stock from which such personal property was taken was not within the

corporate limits of the City; and

(3) the order is received at a permanent business location of the seller located

outside the City; which location is used for the substantial and regular conduct of

such business sales activity. In no event shall the place of business of the buyer be determinative of the situs of the receipt of the order.

For the purpose of this definition it does not matter that all other indicia of business occur within

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 storehouse within 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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Ordinance No. 3046

the order is placed from without the State of Arizona; and

the order is placed by other than a resident of the State to be determined in a

manner similar to "resides within the City"; and

the property is delivered to the buyer at a location outside the State; and

the property is purchased for use outside the State.

Owner-Builder means 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 other association 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 parent corporation.

Prosthetic means any of the 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 practitioner or veterinarian:

(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, or similar braces.

(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 or medicine, including oxygen. ( ) equipment used to generate, monitor, or provide 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 not useful to a person in the absence of illness or

injury and IS appropriate for use in the home.

(Note: Paragraphs 2 and 6 of this definition were changed effective January 1, 1997)

Qualifying Community Health Center means an entity that is recognized as nonprofit under

501 (c}(3) of the United States Internal Revenue Code, that is a community-based, primary care

clinic that has a community-based board of directors and that is either:

(1) the sole provider of primary care in the community.

(2) a non-hospital affiliated clinic that is located in a federally designated medically

under served 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 of all monies that it receives from all sources each year only for health and medical related

educational and charitable services, as documented by annual financial audits prepared by an

independent certified public accountant, performed accordinq to generally accepted accounting standards and filed annually with the Anzona Department Of Revenue.

Qualifying Hospital means:

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(1)

(3)

(2)

Ordinance No. 3046

A licensed hospital which is organized and operated exclusively for charitable

purposes, no part of the net earnings of which Inures to the benefit of any private shareholder or individual.

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 or health related services and is not used or held for profit. A hospital, nursing care institution or residential care institution which is operated

by the federal government, this state or a political subdivision of this state.

Receipt (of Notice) by the Taxpayer means 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 of the release or threat 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 of hazardous substances or taking such other actions as may

be necessary to prevent, minimize or mitigate damage to the public health or welfare 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 drinking water supply.

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

license to others; provided that

(1) (Reserved) (2) the vendee is regularly engaged in the business of renting, leasing, or licensing

such property for a consideration; and

(3) the item so claimed as "rental eqUipment" is not used by the person claiming the

exemption for any purpose other than rental, lease, or license for compensation,

to an extent greater than fifteen percent (15%) of its actual use.

Rental Supply means an expendable or nonexpendable repair or replacement part sold to

become part of "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!ir or replacement part; and

(2) the vendee is regularly engaged in the business of renting, leasing, or licensing

such property for a consideration; and

(3) the item so claimed as "rental equipment" is not used by the person claiming the

exemption for any purpose other than rental} lease, or license for compensation,

to an extent greater than fifteen percent (15~o) of its actual use.

Repairer means a person who restores or renews products, wares, or articles 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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Ordinance No. 3046

Restaurant means any business activity where articles of food, drink, or condiment are

customarily prepared or served to patrons for consumption on or off the 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 or sports or similar events, who prepares or sells food or drink

for consumption on or off the premises is considered a "restaurant", and not a "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.

RetaJ1er means 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 manner or by any means whatsoever, including consignment transactions 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 or in part, furnish either directly or indirectly the materials used in such

fabrication work.

Speculative Builder means 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 of the stage of completion of such homes; or

(B) imprOVed residential or commercial lots without a structure; or

(2) An owner-builder who sells or contracts to sell improved real property, other than

imfroved real property specified in Subsection (1) above:

(A prior to completion; or

(B before the expiration of twenty-four (24) months after the improvements of

the real property sold are substantially complete.

Substantially Complete means the construction contracting or reconstruction contracting:

[

11 has passed final inspection or its equivalent; or

2 certificate of occupancy or its equivalent has been issued; or

3 is ready for immediate occupancy or use.

Supplier means any person who rents, leases, licenses, or makes sales of tangible personal

property within the City, either directly to the consumer or customer or to wholesalers, jobbers, fabricators, manufacturers, modifiers, assemblers, repairers, or those 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 under this Chapter.

Taxpayer m~~ns any person liable,for an~ tax under this Chapte~.

Taxpayer Problem Resolution Officer means the individual designated by the City to 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 of whether the Taxpayer Problem Resolution Officer is or is

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Ordinance No. 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 Officer can be obtained from the Tax Collector.

(Note: This definition was added effective January 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 or any combination OT communications cnannels.

Utility Service means the producing, providing, or fumishing of electricity, electric lights, current,

power, gas (natural or artificial), or water to 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 refer to 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 pit operations for extracting 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 carrier equipment including optical fiber, coaxial cable; and other

transmission media which are components of carrier systems.

(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 or transmitting 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. For the purpose of this

section, related equipment includes: compressor units, regulators, machinery and

equipment, fittings, seals and any other parts that are used in operating the pipes

or valves.

(6) Aircraft. navigational and communication instruments, and other accessories and

related equipment sold to:

(A) A person holding a federal certificate of pUblic 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 or foreign

commerce.

(8) Any foreign govemment for used by such govemment outside of this

state.

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(7)

(8)

(9)

(10)

(11)

(12)

(13)

(14)

(15)

(16) .

(17)

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Ordinance No. 3046

(C) Persons who are not residents of this state and who will not use such

property in this state other than in removing such property from this state.

This subdivision also applies to corporations that are not incorporated in

this state, regardless of maintaining a place of business in this state, if the

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 or on behalf of a certificated or licensed carrier of persons or

property.

Railroad rolling stock, rails, ties and signal control equipment used directly to

transport persons or property.

Machinery or equipment used directly to drill for oil or gas or used directly in the

process of extracting oil or gas from the earth for commercial 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 a federal certificate of convenience and necessity or operated

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 mass transportation.

