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(2) Taxes imposed upon construction contracting shall be reported as follows:

(A) Construction contractors shall report on either a progressive billing

("accrual'1 basis or cash receipts basis.

(8) Speculative builders shall report the gross income derived from the

sale of improved real property at dose of escrow or at transfer of

title or possession, whichever occurs earlier.

(C) Owner-builders who are not speculative builders shall report taxable

amounts as provided in Section 417.

Sec. 62-530. When tax due; when delinquent; verification of return; extensions.

(a) Except as provided elsewhere in this Section, the taxes shall be due and payable

monthly on or before the twentieth (20th) day of the month next succeeding the

month in which the tax accrues.

(1) Quarterly returns. The Tax Collector may authorize a taxpayer whose

reporting history indicates an estimated annual City Privilege and Use

Tax liability on taxable gross income in excess of five thousand dollars

($5,000.00) but less than fifty thousand dollars ($50,000.00) to file returns

on a calendar-quarterly basis. The taxes for each calendar quarter shall

be due and payable on or before the twentieth (20th) day of the month

next succeeding the end of each calendar quarter.

(2) Annual returns. The Tax Collector may authorize a taxpayer whose reporting

history indicates an estimated annual City Privilege and Use Tax liability

on taxable gross income of not more than five thousand dollars

($5,000.00) to file returns for such taxes on a calendar-annual basis. The

taxes for each calendar year shall be due and payable on or before the

twentieth (20th) day of January of the following year.

(b) Special requirements of taxpayers filing quarterly or annual returns. No taxpayer

may report on a quarterly or annual basis until he has established, to the Tax

Collector's satisfaction, six (6) months reporting history. It is the taxpayer's

responsibility to notify the Tax Collector and increase his reporting frequency (to

quarterly or monthly as applicable) when his taxable income or tax due exceeds

the maximum limits for his current reporting frequency. Failure to do so may be

deemed negligence or evasion, and penalties may apply. Failure to file returns

timely, without good cause shown to the satisfaction of the Tax Collector, is

sufficient cause for the Tax Collector to deny future filings by the taxpayer on a

quarterly or annual basis.

(c) Delinquency Date. Except as provided in subsection (d) below, all returns and

remittances received within the Tax Collector's Office on or before the last

business day of the month when due shall be regarded as timely filed. The start

of business of the first business day following the month when due shall be the

delinquency date. It shall be the taxpayer's responsibility to cause his return and

remittance to be timely received. Mailing the return or remittance on or before

the due date or delinquency date does not relieve the taxpayer of the

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responsibility of causing his return or remittance to be timely received by the last

business day of the month when due.

(Editor's note: Returns prior to August 1, 1990, were due on or before the

second to the last business day of the month, and the delinquency date was the

last business day of the month.)

(d) Jeopardy reporting. If the Tax Collector determines that the collection of any tax due

to the City is in jeopardy, the Tax Collector may direct the taxpayer to file his

return and remit the tax on a weekly, daily, or transaction-by-transaction basis.

Such return and remittance shall be due upon the date fixed by the Tax Collector,

and the "delinquency date" shall be the following day.

(e) Extensions. The Tax Collector may extend the time for filing a return, for good

cause shown, and only when requested in writing and received by the Tax

Collector prior to the tax due date. However, the time for filing such return shall

not be extended beyond the last business day of the month next succeeding the

due date of such return. In such cases. only the penalties for late filing and late

payment may be waived, by the Tax Collector for filing and payment within the

extension period. Notwi~standing the granting of an extension, the interest

payable for late payment'of taxes shall be paid for the period commencing upon

the original delinquency date and ending on the date the tax is paid. The interest

may not be waived by the Tax Collector.

Sec. 62-540. Interest and civil penalties.

(a) Any taxpayer who failed to pay any of the taxes imposed by this Chapter which

were due or found to be due before the delinquency date shall be subject to

and shall pay interest upon such tax at the rate of one percent (1%) per month,

until paid. effective with taxes due November 20, 1999. Taxes due prior to

November 20, 1999 shall be subject to and shall pay interest upon such tax at

the rate of one and one-half percent (1.5%) per month, until paid. Fractions of

a month shall be considered to constitute a full month for the purpose of

computing interest Said interest may be neither waived by the Tax Collector

nor abated by the Hearing Officer except as it might relate to a tax abated as

provided by Section 570.

(b) In addition to interest assessed under subsection (a) above, any taxpayer who

failed to pay any of the taxes imposed by this Chapter which were due or found

to be due before the delinquency date shall be subject to and shall pay any or

all of the following civil penalties, in addition to any other penalties prescribed

by this Chapter:

(1) A taxpayer who fails to timely file a return for a tax imposed by this

Chapter shall pay a penalty of five percent (5%) of the tax for each

month or fraction of a month elapsing between the delinquency date of

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the return and the date on which it is filed, unless the taxpayer shows

that the failure to timely file is due to reasonable cause and not due to

willful neglect. This penalty shall not exceed twenty-five percent (25%)

of the tax due.

(2) A taxpayer who fails to pay the tax within the time prescribed shall pay a

penalty of ten percent (10%) of the unpaid tax, unless the taxpayer

shows that the failure to timely pay is due to reasonable cause and not

due to willful neglect. If the taxpayer is also subject to a penalty under

subsection (b)(1) above for the same tax period, the total penalties

under subsection (b)(1) and this subsection shall not exceed twenty-five

percent (25%) of the tax due.

(3) A taxpayer who fails or refuses to file a return within thirty (30) days of

having received a written notice and demand from the Tax Collector

shall pay a penalty of twenty-five percent (25%) of the tax, unless the

taxpayer shows that the failure is due to reasonable cause and not due

to willful neglect or the tax collector agrees to a longer time period.

(4) If the cause of a tax deficiency is determined by the Tax Collector to be

due to negligence, but without regard for intent to defraud, the taxpayer

shall pay a penalty of ten percent (10%) of the amount of deficiency. If

the taxpayer is also subject to a penalty under subsection (b)(1) or (b)(2)

above for the same tax period, the total penalties imposed under

subsection (b)(1), (b)(2) and this subsection shall not exceed twenty-five

percent (25%) of the tax due.

(5) If the cause of a tax deficiency is determined by the Tax Collector to be

due to civil fraud or evasion of the tax, the taxpayer shall pay a penalty

of fifty percent (50%) of the amount of deficiency.

(c) Penalties and interest imposed by this section are due and payable upon notice

by the Tax Collector.

(d) If, following an audit, penalties attributable to the audit period are to be

assessed pursuant to subsection (b)(1) or (b)(2) above, the Tax Collector,

before assessing such penalties, must take into consideration any information

or explanations provided by the taxpayer as to why the return was not timely

filed and/or the tax was not timely paid. If such information and/or explanations

are provided by the taxpayer, and the Tax Collector nevertheless decides to

assess penalties pursuant to subsection (b)(1) or (b)(2) above, then, at the time

the penalties are assessed, the Tax Collector must provide the taxpayer with a

detailed written explanation of the basis for the Tax Collector's determination

that the information and/or explanations provided by the taxpayer did not

constitute reasonable cause.

(e) The assessment of the penalties prescribed by subsections (b)(3) through

(b)(5) above must be approved on a case-by-case basis by the Tax Collector

prior to such assessment. In addition, any assessment which includes

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penalties based upon subsections (b)(3), (b)(4), or (b)(5) above must be

accompanied by a statement signed by the Tax Collector setting forth in detail

the basis for the Tax Collector's determination that the penalties are warranted

under the circumstances.

(f) The Tax Collector shall waive or adjust penalties imposed by subsections (b)(1)

and (b)(2) above upon a finding that:

(1) in the past, the taxpayer has consistently filed and paid the taxes

imposed by this Chapter in a timely manner; or

(2) the amount of the penalty is greatly disproportionate to the amount of

the tax; or

(3) the failure of a taxpayer to file a return and/or pay any tax by the

delinquency date was caused by any of the following circumstances

which must occur prior to the delinquency date of the return or payment

in question:

(A) the return was timely filed but was inadvertently forwarded to

another taxing jurisdiction.

(8) erroneous or insufficient information was furnished the taxpayer

by the Tax Collector or his employee or agent

(C) death or serious illness of the taxpayer, member of his

immediate family, or the preparer of the reports immediately prior

to the due date.

(D) unavoidable absence of the taxpayer immediately prior to the

due date..

(E) destruction, by fire or other casualty, of the taxpayer's place of

business or records.

(F) prior to the due date, the taxpayer made application for proper

forms which could not be furnished in sufficient time to permit a

timely filing.

(G) the taxpayer was in the process of pursuing an active protest of

the tax in question in another taxing jurisdiction at the time the

tax and/or return was due.

(H) the taxpayer establishes through competent evidence that the

taxpayer contacted a tax advisor who is competent on the

specific tax matter and, after furnishing necessary and relevant

information, the taxpayer was incorrectly advised that no tax was

owed and/or the filing of a return was not required.

(I) the taxpayer has never been audited by a city for the tax or on

the issue in question and relied, in good faith, on a state

exemption or interpretation.

(J) the taxpayer can provide some public record (court case, report

in a periodical, professional journal or publication, etc.) stating

that the transaction is not subject to tax.

(K) the Arizona Department of Revenue, based upon the same facts

and circumstances, abated penalties for the same filing period.

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A taxpayer may also request a waiver or adjustment of penalty for a reason

thought to be equally substantive to those reasons itemized above. All

requests for waiver or adjustment of penalty must be in writing and shall contain

all pertinent facts and other reliable and substantive evidence to support the

request. In all cases, the burden of proof is upon the taxpayer.

(g) No request for waiver of penalty under subsection (f) above may be granted

unless written request for waiver is received by the Tax Collector within fortyfive (45) days following the imposition of penalty. Any taxpayer aggrieved by

the refusal to grant a waiver under subsection (f) above may appeal under the

provisions of Section 570 provided that a petition of appeal or request for an

extension is submitted to the Tax Collector within forty-five (45) days of the

taxpayers receipt of notice by the City that waiver has been denied.

(h) For the purpose of this Section, "reasonable cause" shall mean that the

taxpayer' exercised ordinary business care and prudence, Le., had a

reasonable basis for believing that the tax did not apply to the business activity

or the storage or use of the taxpayers tangible personal property in this City.

(i) For the purpose of this section, "negligence" shall be characterized chiefly by

inadvertence, thoughtlessness, inattention, or the like, rather than an "honest

mistake". Examples of negligence include:

(1) the taxpayer's failure to maintain records in accordance with article iii of

this chapter;

(2) repeated failures to timely file returns; or

(3) gross ignorance of the law.

Sec. 62-541. Erroneous advice or misleading statements by the Tax Collector;

abatement of penalties and interest; definition.

(a) Notwithstanding section 540(a), no interest or penalty may be assessed on an

amount assessed as a deficiency if either:

(1) the deficiency assessed is directly attributable to erroneous written

advice furnished to the taxpayer by an employee of the City acting in an

official capacity in response to a specific request from the taxpayer and

not from the taxpayers failure to provide adequate or accurate

information.

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(2) all of the following are true:

(A) A tax return form prepared by the tax collector contains a

statement that, if followed by a taxpayer, would cause the

taxpayer to misapply this chapter.

(8) the taxpayer reasonably relies on the statement.

(C) the taxpayer's underpayment directly results from this reliance.

55
Ordinance No. 3046

(b) Each employee of the Tax Collector, at the time any oral advice is given to any

person, shall inform the person that the Tax Collector is not bound by such oral

advice.

(c) For purposes of this section "tax return form" includes the instructions that the

Tax Collector prepares for use with the tax return form.

Sec. 62-545. Deficiencies; when inaccurate return is filed; when no return is filed;

estimates.

(a) If the taxpayer has failed to file a return, or if the Tax Collector is not satisfied

with the return and payment of the amount of tax required, and additional taxes

are determined by the Tax Collector to be due, the Tax Collector shall deliver

written notice of his determination of a deficiency to the taxpayer, and such

deficiency, plus penalties and interest, shall be due and payable forty-five (45)

days after receipt of the notice and demand. Such additional taxes shall bear

any applicable civil penalties and interest as provided in Section 540, and every

such notice of a determination of an additional amount due shall be assessed

within the limitation period provided in Section 550.

(1) When a return is filed. If the Tax Colledor is not satisfied with a return and

payment of the amount of tax required by this Chapter to be paid to the

City, he may examine the return or examine the records of the taxpayer,

and redetermine the amount of tax, penalties, and interest required to be

paid, for any periods available to the Tax Collector under Section 550,

based upon the information contained in the return or records or based

upon any information within his possession or which comes into his

possession.

(2) When no return is filed. If any person fails to make a return, the Tax

Collector may make an estimate of the amount of tax due under this

Chapter and compute any applicable penalties and interest due, based

upon any information within his possession or which comes into his

possession.

(b) Estimates by the Tax Collector. Any estimate made by the Tax Collector is to be

made on a reasonable basis. The existence of another reasonable basis

of estimation does not, in any way, invalidate the Tax Collector's estimate.

It is the responsibility of the taxpayer to prove that the Tax Collector's

estimate is not reasonable and correct, by providing sufficient

documentation of the type and form required by this Chapter or

satisfactory to the Tax Collector.

Sec. 62-546. Closing agreements in cases of extensive taxpayer misunderstanding or

misapplication; City Attorney approval; rules.

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(a) if the Tax Collector determines that noncompliance with tax obligations results

from extensive misunderstanding or misapplication of provisions of this chapter

it may enter into dosing agreements with those taxpayers under the following

terms and conditions:

(1) Extensive misunderstanding or misapplication of the tax laws occurs if

the tax collector determines that more than sixty percent (60%) of the

persons in the affected class have failed to properly account for their

taxes owing to the same misunderstanding or misapplication of the tax

laws.

(2) The Tax Collector shall publicly declare the nature of the possible

misapplication and the proposed definition of the class of affected

taxpayers and shall conduct a public hearing to hear testimony

regarding the extent of the misapplication and the definition of the

affected class.

(3) If, after the public hearing, the Tax Collector determines that a class of

affected taxpayers has failed to comply with their tax obligations

because of extensive misunderstanding or misapplication of the tax laws

it shall issue a tax ruling announcing that finding and publish the ruling

in a newspaper of general circulation in the city and through the next

two Model City Tax Code updates.

(4) A closing agreement under this section may abate some or all of the

penalties, interest and tax that taxpayers have failed to remit, or the

agreement may provide for the prospective treatment of the matter as to

the class of affected taxpayers. All taxpayers in the class shall be

offered the opportunity to enter into a similar agreement for the same

tax periods.

(5) Taxpayers in the affected class who have properly accounted for their

tax obligations for these tax periods shall be offered the opportunity to

enter into an equivalent closing agreement providing for a pro rata credit

or refund of their taxes previously paid.

