online home sharing; repeal

SB1084 - 572R - I Ver

PREFILED��� JAN 02 2026

REFERENCE TITLE:
online home sharing; repeal

State of Arizona

Senate

Fifty-seventh Legislature

Second Regular Session

2026

SB 1084

Introduced by

Senator
Finchem

AN
ACT

repealing sections
9-500.39 and 11-269.17, arizona revised statutes; amending sections 42-2003,
42-5005, 42-5009, 42-5010 and 42-5014, arizona revised statutes;
repealing section 42-5042, arizona revised statutes; amending sections 42-5061,
42-5070 and 42-5071, arizona revised statutes; repealing section 42-5076,
arizona revised statutes; amending section 42-5159, arizona revised
statutes, as amended by laws 2025, chapter 135, section 2 and chapter 247,
section 2; repealing section 42-5159, Arizona Revised Statutes, as amended by
laws 2025, chapter 251, section 13; repealing sections 42-6009 and
42-6013, arizona revised statutes; amending sections 42-6102, 42-6108,
42-6108.01, 42-12003 and 42-12004, arizona revised statutes; relating to online
lodging.�

(TEXT OF BILL BEGINS ON NEXT PAGE)

Be it enacted by the Legislature of the State of Arizona:

Section 1.
Repeal

Sections 9-500.39 and 11-269.17,
Arizona Revised Statutes, are repealed.

Sec. 2. Section 42-2003, Arizona Revised
Statutes, is amended to read:

START_STATUTE
42-2003.

Authorized disclosure of confidential information

A. Confidential information relating to:

1. A taxpayer may be disclosed to the taxpayer, its
successor in interest or a designee of the taxpayer who is authorized in
writing by the taxpayer. A principal corporate officer of a parent
corporation may execute a written authorization for a controlled
subsidiary. If a taxpayer elects to file an Arizona small business
income tax return under section 43-302, a written authorization by the
taxpayer to allow the department to disclose personal income tax information to
a designee includes the corresponding Arizona small business income tax return.

2. A corporate taxpayer may be disclosed to any
principal officer, any person designated by a principal officer or any person
designated in a resolution by the corporate board of directors or other similar
governing body. If a corporate officer signs a statement under
penalty of perjury representing that the officer is a principal officer, the
department may rely on the statement until the statement is shown to be false.�
For the purposes of this paragraph, "principal officer" includes a
chief executive officer, president, secretary, treasurer, vice president of
tax, chief financial officer, chief operating officer or chief tax officer or
any other corporate officer who has the authority to bind the taxpayer on
matters related to state taxes.

3. A partnership may be disclosed to any partner of
the partnership.� This exception does not include disclosure of confidential
information of a particular partner unless otherwise authorized.

4. A limited liability company may be disclosed to
any member of the company or, if the company is manager-managed, to any
manager.

5. An estate may be disclosed to the personal
representative of the estate and to any heir, next of kin or beneficiary under
the will of the decedent if the department finds that the heir, next of kin or
beneficiary has a material interest that will be affected by the confidential
information.

6. A trust may be disclosed to the trustee or
trustees, jointly or separately, and to the grantor or any beneficiary of the
trust if the department finds that the grantor or beneficiary has a material
interest that will be affected by the confidential information.

7. A government entity may be disclosed to the head
of the entity or a member of the governing board of the entity, or any employee
of the entity who has been delegated the authorization in writing by the head
of the entity or the governing board of the entity.

8. Any taxpayer may be disclosed if the taxpayer has
waived any rights to confidentiality either in writing or on the record in any
administrative or judicial proceeding.

9. The name and taxpayer identification numbers of
persons issued direct payment permits may be publicly disclosed.

10. Any taxpayer may be disclosed during a meeting
or telephone call if the taxpayer is present during the meeting or telephone
call and authorizes the disclosure of confidential information.

B. Confidential information may be disclosed to:

1. Any employee of the department whose official
duties involve tax administration.

2. The office of the attorney general solely for its
use in preparation for, or in an investigation that may result in, any
proceeding involving tax administration before the department or any other
agency or board of this state, or before any grand jury or any state or federal
court.

3. The department of liquor licenses and control for
its use in determining whether a spirituous liquor licensee has paid all
transaction privilege taxes and affiliated excise taxes incurred as a result of
the sale of spirituous liquor, as defined in section 4-101, at the
licensed establishment and imposed on the licensed establishments by this state
and its political subdivisions.

4. Other state tax officials whose official duties
require the disclosure for proper tax administration purposes if the
information is sought in connection with an investigation or any other
proceeding conducted by the official.� Any disclosure is limited to information
of a taxpayer who is being investigated or who is a party to a proceeding
conducted by the official.

5. The following agencies, officials and
organizations, if they grant substantially similar privileges to the department
for the type of information being sought, pursuant to statute and a written
agreement between the department and the foreign country, agency, state, Indian
tribe or organization:

(a) The United States internal revenue service,
alcohol and tobacco tax and trade bureau of the United States treasury, United
States bureau of alcohol, tobacco, firearms and explosives of the United States
department of justice, United States drug enforcement agency and federal bureau
of investigation.

(b) A state tax official of another state.

(c) An organization of states, federation of tax
administrators or multistate tax commission that operates an information
exchange for tax administration purposes.

(d) An agency, official or organization of a foreign
country with responsibilities that are comparable to those listed in
subdivision (a), (b) or (c) of this paragraph.

(e) An agency, official or organization of an Indian
tribal government with responsibilities comparable to the responsibilities of
the agencies, officials or organizations identified in subdivision (a), (b) or
(c) of this paragraph.

6. The auditor general, in connection with any audit
of the department subject to the restrictions in section 42-2002,
subsection D.

7. Any person to the extent necessary for effective
tax administration in connection with:

(a) The processing, storage, transmission,
destruction and reproduction of the information.

(b) The programming, maintenance, repair, testing
and procurement of equipment for purposes of tax administration.

(c) The collection of the taxpayer's civil
liability.

8. The office of administrative hearings relating to
taxes administered by the department pursuant to section 42-1101, but the
department shall not disclose any confidential information without the
taxpayer's written consent:

(a) Regarding income tax or withholding tax.

(b) On any tax issue relating to information
associated with the reporting of income tax or withholding tax.

9. The United States treasury inspector general for
tax administration for the purpose of reporting a violation of internal revenue
code section 7213A (26 United States Code section 7213A), unauthorized
inspection of returns or return information.

10. The financial management service of the United
States treasury department for use in the treasury offset program.

11. The United States treasury department or its
authorized agent for use in the state income tax levy program and in the
electronic federal tax payment system.

12. The Arizona commerce authority for its use in:

(a) Qualifying renewable energy operations for the
tax incentives under section 42-12006.

(b) Qualifying businesses with a qualified facility
for income tax credits under sections 43-1083.03 and 43-1164.04.

(c) Fulfilling its annual reporting responsibility
pursuant to section 41-1512, subsections U and V and section 41-1517,
subsection L.

(d) Certifying computer data centers for tax relief
under section 41-1519.

(e) Certifying applicants for the tax credit for
motion picture production costs under sections 43-1082 and 43-1165.

13. A prosecutor for purposes of section 32-1164,
subsection C.

14. The office of the state fire marshal for use in
determining compliance with and enforcing title 37, chapter 9, article 5.

15. The department of transportation for its use in
administering taxes, surcharges and penalties prescribed by title 28.

16. The Arizona health care cost containment system
administration for its use in administering nursing facility provider
assessments.

17. The department of administration risk management
division and the office of the attorney general if the information relates to a
claim against this state pursuant to section 12-821.01 involving the
department of revenue.

18. Another state agency if the taxpayer authorizes
the disclosure of confidential information in writing, including an
authorization that is part of an application form or other document submitted
to the agency.

19. The department of economic security for its use
in determining whether an employer has paid all amounts due under the
unemployment insurance program pursuant to title 23, chapter 4.

20. The department of health services for its use in
determining the following:

(a) Whether a medical marijuana dispensary is in
compliance with the tax requirements of chapter 5 of this title for the
purposes of section 36-2806, subsection A.

(b) Whether a marijuana establishment, marijuana
testing facility or dual licensee licensed under title 36, chapter 28.2 is in
compliance with the tax obligations under this title or title 43.

21. The Arizona department of agriculture for the
purpose of ascertaining compliance with the licensing provisions in title 3.

22. The office of economic opportunity for the
purpose of performing the duties and obligations to or on behalf of this state
prescribed by title 41, chapter 53.

C. Confidential information may be disclosed in any
state or federal judicial or administrative proceeding pertaining to tax
administration pursuant to the following conditions:

1. One or more of the following circumstances must
apply:

(a) The taxpayer is a party to the proceeding.

(b) The proceeding arose out of, or in connection
with, determining the taxpayer's civil or criminal liability, or the collection
of the taxpayer's civil liability, with respect to any tax imposed under this
title or title 43.

(c) The treatment of an item reflected on the
taxpayer's return is directly related to the resolution of an issue in the
proceeding.

(d) Return information directly relates to a
transactional relationship between a person who is a party to the proceeding
and the taxpayer and directly affects the resolution of an issue in the
proceeding.

2. Confidential information may not be disclosed
under this subsection if the disclosure is prohibited by section 42-2002,
subsection C or D.

D. Identity information may be disclosed for
purposes of notifying persons entitled to tax refunds if the department is
unable to locate the persons after reasonable effort.

E. The department, on the request of any person,
shall provide the names and addresses of bingo licensees as defined in section
5-401, verify whether or not a person has a privilege license and number,
a tobacco product distributor's license and number or a withholding license and
number or disclose the information to be posted on the department's website or
otherwise publicly accessible pursuant to section 42-1124, subsection F
and section 42-3401.

F. A department employee, in connection with the
official duties relating to any audit, collection activity or civil or criminal
investigation, may disclose return information to the extent that disclosure is
necessary to obtain information that is not otherwise reasonably
available. These official duties include the correct determination
of and liability for tax, the amount to be collected or the enforcement of
other state tax revenue laws.

G. Confidential information relating to transaction
privilege tax, use tax, severance tax, jet fuel excise and use tax and any
other tax collected by the department on behalf of any jurisdiction may be
disclosed to any county, city or town tax official if the information relates
to a taxpayer who is or may be taxable by a county, city or town or who may be
subject to audit by the department pursuant to section 42-6002. Any
taxpayer information that is released by the department to the county, city or
town:

1. May be used only for internal purposes, including
audits and communication with taxpayers for the purposes of the notice required
by section 9-499.15, subsection C.
If there is a
legitimate business need relating to enforcing laws, regulations and ordinances
pursuant to section 9-500.39 or 11-269.17, a county, city or town
tax official may redisclose transaction privilege tax information relating to a
vacation rental or short-term rental property owner or online lodging
operator from the new license report and license update report, subject to the
following:

(a) The information redisclosed is
limited to the following:

(i) The transaction privilege tax
license number.