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

Groundwater measuring devices required under A.R.S. 45-604.

(Reserved)

(Reserved)

(Reserved)

Cleanrooms that are used for manufacturing, processing or fabrication of

semiconductor products. For purposes of this paragraph, "cleanroom" means all

property that comprises or creates an environment where humidity, temperature,

particulate matter and contamination are precisely controlled within specified

parameters, without regard to whether the property is actually contained within

that environment or whether 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 or to control airflow, temperature, humidity, chemical purity

or other environmental conditions or manufacturing tolerances, as well as

the production machinery and equipment operating in conjunction with the

c1eanroom environment

(B) does not include the building or other permanent, nonremovable

component of the building that houses the cfeanroom environment . Machinery and equipment that are purchased by or on 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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the expiration of five years after the 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 developing technology. (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 complement the production needs and

orientation of the 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 pursuant to 47 Code Of Federal Regulations Parts 25 and 100.

(8) any satellite television or data transmission facility, if both of the 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 or on behalf of one or more c!irect broadcast satellite television

or data transmission services that operate pursuant to 47 Code Of

Federal RegUlations Parts 25 And 100.

(ii) Over two-tftirds of the transmissions, measured in megabytes, transmitted by or on behalf of those direct broadcast television or

data transmission services during the test period were transmitted

by the facility to or on behalf of those services.

For purposes of subdivision (b) of this paragraph, test reriod 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 or the date on which the direct broadcast

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 or the sorting or cooling of eggs. this exemption

does not apply to vehicles used for transporting 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

development that is used directly to 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, water or air pollution.

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)

Ordinance No. 3046

Communications Commission Order issued April 21, 1997, 47 Code of Federal

Regulations Part 73. This paragraph does not exempt any of the following:

(A) Repair or replacement parts purchased for the machinery or equipment

described in this paragraph.

(8) Machinery or equipment purchased to replace machinery or equipment for which

an exemption was previously claimed and taken under this 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 equipment and hand tools.

Office equipment, furniture, and supplies.

Tangible personal pro~rty used in selling or distributing activities. . Motor vehicles required to be licensed oy the State of Arizona except buses or

other urban mass transit vehicles specifically exempted pursuant to subsection

(a) (10) above without regard to the use of suCh motor vehIcles.

Shops, bUildings, docks, depo!; and all other materials of whatever kind or

character not specifically includea as exempt

Motors and pumps used in drip irrigation systems.

Liquid, solid, or gaseous chemicals used or consumed in manufacturing

processing, fabricating or research and development.

For purposes of this Section:

(1) Aircraft includes:

(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 of the 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

or licensed carrier of persons or proper:tY. (2) Other accessories and related equipment includes aircraft accessories and

equipment such as ground service equipment that physically ~(>ntact aircraft at

some point during the overall carrier operation.

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

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(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 for the purposes of this Chapter, regardless of the

method by which title, possession, or right to use the software is transferred to

the user.

(b) Custom Computer Programming means any computer software which is written

or prepared exclusively for a customer and includes those services represented

by separately stated charges for the modification of existing prewritten programs

when the modifications are written or prepared exclusively for a 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 meet the customer's needs

is custom computer programming only to the extent of the modification,

and only to the extent that the actual amount charged for the modification

is separately stated on invoices, statements, and other billing documents

supplied to the customer.

Sec. 62-120. Definitions: food for home consumption.

(a) For the purposes of this Section only, the following definitions shall be applicable:

(1) Eligible grocery business means an establishment whose sales of food are such

that it is eligible to participate in the food stamp program established by the 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 of this 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 of food means tables, chairs, benches, booths,

stools, counters, and similar conveniences, trays, glasses, dishes, or other

tableware and parking areas for the convenience of in-car consumption of food in

or on the premises on which the retailer conducts business.

Food for consumption on the premises means any of the following:

!

A! Hot prepared food as defined below.

B Hot or cold sandwiches.

C Food served by an attendant to be eaten at tables, chairs, benches,

booths, stools, counters, and similar conveniences and within parking

areas for the convenience of in-car consumption of food.

!~ Food served with trays, glasses, dishes, or other tableware.

Beverages sold in cups, glasses, or open containers.

Food sold by caterers.

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Ordinance No. 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.

Hot prepared food 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 or part of a building, parking lot, or grounds.

(3)

(4)

(b) Food for home consumption means all food, except food for consumption on the

premises, if sold by any of the following:

(1) An eligible grocery business.

(2) A person who conducts 'a business whose primary business is not the sale of

food but who 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 of food on the premises.

A person who conducts a delicatessen business either from a counter which is

separate from the place and cash register where taxable sales are made or from

a counter which has two cash registers and which are used to record taxable and

tax exempt sales, or a retailer who conducts a delicatessen business who uses a

cash register which has at least two tax computing keys which are used to record

taxable and tax exempt sales.

(Reserved)

Vending machines and other types of automatic 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 or a 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 of Gross Income

Sec. 62-200. Determination of Gross Income: in general.

(a) Gross income includes:

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(1 )

(2)

(3)

(4)

Ordinance No. 3046

the value proceeding or accruing from the sale of property, the providing

of service, or both.

the total amount of the sale, lease, license for use, or rental price at the

time of such sale, rental, lease, or license.

all receipts, cash, credits, barter, exchange, reduction of or forgiveness of

indebtedness, and property of every kind or nature derived from a sale,

lease, license for use, rental, or other taxable activity.

all other receipts whether payment is advanced prior to,

contemporaneous with, or deferred in whole or in part SUbsequent to the

activity or transaction.

(b) Barter, exchange, trade-outs, or similar transactions are includable in gross income

at the fair market value of the service rendered or property transferred, whichever

is higher, as they represent consideration given for consideration received.

(c) No deduction or exclusion is allowed from gross income on account of the cost of the

property sold, the time value of money, expense of any kind or nature, losses,

materials used, labor or service performed, interest paid, or credits granted.