(6) The closing agreement shall require the taxpayers to properly account

for and pay such taxes in the future. If a taxpayer fails to adhere to such

a requirement, the closing agreement is voidable by the tax collector

and he may assess the taxpayer for the delinquent taxes. The tax

collector may issue such a proposed assessment within six months after

the date that he declares that closing agreement void or within the

period prescribed by Section 550 of this Chapter.

(b) Before entering into closing agreements pursuant to this section, the Tax

Collector shall secure such approval as required by charter, ordinance or

administrative regulation.

(c) After a closing agreement has been signed pursuant to this Section, it is final

and conclusive except on a showing of fraud, malfeasance or misrepresentation

of a material fact. The case shall not be reopened as to the matters agreed

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Ordinance No. 3046

upon or the agreement shall not be modified by any officer, employee or agent

of the City. The agreement or any determination, assessment, collection,

payment abatement, refund or credit made pursuant to the agreement shall not

be annulled, modified, set aside or disregarded in any suit, action or

proceeding.

(d) The Tax Collector shall report in writing its activities under this section to the

Mayor and City Council on or before February 1 of each year.

Sec. 62-550. Limitation periods.

. .

(a) Limitation when a return has been filed.

(1) Except as provided elsewhere in this Section, the Tax Collector may

assess additional tax due at any time within four (4) years after the date

on which the return is required to be filed, or within four (4) years after

the date on which the return is filed, whichever period expires later.

(2) However. if a taxpayer does not report an amount properly reportable

which is in excess of twenty-five percent (25%) of the taxable amount

stated on the return, the Tax Collector may assess additional tax due at

any tirne within six (6) years after the date on which the return was filed.

(3) Any delay in commencement or completion of any examination by the

Tax Collector, which is requested or agreed to in writing by the taxpayer,

shall be excluded from the computation of any limitation period

prescribed by this Section, and the Tax Collector shall be entitled to

make a determination for taxes due without exclusion of any such time

period, and any limitation period shall be extended for a length of time

equivalent to the period of the agreed upon delay.

(4) Any assessment of additional tax due by the Tax Collector shall be

deemed to have been made by mailing a copy of a notice of audit

assessment by certified mail to the taxpayer's address of record with the

Tax Collector or by personal delivery of a copy of a notice of audit

assessment to the taxpayer or his authorized agent.

(b) Suspension of limitation period. The limitation period on assessment shall be

suspended for any period:

(1) the assets of the taxpayer are in the control or custody of the court in

any proceeding before any court of jurisdiction within the United States

of America, and for one hundred and eighty (180) calendar days

thereafter; or

(2) which the taxpayer and the Tax Collector agree upon in writing.

(c) When no return filed; fraudulent return. In the case of a fraudulent return with

the intent to evade tax. or the failure or refusal to file a return for any month, the

Tax Collector may assess the amount of taxes payable for that month at any

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time, without any reliance by the taxpayer upon any time limitation provided

elsewhere in this Chapter.

(d) Special provisions relating to owner-builders. The limitation for an ownerbuilder subject to the tax as prescribed in Section 417 shall be based upon the

date such tax liability is reportable or was reported, as provided in Section 417.

Sec. 62-555. Tax Collector may examine books and other records; failure to provide

records.

(a) The Tax Collector may require the taxpayer to provide and may examine any

books, records, or other documents of any person who, in the opinion of the

Tax Collector, might be liable for any tax under this Chapter, for any periods

available to him under Section 550.

(b) In order to perform any examination authorized by this Chapter, the Tax

Collector may issue an Administrative Request for the attendance of witnesses

or for the production of documents, as provided by Regulation.

(c) If within sixty (60) days of receiving a written request for information in the

possession of the taxpayer, the taxpayer fails or refuses to fumish the

requested information, the Tax Collector may, in addition to penalties

prescribed under Section 540, impose an additional penalty of twenty-five

percent (25%) of the amount of any tax deficiency which is attributable to the

information which the taxpayer failed to provide, unless the taxpayer shows that

the failure was due to reasonable cause and not due to willful neglect.

(d) The Tax Collector may use any generally accepted auditing procedures,

including sampling techniques, to determine the correct tax liability of any

taxpayer. The Tax Collector shall ensure that the procedures used are in

accordance with generally accepted aUditing standards.

(e) The fact that the taxpayer has not maintained or provided such books and

records which the Tax Collector considers necessary to determine the tax

liability of any person does not preclude the Tax Collector from making any

assessment. In such cases, the Tax Collector is authorized to use estimates,

projections, or samplings, to determine the correct tax. The provisions of

Section 545(b), concerning estimates, shall apply.

(f) The Tax Collector shall give the taxpayer written notice of his determination of a

deficiency by certified mail to the taxpayer's address of record with the Tax

Collector, and the tax deficiency, plus interest and penalties, is final forty-five

(45) days from the date of receipt of the notice by the taxpayer, unless an

appeal is taken pursuant to the provisions of Sections 570 through 575.

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(c)

(b)

(a)

Ordinance No. 3046

Sec. 62-556. No additional audits or proposed assessments; exceptions.

Once the Tax Collector completes an examination authorized by Section 555 and

a written notice of the determination of a deficiency has been issued to the

taxpayer pursuant to Section 545(a) or 555(0, the taxpayer's liability for the time

penod subjected to the examination is fixed and determined, and no additional

audit or examination may be conducted by the Tax Collector with respect to such

time period except under the following circumstances.

(1) if a taxpayer files a claim for refund under Section 560, the Tax Collector

may conduct an examination limited to the issues presented in the refund

claim.

(2) if the taxpayer failed to disclose material information during the initial

examination, falsified books or records, or otherwise engagea in conduct

which prevented the Tax Collector from conducting an accurate

examination. The applicability of this subsection, and the Tax Collector's

right to proceed thereunder, may be raised and contested ~y the taxpayer in a subsequent administrative review brought pursuant to Section 570.

An audit or examination conducted by any other taxing jurisdiction will not

preclude the Tax Collector from conducting an audit or examination for the same

time period.

If the Tax Collector issues a notice of deficienq pursuant to either Section 545(a)

or Section 555(f), the Tax Collector may not Increase the proposed deficiency

except in one or more of the following circumstances:

(1) the taxpayer made a materiarmisrepresentation of fact.

(2) the taxpayer failed to disclose a material fact.

(3) the Tax Collector submitted a written request for information prior to

issuance of the assessment, and the taxpayer, despite possessing or

having access to such information, failed to provide it within 60 days as

required by Section 555(c).

(4) after issuing the notice· of determination of deficiency but before the

deficiency became final, the Arizona Tax Court, Court of Appeals or

Supreme Court issued a decision, the applicability of which causes the

deficiency initially proposed to increase.

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

Sec. 62-560. Erroneous payment of tax; credits and refunds; limitations.

(a) The Tax Collector may authorize either credits or payments of refunds for any

taxes, penalties or interest paid in excess of the amount actually due. Any

credit authorized by the Tax Collector shall be canceled from the accounts of

the City if no timely filed request for credit or refund is made by the taxpayer

claiming same within one (1) year following the date of determination and

notice by the Tax Collector of the excess payment.

(b) No credit shall be allowed or refund paid except under one of the following

conditions:

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(1) as provided in Section 565.

(2) upon examination of filed returns for any period not excluded by Section

550, and not to exceed the tax, penalty, or interest actually paid with

such returns.

(3) upon audit or other examination of the books and records of the

taxpayer, but only for periods as provided in Section 550. In the case of

an examination performed at the taxpayer's request, credit shall be

allowed or refund paid only for any excess taxes, penalties, or interest

actually paid within the limitation period provided in Section 550, such

period to be calculated from the date of receipt of the taxpayer's request

by the Tax Collector. Requests by taxpayers for audits to authorize

credits shall be honored unless, in the opinion of the Tax Collector, the

taxpayer has made excessive requests for audits.

(4) upon the taxpayer's submission of a written claim for refund of any

excess taxes, penalties, or interest paid to the City by the taxpayer.