(ii) The type of organization or
ownership of the business.

(iii) The legal business name and
doing business as name, if different from the legal name.

(iv) The business mailing address, tax
record physical location address, telephone number, email address and fax
number.

(v) The date the business started in
this state, the business description and the North American industry
classification system code.

(vi) The name, address and telephone
number for each owner, partner, corporate officer, member, managing member or
official of the employing unit.

(b) Redisclosure is limited to
nonelected officials in other units within the county, city or
town. The information may not be redisclosed to an elected official
or the elected official's staff.

(c) All redisclosures of confidential
information made pursuant to this paragraph are subject to paragraph 2 of this
subsection.

2. May not be disclosed to the public in any manner
that does not comply with confidentiality standards established by the
department. The county, city or town shall agree in writing with the
department that any release of confidential information that violates the
confidentiality standards adopted by the department will result in the
immediate suspension of any rights of the county, city or town to receive
taxpayer information under this subsection.

H. The department may disclose statistical
information gathered from confidential information if it does not disclose
confidential information attributable to any one taxpayer.� The department may
disclose statistical information gathered from confidential information, even
if it discloses confidential information attributable to a taxpayer, to:

1. The state treasurer in order to comply with the
requirements of section 42-5029, subsection A, paragraph 3.

2. The joint legislative income tax credit review
committee, the joint legislative budget committee staff and the legislative
staff in order to comply with the requirements of section 43-221.

I. The department may disclose the aggregate amounts
of any tax credit, tax deduction or tax exemption enacted after January 1,
1994. Information subject to disclosure under this subsection shall not be
disclosed if a taxpayer demonstrates to the department that such information
would give an unfair advantage to competitors.

J. Except as provided in section 42-2002,
subsection C, confidential information, described in section 42-2001,
paragraph 1, subdivision (a), item (ii), may be disclosed to law enforcement
agencies for law enforcement purposes.

K. The department may provide transaction privilege
tax license information to property tax officials in a county for the purpose
of identification and verification of the tax status of commercial property.

L. The department may provide transaction privilege
tax, luxury tax, use tax, property tax and severance tax information to the
ombudsman-citizens aide pursuant to title 41, chapter 8, article 5.

M. Except as provided in section 42-2002,
subsection D, a court may order the department to disclose confidential
information pertaining to a party to an action.� An order shall be made only on
a showing of good cause and that the party seeking the information has made
demand on the taxpayer for the information.

N. This section does
not prohibit the disclosure by the department of any information or documents
submitted to the department by a bingo licensee.� Before disclosing the
information, the department shall obtain the name and address of the person
requesting the information.

O. If the department is required or allowed to
disclose confidential information, it may charge the person or agency
requesting the information for the reasonable cost of its services.

P. Except as provided in section 42-2002,
subsection D, the department of revenue shall release confidential information
as requested by the department of economic security pursuant to section 42-1122
or 46-291. Information disclosed under this subsection is
limited to the same type of information that the United States internal revenue
service is authorized to disclose under section 6103(l)(6) of the internal
revenue code.

Q. Except as provided in section 42-2002,
subsection D, the department shall release confidential information as
requested by the courts and clerks of the court pursuant to section 42-1122.

R. To comply with the requirements of section 42-5031,
the department may disclose to the state treasurer, to the county stadium
district board of directors and to any city or town tax official that is part
of the county stadium district confidential information attributable to a
taxpayer's business activity conducted in the county stadium district.

S. The department shall release to the attorney
general confidential information as requested by the attorney general for
purposes of determining compliance with or enforcing any of the following:

1. Any public health control law relating to tobacco
sales as provided under title 36, chapter 6, article 14.

2. Any law relating to reduced cigarette ignition
propensity standards as provided under title 37, chapter 9, article 5.

3. Sections 44-7101 and 44-7111, the
master settlement agreement referred to in those sections and all agreements
regarding disputes under the master settlement agreement.

T. For proceedings before the department, the office
of administrative hearings, the state board of tax appeals or any state or
federal court involving penalties that were assessed against a return preparer,
an electronic return preparer or a payroll service company pursuant to section
42-1103.02, 42-1125.01 or 43-419, confidential information
may be disclosed only before the judge or administrative law judge adjudicating
the proceeding, the parties to the proceeding and the parties' representatives
in the proceeding prior to its introduction into evidence in the proceeding. The
confidential information may be introduced as evidence in the proceeding only
if the taxpayer's name, the names of any dependents listed on the return, all
social security numbers, the taxpayer's address, the taxpayer's signature and
any attachments containing any of the foregoing information are redacted and if
either:

1. The treatment of an item reflected on such a
return is or may be related to the resolution of an issue in the proceeding.

2. Such a return or the return information relates
or may relate to a transactional relationship between a person who is a party
to the proceeding and the taxpayer that directly affects the resolution of an
issue in the proceeding.

3. The method of payment of the taxpayer's
withholding tax liability or the method of filing the taxpayer's withholding
tax return is an issue for the period.

U. The department and attorney general may share the
information specified in subsection S of this section with any of the
following:

1. Federal, state or local agencies located in this
state for the purposes of enforcement of the statutes or agreements specified
in subsection S of this section or for the purposes of enforcement of
corresponding laws of other states.

2. Indian tribes located in this state for the
purposes of enforcement of the statutes or agreements specified in subsection S
of this section.

3. A court, arbitrator, data clearinghouse or
similar entity for the purpose of assessing compliance with or making
calculations required by the master settlement agreement or agreements
regarding disputes under the master settlement agreement, and with counsel for
the parties or expert witnesses in any such proceeding, if the information
otherwise remains confidential.

V. The department may provide the name and address
of qualifying hospitals and qualifying health care organizations, as defined in
section 42-5001, to a business that is classified and reporting
transaction privilege tax under the utilities classification.

W. The department may disclose to an official of any
city, town or county in a current agreement or considering a prospective
agreement with the department as described in section 42-5032.02,
subsection G any information relating to amounts that are subject to
distribution and that are required by section 42-5032.02. Information
disclosed by the department under this subsection:

1. May be used only by the city, town or county for
internal purposes.

2. May not be disclosed to the public in any manner
that does not comply with confidentiality standards established by the
department. The city, town or county must agree with the department
in writing that any release of confidential information that violates the
confidentiality standards will result in the immediate suspension of any rights
of the city, town or county to receive information under this subsection.

X. Notwithstanding any other provision
of this section, the department may not disclose information provided by an
online lodging marketplace, as defined in section 42-5076, without the
written consent of the online lodging marketplace, and the information may be
disclosed only pursuant to subsection A, paragraphs 1 through 6, 8 and 10,
subsection B, paragraphs 1, 2, 7 and 8 and subsections C, D and G of this
section.� Such information:

1. Is not subject to disclosure
pursuant to title 39, relating to public records.

2. May not be disclosed to any agency
of this state or of any county, city, town or other political subdivision of
this state.

END_STATUTE

Sec. 3. Section 42-5005, Arizona Revised
Statutes, is amended to read:

START_STATUTE
42-5005.

Transaction privilege tax and municipal privilege tax licenses;
fees; renewal; revocation; violation; classification

A. Every person who receives gross proceeds of sales
or gross income on which a transaction privilege tax is imposed by this article
and who desires to engage or continue in business shall apply to the department
for an annual transaction privilege tax license accompanied by a fee of
$12. A person shall not engage or continue in business until the
person has obtained a transaction privilege tax license.

B. A person desiring to engage or continue in
business within a city or town that imposes a municipal privilege tax shall
apply to the department
of revenue
for an annual municipal
privilege tax license accompanied by a fee of up to $50, as established by
ordinance of the city or town. The person shall submit the fee with
each new license application.� The person may not engage or continue in business
until the person has obtained a municipal privilege tax license.� The
department must collect, hold, pay and manage the fees in trust for the city or
town and may not use the monies for any other purposes.� The fee imposed by
this subsection does not apply to a marketplace facilitator or remote seller
that is only required to obtain a transaction privilege tax license pursuant to
section 42-5043.

C. A transaction privilege tax license is valid only
for the calendar year in which it is issued, but it may be renewed for the
following calendar year. There is no fee for the renewal of the
transaction privilege tax license. The transaction privilege tax
license must be renewed at the same time and in the manner as the municipal
privilege tax license renewal.

D. A municipal privilege tax license is valid only
for the calendar year in which it is issued, but it may be renewed for the
following calendar year by
the payment of

paying

a license renewal fee of
up to

not
more than
$50. The renewal fee is due and payable on January
1 and is considered delinquent if not received on or before the last business
day of January.� The department must collect, hold, pay and manage the fees in
trust for the city or town and may not use the monies for any other purposes.�
The renewal fee imposed by this subsection does not apply to a marketplace
facilitator or remote seller that is only required to obtain a transaction
privilege tax license pursuant to section 42-5043.

E. A licensee that remains in business after the
municipal privilege tax license has expired is subject to the payment of the
license renewal fee and the civil penalty prescribed in section 42-1125,
subsection R.

F. If the applicant is not in arrears in payment of
any tax imposed by this article, the department shall issue a license
authorizing the applicant to engage and continue in business on the condition
that the applicant complies with this article. The license number
shall be continuous.

G. The transaction privilege tax license and the
municipal privilege tax license are not transferable on a complete change of
ownership or change of location of the business. For the purposes of
this subsection:

1. "Location" means the business address
appearing in the application for the license and on the transaction privilege
tax or municipal privilege tax license.

2. "Ownership" means any right, title or
interest in the business.

3. "Transferable" means the ability to
convey or change the right or privilege to engage or continue in business by
virtue of the issuance of the transaction privilege tax or municipal privilege
tax license.

H. When the ownership or location of a business on
which a transaction privilege tax or municipal privilege tax is imposed has
been changed within the meaning of subsection G of this section, the licensee
shall surrender the license to the department. The license shall be
reissued to the new owners or for the new location on application by the
taxpayer and payment of the $12 fee for a transaction privilege tax license and
a fee of up to $50 per jurisdiction for a municipal privilege tax
license. The department must collect, hold, pay and manage the fees
in trust for the city or town and may not use the monies for any other
purposes.