Sec. 62-210. Determination of gross income: transactions between affiliated companies

or persons.

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, but otherwise under similar circumstances and conditions.

Sec. 62-220. Determination of gross income: artificially contrived transactions.

The Tax Collector may examine any transaction, 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

amount subject to tax in cases where such evasion has occurred.

The Tax Collector shall disregard any transaction which has been undertaken in an artificial

manner in order to evade the taxes imposed by this Chapter.

Sec. 62-230. Determination of gross income based upon method of reporting.

The method of reporting chosen by a taxpayer, as provided in Section 520, necessitates the

following adjustments to gross income for all purposes under this Chapter:

(a) Cash basis When a person elects to report and pay taxes on a cash basis,

gross income for the reporting period shall include:

(1) the total amounts received on "paid in full" transactions, against which are

allowed all applicable deductions and exclusions; and

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Ordinance No. 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 if separately 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 of whether or not any security document or

instrument is sold, assigned, or otherwise transferred to another. Persons

reporting on the accrual basis may deduct bad debts, provided that

(1) the amount deducted for the bad debt must be deducted from gross

income of the month in which the actual charge-off was made, and only to

the extent that such amount was actually charged-off, and also only to the

extent that such amount is or was 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 for the month in which it was collected,

without deduction for expense of collection.

Sec. 62-240. Exclusion of cash discounts, returns, refunds, trade-in values, vendorissued coupons, and rebates from gross income..

(a) The following items are not included in gross income:

(1) Cash discounts allowed by the vendor for timely payment, but only

discounts allowed against taxable gross income.

(2) The value of property returned by customers to the extent of the amount

actually refunded either in cash or by credit and 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 under Section 427.

(4) When coupons issued by a vendor are later accepted by the vendor as 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 not be excluded from 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 other thanth-e vendor may not be excluded

from gross income, even when the vendee assigns his right to 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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Ordinance No. 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

subsequent to 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 only to the extent that the excludable amount was reported

as taxable gross income in that prior reporting 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 tax is imposed shall establish to the satisfaction of the Tax Collector that such

tax has been added to the total price of the transaction. The taxpayer must

provide to his customer and also keep a reliable record of the actual tax charged

or collected, shown by cash register tapes, sales tickets, or other accurate

record, separating net transaction price and combined tax. If at any time 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/or clarified to the satisfaction of the Tax Collector.

(1) Remittance of all tax charged and/or collected. When an added charge is

made to cover City (or combined) Privilege and Use Taxes, the person

upon whom the tax is imposed shall pay the full amount of the City taxes

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 event the Tax Collector cannot ascertain from the records kept by the

taxpayer the total or amounts of taxes collected by him, and the Tax

Collector is satisfied that the 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

manner provided in this Chapter.

(2) Itemization. A taxpayer, in order to 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

customer with a written record of the transaction showing at a minimum

the price before the tax, the combined taxes, and the total cost. This shall

be addition to the record required to be kept under subsection (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, or other reliable evidence, that no added charge was made to cover

combined taxes, the taxpayer may exclude tax collected from such income by

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Ordinance No. 3046

dividing such taxable gross income by 1.00 plus a decimal figure representing

the effective combined tax rate expressed as a fraction of 1.00.

Sec. 62-260. Exclusion of fees 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 of a motor vehicle, but only to the extent that such taxes or fees or both

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. For the purpose of the exclusion provided by this subsection only, the terms

vendor and vendee shall also apply to a lessor and lessee respectively, of a

motor vehicle if, in addition to all other requirements of this 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 of article 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 number for emergency 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 pursuant to A.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 battery fees, imposed pursuant to A.R.S. Section 44-1323; and

used oil fees imposed pursuant toA.R.S. Section 49-814(b), (c).

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Ordinance No. 3046

(d) There shall be excluded from gross income of vendors of motor vehicles dealer

documentation fees. but only to the extent that such fees have been separately

itemized and collected from the purchaser of the motor vehicle by the vendor.

Sec. 62-265. (Reserved)

Sec. 62-266. Exclusion of motor carrier revenues from gross income.

There shall be excluded from gross income the gross proceeds of sale or gross income derived

from any of the following:

(a)

(b)

(c)

(d)

A motor carrier's use on the public highways in this State if the motor carrier is subject to

a fee prescribed in AR.S. Title 28. Chapter 16.

Leasing, renting or licensing a motor vehicle subject to and upon which the fee has been

paid under A.R.S. Title 28. Chapter 16.

The sale of a motor vehicle and any repair and replacement parts and tangible personal

property becomin9.-apart of such motor vehicle, to a motor carrier who is subject to 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 motor vehicle weighing 12.000 pounds or less, which pay the

fee prescribed in AR.S. Title 28, Chapter 16.

Sec. 62-270. Exclusion of gross income of persons deemed not engaged in business.

(a) For the purposes of this 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'

Commissioner of Internal Revenue pertaining to same, but not including a

"governmental entity", "proprietary club", or "public educational 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

actiVity for gain or profit, whether or not actually realized. which person is

not required to be licensed for the conduct or transaction of activities

subject to the tax imposed under this Chapter.

(4) Proprietary Club means any club which has qualified or would 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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Ordinance No. 3046

members may own a proprietary interest in the property and assets of the

club.

(5) Public Educational Entity" means any educational entity operated

pursuant to any provisions of Title 15, Arizona Revised Statutes.

(b) Transactions which, if conducted by any other person, would produce gross income

SUbject to tax under this Chapter shall not be subject to the 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

SUbject to the tax under this Chapter shall not be subject to 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 other than 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 subject to 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 Commissioner of Internal Revenue, and

his administrative interpretations and guidelines.

(3) (Reserved)

(d) Except as may be provided elsewhere in this Chapter, transactions where 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 a verified statement that includes:

(1) a statement that 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 or an equivalent excise tax on its gross income from such

transactions and does in fact file returns on same; and

(2) the Privilege License number of the otherwise exempt vendee; and

(3) such other information as the Tax Colledor may require.