When a written claim for refund is submitted, credit shall be allowed or

refund paid only for those excess taxes, penalties, or interest paid within

the limitation period provided in Section 550. such period to be

calculated from the date the tax collector receives the taxpayer's written

refund claim. A refund claim submitted by' a taxpayer pursuant to this

subsection must identify the specific grounds upon which the claim is

based. the dollar amount of the refund requested, the specific tax

periods involved, iand the name, address and tax identification number

~~~~~ .

(c) No credit will be allowed or refund paid where it appears that the taxpayer has

collected. by separately stated itemization, the amount of the tax. except that a

credit or refund will bel allowed in such case if the taxpayer can present

documentation satisfactory to the Tax Collector identifying each customer from

whom the excess taxes were collected and establishing that any taxes refunded

pursuant to this section will be remitted to those customers within sixty (60)

days of receipt of the refund.

(d) Interest shall be allowed· at the rate set forth in section 540(a) on any credit or

refund authorized pursuant to the provisions of this chapter. Interest shall be

calculated from the time of the claim made to the City by the taxpayer.

(e) The determination of the Tax Collector that no refund or credit is to be paid or

allowed pursuant to this· Section may be appealed by the taxpayer under the

provisions of Section 570.

(f) Any refund paid under the provisions of this Section shall be paid from the

Privilege Tax revenue accounts.

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Sec. 62-565. Payment of tax by the incorrect taxpayer or to the incorrect Arizona city or

town.

(a) When it is determined that taxes have been reported and paid to the city by the

wrong taxpayer, any taxes erroneously paid shall be transferred by the city to

the privilege tax account of the person who actually owes and should have paid

such taxes, provided that the city receives an assignment and waiver signed by

both the person who actually paid the tax and the person who should have paid

the tax.

(b) An assignment and waiver provided under this Section, must:

(1) identify the name and City Privilege License number of the person who

erroneously paid the tax and the person who should have paid the tax.

(2) provide that the person who erroneously paid the tax waives any right

such person may have to a refund of the taxes erroneously paid.

(3) authorize the City Treasurer to transfer the erroneously paid tax to the

privilege tax account of the person who should have paid the tax.

(c) When it is determined that taxes have been reported and paid to the wrong

Arizona city or town, such taxes shall be remitted to the correct city or town,

provided that. the city or town to whom the taxes were erroneously paid

receives an assignment and waiver signed by both the person who actually

paid the tax and the person who should have paid the tax. Where the person

who actually paid the tax and the person who should have paid the tax are one

and the same, no assignment and waiver need be provided. The city shall

neither pay nor charge any interest or penalty on any overpayment or

underpayment except such interest and penalty actually paid by the taxpayer

relating to such tax.

(d) This Section in no way limits or restricts the applicability of any remedies which

may otherwise be available under A.R.S. Section 42-1452. The limitations and

procedures set forth in A.R.S. Section 42-1452 shall apply to all payments

under this section.

(e) When reference is made in this section to this city or an Arizona city or town,

and payments made to or requested from this city or an Arizona city or town,

the provisions shall be applicable to the Arizona Department of Revenue when

it is acting for or on behalf of this city or an Arizona city or town.

Sec. 62-567. (Reserved).

Sec. 62-570. Administrative review; petition for hearing or for redetermination; finality

of order.

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(a) Infonnal Conference. A taxpayer shall have the right to discuss any proposed

assessment with the auditor prior to the issuance of any assessment, but any

such informal conference is not required for the taxpayer to file a petition for

administrative review.

(b) Administrative Review.

(1) Filing a Petition. Other than in the case of a jeopardy assessment, a

taxpayer may contest the applicability or amount of tax, penalty, or

interest imposed upon or paid by him pursuant to this Chapter by filing a

petition for a hearing or for redetennination with the Tax Collector as set

forth below:

(A) within forty-five (45) days of receipt by the taxpayer of notice of a

determination by the Tax Collector that a tax, penalty, or interest amount

is due, or that a request for refund or credit has been denied; or

(8) by voluntary payment of any contested amount when

accompanied by a timely filed return and a petition requesting a

refund of the protested portion of said payment; or

(C) by petition accompanying a timely filed return contesting an

amount reported but not paid; or

(D) by petition requesting review of denial of waiver of penalty as

provided in subsection 540(g}.

(2) Extension to file a petition. In all cases, the taxpayer may request only

one (1) extension from the Tax Collector. Such request must be in

writing, state the reasons for the requested delay and time of delay

requested, and must be filed with the Tax Collector within the period

allowed above for originally filing a petition. The Tax Collector shall

allow such extension to file a petition, when such written request has

been properly and timely made by the taxpayer, but such extension shall

not exceed forty-five (45) days beyond the time provided for originally

filing a petition.

(3) Requirements for petition.

(A) The petition shall be in writing and shall set forth the reasons

why any correction, abatement, or refund should be granted, and

the amount of reduction or refund requested. The petition may

be amended at any time prior to the time the taxpayer rests his

case at the hearing or such time as the Hearing Officer allows for

submitting of amendments in cases of redeterminations without

hearings. The Hearing Officer may require that amendments be

in writing, and in that case, he shall provide a reasonable period

of time to file the amendment. The Hearing Officer shall provide

a reasonable period of time for the Tax Collector to review and

respond to the petition and to any written amendments.

(8) The taxpayer, as part of the petition, may request a hearing

which shall be granted by the Hearing Officer. If no request for

hearing is made the petition shall be considered to be submitted

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for decision by the Hearing Officer on the matters contained in

the petition and in any reply made by the Tax Collector.

(C) The provisions of this Section are exclusive, and no petition

seeking any correction, abatement, or refund shall be considered

unless the petition is timely and properly filed under the Section.

(4) Transmittal to Hearing Officer. The Tax Collector shall designate a

Hearing Officer. who may be other than an employee of the City. The

Tax Collector, if designated to receive petitions, shall forward any

petition to the Hearing Officer within ten (10) days after receipt,

accompanied by documentation as to timeliness. In cases where the

Hearing Officer determines that the petition is not timely or not in proper

form, he shall notify both the taxpayer and the Tax Collector; and in

cases of petitions not in proper form only, the Hearing Officer shall

provide the taxpayer with an extension up to forty-five (45) days to

correct the petition.

(5) Hearings shall be conducted by a Hearing Officer and shall be

continuous until the Hearing Officer closes the record. The taxpayer

may be heard in person or by his authorized representative at such

hearing. Hearings shall be conducted informally as to the order of

proceeding and presentation of evidence. The Hearing Officer shall

admit evidence over hearsay objections where the offered evidence has

substantial probative value and reliability.' Further, copies of records

and documents prepared in the ordinary course of business may be

admitted. without objection as to foundation. but subject to argument as

to weight. admissibility, and authenticity. Summary accounting records

may be admitted subject to satisfactory proof of the reliability of the .

summaries. In all cases, the decision of the Hearing Officer shall be

made solely upon substantial and reliable evidence. All expenses

incurred in the hearing shall be paid by the party incurring the same.

(6) Redeterminations upon a "petition for redetermination" shall follow the

same conditions, except that no oral hearing shall be held.

(7) Hearing Ruling. In either case, the Hearing Officer shall issue his ruling

not later than forty-five (45) days after the close of the record by the

Hearing Officer.

(8) Notice of refund or adjusted assessment. Within sixty (60) days of the

issuance of the Hearing Officers decision, the Tax Collector shall issue

to the taxpayer either a notice of refund or an adjusted assessment

recalculated to conform to the Hearing Officers decision.

(c) Stipulations that future tax is also protested. A taxpayer may enter into a

stipulation with the Tax Collector that future taxes of similar nature are also at

issue in any protest or appeal. However. unless such stipulation is made. it is

presumed that the protest or appeal deals solely and exclusively with the tax

specifically protested and no other. When a taxpayer enters into such a

stipulation with the Tax Collector that future taxes of similar nature will be

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included in any redetermination, hearing, or court case, it is the burden of that

taxpayer to identify, segregate, and keep record of such income or protested

taxable amount in his books and records in the same manner as the taxpayer is

required to segregate exempt income.

(d) When an assessment is final.

(1) If a request for administrative review and petition for hearing or

redetermination of an assessment made by the Tax Collector is not filed

within the period required by subsection (b) above, such person shall be

deemed to have waived and abandoned the right to question the

amount determined to be due and any tax, interest, or penalty

determined to be due shall be final as provided in subsections 545(a)

and 555(f).

(2) The decision made by the Hearing Officer upon administrative review by

hearing or redetermination shall become final thirty (30) days after the

taxpayer receives the notice of refund or adjusted assessment required

by subsection (b)(8) above, unless the taxpayer appeals the order or

decision in the manner provided in Section 575.

(e) (Reserved)

Sec. 62-571. Jeopardy assessments.

(a) If the Tax Collector believes that the collection of any assessment or deficiency

of any amounts imposed by this Chapter will be jeopardized by delay, he shall

deliver to the taxpayer a notice of such finding and demand immediate payment

of the tax or deficiency declared to be in jeopardy, including interest, penalties,

and additions.

(b) Jeopardy assessments are immediately due and payable, and the Tax Collector

may immediately begin proceedings for collection. The taxpayer, however, may

stay collection by filing, within ten (10) days after receipt of notice of jeopardy

assessment, or within such additional time as the Tax Collector may allow, by

bond or collateral in favor of the City in the amount Tax Collector declared to be

in jeopardy in his notice.

(c) Bond or Collateral, as required by this Section,

(1) shall mean either:

(A) a bond issued in favor of the City by a surety company authorized to

transact business in this State and approved by the Director of

Insurance as to solvency and responsibility, or

(8) collateral composed of securities or cash which are deposited with,

and kept in the custody of, the Tax Collector.

(2) shall be of such form that it may, at any time without notice, be applied to any

tax, penalties, or interest due and payable for the purposes of this Chapter.

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Securities held as collateral by the Tax Collector must be of a nature that

they may be sold at public or private sale without notice to the taxpayer.

(d) If bond or collateral is not filed within the period prescribed by subsection (b)

above, the Tax Collector may treat the assessment as final for purposes of any

collection proceedings. The taxpayer nevertheless shall be afforded the appeal

rights provided in Sections 570 and 575. The filing of a petition by the taxpayer

under Section 570, however, shall not stay the Tax Collector's rights to pursue

any collection proceedings.

(e) If the taxpayer timely files sufficient bond or collateral, the jeopardy requirements

are deemed satisfied, and the taxpayer may avail himself of the provisions of

Section 570, including requests for additional time to file a petition.

Sec. 62-572. Expedited review of jeopardy assessments.

(a) Within thirty (30) days after the day on which the Tax Collector furnishes the

written notice required by Section 571 (a), the taxpayer, pursuant to Section

570, may request the Tax Collector to review the action taken. Within fifteen

(15) days after the request for review, the Tax Collector shall determine

whether both the jeopardy determination. and the amount assessed are

reasonable.

(b) Within thirty (30) days after the Tax Collector notifies the taxpayer of the

determination he reached pursuant to subsection (a) above, the taxpayer may

bring a civil action in the appropriate Court If the taxpayer so requests, the

City shall stipulate to an accelerated and expedited resolution of the civil action.

If the Court determines that either the jeopardy determination or the amount

assessed is unreasonable, the Court may order the Tax Collector to abate the

assessment, to redetermine any part of the amount assessed or to take such

other action as the Court finds to be appropriate. A determination made by the

Court under this subsection is final except as provided in Arizona Revised

Statutes Section 12-170.

Sec. 62-575. Judicial review.

(a) A taxpayer may seek judicial review of all or any part of a Hearing Officer's

decision by initiating an action against the City in the appropriate Court of this

County. A taxpayer is not required to pay any tax, penalty, or interest upheld

by the Hearing Officer before seeking such judicial review.

(b) The Tax Collector may seek judicial review of all or any part of a Hearing

Officer's decision by initiating an action in the appropriate Court of this County.

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(c) An action for judicial review cannot be commenced by either the taxpayer or the

Tax Collector more than thirty (30) days after receipt by the taxpayer of notice

of any refund or assessment recalculated or reduced to conform to the Hearing

Officer's decision, unless the time to commence such an action is extended in

writing signed by both the taxpayer and the Tax Collector. Failure to bring the

action within thirty (30) days or such other time as is agreed upon in writing

shall constitute a waiver of any right to judicial review, except as provided in

subsection (f) below.

(d) The Court shall hear and determine the appeal as a trial de novo; however, the

Tax Collector cannot raise in the Court any grounds or basis for the

assessment not asserted before the Hearing Officer. Nothing in this

subsection, however, shall preclude the Tax Collector from responding to any

arguments which are raised by the taxpayer in the appeal.

(e) The city has the burden of proof by a preponderance of the evidence in any court

proceeding regarding any factual issue relevant to ascertaining the tax liability of

a taxpayer. this subsection does not abrogate any requirement of this chapter

that requires a taxpayer to substantiate an item of gross income, exclusion,

exemption, deduction, or credit This subsection applies to a factual issue if a

preponderance of the evidence demonstrates that

(1) the taxpayer 'asserts a reasonable dispute regarding the issue.

(2) the taxpayer has fully cooperated with the tax collector regarding the

issue, including providing within a reasonable period of time, access to

and inspection of all witnesses, information and documents within the

taxpayer's control, as reasonably requested by the tax collector.

(3) the taxpayer has kept and maintained records as required by the city.

(f) The issuance of an adjusted or corrected assessment or notice of refund due to

the taxpayer, where made by the Tax Collector pursuant to the decision of the

Hearing Officer, shall not be deemed an acquiescence by the City or the Tax

Collector in said decision, nor shall it constitute a bar or estoppel to the

institution of an action or counterclaim by the City to recover any amounts

claimed to be due to it by virtue of the original assessment.

(g) After the initiation of any action in the appropriate Court by either party, the

opposite party may file such counterclaim as would be allowed pursuant to the

Arizona Rules of Civil Procedure.

Sec. 62-577. Refunds of taxes paid under protest.

In the event the Hearing Officer's decision or a final judgment by the Court is rendered in favor

of the taxpayer to recover protested taxes, it shall be the duty of the Tax Collector, upon receipt

of such decision or of a certified copy of such final judgment, to authorize a warrant in favor of

the taxpayer in an amount equal to the amount of the tax found by such decision or by the final

judgment to have been paid under protest, and such warrant shall include the amount of interest

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or other cost that may have been recovered against the City by the final judgment in such action

in the courts, to be paid from the privilege tax revenue accounts.

Sec. 62-578. Reimbursement of fees and other costs; definitions.

(a) A taxpayer who is a prevailing party may be reimbursed for reasonable fees

and other costs related to any administrative proceeding brought by the

taxpayer pursuant to Section 570(b). For purposes of this section, a taxpayer is

considered to be the prevailing party only if both of the following are true:

(1) the Tax Collector's position was not substantially justified.

(2) the taxpayer prevails as to the most significant issue or set of issues.

(b) Reimbursement under this section may be denied if any of the following

circumstances apply:

(1) during the course of the proceeding the taxpayer unduly and

unreasonably protracted the final resolution of the matter.

(2) the reason that the taxpayer prevailed is due to an intervening change in

the applicable law.

(c) The taxpayer shall present an itemization of the reasonable fees and other

costs to the Taxpayer Problem Resolution Officer within thirty (30) days after

receipt by the taxpayer of a notice of refund or recalculated assessment issued

by the Tax Collector pursuant to Section 570(b)(8). The Taxpayer Problem

Resolution Officer shall detennine the validity of the fees and other costs within

thirty (30) days after receiving the itemization. The Taxpayer Problem

Resolution Officer's decision is considered a final decision. Either the taxpayer

or the Tax Collector may seek judicial review of the Taxpayer Problem

Resolution Officer's Decision. An action for judicial review, however, shall not

be commenced more than thirty (30) days after receipt of the Resolution

Officer's decision.

(d) In the event judicial review is not sought pursuant to subsection (c) above, the

City shall pay the fees and other costs awarded as provided in this section

within thirty days after :demand by a person who has received an award

pursuant to this section.

(e) Reimbursement to a taxpayer under this section shall not exceed twenty

thousand dollars ($20,000) or actual monies spent, whichever is less. The

reimbursable attorney or representative fees shall not exceed one hundred

dollars ($100) per hour or actual monies spent, whichever is less, unless the

Taxpayer Problem Resolution Officer detennines that an increase in the cost of

living or a special factor such as the limited availability of qualified attorneys or