I. A person who is engaged in or conducting a
business in two or more locations or under two or more business names shall
procure a transaction privilege tax license for each location or business name
regardless of whether all locations or business names are reported on a
consolidated return under a single transaction privilege tax license
number. This requirement shall not be construed as conflicting with
section 42-5020.

J. A person who is engaged in or conducting a
business in two or more locations or under two or more business names shall
procure a municipal privilege tax license for each location or business name
regardless of whether all locations or business names are reported on a
consolidated return.

K. A person who is engaged in or conducting business
at two or more locations or under two or more business names and who files a
consolidated return under a single transaction privilege tax license number as
provided by section 42-5020 is required to pay only a single municipal
privilege tax license renewal fee for each local jurisdiction pursuant to
subsection D of this section.� A person who is engaged in or conducting
business at two or more locations or under two or more business names and who
does not file a consolidated return under a single license number is required
to pay a license renewal fee for each location or license in a local
jurisdiction.

L. For the purposes of this chapter
and chapter 6 of this title:

1. Through December 31, 2018, an
online lodging marketplace, as defined in section 42-5076, may register
with the department for a license for the payment of taxes levied by this state
and one or more counties, cities, towns or special taxing districts, at the
election of the online lodging marketplace, for taxes due from an online lodging
operator on any online lodging transaction facilitated by the online lodging
marketplace, subject to sections 42-5076 and 42-6009.

2. Beginning from and after December
31, 2018, an online lodging marketplace, as defined in section 42-5076,
shall register with the department for a license for the payment of taxes
levied by this state and one or more counties, cities, towns or special taxing
districts for taxes due from an online lodging operator on any online lodging
transaction facilitated by the online lodging marketplace, subject to sections
42-5076 and 42-6009.

M. For the purposes of this chapter
and chapter 6 of this title, a person who is licensed pursuant to title 32,
chapter 20 and who files an electronic consolidated tax return for individual
real properties under management on behalf of the property owners may be
licensed with the department for the payment of taxes levied by this state and
by any county, city or town with respect to those properties. There
is no fee for a license issued pursuant to this subsection.

N.
l.
For
the purposes of this chapter, a peer-to-peer car sharing program
shall register with the department for a license for the payment of taxes
levied by this state and one or more counties, cities, towns or special
districts for taxes due from a shared vehicle owner on any shared vehicle
transaction facilitated by the peer-to-peer car sharing program, subject to the
limitations in section 28-9616. A peer-to-peer car
sharing program shall remit the surcharges established pursuant to sections 5-839
and 48-4234 only if the peer-to-peer car sharing program
allows shared vehicle transactions that involve a vehicle for which the shared
vehicle owner has not certified to the department pursuant to section 28-9616,
subsection C that it is an individual-owned shared
vehicle. For the purposes of this subsection, "individual-owned
shared vehicle", "peer-to-peer car sharing program",
"shared vehicle owner" and "shared vehicle transaction"
have the same meanings prescribed in section 28-9601.

O.
m.
If
a person violates this article or any rule adopted under this article, the
department upon hearing may revoke any transaction privilege tax or municipal
privilege tax license issued to the person.� The department shall provide ten
days' written notice of the hearing, stating the time and place and requiring
the person to appear and show cause why the license or licenses should not be
revoked. The department shall provide written notice to the person
of the revocation of the license.� The notices may be served personally or by
mail pursuant to section 42-5037.� After revocation, the department shall
not issue a new license to the person unless the person presents evidence
satisfactory to the department that the person will comply with this article
and with the rules adopted under this article.� The department may prescribe
the terms under which a revoked license may be reissued.

P.
n.
The
department may revoke any transaction privilege tax or municipal privilege tax
license issued to any person who fails for thirteen consecutive months to make
and file a return required by this article on or before the due date or the due
date as extended by the department unless the failure is due to a reasonable
cause and not due to wilful neglect.

Q.
o.
A
person who violates any provision of this section is guilty of a class 3
misdemeanor.
END_STATUTE

Sec. 4. Section 42-5009, Arizona Revised
Statutes, is amended to read:

START_STATUTE
42-5009.

Certificates establishing deductions; liability for making false
certificate; tax exclusion; definitions

A. A person who conducts any business classified
under article 2 of this chapter may establish entitlement to the allowable
deductions from the tax base of that business by both:

1. Marking the invoice for the transaction to
indicate that the gross proceeds of sales or gross income derived from the
transaction was deducted from the tax base.

2. Obtaining a certificate executed by the purchaser
indicating the name and address of the purchaser, the precise nature of the
business of the purchaser, the purpose for which the purchase was made, the
necessary facts to establish the appropriate deduction and the tax license
number of the purchaser to the extent the deduction depends on the purchaser
conducting business classified under article 2 of this chapter and a
certification that the person executing the certificate is authorized to do so
on behalf of the purchaser. The certificate may be disregarded if
the seller has reason to believe that the information contained in the
certificate is not accurate or complete.

B. A person who does not comply with subsection A of
this section may establish entitlement to the deduction by presenting facts
necessary to support the entitlement, but the burden of proof is on that
person.

C. The department may prescribe a form for the
certificate described in subsection A of this section.� Under such rules as it
may prescribe, the department may also describe transactions with respect to
which a person is not entitled to rely solely on the information contained in
the certificate provided for in subsection A of this section but must instead
obtain such additional information as required by the rules in order to be
entitled to the deduction.

D. If a seller is entitled to a deduction by
complying with subsection A of this section, the department may require the
purchaser that caused the execution of the certificate to establish the
accuracy and completeness of the information required to be contained in the
certificate that would entitle the seller to the deduction. If the
purchaser cannot establish the accuracy and completeness of the information,
the purchaser is liable in an amount equal to any tax, penalty and interest
that the seller would have been required to pay under this article if the
seller had not complied with subsection A of this section. Payment
of the amount under this subsection exempts the purchaser from liability for
any tax imposed under article 4 of this chapter. The amount shall be
treated as tax revenues collected from the seller in order to designate the
distribution base for purposes of section 42-5029.

E. If a seller is entitled to a deduction by
complying with subsection B of this section, the department may require
the purchaser to establish the accuracy and completeness of the information
provided to the seller that entitled the seller to the deduction.� If the
purchaser cannot establish the accuracy and completeness of the information,
the purchaser is liable in an amount equal to any tax, penalty and interest
that the seller would have been required to pay under this article if the
seller had not complied with subsection B of this section. Payment
of the amount under this subsection exempts the purchaser from liability for
any tax imposed under article 4 of this chapter. The amount shall be
treated as tax revenues collected from the seller in order to designate the
distribution base for purposes of section 42-5029.

F. The department may prescribe a form for a
certificate used to establish entitlement to the deductions described in
section 42-5061, subsection A, paragraph 46 and section 42-5063,
subsection B, paragraph 3.� Under rules the department may prescribe, the
department may also require additional information for the seller to be
entitled to the deduction. If a seller is entitled to the deductions
described in section 42-5061, subsection A, paragraph 46 and section
42-5063, subsection B, paragraph 3, the department may require the
purchaser who executed the certificate to establish the accuracy and
completeness of the information contained in the certificate that would entitle
the seller to the deduction. If the purchaser cannot establish the
accuracy and completeness of the information, the purchaser is liable in an
amount equal to any tax, penalty and interest that the seller would have been
required to pay under this article. Payment of the amount under this
subsection exempts the purchaser from liability for any tax imposed under
article 4 of this chapter.� The amount shall be treated as tax revenues
collected from the seller in order to designate the distribution base for
purposes of section 42-5029.

G. If a seller claims a deduction under section 42-5061,
subsection A, paragraph 25 and establishes entitlement to the deduction
with an exemption letter that the purchaser received from the department and
the exemption letter was based on a contingent event, the department may
require the purchaser that received the exemption letter to establish the
satisfaction of the contingent event within a reasonable time. If
the purchaser cannot establish the satisfaction of the event, the purchaser is
liable in an amount equal to any tax, penalty and interest that the seller
would have been required to pay under this article if the seller had not been
furnished the exemption letter. Payment of the amount under this
subsection exempts the purchaser from liability for any tax imposed under
article 4 of this chapter. The amount shall be treated as tax
revenues collected from the seller in order to designate the distribution base
for purposes of section 42-5029. For the purposes of this
subsection, "reasonable time" means a time limitation that the
department determines and that does not exceed the time limitations pursuant to
section 42-1104.

H. The department shall prescribe forms for
certificates used to establish the satisfaction of the criteria necessary to
qualify the sale of a motor vehicle for the deductions described in section 42-5061,
subsection A, paragraphs 14, 28 and 44 and subsection V. Except as
provided in subsection J of this section, to establish entitlement to these
deductions, a motor vehicle dealer shall retain:

1. A valid certificate as prescribed by this
subsection completed by the purchaser and obtained before the issuance of the
nonresident registration permit authorized by section 28-2154.

2. For the purposes of the deductions provided by
section 42-5061, subsection A, paragraph 14, subdivision (b) and
section 42-5061,
subsection V, a copy of the nonresident
registration permit authorized by section 28-2154.

3. A legible copy of a current valid driver license
issued to the purchaser by another state or foreign country that indicates an
address outside of this state. For the sale of a motor vehicle to a
nonresident entity, the entity's representative must have a current valid
driver license issued by the same jurisdiction as that in which the entity is
located.

4. For the purposes of the deduction provided by
section 42-5061, subsection A, paragraph 14, subdivision (a), a
certificate documenting the delivery of the motor vehicle to an out-of-state
location.

I. Notwithstanding subsection A, paragraph 2 of this
section, if a motor vehicle dealer has established entitlement to a deduction
by complying with subsection H of this section, the department may require the
purchaser who executed the certificate to establish the accuracy and
completeness of the information contained in the certificate that entitled the
motor vehicle dealer to the deduction. If the purchaser cannot
establish the accuracy and completeness of the information, the purchaser is
liable in an amount equal to any tax, penalty and interest that the motor
vehicle dealer would have been required to pay under this article and under
articles IV and V of the model city tax code as defined in section 42-6051. Payment
of the amount under this subsection exempts the purchaser from liability for
any tax imposed under article 4 of this chapter and any tax imposed under
article VI of the model city tax code as defined in section 42-6051. The
amount shall be treated as tax revenues collected from the motor vehicle dealer
in order to designate the distribution base for purposes of section 42-5029.

J. To establish entitlement to the deduction
described in section 42-5061, subsection A, paragraph 44, a public
consignment auction dealer as defined in section 28-4301 shall retain a
copy of the certificate prescribed by subsection H of this section for its
records.