(e) Franchisees or concessionaires operating businesses for or on behalf of any exempt

organization, governmental entity, public educational entity, proprietary club, or

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Ordinance No. 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 of govemmental 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 or equivalent excise tax

has been paid on such transaction, said organization, dub, or business shall be

liable for the Use Tax upon such acquisitions or use of such 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 upon which a Privilege Tax is imposed by this Chapter.

every person, engaging or continuing in business within the City, storing or

using tangible personal property in this City upon which a Use Tax

is imposed by this 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 or continue in business or engage in such activities until he shall have such

a license:

(1)

(2)

(b) A person engaged in more than one activity subject to 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 may be subject.

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Ordinance No. 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 or general, shall be in the name of the 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 or business name. A "location" is a

place of a separate business establishment.

(Editors note: Two or more business names was effective May 1, 1988.)

(d) Licenses shall not be issued until all legal requirements are met. It shall be a

condition precedent to 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 under the provisions

of Section 320 or by surrender of the license by the licensee or expiration through

cessation by the licensee of the business activity for which it was issued or through failure

of the licensee to pay the annual license fee imposed hereunder.

(b) The Privilege License shall be nontransferable between owners or locations, and shall

be on display to 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 pay the

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 current application license fee for each reissuance of a 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 under this chapter shall pay an annual license fee of ten dollars

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($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 by the tax

collector by the due date and shall be nonrefundable.

(e) Any licensee who fails to renew his license on or before the date provided in (d) above

shall be deemed to be operating without a license following such due date, and shall be

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

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

under Section 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 not to 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) If any person required to be licensed under this chapter fails to obtain a license on or

before the conducting of any business activity requiring such license, such person shall be

subject to a penalty in the amount of one 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 after the 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 of any 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 without obtaining a license, shall be liable to the city for 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 under such sections.

(j) (Reserved)

Sec. 62-315. (Reserved)

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

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(a) Cancellation. The Tax Collector shall be authorized to cancel the City Privilege

License of any licensee as "inactive" if the taxpayer, required to report monthly to the City,

has neither filed any return nor remitted to the City any taxes imposed by this Chapter for

a period of six (6) consecutive months; or, if required to report quarterly, has neither filed

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 Chapter when 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 under this Chapter, or if such 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 of the Privilege License. If within twenty (20) days the licensee

so notified requests a hearing, he shall be granted a hearing before the Tax Colledor.

(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 compliance with the provisions of this Chapter.

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

It shall be unlawful for any person who is required by this Chapter to obtain a Privilege License

to engage in or continue in business within the City without a license. The Tax Collector shall

assess any delinquencies in tax, interest, and penalties which may apply against such person

upon any transactions subject to the taxes imposed by this 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 for which 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 of tax, and all such books and records shall be open for _

inspection by the Tax Collector during any business day.

(b) The Tax Collector may direct, by letter, a specific taxpayer to keep specific

other books, records, and documents. Such letter directive shall apply:

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(1) only for future 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 by the 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 Chapter or Regulation.

(b) Any person who claims and receives an exemption, deduction, exclusion, or credit to

which he is not entitled under this Chapter, shall be subject to, liable for, and pay the 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 if collected from the person claiming

the exemption it shall not also be collected from the vendor.

Sec. 62-370. Inadequate or unsuitable records.

In the event the records provided by the taxpayer are considered by the Tax Collector to be

inadequate or unsuitable to determine the amount of the tax for which such taxpayer is liable

under the provisions of this Chapter, it is the responsibility of the taxpayer either:

(1) to provide such other records required by this Chapter or Regulation; or

(2) to correct or to reconstruct his records, to the satisfaction of the Tax Collector.

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 of the City, such taxes to be collected by the

Tax Collector:

(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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Ordinance No. 3046

income of persons, whether derived from residents of the City or not, or

whether derived from within the City or from 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 or from without, in accordance with provisions of Section 422.

(Editors Note: 400.3, or Jet Fuel Amendment, effective April 1, 1992.)

(b) Taxes imposed by this Chapter are in addition to others. Except as specifically

designated elsewhere in this Chapter, each of the taxes imposed by this Chapter

shall be in addition to all other licenses, fees, and taxes levied by law, including

other taxes imposed by this Chapter.

(c) Presumption. For the purpose of proper administration of this Chapter and to prevent

evasion of the taxes imposed by this Chapter, it shall be presumed that all 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 by this' Chapter. All exemptions, deductions, and credits set forth

in this Chapter shall be limited to the specific activity or transaction described and

not extended to include any other activity or transaction subject to 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",

except the following:

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(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

either no "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 by virtue of a franchise, license, or similar agreement.

24
(6)

(2)

(3)

(4)

(5)

Ordinance No. 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 of a product which 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 only at a single commonly designated business entity.

advertising transportation services where a substantial portion of the

transportation activity of the business entity advertised involves interstate

or foreign 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 similar activities.

(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 following type or nature of businesses:

(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 or pool 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 for exhibition, amusement, or entertainment.

(2) health spas, fitness centers, dance studios, or other 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 activity of construction contracting within the City.

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Ordinance No. 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 exempt from

the tax imposed by this 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 of sales or gross income attributable to the purchase of machinery,

equipment or other tangible personal property that is exempt from or deductible from

privilege or use tax under:

(A) Section 62-465, Subsections (g) and (p)

(B) Section 62-660, Subsections (g) and (p)

Shall be exempt or deductible, respectively, from the tax imposed by this section.

(4) The gross proceeds of sales or gross income that is derived from a contract 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 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 in this paragraph

does not include gross proceeds of sales 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 least one of the following:

(A) To be incorporated into real property.

(8) To become so affIXed to real property that it becomes part of the real property.

(C) To be so attached to real property that removal would cause substantial damage

to the real property from 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 tax imposed under this section.