representatives for the proceeding involved justifies a higher fee.

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(f) For purposes of this Section "reasonable fees and other costs" means fees and

other costs that are based on prevailing market rates for the kind and quality of

the furnished services, but not exceeding the amounts actually spent for expert

witnesses, the cost of any study, analysis, report, test or project that is found to

be necessary to prepare the party's case and necessary fees for attorneys or

other representatives.

Sec. 62-580. Criminal penalties.

(a) It is unlawful for any person to knowingly or willfully:

(1) fail or refuse to make any return required by this Chapter.

(2) fail to remit as and when due the full amount of any tax or additional tax or

penalty and interest thereon.

(3) make or cause to be made a false or fraudulent return.

(4) make or cause to be made a false or fraudulent statement in a return, in

written support of a return, or to demonstrate or support entitlement to a

deduction, exclusion, or credit or to entitle the person to an allocation or

. apportionment or receipts subject to tax.

(5) fail or refuse to permit any lawful examination of any book, account, record,

or other memorandum by the Tax Collector.

(6) fail or refuse to remit any tax collected by such person from his customer to

the Tax Collector before the delinquency date next following such collection.

(7) advertise or hold out to' the public in any manner, directly or indirectly, that

any tax imposed by this Chapter, as provided in this Chapter, is not

considered as an element in the price to the consumer.

(8) fail or refuse to obtain a Privilege License or to aid or abet another in any

attempt to intentionally refuse to obtain such a license or evade the license

fee.

(9) reproduce, forge, falsify, fraudulently obtain or secure, or aid or abet another

in any attempt to reproduce, forge, falsify, or fraudulently obtain or secure, an

exemption from taxes imposed by this Chapter.

(b) The violation of any provision of subsection (a) above shall constitute a Class One

Misdemeanor.

(c) In addition to the foregoing penalties, any person who shall knowingly swear to or

verify any false or fraudulent statement, with the intent aforesaid, shall be guilty

of the offense of pe~ury and on conviction thereof shall be punished in the

manner provided by law.

Sec. 62-590. Civil actions.

...

- (a) Liens.

(1)

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Any tax, penalty, or interest imposed under this Chapter which has

become final, as provided in this Chapter, shall become a lien when the

City perfects a notice and claim of lien setting forth the name of the

taxpayer, the amount of the tax, penalty, and interest, the period or

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periods for which the same is due, and the date of accrual thereof, the

amount of the recording costs by the county recorder in any county in

which the taxpayer owns real property and the documentation and lien

processing fees imposed by the city council and further, stating that the

City claims a lien therefore.

(2) The notice of claim of lien shall be signed by the Tax Collector under his

official seal or the official seal of the City, and, with respect to real

property, shall be recorded in the office of the County Recorder of any

county in which the taxpayer owns real property, and, with respect to

personal property shall be filed in the office of the Secretary of State.

After the notice and claim of lien is recorded or filed, the taxes, penalties,

interest and recording costs and lien processing fees referred to above in

the amounts specified therein shall be a lien on all real property of the

taxpayer located in such county where recorded, and all tangible personal

property of the taxpayer within the State, superior to all other liens and

assessments recorded or filed subsequent to the recording or filing of the

notice and claim of lien.

(3) Every tax and any increases, interest, penalties, and recording costs and

lien processing fees referred to above, shall become from the time the

same is due and payable a personal debt from the person liable to the

City, but shall be payable to and recoverable by the Tax Collector and

which may be collected in the manner set forth in subsection (b) below.

(4) Any lien perfected pursuant to this Section shall, upon payment of the

taxes, penalties, interest, recording costs and lien processing fees

referred to above and lien release fees imposed by the county recorder in

any county in which the lien was recorded, thereby, be released by the

Tax Collector in the same manner as mortgages and judgments are

released. The Tax Collector may, at his sole discretion, release a lien in

part, that is, against only specified property, for partial payment of

moneys due the City.

(b) Actions to recover tax. An action may be brought by the City Attorney or other

legal advisor to the City designated by the City Council, at the request of the Tax

Collector, in the name of the City, to recover the amount of any taxes, penalties,

interest, recording costs, lien processing fees and lien release fees due under

this Chapter; provided that:

(1) no action or proceeding may be taken or commenced to collect any taxes

levied by this Chapter until the amount thereof has been established by

assessment, correction, or reassessment; and

(2) such collection effort is made or the proceedings begun:

(A) within six (6) years after the assessment of the tax; or

(B) prior to the expiration of any period of collection agreed upon in

writing by the Tax Collector and the taxpayer before the expiration

of such six (6) year period, or any extensions thereof; or

(C) at any time for the collection of tax arising by reason of a tax lien

perfected, recorded, or possessed by the City under this Section.

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Sec. 62-595. Collection of taxes when there is succession in and/or cessation of

business.

(a) In addition to any remedy provided elsewhere in this City Code that may apply,

the Tax Colledor may apply the provisions of subsections (b) through (d) below

concerning the colledion of taxes when there is succession in and/or cessation

of business.

(b) The taxes imposed by this Chapter are a lien on the property of any person

subject to this Chapter who sells his business or stock of goods, or quits his

business, if the person fails to make a final return and payment of the tax within

fifteen (15) days after selling or quitting his business.

(c) Any person who purchases, or who acquires by foreclosure, by under trust deed

or warranty deed in lieu of foredosure, or by any other method, improved real

property or a portion of improved real property for which the Privilege Tax

imposed by this Chapter has not been paid shall be responsible for payment of

such tax as a speculative builder or .owner builder, as provided in Sections 416

and 417. .

(d) A person's successors or assignees shall withhold from the purchase money an

amount sufficient to cover the taxes required to be paid, and interest or penalties

due and payable, until ·the former owner produces a receipt from the Tax

Collector showing that all City tax has been paid or a certificate stating that no

amount is due as then shown by the records of the Tax Collector. The Tax

Colledor shall respond to a request from the seller for a certificate within fifteen

(15) days by either providing the certificate or a written notice stating why the

certificate cannot be issued.

(1) If a subsequent audit shows a deficiency arising before the sale of the

business, the deficiency is an obligation of' the seller and does not

constitute a liability against a buyer who has received a certificate from

the Tax Collector.

(2) If the purchaser of a business or stock of goods fails to obtain a certificate

as provided by this Section, he is personally liable for payment of the

amount of taxes required to be paid by the fanner owner on account of

the business so purchased, with interest and penalties accrued by the

fanner owner or assignees.

Sec. 62-596. Agreement for installment payments of tax.

(a) The City may enter into an agreement with a taxpayer to allow the taxpayer to

satisfy a liability for any tax imposed by this Chapter by means of installment

payments. The Tax Collector may require a taxpayer who requests an

installment payment agreement to complete a financial report in such fonn and

manner as the Tax Colledor may prescribe.

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(b) The Tax Collector, without notice, may alter, modify or terminate an installment

payment agreement if the taxpayer: .

(1) fails to pay an installment at the time the installment payment is due

under the agreement.

(2) fails to pay any other tax liability at the time the liability is due.

(3) fails to file any tax report or return at the time the report or return is due.

(4) fails to furnish any information requested by the Tax Collector within

thirty days after receiving a written request for such information.

(5) fails to notify the Tax Collector of a material improvement in the

taxpayer's financial condition above the income previously reported in

the most recent income statement within thirty days after the material

improvement.

(6) provides inaccurate, false qr incomplete information to the Tax

Collector.

(c) Notwithstanding any installment payment agreement, the Tax Collector may

offset any tax refunds against the liabilities provided for in the installment

payment agreement, may file and perfect any tax liens and, in the event the

taxpayer breaches any term or provision .of the installment payment agreement,

may engage in collection activities.

(d) The Tax Collector, without notice, may terminate an installment payment

agreement if the Tax Collector believes that the collection of tax to which the

payment agreement pertains is in jeopardy.

(e) If the Tax Collector determines that the financial condition of a taxpayer has

improved, the Tax Collector may alter,modify or terminate the agreement by

providing notice to the taxpayer at least thirty days before the effective date of

the action. The notice shall include the reasons why the Tax Collector believes

the alteration, modification or termination is appropriate.

(f) An installment payment agreement shall remain in effect for the term of the

agreement except as otherwise provided in this Section.

(g) A taxpayer who is aggrieved by a decision of the Tax Collector to refuse to

enter into an installment payment agreement or to alter, modify or terminate an

agreement entered into pursuant to' this section may petition the Taxpayer

Problem Resolution Officer to review that determination. The Taxpayer

Problem Resolution Officer may stay such alteration, modification or

termination pending its review and may modify or nullify the determination.

(h) The City and the taxpayer may modify any installment payment agreement at

any time by entering into a new or modified agreement.

Sec. 62-597. Private Taxpayer Rulings; request; revocation or modification; definition.

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(a) The Tax Collector shall issue Private Taxpayer Rulings to taxpayers and

potential taxpayers on request. Each request shall be in writing and shall:

(1) state the name, address and, if applicable, taxpayer identifying number

of the taxpayer or potential taxpayer who requests the ruling.

(2) describe all facts that are relevant to the requested ruling.

(3) state whether, to the best knowledge of the taxpayer or potential

taxpayer, the issue or related issues are being considered by the tax

collector or any other taxing jurisdiction in connection with an active

audit, protest or appeal that involves the taxpayer or potential taxpayer

and whether the same request has been or is being submitted to

another taxing jurisdiction for a ruling.

(4) be signed by the taxpayer or potential taxpayer who makes the request

or by an authorized representative of the taxpayer or potential taxpayer.

(b) A Private Taxpayer Raling may be revoked or modified by either:

(1) a change or clarification in the law that was applicable at the time the

ruling was issued, including changes or clarifications caused by

regulations and court decisions.

(2) actual written notice by the Tax Collector to the last known address of

the taxpayer or potential taxpayer of the revocation or modification of

the private taxpayer ruling.

(c) With respect to the taxpayer or prospective taxpayer to whom a Private

Taxpayer Ruling is issued, the revocation or modification of a Private Taxpayer

Ruling shall not be applied retroactively to tax periods or tax years before the

effective date of the revocation or modification and the Tax Collector shall not

assess any penalty or tax attributable to erroneous advice that is furnished to

the taxpayer or potential taxpayer in the private taxpayer ruling if:

(1) the taxpayer reasonably relied on the Private Taxpayer Ruling.

(2) the penalty or tax did not result either from a failure by the taxpayer to

provide adequate or accurate information or from a change in the

information.

(d) A Private Taxpayer Ruling may not be relied upon, cited nor introduced into

evidence in any proceeding by any taxpayer other than the taxpayer who

received the ruling.

(e) A taxpayer may appeal the propriety of a retroactive application of a revoked or

modified Private Taxpayer Ruling by filing a written petition with the Tax

Collector pursuant to Section 570 within forty-five (45) days after receiving

written notice of the intent to retroactively apply a revoked or modified Private

Taxpayer Ruling.

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(f) A Private Taxpayer Ruling constitutes the Tax Collector's interpretation of the

Sections of this Chapter only as they apply to the taxpayer making, and the

particular facts contained in, the request.

(g) A Private Taxpayer Ruling which addresses a taxpayer's ongoing business

activities will apply only to transactions that occur or tax liabilities that accrue

from and after the date of the taxpayer's ruling request.

(h) The Tax Collector shall attempt to issue Private Taxpayer Rulings within fOrtyfive (45) days after receiving the written request and on receiving the facts that

are relevant to the ruling. If the Ruling is expected to be delayed beyond the

forty-five (45) days, the Tax Collector shall notify the requester of the delay and

the proposed date of issuance.

(i) Within thirty (30) days after being issued, the Tax Collector shall maintain the

Private Taxpayer Ruling as a public record and make it available at a

reasonable cost for public inspection and copying. The text of Private Taxpayer

Rulings are open to public inspection subject to tl)e confidentiality requirements

prescribed by Section 510.

0) In this Section, "Private Taxpayer Ruling" means a written determination by the

Tax Collector issued pursuant to this Section that interprets and applies one or

more Sections contained in this Chapter and any applicable Regulations.

(k) A Private Taxpayer Ruling issued by the Arizona Department of Revenue

pursuant to A.R.S. Section 42-139.21 may be relied upon by the taxpayer to

whom the ruling was issued and must be recognized and followed by any city in I

which such taxpayer has obtained a Privilege License if the city.has not issued

a Ruling addressing the ,facts described in the Taxpayer's Ruling request and

the statute at issue in the Taxpayer's Ruling request is, in essence, worded and

written the same as the applicable section hereunder.

Article VI - USE TAX

Sec. 62-600. Definitions.

For the purposes of this Article only, the following definitions shall apply, in addition to the

definitions provided in Article I:

Acquire (for Storage or Use) means purchase, rent, lease, or license for storage or use.

Retailer also means any person selling, renting, licensing for use, or leasing tangible personal

property under circumstances which would render such transactions subject to the taxes

imposed in Article IV, if such transactions had occurred within this City.

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Storage (within the City) means the keeping or retaining of tangible personal property at a place

within the City for any purpose. except for those items acquired specifically and solely for the

purpose of sale, rental, lease, or license for use in the regular course of business or for the

purpose of subsequent use solely outside the City.

Use (of Tangible Personal Property) means consumption or exercise of any other right or power

over tangible personal property incident to the ownership thereof except the holding for the sale.

rental, lease, or license for use of such property in the regular course of business.

Sec. 62-601. (Reserved)

Sec. 62-602. (Reserved)

Sec. 62-610. Use tax: imposition of tax; presumption.

(a) There is hereby levied and imposed. subject to all other provisions of this

Chapter. an excise tax on the storage or use in the City of tangible personal

property. 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.

cost of tangible personal property. except jet fuel acquired from a

retailer. upon every person storing or using such property in this City.

gross income from the business activity upon every person meeting the

requirements of subsection 620 (b) or (c) who is engaged or continuing

in the business activity of sales. rentals. leases. or licenses of tangible

personal property to persons within the City for storage or use within the

City. to the extent that tax has been collected upon such transaction.

cost of the tangible personal property provided under the conditions of a

warranty, maintenance, or service contract.

cost of complimentary items provided to patrons without itemized charge

by a restaurant, hotel, or other business.

cost of food consumed by the owner or by employees or agents of the

owner of a restaurant or bar subject to the provisions of Section 455 of

this Chapter.

(2)

The tax rate shall be at an amount equal to one and one-half percent (1.5%) of

the:

(1)

(3)

(4)

(5)

(b)

(c) It shall be presumed that all tangible personal property acquired by any person

who at the time of such acquisition resides in the City is acquired for storage or

use in this City, until the contrary is established by the taxpayer.

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(d) Exclusions. For the purposes of this Article, the acquisition of the following shall

not be deemed to be the purchase, rental, lease, or license of tangible personal

property for storage or use within the City:

(1) stocks, bonds, options, or other similar materials.

(2) lottery tickets or shares sold pursuant to Article I, Chapter 5, Title 5,

Arizona Revised Statutes.

(3) platinum, bullion, or monitized bullion, except minted or manufactured

coins transferred or acquired primarily for their numismatic value as

prescribed by Regulation.

(e) (Reserved)

(f) Additional Imposition. The tax rate shall be at an amount equal to 2.3 cents

($.023) per gallon of jet fuel upon every person storing or using such property in

this City.

(Editor's note: The use tax and jet fuel use tax rates increased from 1% and $.018, respectively

effective May 1, 1994.)

Sec. 62-620. Use tax: liability for tax.

The following persons shall be deemed liable for the tax imposed by this Article; and such

liability shall not be extinguished until the tax has been paid to this City, except that a receipt

from a retailer separately charging the tax imposed by this Chapter is sufficient to relieve the

person acquiring such property from further liability for the tax to which the receipt refers:

(a) Any person who acquires tangible personal property from a retailer, whether or

not such retailer is located in this City, when such person stores or uses said

property within the City.

(b) Any retailer not located within the City, selling, renting, leasing, or licensing

tangible personal property for storage or use of such property within the City,

may obtain a License from the Tax Collector and collect the Use Tax on such

transactions. Such retailer shall be liable for the Use Tax to the extent such

Use Tax is collected from his customers.

(c) Every agent within the City of any retailer not maintaining an office or place of

business in this City, when such person sells, rents, leases, or licenses tangible

