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Under the Arizona job printing classification, sales of printing, engraving, embossing, or copying to a qualified motion picture production company for use in motion picture production are exempt. To be eligible for this deduction, at the time of sale, the motion picture production company must give the job printer its certificate that is issued pursuant to section 42-5009, subsection H, and that establishes its qualifications for the deduction. Additional provisions regarding the qualifications for motion picture tax incentives apply. (S.B, 1367, Laws 2006)


The Director’s review upheld an earlier decision that separately-stated photographer’s fees were subject to the state’s transaction privilege tax. Specifically, the photographer did not qualify for a “service in addition to a retail sale” exemption as the services provided by the photographer (site visits, set-up, taking photographs, rush processing) were activities that helped create the photographs for sale, not a “service in addition to a sale”. The Director stated that the dominant purpose of a photographer was to sell photographs which qualify as tangible personal property. The photographer also did not meet the requirements to qualify for a “service occupation or business” exemption as its business does not require a state sanctioned or issued license. (Case No. 200500067S-REV, July 17, 2006)


Under Arizona’s job printing classification, postage and freight are exempt from transaction privilege tax. The taxpayer must separately document the postage and freight on the purchaser’s invoice and in the taxpayer’s records to qualify for the exemption. In addition, sales of both postage and freight cannot exceed the actual postage and freight rate that is paid to the United States Postal Service or a commercial delivery service. (H.B. 2089)


The Department of Revenue has amended a regulation to clarify the taxability of sales of computer hardware or software. The modification clarifies that (1) gross receipts derived from changes of prewritten software for the specific use of an individual customer are not subject to tax if separately stated on the sales invoice and in the seller 's records; and (2) the method used to sell prewritten computer software to customers is irrelevant for taxation purposes. Some methods used to sell include using a tangible object such as a computer disk, CD-ROM, or through digital means (Arizona Regulation, R 15-5-154, amended September 10, 2005).


A recent opinion of the Arizona Court of Appeals affirmed the Tax Court’s decision that out-of-state printing services are not subject to use tax. A taxpayer in the business of publishing telephone directories contracted with out-of-state printers for printing services and supplied the printers with paper purchased from out-of-state milling companies. While Arizona’s transaction privilege tax is based on gross receipts and would include printing for an in-state printer, the state’s use tax provisions impose no specific tax on printing services. The decision in this case supports the conclusion that printing services are not subject to use tax by applying both the “dominant purpose” and “common understanding” tests. In this case, it is clear the printer is in the business of providing a service and the paper mill is in the business of selling taxable tangible personal property (Qwest Dex, Inc. v. Arizona Department of Revenue, Arizona Court of Appeals, No. 1 CA-TX 03-0017, April 5, 2005).



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