(6) The gross proceeds of sales or gross income that is derived from the installation,

assembly, repair or maintenance of clean rooms that are deducted from the tax base of

the retail classification pursuant to Section 62-465, Subsection (g) shall be exempt from

the tax imposed under this section.

(l) 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

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Ordinance No. 3046

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 under this section.

(c) Subcontradormeans a construction contractor performing work for either.

(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 subcontractor his City Privilege License number.

(2) an owner-builder who has provided the subcontractor with a written

declaration that

(A) the owner-builder is improving the property for sale; 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

subcontractor with a written declaration that he is liable for the tax for the

site preparation and set-up; and provided the subcontractor his city

privilege license number.

Subcontractor also includes a Construction Contractor performing work for another

Subcontractor as defined above.

(Editor's note: this rate was 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 or continuing in business

as a speculative builder within the City.

(1)

(2)

(3)

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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 of closing of escrow or transfer of title.

Improved Real Property means any real property:

(A) upon which a structure has been constructed; or

(8) where improvements have been made to land containing no structure

(such as paving or landscaping); 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 of Improved Real Property includes any form of transaction, whether

characterized as a lease or otherwise, which in substance is a transfer of

title of, or equitable ownership in. improved real property and 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)

Ordinance No. 3046

multiple unit projects, "sale" refers to the sale of the entire project or to the

sale of any 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 at the time of the 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 of the improved real property sold may be excluded or deducted from

gross income subject to the tax imposed by this 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 builder only if all of the 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 at the time of sale of the partially

improved residential real property; and

(C) The seller also:

(i) maintains proper records of such transactions in a manner

. similar to the requirements provided in this chapter relating

to sales for resale; and

(ii) retains a copy of the written declaration provided by the

buyer for the 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 tax credits:

(1) Exemptions.

(A) The gross proceeds of sales or gross income attributable to the purchase

of machinery, equipment or other tangible personal property that is

exempt from or deductible from privilege or use tax under:

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Ordinance No. 3046

(i) Section 62-465, subsections (g) and (p)

(ii) Section 62-e60, subsections (g) and (p)

Shall be exempt or deductible, respectively, from the tax imposed by this

section.

(8) 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 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 of the 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 or reduce air, water or land pollution shall be exempt from

the tax imposed under this section.

(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 of sales or gross income that 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 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 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 least one of the following:

(i) to be incorporated into real property.

(ii) to become so affixed to real property that it becomes part of the

real property.

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Ordinance No. 3046

(iii) to be so attached to real property that removal would cause

substantial damage to the real property from which it is 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 of the tax collector:

(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 vendor with 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 of any improvement to the real property.

(C) No credits provided herein may be claimed until such time that the gross

income against which said credits apply is reported.

Sec. 62-417. Construction contracting: owner-builders who are not speculative 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

builder shall be at an amount equal to one and one-half percent (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

improvement to real property, computed on the sales price.

(b) The tax liability of this Section is subject to the provisions relating to exemptions,

deductions and tax credits.

(1) Exemptions.

(A) The gross proceeds of sales or gross income attributable to the purchase of

machinery, equipment or other tangible personal property that is exempt from or

deductible from privilege or use tax under:

(i) Section 62-465, subsections (g) and (p)

(ii) Section 62-660, subsections (g) and (p)

Shall be exempt or deductible, respectively, from the tax imposed by this section.

(B) 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 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

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Ordinance No. 3046

base of the retail classification pursuant to Section 62-465, Subsedion (g) shall

be exempt from the tax imposed under this 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 or agricultural, horticultural, viticultural or floricultural

crops or products in this state for the construction, alteration, repair,

improvement, movement, wrecking or demolition or addition to or subtraction

from any building, highway, road, excavation, manufactured building or other

structure, project, development or improvement used directly and primarily to

prevent, monitor, control or reduce air, water or land pollution shall be exempt

from the tax imposed under this 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 of sales or gross income that 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 in this paragraph does not indude gross proceeds of sales 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 least one of the following:

(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

damage to the real property from wtlich it is 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 of the tax collector:

(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 vendor with respect to the tangible personal property

incorporated into the said structure or improvement to real property undertaken

by the owner-builder or speculative 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 that the gross income

against which said credits apply is reported.

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Ordinance No. 3046

(c) The limitation period for the assessment of taxes imposed by this 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. Interest and 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

selling jet fuel.

(1) Gallons Sold includes all gallons sold, bartered, exchanged, included as part

or whole of a trade-out, or similar transactions regardless of the type or

form of payment.

(2) For purposes of this section the following terms are substitutable in Articles

III and V of this chapter and corresponding regulations:

(A) "gallons" for "gross income"

(B) "gallon(s)" for "amount{s)".

(b) The burden of proving that a sale of jet fuel is not a taxable sale shall be upon the

person who made the 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 for taxing a jet fuel 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 for the purposes of this

chapter such city or town has sole and exclusive right to such tax.

(d) The appropriate tax liability for any jet fuel sale where the order is received at a

permanent business location of the seller located in this city or in any Arizona city

of town that levies an equivalent excise tax shall be at the rate of the city or town

of such seller's location.

(e) Exemptions. Notwithstanding Section 400(d), The exemptions in Section 465(a), (b)

and (d) through (z) will apply to sales of jet fuel taxed under this 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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Ordinance No. 3046

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 of job printing, which indudes engraving of printing plates, embossing, copying, micrographics, and photo reproduction.

The tax imposed by this Section shall not apply to:

(1) lob printing purchased for the purpose of resale by the purchaser in the

form supplied by the job printer.

2l out-of-C1ty sales.

3 out-of-state sales.

4 job printing of newspapers, magazines, or other periodicals or

publications for a person who is subject to the tax imposed by subsection

435(a) or an equivalent excise tax; provided further that said person is

properly licensed by the taxing jurisdiction at the location of publication. (5) sales of job printing to a quafifying 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 unrelatea

business income as that term is defined in 26 U.S.C. Section 512.