personal property for storage or use in this City shall, at the time of such

transaction, collect and be liable for the tax imposed by this Article upon the

storage or use of the property so transferred, unless such retailer or agent is

liable for an equivalent excise tax upon the transaction.

(d) Any person who acquires tangible personal property from a retailer located in

the City and such person claims to be exempt from the City Privilege or Use tax

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at the time of the transaction, and upon which no City Privilege Tax was

charged or paid, when such claim is not sustainable.

(e) Every person storing or using tangible personal property under the conditions of

a warranty, maintenance, or service contract.

Sec. 62-630. Use tax: recordkeeping requirements.

All deductions, exclusions, exemptions, and credits provided in this Article are conditional upon

adequate proof of documentation as required by Article 11/ or elsewhere in this Chapter.

Sec. 62-640. Use tax: credit for equivalent excise taxes paid another jurisdiction.

In the event that an equivalent excise tax has been levied and paid upon tangible personal

property which is acquired to be stored or used within this City, full credit for any and all such

taxes so paid shall be allowed by the Tax Collector but only to the extent Use Tax is imposed

upon that transaction by this Article.

Sec. 62-650. Use Tax: exclusion when acquisition subject to Use Tax is taxed or taxable

elsewhere in this Chapter; limitation. ..

The tax levied by this Article does not apply to the storage or use in this City of tangible

personal property acquired in this City, the gross income from the sale, rental, lease, or license

of which were included in the measure of the tax imposed by Article IV of this Chapter, provided,

however, that any person who has acquired tangible personal property from a vendor in this City

without paying the City Privilege Tax because of a representation to the vendor that the property

was not subject to such tax, when such claim is not sustainable, may not claim the exclusion

from such Use Tax provided by this Section.

Sec. 62-660. Use tax: exemptions.

The storage or use in this City of the following tangible personal property is exempt from the

Use Tax imposed by this Article:

(a) tangible personal property brought into the City by an individual who was not a

resident of the City at the time the property was acquired for his own use, if the

first actual use of such property was outside the City, unless such property is

used in conducting a business in this City.

(b) tangible personal property, the value of which does not exceed the amount of

one thousand dollars ($1,000) per item, acquired by an individual outside the

limits of the City for his personal use and enjoyment.

(c) charges for delivery, installation, or other customer services, as prescribed by

Regulation.

(d) charges for repair services, as prescribed by Regulation.

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(e) separately itemized charges for warranty, maintenance, and service contracts.

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

(f) prosthetics.

(g) income-producing capital equipment

(h) rental equipment and rental supplies.

(i) mining and metallurgical supplies.

(j) motor vehicle fuel and use fuel which are used upon the highways of this State

and upon which a tax has been imposed under the provisions of Article I or II,

Chapter 16, Title 28, Arizona Revised Statutes.

(k) tangible personal property purchased by a construction contractor, but not an

owner-builder, when such person holds a valid Privilege License for engaging or

continuing in the business of construction contracting, and where the property

acquired is incorporated into any structure or improvement to real property in

fulfillment of a construction contract.

(I) 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.

(m) 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 used up in a

manufacturing, job printing, publishing, or production process is not an ingredient

or component part of a product.

(n) rental, leasing, or licensing for use of film, tape, or slides by a theater or other

person taxed under Section 410, or by a radio station, television station, or

subscription television system.

(0) food served to patrons for a consideration by any person engaged in a business

properly licensed and taxed under Section 455, but not food consumed by

owners, agents, or employees of such business.

(p) tangible personal property acquired by a qualifying hospital, qualifying community

health center or a qualifying health care organization, except when the property

is in fact used in activities resulting in gross income from unrelated business

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

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(q) 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).

(r) the following tangible personal property purchased by persons engaging or

continuing in the business of farming, ranching, or feeding livestock, poultry or

ratites.

(1 )

(2)

(3)

(4)

seed, fertilizer, fungicides, seed treating chemicals, and other similar

chemicals.

feed for livestock, poultry or ratites, including salt, vitamins, and other

additives to such feed.

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. . (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)

(s)

(t)

(u)

(v)

sales of aircraft acquired for use outside the state, as prescribed by Regulation. (Note: This subsection was 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.)

(w)

(x)

(y)

(z)

(aa)

(bb)

(Reserved)

(Reserved)

(Reserved)

(Reserved)

the sale of tangible personal propel1Y 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

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(cc)

(dd)

(ee)

(ff)

(gg)

(hh)

(ii)

(jj)

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university libraries or federal, 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 A.R.S. § 42-5061 (A)(50), that

serves the food and beverages to Its passengers, without additional charge, for

consumption in flight for the pureoses of this Subsection, accessories means

paper plates, plastic eating utensils, napkins, paper cups, drinking straws, paper

sacks or other disposaole containers, or other items whicti 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

customer 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 A.R.S. § 1-215, to a used oil fuel burner

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

or used oil fuel under A.R.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, paper cups, drinking straws, paper sacks or other disposable

containers, or other items which facilitate the consumption of the food.

sales of personal hygiene items to a person engaged in the business of and

subject to tax under Section 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.

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.

Food, beverages, condiments and accessories purchased by or for 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,

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Ordinance No. 3046

"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 vehicles that use alternative fuel as defined in A.R.S. section 43-

1086 on or after may 5, 1999.

(Editor's Note: Subsections (aa) through (hh) were added effective July 11, 1998.)

REGULATIONS - PRJVILEGE AND EXCISE TAXES

Reg. 62-100.1. Brokers

(a) For the purposes of proper administration of this Chapter and to prevent evasion of

taxes imposed, brokers shall be wherever necessary treated as taxpayers for all

purposes, and shall file a return and remit the tax imposed on the activity on

behalf of the principal. No deduction shall be allowed for any commissions or fees

retained by such broker, except as provided in Section 405, relating to advertising

commissions.

(b) Brokers for vendors. A broker acting for a seller, lessor, or other similar person

deriving gross income in a category upon which this Chapter imposes a tax shall

be liable for such tax, even if his principal would not be subject to the tax if he

conducted such activity in his own behalf, by reason of the activity being deemed

a "casual" one. For example:

(1) An auctioneer or other sales agent of tangible personal property is subject

to the tax imposed upon retail sales, even if such sales would be deemed

"casual" if his principal had sold such items himself.

(2) A property manager is subject to the tax imposed upon rental, leasing, or

licensing of real property, even if such rental, leasing, or licensing would

be deemed "casual" if his principal managed such real property himself.

(c) Brokers for vendees. A broker acting solely for a buyer, lessee, tenant, or other

similar person who is a party to a transaction which may be subject to the tax,

shall be liable for such tax and for filing a retum in connection with such tax only

to the extent his principal is subject to the tax.

(d) The liability of a broker does not relieve the principal of liability except upon

presentation to the Tax Collector of proof of payment of the tax, and only to the

extent of the correct payment The broker shall be relieved of the responsibility

to file and pay taxes upon the filing and correct payment of such taxes by the

principal.

(e) (Reserved)

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(f) Location of Business. Retail sales by brokers acting for another person shall be

deemed to have occurred at the regular business location of the broker, in a

manner similar to that used to determine "out-of-city sales"; provided, however,

that an auctioneer is deemed to be engaged in business at the site of each

auction.

Reg. 62-100.2. Delivery, installation, or other direct customer services.

(a) "Delivery Charges" exist only when the total charges to the ultimate customer or

consumer include, as separately charged to the ultimate customer, charges for

delivery to the ultimate consumer, whether the place of delivery is within or

without the City, and when the taxpayer's books and records show the separate

delivery charges.

(1) Identification to the customer or consumer that the listed price has

"delivery included" or other similar expression is insufficient to show the

delivery as a separate charge. Only the separately stated charge for the

delivery shall be deemed a "delivery charge".

(2) Freight in. Charges for delivery from place of production or the

manufacturer to the vendor either directly or through a chain of

wholesalers or jobbers or other middlemen are deemed ''freight-in'' and

are not considered delivery.

(b) Installation as used in this definition, relates only to tangible personal property.

Installation to real property is deemed construction contracting in this Chapter.

Examples of installation relating to tangible personal property are: installing a

radio in an automobile; applying sun screens on the windows of a boat; installing

cabinets, carpeting, or "built-in appliances" to a camper or motorized recreational

vehicle.

(c) Repair of tangible personal property is not included in this definition. See

Regulation 465.1.

(d) Direct Customer SeNices means services other than repair rendered directly to

the customer. Services or labor provided by any person prior to the transfer of

tangible personal property to the customer or consumer are not included in this

definition. In the following examples, the requirements of subsection (e) below

are referred to by the words "identify" or "identification."

(1) A retailer sells a customer a $100 "plug-in" appliance, with a $25 delivery

and installation charge. If the retailer identifies the $25 delivery and

installation charge, it is a charge for direct customer services.

(2) A caterer charges his customer $1,000 for the food and drink served,

$300 for setup and site cleanup, and $500 for bartender and waiters. If

all charges are propeny identified, only the $300 for set up and cleanup is

a charge for direct customer services, and the $1,500 for food and service

is restaurant gross income.

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(3) Persons engaged in engraving on wood, metal, stone, etc. or persons

engaged in retouching photographs or paintings may consider such

charges for labor as direct customer services.

(4) All charges by a photographer resulting in the sale of a photograph

(sitting charges, developing, making enlargements, retouching, etc.) for

services that occur prior to transfer of tangible personal property are not

direct customer services.

(5) An equipment rental company charging $25 for delivery may consider

such delivery charge as a charge for direct customer service only if such

charge is properly identified.

(6) Even if identified, charges for labor incurred in the production of any

manufactured article or of a custom-made article Oewelry, artwork,

tailoring, draperies, etc.) are not included in this definition, as such labor

occurs prior to the transfer of property.

(e) Recordkeeping requirements.

(1) Any person who engages in transactions involving these services must:

(A) Separately bill, invoice, or charge the customer for such services in

a manner by which the customer or consumer may readily identify

the specific dollar amount of the service charge; and

(8) Maintain business books and records in a manner in which the

separate charge for such services can be clearly identified, to the

satisfaction of the Tax Collector.

(2) Rendering a statement to a customer for a transaction involving such

services and the transfer of tangible personal property which only

indicates the total amount of the charges with words such as "services

included" or "charge includes labor and parts" or similar a expression

does not satisfy the requirements of this subsection.

Reg. 62-100.3. Retailers.

When in the opinion of the Tax Collector it is necessary for efficient administration of this

Chapter, he may regard any salesman, representative, peddler, canvasser, or agent of any

dealer, distributor, supervisor, or employer under whom he operates or from whom he obtains

tangible personal property for sale, rental, lease, or license as a retailer for the purposes of this

Chapter, irrespective of whether he is making sales, rentals, leases, or licenses on his own

behalf or on behalf of others. The Tax Collector may also regard such dealer, distributor,

supervisor, or employer as a retailer for the purposes of this Chapter.

Reg. 62-100.4. Out-of-City/Out-of-State Sales: Sales to Native Americans

Sales to Native Americans or tribal councils by vendors located within the City shall be

deemed sales within the City, unless all of the following conditions exist:

(1) The vendor has properly accounted for such sales, in a manner similar to

the recordkeeping requirements for out-of-City sales; and,

(2) All of the following elements of the sale exist:

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(a) solicitation and placement of the order occurs on the reservation;

and

(b) delivery is made to the reservation; and

(c) payment originates from the reservation.

Reg. 62-100.5. Remediation contracting.

The following activities are considered remediation contracting and are exempt

(1) excavation, transportation, treatment, and/or disposal of contaminated soil for

purposes of site remediation (rather than characterization);

(2) installation of groundwater extraction and/or injection wells for purposes of

groundwater remediation;

(3) installation of pumps and piping into groundwater extraction wells for remediation

purposes;

(4) installation of vapor extraction wells for the purpose of soil or groundwater

remediation;

(5) construction of remediation systems, such as groundwater treatment plants,

vapor extraction systems, or air injection systems;

(6) connection of remediation systems to utilities;

(7) abandonment of groundwater or vapor extraction wells;

(8) removal/demolition of remediation systems;

(9) capping/closure construction activities;·and

(10) service or handling charges for subcontracted remediation contracting activities.

Note: Reg. 110.1 is repealed effective July 1, 1995.

Reg. 62-110.1 Income-producing capital equipment: in general.

(a) The term "income-producing capital equipment" applies only when the purchaser

or lessee is directly using, such equipment primarily for the purpose of directly

producing income in his normal course of business. For example:

(1) Rental of a printing press to a job printer would qualify. Rental of the

same equipment to a trade school or an airline company would not

qualify.

(2) A lease of an electric generator rated at 75KV to an electric utility

company or a manufacturer or job printer would qualify. The same lease

to a telecommunications company or an irrigation district would not

qualify.

(b) Note the "two-pronged test" this definition requires:

(1) the purchaser or lessor must be engaged in a business that directly uses

the item to produce income; and

(2) the item is to be directly used in the production of income. Ancillary

equipment for backup power, removal of wastes, storage, transport of

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materials, etc. do not qualify unless the definition allows it for that specific

business activity.

Note: Reg. 110.2/s repealed effective July 1,1995.

Reg. 62-110.2 Income-producing capital equipment: manufacturing equipment; job

printing equipment.

(a) Manufacturing involves the change of tangible personal property into a new form

of tangible personal property. This may involve activities often called

"processing" or "fabricating," for example: making electronic parts in quantity,

refining crude oil, pasteurizing milk, fabricating a mobile home, producing syrup

for soft drinks from other ingredients. Therefore, there are four reasons why an

activity is not considered manufacturing, as follows, with examples.

(1) The activity is specifically defined elsewhere in this Chapter. For

example: publishing; construction contracting; baking or cooking food

(defined as restaurant activity).

(2) The activity does not begin with a physical product ("raw materials"). For

example: word processing; electronic data processing; photography;

video or sound recording by a recording studio.

(3) The activity does not physically change the raw materials into another

form of tangible personal property. For example: sorting or "screening"

sand, .gravel, or rock; picking cotton; stuffing envelopes; chilling (but not

freezing) water, cooling or heating air.

(4) The ''finished product" is not tangible personal property available for sale.

For example: broadcasting by radio or television waves; cooling or

heating air; electronic data processing.

(b) Manufacturing is limited to those activities involving the actual changing of

tangible personal property into another. form, and not to include any other

activities of persons involved in the business of manufacturing. Therefore,

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(1)

(2)

Items typically called ''work in process" are often produced from "raw

materials" or other ''work in process" and then stockpiled until needed at a

later stage in production (or perhaps sold in this form). For the purposes

of this Chapter, the activity of manufacturing is deemed to cease when

the last act of physically combining, separating, or otherwise changing of

this ''work in process" ceases, and does not resume until such ''work in

process" is again used in the production process as "raw material" for

such process.

"In-line" inspection procedures (between the 5th and 6th steps of an

assembly process, .for example) shall be deemed part of the activity of

manufacturing, provided that the material so inspected is not physically

removed from the location of the production process (removal to the

Quality Assurance labs or the stockroom, for example, would be deemed

to be removal from the physical location of the production process).

Therefore, activities that occur in the Quality Assurance labs, stockroom,

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Ordinance No. 3046

or other such locations are by definition not part of the activity of

manufacturing.

(3) Packaging shall be deemed part of the manufacturing activity if:

(A) The packaging process is an integral part of the production

process, and

(8) The goods so packaged have come directly from the production