K. Notwithstanding any other law, compliance with
subsection H of this section by a motor vehicle dealer entitles the motor
vehicle dealer to the exemption provided in section 42-6004, subsection
A, paragraph 4.

L. The department shall prescribe a form for a
certificate to be used by a person that is not subject to tax under section 42-5075
when the person is engaged by a contractor that is subject to tax under section
42-5075 for a project that is taxable under section 42-5075. The
certificate permits the person purchasing tangible personal property to be
incorporated or fabricated by the person into any real property, structure,
project, development or improvement to provide documentation to a retailer that
the sale of tangible personal property qualifies for the deduction under
section 42-5061, subsection A, paragraph 27,
subdivision (b). A prime contractor shall obtain the
certificate from the department and shall provide a copy to any such person
working on the project. The prime contractor shall obtain a new certificate
for each project to which this subsection applies. For the purposes
of this subsection, the following apply:

1. The person that is not subject to tax under
section 42-5075 may use the certificate issued pursuant to this
subsection only with respect to tangible personal property that will be
incorporated into a project for which the gross receipts are subject to tax
under section 42-5075.

2. The department shall issue the certificate to the
prime contractor on receiving sufficient documentation to establish that the
prime contractor meets the requirements of this subsection.

3. If any person uses the certificate provided under
this subsection to purchase tangible personal property to be used in a project
that is not subject to tax under section 42-5075, the person is liable in
an amount equal to any tax, penalty and interest that the seller would have
been required to pay under this article if the seller had not complied with
subsection A of this section. Payment of the amount under this
section exempts the person from liability for any tax imposed under article 4
of this chapter. The amount shall be sourced under section 42-5040,
subsection A, paragraph 2.

M. Notwithstanding any other law, compliance with
subsection L of this section by a person that is not subject to tax under
section 42-5075 entitles the person to the exemption allowed by section
465, subsection (k) of the model city tax code when purchasing tangible
personal property to be incorporated or fabricated by the person into any real
property, structure, project, development or improvement.

N. The requirements of subsections A and B of this
section do not apply to owners, proprietors or tenants of agricultural lands or
farms who sell livestock or poultry feed that is grown or raised on their lands
to any of the following:

1. Persons who feed their own livestock or poultry.

2. Persons who are engaged in the business of
producing livestock or poultry commercially.

3. Persons who are engaged in the business of
feeding livestock or poultry commercially or who board livestock
noncommercially.

O. A vendor who has reason to believe that a
certificate prescribed by this section is not accurate or complete will not be
relieved of the burden of proving entitlement to the exemption. A
vendor that accepts a certificate in good faith will be relieved of the burden
of proof and the purchaser may be required to establish the accuracy of the
claimed exemption. If the purchaser cannot establish the accuracy
and completeness of the information provided in the certificate, the purchaser
is liable for an amount equal to the transaction privilege tax, penalty and
interest that the vendor would have been required to pay if the vendor had not
accepted the certificate.

P. Notwithstanding any other law, an
online lodging operator, as defined in section 42-5076, shall be entitled
to an exclusion from any applicable taxes for any online lodging transaction,
as defined in section 42-5076, facilitated by an online lodging
marketplace, as defined in section 42-5076, for which the online lodging
operator has obtained from the online lodging marketplace written notice that
the online lodging marketplace is registered with the department to collect
applicable taxes for all online lodging transactions facilitated by the online
lodging marketplace, and transaction history documenting tax collected by the
online lodging marketplace, pursuant to section 42-5005, subsection L.

Q.

P.
The
department shall prescribe the form of a certificate to be used by a person
purchasing an aircraft to document eligibility for a deduction pursuant to
section 42-5061, subsection B, paragraph 8, subdivision (a), item (v) or
an exemption pursuant to section 42-5159, subsection B, paragraph 8,
subdivision (a), item (v), relating to aircraft. The person must
provide this certificate and documentation confirming that the operational
control of the aircraft has been transferred or will be transferred immediately
after the purchase to one or more persons described in section 42-5061,
subsection B, paragraph 8, subdivision (a), item (i), (ii), (iii) or (iv) or
section 42-5159, subsection B, paragraph 8, subdivision (a), item (i),
(ii), (iii) or (iv).� Operational control of the aircraft must be transferred
for at least fifty percent of the aircraft's flight hours. If such
operational control is not transferred for at least fifty percent of the
aircraft's flight hours during the recapture period, the owner of the aircraft
is liable for an amount equal to any tax that the seller or purchaser would
have been required to pay under this chapter at the time of the sale, plus
penalty and interest. The recapture period begins on the date that
operational control of the aircraft is first transferred and ends on the later
of the date the aircraft is fully depreciated for federal income tax purposes
or five years after operational control was first transferred. For the purposes
of this subsection, operational control of the aircraft must be within the
meaning of federal aviation administration operations specification A008, or
its successor, except that:

1. If it is determined that operational control has
been transferred for less than fifty percent but more than forty percent of the
aircraft's flight hours, the owner of the aircraft is liable for an amount
equal to any tax that the seller or purchaser would have been required to pay
under this chapter at the time of the sale, plus interest.

2. If the aircraft is sold during the recapture
period, the seller is not liable for the amount determined pursuant to this
subsection unless the operational control of the aircraft had not been
transferred for at least fifty percent of the aircraft's flight hours at the
time of the sale.

R.

Q.
Notwithstanding
any other law, a shared vehicle owner is entitled to an exclusion from any
applicable taxes for a shared vehicle transaction that is facilitated by a peer-to-peer
car sharing program and for which the peer-to-peer car sharing program has
collected and remitted applicable taxes.

S.

R.
A
qualifying community health center, qualifying health care organization or
qualifying hospital or any other entity that is recognized as nonprofit under
section 501(c) of the United States internal revenue code and that is required
to obtain an exemption letter from the department shall:

1. Apply to the department for the exemption letter
and fully answer any eligibility questions required by the department for the
purposes of the exemption letter. If the department approves the
exemption letter application, the exemption letter is valid until the entity is
no longer qualified for the exemption letter.

2. Notify the department in writing if the entity no
longer qualifies for the exemption letter. Regardless of whether the entity
notifies the department as required by this paragraph, if the entity no longer
qualifies for the exemption letter, the entity is liable in an amount equal to
any tax, penalty and interest that the seller would have been required to pay
under this article if the seller had not been furnished the exemption
letter. Payment of the amount under this paragraph exempts the
entity from liability for any tax imposed under article 4 of this chapter.� The
amount shall be treated as tax revenues collected from the seller in order to
designate the distribution base for the purposes of section 42-5029.

T.

S.
For
the purposes of this section, "peer-to-peer car sharing
program", "shared vehicle owner" and "shared vehicle
transaction" have the same meanings prescribed in section 28-9601.
END_STATUTE

Sec. 5. Section 42-5010, Arizona Revised
Statutes, is amended to read:

START_STATUTE
42-5010.

Rates; distribution base

A. The tax imposed by this article is levied and
shall be collected at the following rates:

1. Five percent of the tax base as computed for the
business of every person engaging or continuing in this state in the following
business classifications described in article 2 of this chapter:

(a) Transporting classification.

(b) Utilities classification.

(c) Telecommunications classification.

(d) Pipeline classification.

(e) Private car line classification.

(f) Publication classification.

(g) Job printing classification.

(h) Prime contracting classification.

(i) Amusement classification.

(j) Restaurant classification.

(k) Personal property rental classification.

(l) Retail classification and amounts equal to
retail transaction privilege tax due pursuant to section 42-5008.01.

2. Five and one-half
percent of the tax base as computed for the business of every person engaging
or continuing in this state in
:

(a)
the
transient lodging classification described in section 42-5070.

(b) The online lodging marketplace
classification described in section 42-5076 who has entered into an
agreement with the department to register for, or has otherwise obtained from
the department, a license to collect tax pursuant to section 42-5005,
subsection L.

3. Three and one-eighth percent of the tax
base as computed for the business of every person engaging or continuing in
this state in the mining classification described in section 42-5072.

4. Zero percent of the tax base as computed for the
business of every person engaging or continuing in this state in the commercial
lease classification described in section 42-5069.

B. Except as provided by subsections J and K of this
section, twenty percent of the tax revenues collected at the rate prescribed by
subsection A, paragraph 1 of this section from persons on account of engaging
in business under the business classifications listed in subsection A,
paragraph 1, subdivisions (a) through (h) of this section is designated as
distribution base for the

purposes of section 42-5029.

C. Except as provided by subsection K of this
section, forty percent of the tax revenues collected at the rate prescribed by
subsection A, paragraph 1 of this section from persons on account of engaging
in business under the business classifications listed in subsection A,
paragraph 1, subdivisions (i) through (l) of this section is designated as
distribution base for the purposes of section 42-5029.

D. Thirty-two percent of the tax revenues
collected from persons on account of engaging in business under the business
classification listed in subsection A, paragraph 3 of this section is
designated as distribution base for the purposes of section 42-5029.

E. Fifty-three and one-third percent of
the tax revenues collected from persons on account of engaging in business
under the business classification listed in subsection A, paragraph 4 of this
section is designated as distribution base for the purposes of section 42-5029.

F. Fifty percent of the tax revenues collected from
persons on account of engaging in business under the business classification
listed in subsection A, paragraph 2 of this section is designated as
distribution base for the

purposes of section 42-5029.

G. In addition to the rates prescribed by subsection
A of this section, if approved by the qualified electors voting at a statewide
general election, an additional rate increment is imposed and shall be
collected through June 30, 2021. The taxpayer shall pay taxes
pursuant to this subsection at the same time and in the same manner as under
subsection A of this section. The department shall separately
account for the revenues collected with respect to the rates imposed pursuant
to this subsection and the state treasurer shall distribute all of those
revenues in the manner prescribed by section 42-5029, subsection E.� The
rates imposed pursuant to this subsection shall not be considered local
revenues for purposes of article IX, section 21, Constitution of
Arizona. The additional tax rate increment is levied at the rate of
six-tenths of one per cent of the tax base of every person engaging or
continuing in this state in a business classification listed in subsection A,
paragraph 1 of this section.

H. Any increase in the rate of tax that is imposed
by this chapter and that is enacted by the legislature or by a vote of the
people does not apply with respect to contracts entered into by prime
contractors or pursuant to written bids made by prime contractors on or before
the effective date of the legislation or the date of the election enacting the
increase. To qualify for the exemption under this subsection, the
prime contractor must maintain sufficient documentation, in a manner and form
prescribed by the department, to verify the date of the contract or written
bid.