(6) (Reserved)

(Editor's note: this rate was effective May 1, 1994; the previous rate was 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/or set-up, upon

every person .engaging or continuing in the business activity of selling

manufactured buildings within the city. Such business activity is deemed to

occur at the business location of the seller where the purchaser first entered into

the contract to purchase the manufactured building.

(b) The sales of used manufactured buildings are not taxable.

(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

subject to the tax under Section 460.

(d) Under this Section, a trade-in will not be allowed for the purpose of reducing the tax

liability.

Sec. 62-430. Timbering and other extraction.

(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 following businesses:

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Ordinance No. 3046

(1) felling, producing, or preparing timber or any product of the forest for sale,

profit, or commercial 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 of the place of sale of

the 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 or transports

prOducts, or any part thereof, out of the State without making sale of such

products, or ships his products outside of the 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 they enter interstate commerce shall be

the basis for assessment of the tax imposed by this Section.

(d) (Reserved)

(Editor's note: this rate was 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, of the gross income from the business activity

upon every person engaging or continuing in the business of mining, smelting, or

producing for sale, profit, or commercial use any copper, gold, silver, or other

mineral product, compound, or combination of mineral products; but not inclUding

the extraction, removal, or produdionof sand, gravel, or rock from the ground for

sale, profit, or commercial 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 of the place of sale of the 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 or transports

products, or any part thereof, out of the state without making sale of such products, or

ships his products outside of the 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 they enter interstate commerce shall be the basis for

assessment of the tax imposed by this 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%.)

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34
Ordinance No. 3046

Sec. 62-435. Publishing and periodicals distribution.

(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 activity of:

(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

derivecf from residents of this State or generated by permanent business

locations within this State.

(2) distribution or delivery within the City of newspapers, magazines, or other

periodicals not published within the City, measured by the gross income

derived from subscriptions.

Location of Publication is determined by: (1) location of the editorial offices of the publisher, when the physical printing is not performed by the publisher; or

(2) location of either the editorial offices or the printing facilities, if the

pUblisher performs his own physical printing.

Subscription income shall indude all circulation revenue of the publisher except

amounts retained by or credited to carriers or other vendors as compensation for

delivery within the State by such carriers or vendors, and further except sales of

published items, directly, or through distributors, for the purpose of resale, to

retailers subject to the Privil8ge Tax on such resale.

Circulation for the purpose of measurement of gross income subject to the tax,

shall be considered to occur at the place of delivery of the published items to the

subscriber or intended reader irrespective of the location of the physical facilities

or personnel of the publisher. However, delivery by the United States mails shall

be considered to have occurred 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 subject to tax by the City shall incfude:

(1) that portion of the gross Income from publication which reflects the ratio of

circulation within thiS City to circulation in all incorporated cities and towns

in this State having substantially similar ~rovisions; plus

(2) only when publication occurs Within the City, that portion of the 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 taxpayer maintains a location of publication.

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 that term is defined in 26 U.S.C. Section 512.

(Editor's note: this rate was effective May 1, 1994; the previous rate was 1%.)

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Ordinance No. 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 or continuing in the business of

operating a hotel charging for lodging and/or lodging 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 of this state or of any other state in a privately operated prison, jail or

detention facility is exempt from the tax imposed by this section.

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

(2)

(3)

(a)

(b)

(c)

(d)

(e)

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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 property to the final licensee located within the City for a consideration

including any improvements, rights, or interest in such property; provided further

that:

(1) Payments made by the lessee to, or on behalf of, the lessor for 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 part of the taxable 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 for joint pole usage by a person engaged in the business of providir'lg or

furnishing utility or telecommunication services to another person engaged in the

business of providing or furnishing utility or telecommunication services are

exempt from the tax imposed by this Section.

(Reserved)

36
(f)

(g)

(h)

(i)

U)

(k)

(I)

(m)

(n)

{o)

Ordinance No. 3046

(Reserved

(Reserved)

(Reserved)

(Reserved)

Exempt from the tax imposed by this Section is gross income derived from the

activitIes taxable under Section 444 of this Code.

(Reserved)

(Reserved)

(Reserved)

Notwithstanding the provisions of Section 200(b), the fair market value 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

subject to the tax imposed by this section.

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 of this state or of

any other state in a privately operated prison, jailor detention facility is exempt from the

tax imposed by this sedion.

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 or at the expense of another, obtains lodging or the use of any lodging space

in any hotel for which lodging or use 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 of tangible personal property.

(a)

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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
Ordinance No. 3046

continuing in the business of leasing, licensing for use, or renting tangible personal property for a consideration, including that which is semi-permanently or

permanently installed within the City as provided by Regulation.

(b) Special provisions relating to long-term motor vehicle leases. A lease transaction

involving a motor vehicle for a minimum period of twenty-four (24) months shall

be considered to have occurred at the location of the motor vehicle dealership,

rather than the location of the place of business of the lessor, even if the lessor's

interest in the lease and its proceeds are sold, transferred, or otherwise assigned

to a lease financing institution; provided further that the city or town where such

motor vehicle dealership is located levies a Privilege Tax or an equivalent excise

tax upon the transaction.

(c) Gross income derived from the following transactions shall be exempt from

Privilege Taxes imposed by this 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, or rental of such property.

(2) rental, leasing, or licensing for use of tangible personal property that is

semi-permanently or permanently installed within another city or town that

levies an equivalent excise tax on the transaction.

(3) rental, leasing, or licensing for use of film, tape, or slides to a theater or

other person taxed under Section 410, or to a radio station, television

station, or subscription television system.

(4) rental, leasing, or licensing for use of the following:

(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 equipment or mining 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, except when 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 exclusively for training, 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.

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38
Ordinance No. 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, or licensing had been a sale.

(10) rental, leasing and licensing for use of motor vehicles that use alternative fuel as

defined in A.RS. section 43-1086 on or after May 5,1999.

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 of this 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 by this 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 as that term 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), that serves the 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 or accessories to a public educational entity, pursuant to

any of the 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 of a public educational entity during school hours.

for the purposes of this Section, 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 of the food.

