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Arizona’s temporary increase in sales tax rates expires on May 31, 2013. The state’s current rate of 6.6% will decrease to 5.6% beginning June 1, 2013. The state’s current rate for transient lodging will decrease from 6.5% to 5.5%. The new tax rates will be reported to the Arizona Department of Revenue beginning with the June 2013 TPT-1 due in July 2013. For quarterly filers, activity from June 1, 2013 through June 30, 2013, will be based on the decreased rate, and activity from April 1, 2013, through May 31, 2013, will be reported on a second row. Annual filers will follow a similar set-up on their December 2013 return. The temporary tax expiration affects the following categories: utilities, communications, transporting, private (rail) car, pipeline, publication, job printing, restaurants and bars, amusement, personal property rental, contracting-prime and owner-builder, retail, transient lodging, and use tax. Categories not affected by this change include commercial lease, severance-metalliferous mining, telecommunications devices, municipal water, jet fuel use tax, and 911 telecommunications. For prime contracting contracts entered into before June 1, 2013, the lower rate applies to receipts received after June 1, 2013 for cash receipts, regardless of when the contract was entered into.  For accrual taxpayers, the date the contract is signed is the determining date for the rate. The news release also contains a chart of county and state tax rates that will be effective June 1, 2013.  (Transaction Privilege Tax Changes and News, Arizona Department of Revenue, June 1, 2013)

(05/24/2013)

The federal Marketplace Fairness Act of 2013 was introduced in the House of Representatives and the Senate on February 14, 2013.  If passed, the bill would authorize states that meet certain requirements to require remote sellers that do not meet a "small seller exception" to collect their state and local sales and use taxes.  Under the legislation, a state would be authorized to require a remote seller to collect sales and use taxes only if the remote seller has gross annual receipts in total remote sales in the United States of more than $1 million in the preceding calendar year.

 

Member states of the Streamlined Sales and Use Tax (SST) Agreement would be authorized to require all sellers that do not qualify for the small seller exception to collect and remit sales and use taxes with respect to remote sales sourced to that member state pursuant to the provisions of the SST Agreement. The SST Agreement would have to include certain minimum simplification requirements. An SST member state could begin to exercise authority under the Act beginning 90 days after the state publishes notice of its intent to exercise such authority, but no earlier than the first day of the calendar quarter that is at least 90 days after the date of the enactment of the Act.

 

States that are not members of the SST Agreement would be authorized, notwithstanding any other provision of law, to require all sellers that do not qualify for the small seller exception to collect and remit sales and use taxes with respect to remote sales sourced to the state if the state implements certain minimum simplification requirements. The authority would begin no earlier than the first day of the calendar quarter that is at least six months after the state enacts legislation to exercise the authority granted by the Act.

 

To enforce collection requirements on remote sellers that do not meet the small seller exception, states that are not members of the SST Agreement would have to implement the minimum simplification requirements listed below. For SST member states to have collection authority, the requirements would have to be included in the SST Agreement.

 

-       A single entity within the state responsible for all state and local sales and use tax administration, return processing, and audits for remote sales sourced to the state

-       A single audit of a remote seller for all state and local taxing jurisdictions within that state

-       A single sales and use tax return to be used by remote sellers to be filed with the single entity responsible for tax administration.

-       Each state would have to provide a uniform sales and use tax base among the state and the local taxing jurisdictions within the state.

-       Each state would have to source all interstate sales in compliance with the sourcing definition outlined below.

-       Each state would have to provide information indicating the taxability of products and services along with any product and service exemptions from sales and use tax in the state and a rates and boundary database. States would have to provide free software for remote sellers that calculates sales and use taxes due on each transaction at the time the transaction is completed, that files sales and use tax returns, and that is updated to reflect state and local rate changes. States would also have to provide certification procedures for persons to be approved as certified software providers (CSPs). Such CSPs would have to be capable of calculating and filing sales and use taxes in all the states qualified under the Act.

-       Each state would have to relieve remote sellers from liability to the state or locality for incorrect collection, remittance, or noncollection of sales and use taxes, including any penalties or interest, if the liability is the result of an error or omission made by a CSP.

-       Each state would have to relieve CSPs from liability to the state or locality for the incorrect collection, remittance, or noncollection of sales and use taxes, including any penalties or interest, if the liability is the result of misleading or inaccurate information provided by a remote seller.

-       Each state would have to relieve remote sellers and CSPs from liability to the state or locality for incorrect collection, remittance, or noncollection of sales and use taxes, including any penalties or interest, if the liability is the result of incorrect information or software provided by the state.

-       Each state would have to provide remote sellers and CSPs with 90 days’ notice of a rate change by the state or any locality in the state and update the taxability and exemption information and rate and boundary databases, and would have to relieve any remote seller or CSP from liability for collecting sales and use taxes at the immediately preceding effective rate during the 90-day notice period if the required notice is not provided.