I. For taxpayers that are taxable under this chapter
other than prime contractors taxable pursuant to section 42-5075:

1. Any increase in the rate of tax that is levied by
this article or article 2 of this chapter enacted by the legislature or by a
vote of the people does not apply for a period of one hundred twenty days after
the date of the tax rate increase to the gross proceeds of sales or gross
income from the business of the taxpayer with respect to written contracts
entered into before the effective date of the tax rate increase unless the
taxpayer has entered into a contract that contains a provision that entitles the
taxpayer to recover from the purchaser the amount of the additional tax levied.

2. The provisions of this subsection apply without
regard to the accounting method used by the taxpayer to report the taxes
imposed under article 2 of this chapter.

3. The provisions of this subsection shall not be
considered in determining the rate of tax imposed under chapter 6, article 3 of
this title.

J. Zero percent of the tax revenues that are
collected at the rate prescribed by subsection A, paragraph 1 of this section
from persons on account of engaging in business under the business
classification listed in subsection A, paragraph 1, subdivision (h) of this
section and that are subject to any distribution required by section 42-5032.02
is designated as distribution base for the purposes of section 42-5029
until the total amount subject to distribution pursuant to section 42-5032.02
has reached the maximum amount prescribed by section 42-5032.02,
subsection C.� Thereafter, twenty percent of the remaining tax revenues is
designated as distribution base for the purposes of section 42-5029 as
provided by subsection B of this section.

K. Subject to section 48-4238, beginning on
October 1, 2025 through December 31, 2055, zero percent of the tax revenues
that are collected at the rate prescribed by subsection A, paragraph 1 of this
section from persons engaging in business under the business classifications
listed in subsection A, paragraph 1, subdivisions (h), (i), (j) and (l) of this
section and that are subject to transmittal required by section 42-5032.03
is designated as distribution base for the purposes of section 42-5029.�
Beginning January 1, 2056, twenty percent of the remaining tax revenues
collected at the rate prescribed by subsection A, paragraph 1 of this section
from persons engaging in business under the business classification listed in
subsection A, paragraph 1, subdivision (h) of this section is designated as
distribution base for the purposes of section 42-5029 as provided by
subsection B of this section and forty percent of the remaining tax revenues
collected at the rate prescribed by subsection A, paragraph 1 of this section
from persons engaging in business under the business classifications listed in
subsection A, paragraph 1, subdivisions (i), (j) and (l) of this section is
designated as distribution base for the purposes of section 42-5029 as
provided by subsection C of this section.
END_STATUTE

Sec. 6. Section 42-5014, Arizona Revised
Statutes, is amended to read:

START_STATUTE
42-5014.

Return and payment of tax; estimated tax; extensions; abatements;
definitions

A. Except as provided in subsection B, C
,

or
D
, E or F

of this section, the taxes levied under this article:

1. Are due and payable monthly in the form required
by section 42-5018 for the amount of the tax, to the department, on or
before the twentieth day of the month next succeeding the month in which the
tax accrues.

2. Are delinquent as follows:

(a) For taxpayers that are required or elect to file
and pay electronically in any month, if not received by the department on or
before the last business day of the month.

(b) For all other taxpayers, if not received by the
department on or before the business day preceding the last business day of the
month.

B. The department, for any taxpayer whose estimated
annual liability for taxes imposed or administered by this article or chapter 6
of this title is between $2,000 and $8,000, shall authorize the taxpayer
to pay the taxes on a quarterly basis. The department, for any
taxpayer whose estimated annual liability for taxes imposed by this article is
less than $2,000, shall authorize the taxpayer to pay the taxes on an annual
basis.� For the purposes of this subsection, the taxes due under this article:

1. For taxpayers that are authorized to pay on a
quarterly basis, are due and payable monthly in the form required by section 42-5018
for the amount of the tax, to the department, on or before the twentieth day of
the month next succeeding the quarter in which the tax accrues.

2. For taxpayers that are authorized to pay on an
annual basis, are due and payable monthly in the form required by section 42-5018
for the amount of the tax, to the department, on or before the twentieth day of
January next succeeding the year in which the tax accrues.

3. Are delinquent as follows:

(a) For taxpayers that are required or elect to file
and pay electronically in any quarter, if not received by the department on or
before the last business day of the month.

(b) For all other taxpayers that are required to
file and pay quarterly, if not received by the department on or before the
business day preceding the last business day of the month.

(c) For taxpayers that are required or elect to file
and pay electronically on an annual basis, if not received by the department on
or before the last business day of January.

(d) For all other taxpayers that are required to
file and pay annually, if not received by the department on or before the
business day preceding the last business day of January.

C. The department may require a taxpayer whose
business is of a transient character to file the return and remit the taxes
imposed by this article on a daily, a weekly or a transaction-by-transaction
basis, and those returns and payments are due and payable on the date fixed by
the department without a grace period otherwise allowed by this
section. For the purposes of this subsection, "business of a
transient character" means sales activity by a taxpayer not regularly
engaged in selling within this state that is conducted from vehicles, portable
stands, rented spaces, structures or booths, or concessions at fairs,
carnivals, circuses, festivals or similar activities for not more than thirty
consecutive days.

D. If the business entity under which a taxpayer
reports and pays income tax under title 43 has an annual total tax liability
under this article, article 6 of this chapter and chapter 6, article 3 of this
title of $1,000,000 or more in 2019, $1,600,000 or more in 2020, $2,300,000 or
more in 2021, $3,100,000 or more in 2022 or $4,100,000 or more in 2023 and each
year thereafter, based on the actual tax liability in the preceding calendar
year, regardless of the number of offices at which the taxes imposed by this
article, article 6 of this chapter or chapter 6, article 3 of this title are
collected, or if the taxpayer can reasonably anticipate such liability in the
current year, the taxpayer shall report on a form prescribed by the department
and pay an estimated tax payment each June.� Any other taxpayer may voluntarily
elect to pay the estimated tax payment pursuant to this
subsection. The payment shall be made on or before June 20 in
the same manner as the taxpayer is required to make regular payments and is
delinquent if not received by the department on or before the last business day
of June if the taxpayer is required to make the payment by electronic means, is
delinquent on or before the business day preceding the last business day of
June for those taxpayers allowed to file by mail or is delinquent if not
received by the department on the business day preceding the last business day
of June for those taxpayers allowed to file in person. The estimated
tax paid shall be credited against the taxpayer's tax liability under this
article, article 6 of this chapter and chapter 6, article 3 of this title for
the month of June for the current calendar year. The estimated tax
payment shall equal either:

1. One-half of the actual tax liability under
this article plus one-half of any tax liability under article 6 of this
chapter and chapter 6, article 3 of this title for May of the current calendar
year.

2. The actual tax liability under this article plus
any tax liability under article 6 of this chapter and chapter 6, article 3 of
this title for the first fifteen days of June of the current calendar year.

E. An online lodging marketplace, as
defined in section 42-5076, that is registered with the department
pursuant to section 42-5005, subsection L:

1. Shall remit to the department the
applicable taxes payable pursuant to section 42-5076 and chapter 6 of
this title with respect to each online lodging transaction, as defined in
section 42-5076, facilitated by the online lodging marketplace.

2. Shall report the taxes monthly and
remit the aggregate total amounts for each of the respective taxing
jurisdictions.

3. Shall not be required to list or
otherwise identify any individual online lodging operator, as defined in
section 42-5076, on any return or any attachment to a return.

F. A person who is licensed pursuant
to title 32, chapter 20 and who is licensed with the department pursuant to
section 42-5005, subsection M shall:

1. File a consolidated return monthly
with respect to all managed properties for which the licensee files an
electronic consolidated tax return pursuant to section 42-6013.

2. Remit to the department the
aggregate total amount of the applicable taxes payable pursuant to this chapter
and chapter 6 of this title for all of the respective taxing jurisdictions with
respect to the managed properties.

G.

e.
A
peer-to-peer car sharing program that is licensed by the department pursuant to
section 42-5005, subsection
N
L
:

1. Shall electronically remit to the department the
applicable taxes pursuant to section 42-5071 and chapter 6 of this title
and any additional taxes, fees or charges on the gross proceeds or gross income
of a shared vehicle transaction, subject to the limitations in section 28-9616,
and, if the peer-to-peer car sharing program allows owners of vehicles that are
not individual-owned shared vehicles to use the peer-to-peer
car sharing program, applicable surcharges pursuant to sections 5-839 and 48-4234.

2. Shall electronically report the taxes monthly and
remit the aggregate total amounts for each respective taxing jurisdiction.

3. Is not required to list or otherwise identify an
individual-owned shared vehicle on any return or any attachment to a
return.� The peer-to-peer car sharing program shall retain
surcharge and tax information for each peer-to-peer car sharing
program transaction and shall provide the information to the department at the
department's request.

H.

f.
The
remittance of transaction privilege tax and any other tax applicable to a
shared vehicle transaction by a peer-to-peer car sharing program fully
satisfies any obligation of a shared vehicle owner to remit any taxes
applicable to the shared vehicle transaction.

I.

g.
The
taxpayer shall prepare a return showing the amount of the tax for which the
taxpayer is liable for the preceding month
,
and
shall mail or deliver the return to the department in the same manner and time
as prescribed for the payment of taxes in subsection A of this section.� If the
taxpayer fails to file the return in the manner and time as prescribed for the
payment of taxes in subsection A of this section, the amount of the tax
required to be shown on the return is subject to the penalty imposed pursuant
to section 42-1125, subsection X, without any reduction for taxes paid on
or before the due date of the return.� The return shall be verified by the oath
of the taxpayer or an authorized agent or as prescribed by the department
pursuant to section 42-1105, subsection B.

J.

h.
Any
person who is taxable under this article and who makes cash and credit sales
shall report the cash and credit sales separately and may apply for and obtain
from the department an extension of time to pay taxes due on the credit
sales. The department shall grant the extension under such rules as
the department prescribes. When the extension is granted, the
taxpayer shall thereafter include in each monthly report all collections made
on such credit sales during the month next preceding and shall pay the taxes
due at the time of filing such a report.

K.

i.
The
returns required under this article shall be made on forms prescribed by the
department and shall capture data with sufficient specificity to meet the needs
of all taxing jurisdictions.

L.

j.
Any
person who is engaged in or conducting business in two or more locations or
under two or more business names shall file the return required under this
article using an electronic filing program established by the department.