process (or from an "in-line" inspection as defined above).

(4) Only "in-line" materials handling shall be deemed as part of the activity of

manufacturing, in a manner similar to "in-line" inspection procedures.

Therefore delivery or the moving of materials up to and including delivery

to the first stage of the production process (or the first stage of separate

phase of production, when in reference to "work in process") is not part of

the manufacturing activity. In like manner, delivery to the stockroom,

Quality Assurance labs, or other such place not deemed part of the

production process, and that all subsequent movement of such materials

until they have once again entered the production process, are deemed

not to be part of the activity of manufacturing.

(c) The activity of job printing shall be determined in a manner similar to that

provided above relating to "manufacturing".

(d) The following items are· specifically not included as machinery or equipment

which is acquired for use primarily during the activity of manufacturing or job

printing:

(1) . Equipment used primarily for the storage of materials when not being

physically changed (for example, storage vats or bins, holding tanks).

(2) Materials handling equipment (for example, dollies, fork lifts, hand trucks)

not used directly "in-line".

(3) .Ancillary testing equipment of all kinds (for example, testing equipment in

the Quality Assurance area or in the stockroom).

(4) Ancillary packaging equipment of all kinds (for example, packaging

equipment in the stockroom or mailroom).

(5) (Reserved)

(6) Any structural changes to real property (for example, plumbing or

electrical changes to a structure, loading docks).

Reg. 62-115.1 Computer hardware, software, and data services.

(a) Definitions.

(1) Computer Hardware (also called "computer equipment" or "peripherals") is

the components and accessories which constitute the physical computer

assembly. including but not limited to: central processing unit, keyboard,

console, monitor, memory unit, disk drive, tape drive or reader, terminal,

printer, plotter, modem, document sorter, optical reader and/or digitizer,

network.

(2) Computer Software (also called "computer program") is tangible personal

property, and includes:

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(A) Operating Program (Software) (also called "executive program

(software)j, which is the programming system or technical

language upon which or by means of which the basic operating

procedures of the computer are recorded. The operating program

serves as an interface with user applied programs and allows the

user to access the computer's processing capabilities.

(8) Applied Program (Software), which is the programming system or

technical language (including the tape, disk, cards, or other

medium upon which such language or program is recorded)

designed either for application in a specialized use, or upon which

or by means of which a plan for the solution of a particular problem

is based. Typically, applied programs can be transferred from one

computer to another via storage media. Examples of applied

programs include: payroll processing, general ledger, sales data,

spread sheet, word processing, and data management programs.

(3) Storage Medium is any hard disk, compact disk, floppy disk, diskette,

diskpack, magnetic tape, cards, or other medium used for storage of

information in a form readable by a computer, but not including the

memory of the computer itself.

(4) A Terminal Arrangement (also called u'on-Iine' arrangement") is any

agreement allowing access to a remote central processing unit through

telecommunications via hardware.

(5) A Computer Services Agreement (also called "data services agreement") is

an .agreement allowing access to a computer through a third-party

operator.

(b) For the purposes of this Chapter, transfer of title and possession of the following

are deemed sales of tangible personal property and any other transfer of title,

possession, or right to use for a consideration of the following is deemed rental,

leasing, or licensing of tangible personal property:

(1) Computer hardware or storage media. Rental, leasing, or licensing for

use of computer hardware or storage media includes ttle lessee's use of

such hardware or storage media on the lessor's premises.

(2) Computer software which is not custom computer programming. Such

prewritten ("canned") programs may be transferred to a customer in the

form of punched cards, magnetic tape, or other storage medium, or by

listing the program instructions on coding sheets. Transfer is deemed to

have occurred whether title to the storage medium upon which the

program is recorded, coded, or punched passes to the customer or the

program is recorded, coded, or punched on storage medium furnished by

the customer. Gross income from the transfer of such prewritten

programs includes:

(A) The entire amount charged to the customer for the sale, rental,

lease, or license for use of the storage medium or coding sheets

on which or into which the prewritten program has been recorded,

coded, or punched.

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(8) The entire amount charged for the temporary transfer or

possession of a prewritten program to be directly used or to be

recorded, coded, or punched by the customer on the customer's

premises.

(C) License fees, royalty fees, or program design fees; any fee

present or future, whether for a period of minimum use or of use

for extended periods, relating to the use of a prewritten program.

(0) The entire amount charged for transfer of a prewritten ("canned")

program by remote telecommunications from the transferor's place

of business to or through the customer's computer.

(E) Any charge for the purchase of a maintenance contract which

entitles the customer to receive storage media on which prewritten

program improvements or error corrections have been recorded or

to receive telephone or on-site consultation services, provided

that:

(i) if such maintenance contract is not optional with the

customer, then the charges for the maintenance contract,

induding the consultation services, are deemed gross

income from the transfer of the prewritten program.

(ii) if such maintenance contract is optional with the customer

but the customer does not have the option to purchase the

consultation services separately from the storage media

containing the improvements or error corrections, then the

charges for the maintenance contract, including the

consultation services, are deemed gross income from the

transfer of the prewritten program.

(iii)if such maintenance contract is optional with the customer

and the customer may purchase the consultation services

separately from the storage media containing the

improvements or error corrections, then only the charges

for such improvements or error corrections are deemed

gross income from the transfer of a prewritten program and

charges for consultation are deemed to be charges for

professional services.

(c) Producing the following by means of computer hardware is deemed to be the

activity of job printing for the purposes of this Chapter.

(1) Statistical reports, graphs, diagrams, microfilm, microfiche,

photorecordings, or any other information produced or compiled by a

computer; except as provided in subsection (e) below.

(2) Additional copies of records, reports, manuals, tabulations, etc. Additional

copies are any copies in excess to those produced simultaneously with

the production of the original .and on the same printer, whether such

copies are prepared by running the same program, by using multiple

printers, by looping the program, by using different programs to produce

the same output, or by other means.

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(d) Charges for the use of communications channel in conjunction with a terminal

arrangement or data services agreement are deemed gross income from the

activity of providing telecommunication services.

(e) The following transactions are deemed direct customer services, provided that

charges for such services are separately stated and maintained as provided by

Regulation 100.2(e):

(1) Custom (Computer) Programming which is any computer software which

is written or prepared for a single customer, including those services

represented by separately stated charges for the modification of existing

prewritten programs.

(A) Customer computer programming is deemed a professional

service regardless of the form in which the programming is

transferred.

(8) Custom programming includes such programming performed in

connection with the sale, rental, lease, or license for use of

computer hardware, provided that the charges for such are

separately stated from the charges for the hardware.

(C) Custom computer programming includes a program prepared to

the special order of a customer who will use the program to

produce copies of the program for sale, rental, lease, or license.

The subsequent sale, rental, lease, or license of such a program

is deemed the sale, rental, lease, or license of a prewritten

program.

(2) Training services related to computer hardware or software, provided

further that

(A) The provider of such training services is deemed the ultimate

consumer of all tangible personal property used in training others

or provided to such trainees without separately itemized charge

for the materials provided.

(8) Training deemed a direct customer service does not include:

(i) training materials, books, manuals, etc. furnished to

customers for a charge separate from the charge for

training services.

(ii) training provided to customers without separate charge as

part of the sale, rental, lease, or license of computer

hardware or software, or as part of a terminal arrangement

or data services agreement.

(3) The use of computer time through the use of a terminal arrangement or a

data service agreement, but not charges for computer hardware located

at the customer's place of business (for example, the terminal, a printer

attached to the terminal, a modem used to communicate with the remote

central processing unit over a telephone line).

(4) Compiling and producing, as part of a terminal arrangement or computer

services agreement, original copies of statistical reports, graphs,

diagrams, microfilm, microfiche, photorecordings, or other information for

the same person who supplied the raw data used to create such reports.

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(f) The purchase, rental, lease, or license for use of computer hardware, storage

media, or computer software which is not deemed custom programming is

deemed the use or storage of tangible personal property for the purpose of this

Chapter, and the amount which may be subject to Use Tax shall be determined

in the same manner as 'the determination of the gross income from the sale,

rental, lease, or license for use of such.

Reg. 62-120.1 (Reserved)

Reg. 62-200.1. When refundable deposits are includable in gross income.

(a) Refundable deposits shall be includable as gross income of the taxpayer for the

month in which the deposits are forfeited by the lessee.

(b) Nonrefundable deposits for cleaning, keys, pet fees, maintenance, or for any

other purpose are deemed gross income upon receipt.

Reg. 62-250.1 Excess tax collected.

If a taxpayer collects taxes in excess of the combined tax from any customer in any transaction,

all such excess tax shall be paid to the taxing jurisdictions in proportion to their effective rates.

The right of the taxpayer to charge his customer for his own liability for tax does not allow the

taxpayer to enrich himself at the cost of his customers.

J

Reg. 62-270.1 Proprietary activities of municipalities are not considered activities of a

governmental entity.

The following activities, when performed by a municipality, are considered to be activities of a

person engaged in business for the purposes of this Chapter, and not excludable by reason of

Section 270:

(a) rental, leasing, or licensing for use of real property to other than another

department or agency of the municipality.

(b) producing, providing, or furnishing electricity, electric lights, current, power, gas

(natural or artificial), or water to consumers or ratepayers.

(c) sale of tangible personal property to the public, when similar tangible personal

property is available for sale by other persons, as, for example, at police or

surplus auctions.

Reg. 62-270.2 Proprietary clubs.

(a) Equity requirements. In order to qualify for exclusion under Section 270, a

proprietary club must actually be owned by the members. For the purposes of

qualification, a club will be deemed to be member-owned at least eighty-five

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percent (85%) of the equity of the total amount of dub-owned property is owned

by bona fide individual members whose membership is represented in the form

of shares, certificates, bonds, or other indicia of capital interest. A corporation

may be considered an individual owner provided that it owns a membership

solely for the benefit of one or more of its employees and it is not engaged in any

business activity connected with the operation of the dub.

(b) Gross revenue requirements. In computing gross revenue for the computation of

this fifteen percent (15%) rule of subsection 270(b)(1),

(1) The following shall be excluded:

(A) membership dues.

(8) membership fees which relate to the general admission to the club

on a periodic (or perpetual) basis.

(C) assessments.

(0) special fund raising events, raffles, etc.

(E) donations, gifts, or bequests.

(F) gate receipts, admissions, and program advertising for not more

than one tournament in any calendar year.

(2) The following must be included:

(A) Green fees, court use fees, and similar charges for the actual use

of a facility or part thereof.

(8) Pro shop sales if the shop is owned by the club.

(C) Golf cart rental if the carts are owned by the club.

(0) Rentals, percentages, or commissions received for permitting the

use of the premises or any portion thereof by a caterer,

concessionaire, professional, or any other person for sales, rental,

leasing, licensing, catering, food or beverage service, or

instruction.

(E) All receipts from food or beverage sales, room use or rental

charge, corkage and catering charges, and similar receipts.

(F) Locker and locker room fees and attendants charges if paid to the

club.

(G) Tournament entry fees other than entry fees for the one annual

toumament exempt under subsection (b)(1)(F) above.

Reg. 62-300.1 Who must apply for a license.

(a) For the purposes of determining whether a license is required under Section 300,

a person shall be deemed to be "engaged in or continuing in business" within the

City, if he meets any of the following conditions:

(1) He is engaged in any activity subject to the City's Privilege Taxes as

principal or broker.

(2) He has or maintains within the City directly, or if a corporation, by a

subsidiary, an office, distribution house, sales house, warehouse or other

place of business, or any agent or other representative operating within

this City under the authority of such person or if a corporation, its

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subsidiary, irrespective of whether such place of business or agent or

other representative is located here permanently or temporarily or

whether such person or subsidiary is authorized or licensed to do

business in this State or this City.

(3) He is soliciting sales, orders, contracts, leases, and other similar forms of

business relationships, within the City from customers, consumers, or

users located within the City, by means of salesmen, solicitors, agents,

representatives, brokers, and other similar agents or by means of

catalogs or other advertising, whether such orders are received or

accepted within or without this City.

(4) He is regularly engaged in any activity subject to the City's Use Tax;

provided, however, that individuals are not normally required to obtain a

license because they acquire items outside the City for their own or their

family's personal use and enjoyment.

(5) (Reserved)

(b) (Reserved)

Reg. 62-300.2 (Reserved)

Reg. 62-310.1 (Reserved)

Reg. 62-310.2 "Casual" exemption of activities from the licensing requirements of

Section 310.

Individuals, other than those engaging in rental of real property, may be considered as engaged

in "casual" activities, and not subject to the annual license fee imposed under section 310,

provided that they are engaged in activities such as the private sale of personal automobiles,

garage sales, and the sale of homemade artifacts, on no more than three separate occasions

during any calendar year. :

Reg. 62-310.3 Annual license fee for persons engaged in providing transient and nontransient lodging.

(a) For the purposes of payment of the annual license fee imposed by Section 310,

and this regulation, "primarily used for transient lodging" shall mean actual use of

that particular lodging unit as transient lodging at or exceeding eighty-five percent

(85%) of total use.

(b) For the purposes of Subsections 310 (d) and (f) only, it shall be presumed that

each lodging unit is not primarily for transient lodging and is therefore subject to

the two dollar ($2.00) per unit annual fee up to a maximum of twenty-five dollars

($25.00) per license, until the contrary is established by the licensee to the

satisfaction of the tax collector.

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(c) A person who is engaged in providing both transient and nontransient lodging

shall pay:

(1) the two dollar ($2.00) per unit annual license fee for each unit not

primarily used for transient lodging; plus

(2) the ten dollar ($10.00) per location annual license fee for each location

where he is providing units primarily used for transient lodging provided

that the total annual license fees paid shall not exceed twenty-five dollars

($25.00) per license.

(d) ''Transient'' shall have the meaning set forth in Section 447.

Reg. 62-350.1 Recordkeeping: income.

The minimum records required for persons having gross income subject to, or exempt or

excluded from, tax by this Chapter must show:

(a) The gross income of the taxpayer attributable to any activity occurring in whole or

in part in the City.

(b) The gross income taxable under this Chapter, divided into categories as stated in

the official City tax return.'

(c) The gross income subject to Arizona Transaction Privilege Taxes, divided into

categories as stated in the official State tax return.

(d) The gross income claimed to be exempt, and with respect to each activity or

transaction so claimed:

(1) If the transaction is claimed to be exempt as a sale for resale or as a sale,

rental, lease, or license for use of rental equipment

(A) The City Privilege License number and State Transaction Privilege

Tax License number of the customer (or the equivalent city, if

applicable, and state tax numbers of the city and state where the

customer resides), and

(8) The name, business address, and business activity of the

customer, and

(C) Evidence sufficient to persuade a reasonably prudent

businessman that the transaction is believed to be in good faith a

purchase for resale, or a purchase, rental, lease, or license for use

of rental equipment, by the vendee in the ordinary and regUlar

course of his business activity, as provided by Regulation.

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(2) If the transaction is claimed to be exempt for any other reason:

(A) The name, business address, and business activity of the

customer, and

(8) Evidence which would establish the applicability of the exemption

to a reasonably prudent businessman acting in good faith.

93
i Ordinance No. 3046

Ordinary ·business documentation which would reasonably

indicate the applicability of an exemption shall be sufficient to

relieve the person on whom the tax would otherwise be imposed

from liability therein, if he acts in good faith as provided by

Regulation.

(e) With respect to those allowed deductions or exclusions for tax collected or

charges for delivery or other direct customer services, where applicable,

evidence that the deductible income has been separately stated and shown on

the records of the taxpayer and on invoices or receipts provided to the customer.

All other deductions, exemptions, and exclusions shall be separately shown and