(Note: This rate is effective May 1, 1994; previous rate was 1.3%, effective July 1, 1991; the

previous rate was 1%.)

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39
Ordinance No. 3046

Sec. 62-460. Retail sales: measure of tax; 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 of selling tangible personal property at retail.

(b) The burden of proving that a sale of tangible 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 of stocks, bonds, options, or other similar materials.

(2) sales of lottery tickets or shares pursuant to 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

numismatic value 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 subject to the tax imposed by this Section.

(5) sales by professional or personal service occupations where such sales

are inconsequential elements of the service provided.

(d) (Reserved)

(e) When this City and another Arizona city or town with an equivalent excise tax

could claim nexus for taxing a retail 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 for the purposes of this Chapter such city or town has

sole and exclusive right to 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 or town of such seller's location.

(g) Retail sales of prepaid calling cards or prepaid authorization numbers for

telecommunications services. including sales of reauthorization of a prepaid card

or authorization number, are subject to tax under this section.

Sec.62-465. Retail sales: exemptions.

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40
Ordinance No. 3046

Income derived from the following sources is exempt from the tax imposed by Section 460:

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

G)

(k)

(I)

(m)

(n)

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sales ~f tangible personal property to a person regularly engaged in the business

of seiling suCh property.

out-of-City sales or out-of-state sales.

charges for delivery, installation, or other 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 of the taxpayer.

sales of warranty, maintenance, and service contracts, when separately charged

and separately maintained in the books and records of the taxpayer.

(Note: This subsection was added effective January 1, 1997.)

sales of prosthetics.

sales of income-producing capital equipment

sales of rental equipment' and rental supplies.

sales of mining and metailurgical supplies.

sales of motor vehicle fuel and use fuel which are SUbject to a tax imposed under

the provisions of Article I or II, Chapter 16, Title 28, Arizona Revised Statutes; or

sales of use fuel to a holder of 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 motor vehicle.

(Note: This subsection was ~mended effective January 1, 1997.)

, .

sales of tangible personal property to a construction contractor who 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 motor vehicles to nonresidents of this State for use outside this State if

the vendor ships or delivers the motor vehicle 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, or other periOdicals. Tangible personal property which is consumed

or usec:t up il'1 a manUfacturing, job pnnting, publishing, or production process is

not an IngredIent nor component part of a product. . -

sales made directly to the Federal.government to the extent of:

(1) one hundred percent (100%) of the gross income derived from retail sales

made by a manufa~rer, mOdifier, assembler, or repairer.

41
(0)

(p)

(q)

(r)

(s)

(t)

(u)

(v)

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Ordinance No. 3046

(2) fifty percent (50%) of the gross income derived from retail sales made by

any other person. 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 or served to patrons for consumption on or off the premises, where the

purchaser is properly licensed and payIng a tax under Section 455 or the

equivalent excIse tax upon such income.

sales of tangible personal property 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 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 under Section 501 (C)(3) of the 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

by the 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 only to the extent that food stamps or food instruments were actually

used to purchase such food.

sales of the following to persons engaging or continuing in the business of

farming, ranching, or feeding livestock,. poultry or ratites:

(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 livestoCk purchased or raised for production or use, such as milk

cows, breeding bulls, laying hens, riding or work horses.

(4) (Reserved)

This exemption shall not be construed to include machinery, equipment, fuels,

lubricants, pharmaceuticals, repair and replacement parts, or other items used or

consumed in the running, maintenance, or repair of machinery, equipment, buildings, or structures used or consumed in the business of farming, ranching,

or feeding of livestock, poultry or ratites.

sales of groundwater measuring devices required by A.R.S. Section 45-604.

(Reserved)

sales of aircraft acquired for use outside the state, as prescribed by Regulation. (Note: This subsection ~s added effective July 1, 1995.)

sales of food products by producers as provided for by A.R.S. Sections 3-561, 3-

562 and 3-563.

(Note: This subsection was added effective January 1, 1997.)

42
(w)

(x)

(y)

(z)

(aa)

(bb)

(cc)

(dd)

(ee)

(ff)

(gg)

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Ordinance No. 3046

(Reserved)

(Reserved)

(Reserved)

(Reserved)

the sale of tangible personal property used in remediation contracting as defined

in Section 100 and Regulation 100.5.

sales of materials that are purchased by or for publicly funded libraries including school district libraries; charter school libraries, community college libraries, state

university libraries or lederal, state, county or municipal libraries for use by the

public as follows:

(1) printed or photographic materials.

(2) electronic or digital media materials.

sales of food, beverages, condiments and accessories used for serving 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 For the 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 of the food.

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 of sales or gross income does not include any sales

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.

for the purposes of this Section, a sale of wireless 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

regular course of business.

sales of alternative fuel as defined in AR.S. § 1-215, to a used oil fuel burner

who has received a DeJJartment of Environmental Quality permit to bum used oil

or used oil fuel under AR.S. § 49-426 or § 49-480.

sales of food, beverages, condiments and accessories to a pUblic educational

entity, pursuant to any of the 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 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, or other items which facilitate the consumption of the food.

43
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Ordinance No. 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.

For the purposes of this 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 of fueling compressor equipment to pressurize the pipeline, is not a

sale of the gas to the operator of the 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 paper plates, plastic eating utensils, napkins, paper cups, drinking straws,

paper sacks or other disposable containers, or other items which facilitate the

consumption of the food.

(kk) Sales of motor vehides that use alternative fuel as defined in A.R.S. section 43-

1086 on or after may 5, 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 consumers within 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 repeater service.

(E) providing computer interface services over a communications

channel.

(F) time-sharing activities with a computer accomplished through the use

of a communications channel.

(2) Gross income from the business activity of providing telecommunication

services to consumers within this City shall include:

(A) all fees for connection to a telecommunication system.