M.

k.
For
taxable periods beginning from and after December 31, 2017, any taxpayer with
an annual total tax liability under this chapter and chapter 6 of this title of
$20,000 or more, based on the actual tax liability in the preceding calendar
year, regardless of the number of offices at which the taxes imposed by this
chapter or chapter 6 of this title are collected, or a taxpayer that can
reasonably anticipate that liability in the current year, shall file the return
required under this article using an electronic filing program established by
the department.

N.

l.
For
taxable periods beginning from and after December 31, 2018, any taxpayer with
an annual total tax liability under this chapter and chapter 6 of this title of
$10,000 or more, based on the actual tax liability in the preceding calendar
year, regardless of the number of offices at which the taxes imposed by this
chapter or chapter 6 of this title are collected, or a taxpayer that can
reasonably anticipate that liability in the current year, shall file the return
required under this article using an electronic filing program established by
the department.

O.

m.
For
taxable periods beginning from and after December 31, 2019, any taxpayer with
an annual total tax liability under this chapter and chapter 6 of this title of
$5,000 or more, based on the actual tax liability in the preceding calendar
year, regardless of the number of offices at which the taxes imposed by this
chapter or chapter 6 of this title are collected, or a taxpayer that can
reasonably anticipate that liability in the current year, shall file the return
required under this article using an electronic filing program established by
the department.

P.

n.
For
taxable periods beginning from and after December 31, 2020, any taxpayer with
an annual total tax liability under this chapter and chapter 6 of this title of
$500 or more, based on the actual tax liability in the preceding calendar year,
regardless of the number of offices at which the taxes imposed by this chapter
or chapter 6 of this title are collected, or a taxpayer that can reasonably
anticipate that liability in the current year, shall file the return required
under this article using an electronic filing program established by the
department.

Q.

o.
Any
taxpayer that is required to report and pay using an electronic filing program
established by the department may apply to the director, on a form prescribed
by the department, for an annual waiver from the electronic filing
requirement.� The director may grant a waiver, which may be renewed, if any of
the following applies:

1. The taxpayer has no computer.

2. The taxpayer has no internet access.

3. Any other circumstance considered to be worthy by
the director exists.

R.

p.
A
waiver is not required if the return cannot be electronically filed for reasons
beyond the taxpayer's control, including situations in which the taxpayer was
instructed by either the internal revenue service or the department of revenue
to file by paper.

S.

q.
The
department, for good cause, may extend the time for making any return required
by this article and may grant such reasonable additional time within which to
make the return as it deems proper, but the time for filing the return shall
not be extended beyond the first day of the third month next succeeding the
regular due date of the return.

T.

r.
The
department, with the approval of the attorney general, may abate small tax
balances if the administration costs exceed the amount of tax due.

U.

s.
For
the purposes of subsection D of this section, "taxpayer" means the
business entity under which the business reports and pays state income taxes
regardless of the number of offices at which the taxes imposed by this article,
article 6 of this chapter or chapter 6, article 3 of this title are collected.

V.

t.
For
the purposes of this section, "individual-owned shared
vehicle", "peer-to-peer car sharing program",
"shared vehicle owner" and "shared vehicle transaction"
have the same meanings prescribed in section 28-9601.
END_STATUTE

Sec. 7.
Repeal

Section 42-5042, Arizona Revised
Statutes, is repealed.

Sec. 8. Section 42-5061, Arizona Revised
Statutes, is amended to read:

START_STATUTE
42-5061.

Retail classification; definitions

A. The retail classification is comprised of the
business of selling tangible personal property at retail. The tax
base for the retail classification is the gross proceeds of sales or gross
income derived from the business. The tax imposed on the retail
classification does not apply to the gross proceeds of sales or gross income
from:

1. Professional or personal service occupations or
businesses that involve sales or transfers of tangible personal property only
as inconsequential elements.

2. Services rendered in addition to selling tangible
personal property at retail.

3. Sales of warranty or service
contracts. The storage, use or consumption of tangible personal
property provided under the conditions of such contracts is subject to tax
under section 42-5156.

4. Sales of tangible personal property by any
nonprofit organization organized and operated exclusively for charitable
purposes and recognized by the United States internal revenue service under
section 501(c)(3) of the internal revenue code.

5. Sales to persons engaged in business classified
under the restaurant classification of articles used by human beings for food,
drink or condiment, whether simple, mixed or compounded.

6. Business activity that is properly included in
any other business classification that is taxable under this article.

7. The sale of stocks and bonds.

8. Drugs and medical
oxygen, including delivery hose, mask or tent, regulator and tank, if
prescribed by a member of the medical, dental or veterinarian profession who is
licensed by law to administer such substances.

9. Prosthetic appliances as defined in section 23-501
and as prescribed or recommended by a health professional who is licensed
pursuant to title 32, chapter 7, 8, 11, 13, 14, 15, 16, 17 or 29.

10. Insulin, insulin syringes and glucose test
strips.

11. Prescription eyeglasses or contact lenses.

12. Hearing aids as defined in section 36-1901.

13. Durable medical equipment that has a centers for
medicare and medicaid services common procedure code, is designated
reimbursable by medicare, is prescribed by a person who is licensed under title
32, chapter 7, 8, 13, 14, 15, 17 or 29, can withstand repeated use, is
primarily and customarily used to serve a medical purpose, is generally not
useful to a person in the absence of illness or injury and is appropriate for
use in the home.

14. Sales of motor vehicles to nonresidents of this
state for use outside this state if either of the following applies:

(a) The motor vehicle dealer ships or delivers the
motor vehicle to a destination out of this state.

(b) The vehicle, trailer or semitrailer has a gross
vehicle weight rating of more than ten thousand pounds, is used or maintained
to transport property in the furtherance of interstate commerce and otherwise
meets the definition of commercial motor vehicle as defined in section 28-5201.

15. Food, as provided in and subject to the
conditions of article 3 of this chapter and sections 42-5074 and 42-6017.

16. Items purchased with United States department of
agriculture coupons issued under the supplemental nutrition assistance program
pursuant to the food and nutrition act of 2008 (P.L. 88-525; 78 Stat. 703; 7
United States Code sections 2011 through 2036b) by the United States department
of agriculture food and nutrition service or food instruments issued under
section 17 of the child nutrition act (P.L. 95-627;
92 Stat. 3603; P.L. 99-661, section 4302; P.L. 111-296; 42
United States Code section 1786).

17. Textbooks by any bookstore that are required by
any state university or community college.

18. Food and drink to a person that is engaged in a
business that is classified under the restaurant classification and that
provides such food and drink without monetary charge to its employees for their
own consumption on the premises during the employees' hours of employment.

19. Articles of food, drink or condiment and
accessory tangible personal property to a school district or charter school if
such articles and accessory tangible personal property are to be prepared and
served to persons for consumption on the premises of a public school within the
district or on the premises of the charter school during school hours.

20. Lottery tickets or shares pursuant to title 5,
chapter 5.1, article 2.

21. The sale of cash equivalents and the sale of
precious metal bullion and monetized bullion to the ultimate consumer, but the
sale of coins or other forms of money for manufacture into jewelry or works of
art is subject to the tax and the gross proceeds of sales or gross income
derived from the redemption of any cash equivalent by the holder as a means of
payment for goods or services that are taxable under this article is subject to
the tax. For the purposes of this paragraph:

(a) "Cash equivalents" means items or
intangibles, whether or not negotiable, that are sold to one or more persons,
through which a value denominated in money is purchased in advance and may be
redeemed in full or in part for tangible personal property, intangibles or
services. Cash equivalents include gift cards, stored value cards,
gift certificates, vouchers, traveler's checks, money orders or other
instruments, orders or electronic mechanisms, such as an electronic code,
personal identification number or digital payment mechanism, or any other
prepaid intangible right to acquire tangible personal property, intangibles or
services in the future, whether from the seller of the cash equivalent or from
another person. Cash equivalents do not include either of the
following:

(i) Items or intangibles that are sold to one or
more persons, through which a value is not denominated in money.

(ii) Prepaid calling cards or prepaid authorization
numbers for telecommunications services made taxable by subsection P of this
section.

(b) "Monetized bullion" means coins and
other forms of money that are manufactured from gold, silver or other metals
and that have been or are used as a medium of exchange in this or another
state, the United States or a foreign nation.

(c) "Precious metal bullion" means
precious metal, including gold, silver, platinum, rhodium and palladium, that
has been smelted or refined so that its value depends on its contents and not
on its form.

22. Motor vehicle fuel and use fuel that are subject
to a tax imposed under title 28, chapter 16, article 1, sales of use fuel to a
holder of a valid single trip use fuel tax permit issued under section 28-5739,
sales of aviation fuel that are subject to the tax imposed under section 28-8344
and sales of jet fuel that are subject to the tax imposed under article 8 of
this chapter.

23. Tangible personal property sold to a person
engaged in the business of leasing or renting such property under the personal
property rental classification if such property is to be leased or rented by
such person.

24. Tangible personal property sold in interstate or
foreign commerce if prohibited from being so taxed by the constitution of the
United States or the constitution of this state.

25. Tangible personal property sold to:

(a) A qualifying hospital as defined in section 42-5001.

(b) A qualifying health care organization as defined
in section 42-5001 if the tangible personal property is used by the
organization solely to provide health and medical related educational and
charitable services.

(c) A qualifying health care organization as defined
in section 42-5001 if the organization is dedicated to providing
educational, therapeutic, rehabilitative and family medical education training
for blind and visually impaired children and children with multiple
disabilities from the time of birth to age twenty-one.

(d) A qualifying community health center as defined
in section 42-5001.

(e) A nonprofit charitable organization that has
qualified under section 501(c)(3) of the internal revenue code and that
regularly serves meals to the needy and indigent on a continuing basis at no
cost.

(f) For taxable periods beginning from and after
June 30, 2001, a nonprofit charitable organization that has qualified under
section 501(c)(3) of the internal revenue code and that provides residential
apartment housing for low-income persons over sixty-two years of
age in a facility that qualifies for a federal housing subsidy, if the tangible
personal property is used by the organization solely to provide residential
apartment housing for low-income persons over sixty-two years of
age in a facility that qualifies for a federal housing subsidy.

(g) A qualifying health sciences educational
institution as defined in section 42-5001.

(h) Any person representing or working on behalf of
another person described in subdivisions (a) through (g) of this paragraph if
the tangible personal property is incorporated or fabricated into a project
described in section 42-5075, subsection P.

26. Magazines or other periodicals or other
publications by this state to encourage tourist travel.

27. Tangible personal property sold to:

(a) A person that is subject to tax under this
article by reason of being engaged in business classified under section 42-5075
or to a subcontractor working under the control of a person engaged in business
classified under section 42-5075, if the property so sold is any of the
following:

(i) Incorporated or fabricated by the person into
any real property, structure, project, development or improvement as part of
the business.