substantiated.

(f) With respect to special classes and activities, such other books, records, and

documentation as the Tax Collector, by regulation, shall deem necessary for

specific classes of taxpayer by reason of the specialized business activity of any

such class.

(g) In all cases, the books and records of the taxpayer shall indicate both individual

transaction amounts and totals for each reporting period for each category of

taxable, exempt, and excluded income defined by this Chapter.

Reg. 62-350.2 Recordkeeping: expenditures.

The minimum records required for persons having expenditures, costs, purchases and rental or

lease or license expenses subject to, or exempt or excluded from, tax by this Chapter are:

(a) The total price of all goods acquired for use or storage in the City.

(b) The date of acquisition and the name and business address of the seller or

lessor of all goods acquired for use or storage in the City.

(c) Documentation of taxes, freight, and direct customer service labor separately

charged and paid for each purchase, rental, lease, or license.

(d) The gross price of each acquisition claimed as exempt from tax, and with respect

to each transaction so claimed, sufficient evidence to satisfy the Tax Collector

that the exemption claimed is applicable.

(e) As applicable to each taxpayer, documentation sufficient to the Tax Collector, so

that he may ascertain:

(1) All construction expenditures and all Privilege and Use Taxes claimed

paid, relating to owner-builders and speculative builders.

(2) Disbursement of collected gratuities and related payroll information

required of restaurants.

(3) (Reserved)

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(4)

(5)

(6)

(7)

(8)

(9)

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The validity of any claims of proof of exemption, as provided by

Regulation.

A claimed alternative prior value for reconstruction.

All claimed exemptions to the Use Tax imposed by Article VI of this

Chapter.

(Reserved)

(Reserved)

(Reserved)

(f) Any additional documentation as the Tax Collector, by Regulation, shall deem

necessary for any specific class of taxpayer by reason of the specialized

business activity of specific exemptions afforded to that class of taxpayer.

(g) In all cases, the books and records of the taxpayer shall indicate both individual

transaction amounts and totals for each reporting period for each category of

taxable, exempt, and excluded expenditures as defined by this Chapter.

Reg. 62-350.3 Recordkeeping: out-of-City and out-of-state sales.

(a) Out-of-City Sales. Any person engaging or continuing in a business who claims

out-of-city sales shall maintain and keep accounting records or books indicating

separately the gross income from the sales of tangible personal property from

such out-of-city branches or locations.

(b) Out-of-State Sales. Persons engaged in a business claiming out-of-state sales

shall maintain accounting records or books indicating for each out-of-state sale

the following documentation:

(1) Documentation of location of the buyer at the time of order placement;

and

(2) Documentation of residency of the buyer, determined in the manner one

determines if a person "resides within the City"; and

(3) Shipping, delivery, or freight documents showing where the buyer took

delivery; and

(4) Documentation of intended location of use or storage of the tangible

personal property sold to such buyer.

Reg. 62-360.1 Proof of exemption: sale for resale; sale, rental, lease, or license of rental

equipment.

A claim of purchase for resale or of purchase, rental, lease, or license for rent, lease, or license

is valid only if the evidence is sufficient to persuade a reasonably prudent businessman that the

particular item is being acquired for resale or for rental, lease, or license in the ordinary course

of business. The fact that the acquiring person possesses a PriVilege License number, and

makes a verbal claim of "sale for resale or lease" or "lease for re-lease" does not meet this

burden and is insufficient to justify an exemption. The "reasonable evidence" must be evidence

which exists objectively, and not merely in the mind of the vendor, that the property being

acqUired is nonnally sold, rented, leased, or licensed by the acquiring person in the ordinary

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Ordinance No. 3046

course of business. Failure to obtain such reasonable evidence at the time of the transaction

will be a basis for disallowance of any claimed deduction on returns filed for such transactions.

Reg. 62-360.2 Proof of exemption: exemption certificate.

For the purpose of proof of exemption, in transactions other than those in which the proof is set

by standard documentation as detailed in Regulations 350.1 and 360.1, the minimum

acceptable proof and documentation for each transaction shall be the completion, at the time of

the transaction, in all material respects, of a certificate containing all the information set forth

below. For the purpose of validating the vendor's claim of exemption, such certificate is

sufficient if executed by any person with apparent authority to act for the customer, and the

information provided validates the claim.

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INVALID UNLESS COMPLETED IN FULL

VENDOR'S NAME, Sales Invoice No:, _

CustQmer's ExemptiQn Claim

City of Chandler Privilege license (Sales) Tax

CustQmer's Business Name: _

CustQmer's Business Addr. _

Specific Business Activity: _

(e.g., if retailer, lessQr

Qr manufacturer, specify

items leased, sold or made

l.e.,cars,cQmputers,etc.)

CustQmer's License No's. CIly: State: _

ITEMS CLAIMED AS EXEMPT FROM TAX

All Items On This InvQice or Purchase Order

or

Only Those Items Marked With An "E".

REASON FOR CLAIMED EXEMPTION:

___: The items claimed as exempt are SQld, rented, leased, or licensed by the above named customer in the normal CQurse of

its business activity.

Qr

___: The items claimed as exempt are exempt frQm the City of Chandler Privilege Tax fQr the fQIIQwing specific reason{s):

CUSTOMER'S CERTIFICATE

I certify that the above infQrmatiQn Is accurate tQ the best Qf my information and belief, and that I am authQrized by the CustQmer

above tQ acquire the items claimed as exempt Qn a tax-free baais on its behalf. I further understand that the making Qf a false Qr

fraudulent claim tQ Qbtain a tax exemptiQn Is a Class One Misdemeanor under Chandler City CQde SectiQn 15-1.

Name

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Date
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Reg. 62405.1 Local advertising examples.

For the purposes of illustration only, and not by way of limitation, the following are provided as

examples of local advertising subject to the tax:

(1) Retail sales and rental establishments doing business within the State when only

one commonly designated business entity is identified by name in the

advertisement.

(2) Financial institutions doing business within the State whether part of a national

chain or local business only.

(3) Sales of real estate located within the State.

(4) Health care facilities located within the State.

(5) Hotels, motels, and apartments, whether a national d1ain or local so long as the

advertisement identifies any location within the State.

(6) Brokers doing business within the State whether stockbrokers, real estate

brokers, insurance brokers, etc.

(7) Nonprofit organizations, which even though tax exempt, have an office, whether

national, local, or brand1, within the State.

(8) Political activity, except United States Presidential and Vice Presidential

candidates.

(9) Restaurants or food service establishments which have one or more branches,

outlets, or franchises within the State even though the local frand1isee or

licensee may not be responsible for the placement of the advertisement.

(10) Services provided by individuals or entities within the State such as doctors,

lawyers, architects, hairdressers, auto repair shops, counseling services, utilities,

contractors, auction houses, etc.

(11) Coupons redeemable only at a single commonly designated business entity

within the State.

(12) Theater, sports, and other entertainment events held at locations within the

State.

Reg. 62-405.2 Advertising activity within the City.

(a) In General. Except as provided elsewhere in this regulation, a person engaged

in advertising activity shall be considered to be doing business entirely within the

City if all or a major portion of the dissemination facilities such as broadcasting

studios, printing plants, or distribution centers are located within the City limits.

Remote studios patched to an in-City studio and SUbject to engineering

modulation or control at the in-City studio are considered studios doing business

in the City.

(b) Billboards and other outdoor advertising companies shall be considered to be

doing business within the City to the extent they have billboards or similar

displays within the City.

(c) Publishers and distributors of newspaper and other periodicals shall be subject to

the tax upon advertising imposed by Section 405 and such tax shall be allocated

in the manner prescribed by subsection (e) of Section 435.

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Reg. 62-407.1 (Reserved)

Reg. 62-415.1 Distinction between the categories of construction contracting.

For the purposes of this Chapter, transactions involving improvements to, or sales of, real

property are designated into one of the following categories, and these categorizations shall

apply, whether or not a person designates himself as a contractor, construction manager,

developer, or otherwise:

(a) A person performing improvements to real property is one of the following:

(1) An "Owner-Builder" when the work is performed by the owner or lessor or

lessee-in-possession. An "owner-builder" may also be a "speculative

builder".

(2) A "Construction Contractor" when performing work for the owner or lessor

or lessee-in-possession of the real property, unless that person has

provided a written declaration stating that

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

(B) 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 "Subcontractor" as provided in Section 415(c).

(b) An owner or lessor ("owner-builder") of improved real property is one of the

following:

(1) A "Speculative Builder" as provided in Section 100; or

(2) An "owner-builder who is not a speculative builder" in all other cases.

(c) The terms "owner", "lessor", and "Iessee-in-possession" shall be deemed to

include any authorized agent for such person.

Reg. 62-415.2 Distinction between construction contracting and certain related activities.

(a) Certain rentals, leases, and licenses for use in connection with construction

contracting. Rental, leasing, or licensing of earthmoving equipment with an

operator shall be deemed construction contracting activity. Rental, leasing, or

licensing of any other tangible personal property (with or without an operator) or

of earthmoving equipment without an operator shall be deemed rental, leasing, or

licensing of tangible personal property. For example:

(1) Rental of a backhoe, bulldozer, or similar earthmoving equipment with

operator is construction contracting. Rental of these items without an

operator is rental of tangible personal property.

(2) Rental of scaffolding, temporary fences, or barricades is rental of tangible

personal property.

(3) Rental of pumps or cranes is rental of tangible personal property, whether

or not an operator is provided with the equipment rented.

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(b) Distinction between construction contracting, retail, and certain direct customer

service activities.

(1) When an item is attached or installed on real property, it is a construction

contracting activity and any subsequent repair, removal, or replacement

of that item is construction contracting.

(2) Items attached or installed on tangible personal property are retail sales.

(3) Transactions where no tangible personal property is attached or installed

are considered direct customer service activities (for example: carpet

cleaning, lawn mowing, landscaping maintenance).

(4) Demolition, earth moving, and wrecking activities are considered

construction contracting.

Note: The following subsection (c) was repealed effective February 1, 1995. Subsections (d)

and (e) were subsequently re-enurnerated as (c) and (d), respectively.

(c) Prefabricated buildings; manufactured housing.

(1) Any prefabricated building or manufactured housing with respect to

which an affidavit of affixture has been recorded pursuant to A. R. S.

Section 42-641,01 shall' be deemed an improvement of real

property, and any improvement or alteration of such prefabricated

building or manufactured housing shall be deemed construction

contracting activity.

(2) Any prefabricated building or manufactured housing with respect to

which an affidavit of affixture has not been recorded shall be

deemed tangible personal property for all purposes of this Chapter.

(3) A "mobile home" shall qualify for this definition only to the extent

that such affidavit of affixture has been recorded at the time of sale.

(d) Sale of consumable goods incorporated into or applied to real property is

considered a retail sale and not construction contracting. Examples of

consumable goods are lubricants, faucet washers, and air conditioning coolant,

but not paint

(e) Installation or removal of tangible personal property which has independent

functional utility is considered a retail activity.

(1) ''Tangible personal property which has independent functional utility" must

be able to substantially perform its function(s) without attachment to real

property. "Attachment to real property" must include more than

connection to water, power, gas, communication, or other service.

(2) Examples of tangible personal property which has independent functional

utility include art'NOrk, furnishings, "plug-in" kitchen equipment, or similar

items installed by bolts or similar fastenings.

(3) Examples of tangible personal property which does not have independent

functional utility include wall-ta-wall carpeting, flooring, wallpaper, kitchen

cabinets, or "built-in" dishwashers or ranges.

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(4) The installation of window coverings (drapes, mini-blinds, etc.) is always a

retail activity.

Reg. 62-416.1 Speculative builders: homeowner's bona fide non-business sale of a

family residence.

(a) A sale of a custom home, regardless of the stage of completion of such home

shall be considered a "homeowner's bona fide non-business sale" and not

subject to the tax on speculative builders if:

(1) The property was actually used as the principal place of family residence

or vacation residence by the immediate family of the seller for the six (6)

months next prior to the offer for sale; and

(2) The seller has not sold more than two (2) such residences (or, if the

residence is a vacation residence, two (2) such vacation residences)

within the thirty-six (36) months immediately prior to the offer for sale; and

(3) The seller has not licensed, leased, or rented the sold premises for any

period within the twenty-four (24) months prior to the offer for sale.

(b) In the event that a homeowner of a family residence contracts with a licensed

construction contractor for improvements to a residence the construction

-contracting on a family residence shall be presumed to be for an owner's bona

fide non-business purpose and all construction contractors shall be required to

report and pay the tax imposed on all such improvements.

(c) - Purchases by a homeowner of tangible personal property for inclusion in any

construction, alteration, or repair of his residence shall be subject to tax as retail

sales to the ultimate consumer.

(d) Owner and Homeowner as used in this Regulation shall only mean an individual,

and no other entity, association, or representative shall qualify; except that an

administrator, executor, personal representative or guardian in guardianship or

probate proceedings, for the estate of a deceased or incompetent person or a

minor, may claim "homeowner" status for such person if such person would have

otherwise qualified with respect to the specific property involved.

Reg. 62-416.2 Reconstruction contracting.

(a) Reconstruction (of Real Property) shall mean the subdividing of real property

and, in addition, all construction contracting activities performed upon said real

property; provided, however, that each of the following conditions are met

(1) A structure existed on said real property prior to the reconstruction

activity; and

(2) The "prior value" of said structure exceeds fifteen percent (15%) of the

"prior value" of the integrated property (land, improvements, and

structure); and

(3) The total cost of all construction contracting activities performed on said

real property in the twenty-four (24) month period prior to the sale of any

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share, or a sufficient number of shares which entitle the purchaser to the

occupancy of a residential unit. In all cases a person shall include a husband

and wife as a community, or any co-occupants of a single unit as joint tenants.

Reg. 62-425.1 Distinction between job printing and certain related activities.

(a) Computerized Printing. Computerized versions of all items which would be

taxable under Section 425 if performed without computerized assistance are

considered taxable under that Section, and therefore, are not exempt services.

(b) Book publishing. The printing of books shall be deemed job printing. Sales of

books shall be deemed retail sales.

(c) Publication of newspapers, magazines, or other periodicals shall not be

considered job printing for the purposes of this Chapter.

Reg. 62-435.1 Distinction between publishing of periodicals and certain related

activities.

(a) Book publishing shall not be considered publication of newspapers, magazines,

or other periodicals for purposes of this Chapter. Sales of books shall be

deemed retail sales. The printing of books shall be deemed job printing.

(b) Publication of newspapers, magazines, or other periodicals shall not be

considered job printing for the purposes of this Chapter.

Reg. 62-435.2 Advertising income of publishers and distributors of newspapers and

other periodicals.

Publishers and distributors of newspapers and other periodicals shall be subject to the tax upon

advertising imposed by Section 405 such tax shall be allocated in the manner prescribed by

subsection (e) of Section 435.

Reg. 62-445.1 (Reserved)

Reg. 62-445.2 (Reserved)

(Note: Reg 445.2 as listed below was repealed effective 2/1/95.)

Reg. 62-445.2 Rental, leasing, and licensing of real property as lodging: refundable and

non-refundable deposits.

(a) Nonrefundable deposits for cleaning, keys, pet fees, maintenance, or for any

other purpose are deemed gross income upon receipt.

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part of the real property exceeds fifteen percent (15%) of the "prior value"

of the real property; and

(4) The structure which existed on the real property prior to the

reconstruction activity still exists in some form upon the property, and is

included, in whole or in part, in the property sold.

(b) Except as provided in subsection (c) below, prior value means the value of the

total integrated property, with improvements, as existing immediately prior to any

reconstruction activity. VVhere, according to Title 42 of the Arizona Revised

Statutes, a property's full cash value for Secondary Tax purposes is intended to

represent the property's Fair Market Value, "Prior Value" shall be the property's

Full Cash Value for Secondary Property Tax purposes as determined by the

County Assessor in the year immediately preceding the year in which the

reconstruction improvement(s) are or could have been included in the County

Assessors valuation. If the County Assessors valuation is contested or

appealed, the final determination at either the administrative or judicial level shall

apply. Where, according to Title 42 of the Arizona Revised Statutes, a property's

Full Cash Value for Secondary Property Tax purposes is not intended to

represent the property's Fair Market Value, Prior Value shall be the property's

Fair Market Value prior to the reconstruction improvement(s).