(B) toll charges, charges for transmissions, and charges for other

telecommunications services; provided that such charges relate to

transmissions originating in the City and terminating in this State.

(C) fees charged for access to or subscription to or membership in a

telecommunication system or network.

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(0) charges for monitoring services relating to a security or burglar alarm

system located within the City where such system transmits or

receives signals or data over a communications channel.

(b) Resale telecommunication services. Gross income from sales of

telecommunication services to another provider of telecommunication services

for the purpose of providing the purchaser's customers with such service shall be

exempt from the tax imposed by this Section; provided, however, that such

purchaser is properly licensed by the City to 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

exempt from the tax imposed by this Section.

(d) (Reserved)

(e) (Reserved)

(f) Prepaid Calling Cards. Telecommunications services purchased with a prepaid calling card

that are taxable under sedion 62-460 are exempt from the tax imposed under this section.

(Editor's Note: This rate is effective May 1, 1994; previous rate was 2.25%, effective August 1,

1990; the previous rate was 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 of transportatior. for hire from this City to another point within the

State:

(a) transporting of persons or property by railroad:.; provided, however, that the tax imposed

by this subsection shall not apply to 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 or from a point outside this state to a point in this

state. For purposes of this 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 of the freight or property to a party other than one of the railroads.

(b) transporting of oil or natural or artificial gas through pipe or conduit.

(c) transporting of property by aircraft.

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Ordinance No. 3046

(d) (Reserved)

Sec. 62-480. Utility services.

(a)

(b)

(c)

(d)

(e)

(f)

(9)

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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 producing, providing, or

furnishing utility services, including electricity, electric lights, current, power, gas

!

natural or artificial), or water to:

1) consumers or ratepayers who reside within the City. 2) consumers or ratepayers of this City, whether within the City or without, to

the extent that this City provides such persons utility services, excluding

consumers or ratepayers who are residents of another city or town 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 subject to Sections 460 and 465, and not considered . gross income taxable under this Section.

Resale utility services. Sales of utility services to another provider of the same

utility services for the purpose of providing such utility services·either to another

properly licensed utility provider or directly to such purchaser's customers or

ratepayers shall be exempt and deductible from the gross income· subject to 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 or a qualifying health care

orgamzation, except when sold for use In activities resulting In gross Income from

unrelated business income as that term 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 motor vehicle.

The tax imposed by this Section shall not apply to:

(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

dect service of the utility system or systems. (2) revenues received by any person or persons owning a utility system in

the form of reimbursement or contribution 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

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Ordinance No. 3046

property of the utility. This exclusion shall not exceed the value of such

property and 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

under A.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 rate was 1%. Subsection (h) was added effective July 11, 1998.)

Sec. 62-485. (Reserved)

Article V - Administration

Sec. 62-500. Administration of this 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 of the taxes imposed by this Chapter.

(c) Except as provided in this Section, no rule or regulation shall be adopted until

approved by formal action of the City Council.

(d) (Reserved)

Sec. 62-510. Divulging of information prohibited; exceptions allowing disclosure.

(a) Except as specifically provided, it shall be unlawful for any official or employee of

the City to make known information obtained pursuant to this Chapter concerning

the business financial affairs or operations of any 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 of Arizona, or any 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 of that county, city, or town.

(d) Successors, receivers, trustees, personal representatives, executors, guardians,

administrators, and assignees, if directly interested, may be given information by

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Ordinance No. 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 by the City Council, officials or employees of the City may divulge the

amount and source of income, profits, leases, or expenditures disclosed in any

return or report, and the amount of such delinquent and unpaid tax, penalty, or

interest, to a private collection agency having a written collection agreement with

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 assessment and 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 of periodicals.

(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 of the Taxpayer Problem Resolution Officer.

(a) The Taxpayer Problem Resolution Officer shall assist taxpayers in:

(1) obtaining easily understandable tax information and information on

audits, corrections and appeals procedures of the City.

(2) answering questions regarding preparing and filing the returns required

under this chapter.

(3) locating documents filed with or payments submitted to the Tax

Collector by the taxpayer.

(b) The Taxpayer Problem Resolution Officer shall 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, or agents that might be barriers to the equitable

treatment of taxpayers and recommend alternatives to the City Manager

or, for a city without a City Manager, the Chief Administrative Officer.

(3) provide expeditious service to taxpayers whose problems are not

resolved through normal channels.

(4) negotiate with the Tax Collector, his designees, employees, or agents to

resolve the most complex and sensitive taxpayer problems.

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(5) take action to stop or prohibit the Tax Collector from taking an action

against a taxpayer.

(6) participate and present taxpayers' interests and concerns in meetings

formulating the City's policies and procedures under and interpretation

of this chapter.

(7) compile data each year on the number and type of taxpayer complaints

and evaluate the actions taken 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 by the City Manager or, for a city without a City Manager, the

Chief Administrative 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

Collector or a 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 of the last report.

Sec. 62-516. Taxpayer assistance 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, a taxpayer is suffering or will 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 of the issue giving rise to the Taxpayer Assistance Order.

(c) The Taxpayer Problem Resolution Officer, City Manager or, for a city without a

City Manager, the Chief Administrative Officer may modify, reverse or rescind a

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Taxpayer Assistance Order. A Taxpayer Assistance Order is binding on the

Tax Collector until 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 affected by the issuance of a Taxpayer Assistance Order.

(e) a Taxpayer Assistance Order may not be used:

(1) to contest the merits of a tax liability.

(2) to substitute for informal protest procedures or administrative or judicial

proceedings to review a deficiency assessment, collection action or

denial of a refund claim.

Sec. 62-517. Basis for evaluating 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 or collected by that employee.

Sec. 62-520. Reporting and payment of tax.

(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 by the Tax Collector.

(b) Payment. If payment is made in any form other than United States legal tender, the

tax obligation shall not be satisfied until the payment has 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

prior written approval by the Tax Collector.

(1) Taxpayers must report all gross income subject to the tax using the same

basis of reporting.

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