(ii) Incorporated or fabricated by the person into
any project described in section 42-5075, subsection P.

(iii) Used in environmental response or remediation
activities under section 42-5075, subsection B, paragraph 6.

(b) A person that is not subject to tax under
section 42-5075 and that has been provided a copy of a certificate under
section 42-5009, subsection L, if the property so sold is incorporated or
fabricated by the person into the real property, structure, project,
development or improvement described in the certificate.

28. The sale of a motor vehicle to a nonresident of
this state if the purchaser's state of residence does not allow a corresponding
use tax exemption to the tax imposed by article 1 of this chapter and if the
nonresident has secured a special ninety day nonresident registration permit
for the vehicle as prescribed by sections 28-2154 and 28-2154.01.

29. Tangible personal property purchased in this
state by a nonprofit charitable organization that has qualified under section
501(c)(3) of the United States internal revenue code and that engages in and
uses such property exclusively in programs for persons with mental or physical
disabilities if the programs are exclusively for training, job placement,
rehabilitation or testing.

30. Sales of tangible personal property by a
nonprofit organization that is exempt from taxation under section 501(c)(3),
501(c)(4) or 501(c)(6) of the internal revenue code if the organization is
associated with a major league baseball team or a national touring professional
golfing association and no part of the organization's net earnings inures to
the benefit of any private shareholder or individual. This paragraph
does not apply to an organization that is owned, managed or controlled, in
whole or in part, by a major league baseball team, or its owners, officers,
employees or agents, or by a major league baseball association or professional
golfing association, or its owners, officers, employees or agents, unless the
organization conducted or operated exhibition events in this state before
January 1, 2018 that were exempt from taxation under section 42-5073.

31. Sales of commodities, as defined by title 7
United States Code section 2, that are consigned for resale in a warehouse in
this state in or from which the commodity is deliverable on a contract for
future delivery subject to the rules of a commodity market regulated by the
United States commodity futures trading commission.

32. Sales of tangible personal property by a
nonprofit organization that is exempt from taxation under section 501(c)(3),
501(c)(4), 501(c)(6), 501(c)(7) or 501(c)(8) of the internal revenue code if
the organization sponsors or operates a rodeo featuring primarily farm and
ranch animals and no part of the organization's net earnings inures to the
benefit of any private shareholder or individual.

33. Sales of propagative materials to persons who
use those items to commercially produce agricultural, horticultural,
viticultural or floricultural crops in this state. For the purposes of this
paragraph, "propagative materials":

(a) Includes seeds, seedlings, roots, bulbs, liners,
transplants, cuttings, soil and plant additives, agricultural minerals,
auxiliary soil and plant substances, micronutrients, fertilizers, insecticides,
herbicides, fungicides, soil fumigants, desiccants, rodenticides, adjuvants,
plant nutrients and plant growth regulators.

(b) Except for use in commercially producing
industrial hemp as defined in section 3-311, does not include any
propagative materials used in producing any part, including seeds, of any plant
of the genus cannabis.

34. Machinery, equipment, technology or related
supplies that are only useful to assist a person with a physical disability as
defined in section 46-191 or a person who has a developmental disability
as defined in section 36-551 or has a head injury as defined in section
41-3201 to be more independent and functional.

35. Sales of natural gas or liquefied petroleum gas
used to propel a motor vehicle.

36. Paper machine clothing, such as forming fabrics
and dryer felts, sold to a paper manufacturer and directly used or consumed in
paper manufacturing.

37. Coal, petroleum, coke, natural gas, virgin fuel
oil and electricity sold to a qualified environmental technology manufacturer,
producer or processor as defined in section 41-1514.02 and directly used
or consumed in generating or providing on-site power or energy solely for
environmental technology manufacturing, producing or processing or
environmental protection. This paragraph applies for twenty full
consecutive calendar or fiscal years
from

after

the date the first paper manufacturing machine is placed in
service. In the case of an environmental technology manufacturer,
producer or processor that does not manufacture paper, the time period begins
with the date the first manufacturing, processing or production equipment is
placed in service.

38. Sales of liquid, solid or gaseous chemicals used
in manufacturing, processing, fabricating, mining, refining, metallurgical
operations, research and development and, beginning on January 1, 1999,
printing, if using or consuming the chemicals, alone or as part of an
integrated system of chemicals, involves direct contact with the materials from
which the product is produced for the purpose of causing or allowing a chemical
or physical change to occur in the materials as part of the production
process. This paragraph does not include chemicals that are used or
consumed in activities such as packaging, storage or transportation but does
not affect any deduction for such chemicals that is otherwise provided by this
section. For the purposes of this paragraph, "printing"
means a commercial printing operation and includes job printing, engraving,
embossing, copying and bookbinding.

39. Through December 31, 1994, personal property
liquidation transactions, conducted by a personal property
liquidator. From and after December 31, 1994, personal property liquidation
transactions shall be taxable under this section provided that nothing in this
subsection shall be construed to authorize the taxation of casual activities or
transactions under this chapter. For the purposes of this paragraph:

(a) "Personal property liquidation
transaction" means a sale of personal property made by a personal property
liquidator acting solely on behalf of the owner of the personal property sold
at the dwelling of the owner or on the death of any owner, on behalf of the
surviving spouse, if any, any devisee or heir or the personal representative of
the estate of the deceased, if one has been appointed.

(b) "Personal property liquidator" means a
person who is retained to conduct a sale in a personal property liquidation
transaction.

40. Sales of food, drink and condiment for
consumption within the premises of any prison, jail or other institution under
the jurisdiction of the state department of corrections, the department of
public safety, the department of juvenile corrections or a county sheriff.

41. A motor vehicle and any repair and replacement
parts and tangible personal property becoming a part of such motor vehicle sold
to a motor carrier that is subject to a fee prescribed in title 28, chapter 16,
article 4 and that is engaged in the business of leasing or renting such
property.

42. Sales of:

(a) Livestock and poultry to persons engaging in the
businesses of farming, ranching or producing livestock or poultry.

(b) Livestock and poultry feed, salts, vitamins and
other additives for livestock or poultry consumption that are sold to persons
for use or consumption by their own livestock or poultry, for use or
consumption in the businesses of farming, ranching and producing or feeding
livestock, poultry, or livestock or poultry products or for use or consumption
in noncommercial boarding of livestock. For the purposes of this
paragraph, "poultry" includes ratites.

43. Sales of implants used as growth promotants and
injectable medicines, not already exempt under paragraph 8 of this subsection,
for livestock or poultry owned by or in possession of persons that are engaged
in producing livestock, poultry, or livestock or poultry products or that are
engaged in feeding livestock or poultry commercially. For the
purposes of this paragraph, "poultry" includes ratites.

44. Sales of motor vehicles at auction to
nonresidents of this state for use outside this state if the vehicles are
shipped or delivered out of this state, regardless of where title to the motor
vehicles passes or its free on board point.

45. Tangible personal property sold to a person
engaged in business and subject to tax under the transient lodging
classification if the tangible personal property is a personal hygiene item or
articles used by human beings for food, drink or condiment, except alcoholic
beverages, that are furnished without additional charge to and intended to be
consumed by the transient during the transient's occupancy.

46. Sales of alternative fuel, as defined in section
1-215, to a used oil fuel burner who has received a permit to burn used
oil or used oil fuel under section 49-426 or 49-480.

47. Sales of materials that are purchased by or for
publicly funded libraries, including school district libraries, charter school
libraries, community college libraries, state university libraries or federal,
state, county or municipal libraries, for use by the public as follows:

(a) Printed or photographic materials, beginning
August 7, 1985.

(b) Electronic or digital media materials, beginning
July 17, 1994.

48. Tangible personal property sold to a commercial
airline and consisting of food, beverages and condiments and accessories used
for serving the food and beverages, if those items are to be provided without
additional charge to passengers for consumption in flight. For the
purposes of this paragraph, "commercial airline" means a person
holding a federal certificate of public convenience and necessity or foreign
air carrier permit for air transportation to transport persons, property or
United States mail in intrastate, interstate or foreign commerce.

49. Sales of alternative fuel vehicles if the
vehicle was manufactured as a diesel fuel vehicle and converted to operate on
alternative fuel and equipment that is installed in a conventional diesel fuel
motor vehicle to convert the vehicle to operate on an alternative fuel, as
defined in section 1-215.

50. Sales of any spirituous, vinous or malt liquor
by a person that is licensed in this state as a wholesaler by the department of
liquor licenses and control pursuant to title 4, chapter 2, article 1.

51. Sales of tangible personal property to be
incorporated or installed as part of environmental response or remediation
activities under section 42-5075, subsection B, paragraph 6.

52. Sales of tangible personal property by a
nonprofit organization that is exempt from taxation under section 501(c)(6) of
the internal revenue code if the organization produces, organizes or promotes
cultural or civic related festivals or events and no part of the organization's
net earnings inures to the benefit of any private shareholder or individual.

53. Application services that are designed to assess
or test student learning or to promote curriculum design or enhancement
purchased by or for any school district, charter school, community college or
state university. For the purposes of this paragraph:

(a) "Application services" means software
applications provided remotely using hypertext transfer protocol or another
network protocol.

(b) "Curriculum design or enhancement"
means planning, implementing or reporting on courses of study, lessons,
assignments or other learning activities.

54. Sales of motor vehicle fuel and use fuel to a
qualified business under section 41-1516 for off-road use in harvesting,
processing or transporting qualifying forest products removed from qualifying
projects as defined in section 41-1516.

55. Sales of repair parts installed in equipment
used directly by a qualified business under section 41-1516 in
harvesting, processing or transporting qualifying forest products removed from
qualifying projects as defined in section 41-1516.

56. Sales or other transfers of renewable energy
credits or any other unit created to track energy derived from renewable energy
resources. For the purposes of this paragraph, "renewable energy
credit" means a unit created administratively by the corporation
commission or governing body of a public power utility to track kilowatt hours
of electricity derived from a renewable energy resource or the kilowatt hour
equivalent of conventional energy resources displaced by distributed renewable
energy resources.

57. Orthodontic devices dispensed by a dental
professional who is licensed under title 32, chapter 11 to a patient as part of
the practice of dentistry.