(c) Alternative Prior Value shall mean that as an alternative to the "prior value"

defined above, the taxpayer may use his actual cost of the reconstructed

property prior to the reconstruction, provided that evidence of such cost is

presented to the Tax Collector and is determined by the Tax Collector, in his sole

discretion, to be satisfactory. Such evidence shall consist, at a minimum, of

proof of the actual, anns-length acquisition price, accompanied by a full appraisal

of all property involved which appraisal shall have been performed by a real

estate broker or MAl appraiser specifically for the purpose of assisting in the

acquisition and further shall have been performed on behalf of the seller or a

lending institution which has lent at least sixty-five percent (65%) of the

acquisition price. (Only long term lending not interim or construction financing

will be considered.) This· alternative value shall be used only if the property was

acquired by the reconstruction taxpayer not more than thirty-six (36) months prior

to a "sale" as defined below.

(d) A sale for the purpose of determining "alternative prior value" or "reconstruction"

only shall be deemed to have occurred as of the date of the execution of a

contract of sale or deed Ooint tenancy or warranty) whichever is earlier, to a

purchaser or grantee of any single residential or other occupancy unit. In

addition to the foregoing, a lease with option to purchase a single residential unit

shall be considered a "sale" at the date of execution of such lease if said option

is exercisable by the lessee in not later than nine (9) months. Further in the case

of cooperative apartments, the sale date shall be the date of execution of the

contract selling (subject or not to encumbrances, liens or security interests) of a

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(b) "Security deposits" and other refundable deposits are deemed gross income at

the time such deposits become forfeit, provided that they are maintained in the

manner required for seaJrity deposits both by Regulation 200.1 and by the

Arizona Residential Landlord and Tenant Ad, Chapter 10, Title 33, Arizona

Revised Statutes. If there is a conflid between these two provisions, the more

stringent of the two shall apply in that case. Failure to comply with such

provisions with regard to refundable deposits makes such deposits gross income

at the time of receipt

Reg. 62-445.3 Rental, leasing, and licensing of real property as lodging: room and

board; furnished lodging.

(a) Room and board.

(1) Rooming houses, lodges, or other establishments providing both lodging

and meals, shall maintain a record of the separate charges made for the

lodging and the meals.

(2) The charge for lodging shall be subject to the tax imposed by Section 444

or 445. The charge for meals is subjed to the tax upon restaurants and

bars prescribed by Section 455.

(b) Furnished lodging. A person who provides lodging with furnishings shall be

deemed to be only in the business of rental, leasing, and licensing of lodging,

and not in the business of rental, leasing, and licensing of such fumishings as

tangible personal property, unless:

(1) Any tenant of any lodging space may choose to rent, lease, or license

such lodging space eitherfurnished or unfurnished; and

(2) The lessor separately charges tenants for lodging and for furnishings; and

(3) The lessor separately maintains his gross income from lodging and from

furnishings separately in his accounting books and records.

If all of the above conditions are met, such person shall report both sources of income

separately to the City.

Reg. 62-447.1 Gross income from rental, leasing, and licensing for use of real property

as lodging or lodging space to transients.

(a) If the charge made by a hotel to a transient includes any charge for services or

accommodations in addition to that of lodging and/or the use of lodging space,

then such portion of the total charge as represents only the charge for the use of

the room and/or lodging space shall be distinctly set out and billed to such

transient by such hotel as a separate item, or the entire charge shall be deemed

charge for use of lodging spacesubjed to the tax imposed by Section 447.

(b) A separately itemized charge for use of the furnishings contained in lodging or

lodging space rented, leased, or licensed to a transient shall be deemed gross

income from the business of renting, leasing, and licensing lodging to a transient.

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Furthermore, in regard to such tangible personal property, such person is

deemed not in the business of rental, leasing, and licensing of tangible personal

property for all purposes of this Chapter.

(c) Complimentary food and drink. Persons engaged in the business of rental,

leasing, and licensing of lodging to transients shall include charges for

complimentary food and drink as gross income from the business of rental,

leasing, and licensing of lodging to transients, and shall not be deemed in the

restaurant business for all purposes of this Chapter, unless such charges:

(1) Are made only at the request of the transient, or as a separate, optional

charge for consuming specific food or drink (for example, "room service"

charges); and

(2) Are commensurate with charges for like quantity and type of food

consumed by patrons of persons engaged in the restaurant business. I

Reg. 62-450.1 Distinction between rental, leasing, and licensing for use of tangible

personal property and certain related activities.

(a) Certain rentals, leases, and licenses for use in connection with construction

contracting. Rental, leasing, or licensing of earthmoving equipment with an

operator shall be deemed construction contracting activity. Rental, leasing, or

licensing of any other tangible personal property (with or without an operator) or

of earthmoving equipment without an operator shall be deemed rental, leasing, or

licensing of tangible personal property. For example:

(1) Rental of a backhoe, bulldozer, or similar earthmoving equipment with

operator is construction contracting. Rental of these items without an

operator is rental of tangible personal property.

(2) Rental of scaffolding, temporary fences, or barricades is rental of tangible

personal property.

(3) Rental of pumps or cranes is 'rental of tangible personal property,

regardless of whether or not an operator is included with the equipment

rented.

(b) Distinction between equipment rental, leasing, or licensing for use and

transporting for hire. The hiring of mobile equipment (cranes, airplanes,

limousines, etc.) is considered rental, leasing, or licensing of tangible personal

property whenever the charge is for a fIXed sum or hourly rate. By comparison,

the activity of a common carrier conveying goods or persons for a fee based

upon distance, and not time, shall be considered transporting for hire.

Reg. 62-450.2 Rental, leasing, and' licensing for use of tangible personal property:

membership fees; other charges.

(a) Membership, admission, or other fees charged by any rental club or limited

access lessor are considered part of taxable gross income.

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(b) Gross income from rental, leasing, or licensing for use of tangible personal

property must include all charges by the lessor to the lessee for repair,

maintenance, or other service upon the tangible personal property rented,

leased, or licensed.

(c) (Reserved)

Reg. 62-450.3 Rental, leasing, and licensing for use of equipment with operator.

In cases where the tangible personal property is rented, leased, or licensed with an operator

provided by the lessor, the charge for the operator shall not be includable in the gross income

from the rental, lease, or license of such tangible personal property if the charge for the operator

and the charge for the use of the equipment are separately itemized to the lessee and

separately maintained on the books and records of the lessor.

Reg. 62-450.4 Rental, leasing, and licensing for use of tangible personal property: semipermanently or pennanently installed tangible personal property.

(a) The tenn "semi-pennanently or pennanently installed" means that the item of

tangible personal property has and is expected to have at the time of installation

a pennanent location at the site installed, as under a long-tenn lease agreement,

except that the person using or applying said property may eventually replace it

because it has become worn out or has become obsolete or the person ceases

to have the right to possession of said property.

(b) An item of tangible personal property is deemed pennanently installed if its

installation requires alterations to the premises.

(c) Examples of "semi-pennanently or pennanently installed tangible personal

property" include, but are not limited to: computers, duplicating machines,

furniture not of portable design, major appliances, store fixtures.

(d) The tenn does not include mobile transportation equipment or tangible personal

property designed for regular use at different locations or customarily used at

different locations, as under numerous short-tenn rental, lease, or license

agreements, whether or not such property is in fact so used.

(1) For example, use of a mobile crane, trencher, automobile, or other similar

equipment shall be considered a rental, lease, or license transaction

subject to taxation only by the city in which such business office of the

lessor is based.

(2) Other similar examples include, but are not limited to: camping

equipment, contracting equipment, chain saw, forklift, household items,

invalid needs, janitorial equipment, reducing equipment, furniture of

portable design, trucks or trailers, tools, towbars, sump pumps, arc

welders.

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(e) A rental, lease, or license agreement which specifies that the item in question

shall remain, under the tenns of the agreement, located within the same city or

town for more than one hundred eighty (180) consecutive days shall be sufficient

evidence that such rented, leased, or licensed item is "pennanently or semipermanently installed" in said city or town, except when the item is mobile

transportation equipment or one of the other types of portable equipment or

property described in subsection (d) above.

Reg. 62-450.5 Rental, leasing, and licensing for use of tangible personal property:

delivery, installation, repair, and maintenance charges.

(a) Delivery and installation charges in connection with the rental, leasing, and

licensing of tangible personal property are exempt from the tax imposed by

Section 450; provided that the provisions of Regulation 100.2 have been met.

(b) Gross income from the sale of a warranty, maintenance, or similar service

contract in connection with the rental, leasing, and licensing of tangible personal

property shall be exempt.

(c) Separately stated charges for repair not included as part of a warranty,

maintenance, or similar service contract relating to the rental, leasing, or

licensing of tangible personal property are exempt from the tax imposed by

Section 450; however, such income is subject to the provisions of Sections 460

and 465, and the provisions of Regulation 465.1.

Reg. 62-455.1 Gratuities related to restaurant activity.

Gratuities charged by or collected by persons subject to the tax imposed by Section 455 may be

excluded from gross income it

(1) Such charge is separately stated upon the bill, invoice, etc. provided the

customer, and such amounts are maintained separately in the books and records

of the taxpayer; and

(2) Such gratuities are distributed in total to employees of the taxpayer in addition to

customary and regular wages.

Reg. 62-460.1 Distinction between retail sales and certain other transfers of tangible

personal property.

(a) Charges for transfer of tangible personal property included in the gross income of

the business activity of persons engaged in the following business activities shall

be deemed only as gross income from such business activity and not sales at

retail taxed by Section 460: -

(1) Tangible personal property incorporated into real property as part of

reconstruction or construction contracting, per Sections 415 through 418.

(2) (Reserved)

(3) Job printing, per Section 425.

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(4)

(5)

(6)

(7)

(8)

(9)

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Mining, timbering, and other extraction, but not sales of sand, gravel, or

rock extracted from the ground, per Section 430.

Publication of newspapers, magazines, and other periodicals, per Section

435.

Rental, leasing, and licensing of real or tangible personal property, per

Sections 445 or 450.

Restaurants and bars, per Section 455.

Telecommunications services, per Section 470.

Utility services, per Section 480.

(b) Distinction between construction contracting, retail, and certain direct customer

service activities.

(1) When an item is attached or installed on real property, it is a construction

contracting activity and any subsequent repair, removal, or replacement

of that item is construction contracting.

(2) Items attached or installed on tangible personal property are retail sales.

(3) Transactions where no tangible personal property is attached or installed

are considered direct customer service activities (for example: carpet

cleaning, lawn mowing, landscape maintenance).

(4) Demolition, earth moving, and wrecking activities are considered

construction contracting.

(c) The sale of sand, rock, and gravel extracted from the ground shall be deemed a

sale of tangible personal property and not mining or metallurgical activity.

(d) Sale of consumable goods incorporated into or applied to real property is

considered a retail sale and not construction contracting. Examples of

consumable goods are lubricants, faucet washers, and air conditioning coolant,

but not paint.

(e) Installation or removal of tangible personal property which has independent

functional utility is considered a retail activity.

(1) ''Tangible personal property which has independent functional utility" must

be able to substantially perform its function(s) without attachment to real

property. "Attachment to real property" must include more than

connection to water, power, gas, communication, or other service.

(2) Examples of tangible personal property which has independent functional

utility include artwork, furnishings, "plug-in" kitchen equipment, or similar

items installed by bolts or similar fastenings.

(3) Examples of tangible personal property which does not have independent

functional utility include wall-to-wall carpeting, flooring, wallpaper, kitchen

cabinets, or "built-in" dishwashers or ranges.

(4) The installation of window coverings (drapes, mini-blinds, etc.) is always a

retail activity.

Reg. 62-460.2 Retail sales: trading stamp company transactions.

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A trading stamp transaction is defined as follows: the trading stamp company issues stamps to

a vendor; the vendor then provides them to its customers; and the customer then eXchanges the

stamps for merchandise from the trading stamp company.

The exchange transaction for the merchandise shall be deemed a retail sale and the trading

stamp company a retailer. All taxes imposed by this Chapter applicable to retail transactions

are therefore applicable to such exchange transactions.

The rate of tax shall be the retail rate based upon the retail dollar value of the redeemed

merchandise as expressed in the redemption dollar value per book of stamps or portion thereof.

The tax imposition described herein is in lieu of any Privilege or Use Tax upon the business of

issuing stamps, redeeming the same, or using or storing property redeemed.

Reg. 62-460.3 Retail sales: membership fees of retailers.

Membership, admission, or other fees charged by limited access retailers are considered part of

taxable gross income of the business activity of selling tangible personal property.

Reg. 62-460.4 Retail sales: professional services.

(a) Professional Services refer to services rendered by such persons as doctors,

lawyers, accountants, architects, etc. for their customers or clients where the

services meet.particular needs of a specific client and only apply in the factual

context of the client and the final prodUct has no retail value in itself. For

example, opinion letters, work papers, reports, etc. are not in a form which would

. be subject to retail sales to customers. However, transfer of items in a form

which would be subject to retail sales (e.g., artwork, forms, manuals, etc.) would

not be considered professional services. The issue is one of fact which must be

resolved in each situation.

(b) Creative ("ideaj labor and design labor that do not result in tangible personal

property that will be or can be sold are deemed professional services and, if

charged separately and maintained separately in the taxpayer's books and

records, are not includable in gross income.

(c) Professional services shall be deemed to include those items of tangible

personal property which are incidental to the services rendered, provided such

tangible personal property is "inconsequential."

(1) Incidental transfers of tangible personal property shall be regarded as

"inconsequential" if,

(A) The purchase price of the tangible personal property to the person

rendering the professional services represents less than fifteen

percent (15%) of the charge, billing, or statement rendered to the

purchaser in connection with the transaction, and

(8) The tangible personal property transferred is not itself in a form

which is subject to retail sale.

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(2) In cases where the tangible personal property transferred is deemed

inconsequential, the provider of the tangible personal property so

transferred is deemed the ultimate consumer of such tangible personal

property, and subject to all applicable taxes imposed by this Chapter

upon such transfer.

(d) Examples:

(1) The transfer of paper embodying the result or work product of the

services rendered by an attorney or certified public accountant is

regarded as inconsequential to the charges for professional services.

(2) An appraisal report issued by an appraiser, reflecting such appraiser's

efforts to appraise real estate, is regarded inconsequential.

(3) Use of a hair care product on a client's hair by a barber or beautician in

connection with performing professional services is usually

inconsequential. On the other hand, if the barber or beautician supplies

the customer with a bottle of the product for the client's use thereafter and

without the professional's assistance, the transfer of the bottle of hair care

product is deemed not inconsequential.

(4) If a mortician properly segregates his professional services from other

taxable activities on his bill (invoice, contract), his gross income would

include only the income derived from the sale of tangible personal

property (casket, cards, flowers, etc.) and rental, leasing, or licensing of

real and tangible personal property. His charges for professional services

(embalming, cosmetic work, etc.) would not be includable in gross

income.

Reg. 62-460.5 Retail sales: monetized bullion; numismatic value of coins.

(a) Monetized Bullion means coins or other forms of money manufactured or minted

from precious metals or other metals and issued as legal tender or a medium of

exchange by or for any government authorized to do so.

(b) Any coin shall be considered to have been transferred or acquired primarily for its

"Numismatic value" if the sale or acquisition price:

(1) Is equal to or greater than twice (2 times) the value of the metallic content

of the coin as of the date of transfer or acquisition; and

(2) Is equal to or greater than twice (2 times) its face value, in the case of a

coin which, at the time of transfer or acquisition, was legal tender or a

medium of exchange of the government issuing or authorizing its

issuance.

Reg.62-460.6 Retail sales: consignment sales.

Sales of merchandise acquired on consignment are taxable as retail sales. In cases where the

merchant is acting as an agent on behalf of another dealer, sales of the consigned merchandise

are taxable to the principal, provided the merchant makes full disclosure to customers that he is

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