 

For non-SST member states, the location to which a remote sale is sourced would be the location where the item sold is received by the purchaser, based on the location indicated by instructions for delivery. When no delivery location is specified, the remote sale is sourced to the customer's address that is either known to the seller or, if not known, obtained by the seller during the transaction, including the address of the customer's payment instrument if no other address is available. If an address is unknown and a billing address cannot be obtained, the remote sale is sourced to the address of the seller from which the remote sale was made. SST member states would be required to comply with the sourcing provisions of the SST Agreement.

 

On March 22, 2013, the U.S. Senate voted 75-to-24 in favor of the concept of the Marketplace Fairness Act. The actual Marketplace Fairness Act was introduced in both chambers in February, but last week Senator Enzi, the sponsor of the Senate bill, offered an amendment to the 2014 Budget Resolution that would include insertion of the language of Marketplace Fairness in the budget. It was a largely symbolic tactic since the Budget Resolution itself will not become law, but by approving the amendment, the Senate has shown that there is broad, bipartisan support for the notion of requiring remote sellers to collect sales tax.

 

On May 6, 2013, the U.S. Senate passed the Marketplace Fairness Act with a 69-27 vote.

 

UPDATE: On September 18, 2013, Rep. Bob Goodlatte, the chairman of the House Judiciary Committee released a set of seven principles that he believes any internet sales tax bill should meet.  The seven principles outlined by Goodlatte are tax relief, tech neutrality, no regulation without representation, simplicity, tax competition, states’ rights, and privacy rights.  For more details on the principles, click here to see the House Judiciary Committee’s press release.

 

We are continuing to track the activities of these bills.  We are also involved in planning efforts involving states and businesses regarding the potential implementation consequences of passage.  Watch for updates in the Sales Tax Compass as well as through our Twitter account and LinkedIn updates. 

 

The text of the bill passed by the Senate can be viewed here.

 

For an update on this news item, visit Senate Introduces Marketplace Fairness Act of 2015.

 

(H.R. 684 and S. 336, as introduced in Congress on February 14, 2013; S.743, as passed by the U.S. Senate on May 6, 2013)

(09/20/2013)

Arizona has enacted legislation authorizing the Department of Revenue to establish a tax amnesty program applying to all state and local taxes administered by the Arizona Department of Revenue except estate and property tax. This amnesty does not cover home rule taxes administered by independent cities. The amnesty program will run from September 1 through October 1, 2011. The Department will waive all or part of the civil penalties and impose interest at a reduced rate for tax liabilities that have been assessed or could be assessed or imposed for any taxable period during the applicable liability period. For taxpayers who file annually, the liability period is any taxable period beginning from and after December 31, 2003 and ending before January 1, 2010. For taxpayers who have a 52-53 week tax year, it is any taxable period beginning from and after January 14, 2004 and ending before January 1, 2010. For all other taxpayers, it is any taxable period beginning from and after December 31, 2004 and ending before January 1, 2010. To qualify, taxpayers must submit an application in which they identify the tax, the qualifying taxable period, the tax liability for which recovery is sought, and provide other requested information, and pay the tax and interest due by October 1, 2011. A taxpayer does not qualify to participate in the program if an audit determination has become final for the tax period for which recovery is sought, if they are party to any criminal investigation or proceeding pending on January 1, 2011 for failure to file or pay or fraud relating to any Arizona tax, if they have been found guilty in a previous tax-related criminal investigation, if they’ve been convicted of a crime relating to any period or tax assessment that is the basis of the penalty or interest that is trying to be recovered, or if they are a party to a closing agreement with the department for the tax periods included in the recovery application. Approval to participate in the amnesty program does not entitle any affected taxpayer to a refund or credit of any amount previously paid. (S.B. 1616, Laws 2011, effective 90 days after adjournment)

(06/14/2011)

Arizona voters passed Proposition 100 which temporarily increases the transaction privilege tax rate from 5.5% to 6.5%. This rate change is effective June 1, 2010 through May 31, 2013 (Proposition 100, approved by the voters at the May 18, 2010, election)

(06/01/2010)

The Arizona Department of Revenue has been authorized to extend a tax amnesty program beginning May 1, 2009 and ending June 1, 2009 for Individual and Corporate Income, Transaction Privilege, Use, Withholding, Partnership, Fiduciary, and Luxury taxes. Eligible taxpayers who pay back taxes in full during this period will not be penalized or criminally prosecuted, and may qualify for a reduced interest rate. Amnesty is available for periods beginning on or after January 1, 2002 and ending before January 1, 2008 for taxes filed on an annual basis. For taxes filed on a quarterly basis, amnesty is available for periods beginning on or after January 1, 2003 and ending before January 1, 2008. To qualify, Amnesty Tax Returns must be accompanied by the Amnesty Application form and must be filed or postmarked and paid in full by June 1, 2009.

Individuals and businesses who failed to file a tax return, failed to report all income or all tax, interest and penalties due, claimed incorrect credits and deductions, or misrepresented or omitted tax due are eligible for the program, even if they are non-residents, part-year residents, or taxpayers under audit. Taxpayers who are seeking amnesty for finalized audit periods, are under criminal investigation, or are party to criminal proceedings for fraud, failure to file or failure to pay Arizona taxes are not eligible. (S.B. 1003, Laws 209, First Special Session, effective 90 days after adjournment)

(04/01/2009)

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