58. Sales of tangible personal property incorporated
or fabricated into a project described in section 42-5075, subsection P,
that is located within the exterior boundaries of an Indian reservation for
which the owner, as defined in section 42-5075, of the project is an
Indian tribe or an affiliated Indian. For the purposes of this
paragraph:

(a) "Affiliated Indian" means an
individual Native American Indian who is duly registered on the tribal rolls of
the Indian tribe for whose benefit the Indian reservation was established.

(b) "Indian reservation" means all lands
that are within the limits of areas set aside by the United States for the
exclusive use and occupancy of an Indian tribe by treaty, law or executive
order and that are recognized as Indian reservations by the United States
department of the interior.

(c) "Indian tribe" means any organized
nation, tribe, band or community that is recognized as an Indian tribe by the
United States department of the interior and includes any entity formed under
the laws of the Indian tribe.

59. Sales of works of fine art, as defined in
section 44-1771, at an art auction or gallery in this state to
nonresidents of this state for use outside this state if the vendor ships or
delivers the work of fine art to a destination outside this state.

60. Sales of tangible personal property by a
marketplace seller that are facilitated by a marketplace facilitator in which
the marketplace facilitator has remitted or will remit the applicable tax to
the department pursuant to section 42-5014.

B. In addition to the deductions from the tax base
prescribed by subsection A of this section, the gross proceeds of sales or
gross income derived from sales of the following categories of tangible
personal property shall be deducted from the tax base:

1. Machinery, or equipment, used directly in
manufacturing, processing, fabricating, job printing, refining or metallurgical
operations. The terms "manufacturing", "processing",
"fabricating", "job printing", "refining" and
"metallurgical" as used in this paragraph refer to and include those
operations commonly understood within their ordinary meaning.
"Metallurgical operations" includes leaching, milling, precipitating,
smelting and refining.

2. Mining machinery, or equipment, used directly in
the process of extracting ores or minerals from the earth for commercial
purposes, including equipment required to prepare the materials for extraction
and handling, loading or transporting such extracted material to the surface.
"Mining" includes underground, surface and open pit operations for
extracting ores and minerals.

3. Tangible personal property sold to persons
engaged in business classified under the telecommunications classification,
including a person representing or working on behalf of such a person in a
manner described in section 42-5075, subsection P, and consisting of
central office switching equipment, switchboards, private branch exchange
equipment, microwave radio equipment and carrier equipment including optical
fiber, coaxial cable and other transmission media that are components of
carrier systems.

4. Machinery, equipment or transmission lines used
directly in producing or transmitting electrical power, but not including
distribution. Transformers and control equipment used at transmission
substation sites constitute equipment used in producing or transmitting
electrical power.

5. Machinery and equipment used directly for energy
storage for later electrical use. For the purposes of this paragraph:

(a) "Electric utility scale" means a
person that is engaged in a business activity described in section 42-5063,
subsection A or such person's equipment or wholesale electricity suppliers.

(b) "Energy storage" means commercially
available technology for electric utility scale that is capable of absorbing
energy, storing energy for a period of time and thereafter dispatching the
energy and that uses mechanical, chemical or thermal processes to store energy.

(c) "Machinery and equipment used
directly" means all machinery and equipment that are used for electric
energy storage from the point of receipt of such energy in order to facilitate
storage of the electric energy to the point where the electric energy is
released.

6. Neat animals, horses, asses, sheep, ratites,
swine or goats used or to be used as breeding or production stock, including
sales of breedings or ownership shares in such animals used for breeding or
production.

7. Pipes or valves four inches in diameter or larger
used to transport oil, natural gas, artificial gas, water, wastewater or coal
slurry, including compressor units, regulators, machinery and equipment,
fittings, seals and any other part that is used in operating the pipes or
valves.

8. Aircraft, navigational and communication
instruments and other accessories and related equipment sold to:

(a) A person:

(i) Holding, or exempted by federal law from
obtaining, a federal certificate of public convenience and necessity for use
as, in conjunction with or becoming part of an aircraft to be used to transport
persons for hire in intrastate, interstate or foreign commerce.

(ii) That is certificated or licensed under federal
aviation administration regulations (14 Code of Federal Regulations part 121 or
135) as a scheduled or unscheduled carrier of persons for hire for use as or in
conjunction with or becoming part of an aircraft to be used to transport
persons for hire in intrastate, interstate or foreign commerce.

(iii) Holding a foreign air carrier permit for air
transportation for use as or in conjunction with or becoming a part of aircraft
to be used to transport persons, property or United States mail in intrastate,
interstate or foreign commerce.

(iv) Operating an aircraft to transport persons in
any manner for compensation or hire, or for use in a fractional ownership
program that meets the requirements of federal aviation administration
regulations (14 Code of Federal Regulations part 91, subpart K), including
as an air carrier, a foreign air carrier or a commercial operator or under a
restricted category, within the meaning of 14 Code of Federal Regulations,
regardless of whether the operation or aircraft is regulated or certified under
part 91, 119, 121, 133, 135, 136 or 137, or another part of 14 Code of Federal
Regulations.

(v) That will lease or otherwise transfer
operational control, within the meaning of federal aviation administration
operations specification A008, or its successor, of the aircraft, instruments
or accessories to one or more persons described in item (i), (ii), (iii) or
(iv) of this subdivision, subject to section 42-5009, subsection
Q

p
.

(b) Any foreign government.

(c) Persons who are not residents of this state and
who will not use such property in this state other than in removing such
property from this state. This subdivision also applies to
corporations that are not incorporated in this state, regardless of maintaining
a place of business in this state, if the principal corporate office is located
outside this state and the property will not be used in this state other than
in removing the property from this state.

9. Machinery, tools, equipment and related supplies
used or consumed directly in repairing, remodeling or maintaining aircraft,
aircraft engines or aircraft component parts by or on behalf of a certificated
or licensed carrier of persons or property.

10. Railroad rolling stock, rails, ties and signal
control equipment used directly to transport persons or property.

11. Machinery or equipment used directly to drill
for oil or gas or used directly in the process of extracting oil or gas from
the earth for commercial purposes.

12. Buses or other urban mass transit vehicles that
are used directly to transport persons or property for hire or pursuant to a
governmentally adopted and controlled urban mass transportation program and
that are sold to bus companies holding a federal certificate of convenience and
necessity or operated by any city, town or other governmental entity or by any
person contracting with such governmental entity as part of a governmentally
adopted and controlled program to provide urban mass transportation.

13. Groundwater measuring devices required under
section 45-604.

14. Machinery and equipment consisting of
agricultural aircraft, tractors, off-highway vehicles, tractor-drawn
implements, self-powered implements, machinery and equipment necessary
for extracting milk, and machinery and equipment necessary for cooling milk and
livestock, and drip irrigation lines not already exempt under paragraph 7 of
this subsection and that are used for commercial production of agricultural,
horticultural, viticultural and floricultural crops and products in this
state. For the purposes of this paragraph:

(a) "Off-highway vehicles" means off-highway
vehicles as defined in section 28-1171 that are modified at the time of
sale to function as a tractor or to tow tractor-drawn implements and that
are not equipped with a modified exhaust system to increase horsepower or speed
or an engine that is more than one thousand cubic centimeters or that have a
maximum speed of fifty miles per hour or less.

(b) "Self-powered implements"
includes machinery and equipment that are electric-powered.

15. Machinery or equipment used in research and
development. For the purposes of this paragraph, "research and
development" means basic and applied research in the sciences and
engineering, and designing, developing or testing prototypes, processes or new
products, including research and development of computer software that is
embedded in or an integral part of the prototype or new product or that is
required for machinery or equipment otherwise exempt under this section to
function effectively. Research and development do not include
manufacturing quality control, routine consumer product testing, market
research, sales promotion, sales service, research in social sciences or
psychology, computer software research that is not included in the definition
of research and development, or other nontechnological activities or technical
services.

16. Tangible personal property that is used by
either of the following to receive, store, convert, produce, generate, decode,
encode, control or transmit telecommunications information:

(a) Any direct broadcast satellite television or
data transmission service that operates pursuant to 47 Code of Federal
Regulations part 25.

(b) Any satellite television or data transmission
facility, if both of the following conditions are met:

(i) Over two-thirds of the transmissions,
measured in megabytes, transmitted by the facility during the test period were
transmitted to or on behalf of one or more direct broadcast satellite
television or data transmission services that operate pursuant to 47 Code of
Federal Regulations part 25.

(ii) Over two-thirds of the transmissions,
measured in megabytes, transmitted by or on behalf of those direct broadcast
television or data transmission services during the test period were
transmitted by the facility to or on behalf of those services. For the
purposes of subdivision (b) of this paragraph, "test period" means
the three hundred sixty-five day period beginning on the later of the
date on which the tangible personal property is purchased or the date on which
the direct broadcast satellite television or data transmission service first
transmits information to its customers.

17. Clean rooms that are used for manufacturing,
processing, fabrication or research and development, as defined in paragraph 15
of this subsection, of semiconductor products. For the purposes of
this paragraph, "clean room" means all property that comprises or
creates an environment where humidity, temperature, particulate matter and
contamination are precisely controlled within specified parameters, without
regard to whether the property is actually contained within that environment or
whether any of the property is affixed to or incorporated into real property.
Clean room:

(a) Includes the integrated systems, fixtures,
piping, movable partitions, lighting and all property that is necessary or
adapted to reduce contamination or to control airflow, temperature, humidity,
chemical purity or other environmental conditions or manufacturing tolerances,
as well as the production machinery and equipment operating in conjunction with
the clean room environment.

(b) Does not include the building or other
permanent, nonremovable component of the building that houses the clean room
environment.

18. Machinery and equipment used directly in feeding
poultry, environmentally controlling housing for poultry, moving eggs within a
production and packaging facility or sorting or cooling eggs. This
exemption does not apply to vehicles used for transporting eggs.

19. Machinery or equipment, including related
structural components and containment structures, that is employed in
connection with manufacturing, processing, fabricating, job printing, refining,
mining, natural gas pipelines, metallurgical operations, telecommunications,
producing or transmitting electricity or research and development and that is
used directly to meet or exceed rules or regulations adopted by the federal
energy regulatory commission, the United States environmental protection
agency, the United States nuclear regulatory commission, the Arizona department
of environmental quality or a political subdivision of this state to prevent,
monitor, control or reduce land, water or air pollution. For the
purposes of this paragraph, "containment structure" means a structure
that prevents, monitors, controls or reduces noxious or harmful discharge into
the environment.

20. Machinery and equipment that are sold to a
person engaged in commercially producing livestock, livestock products or
agricultural, horticultural, viticultural or floricultural crops or products in
this state, including a person representing or working on behalf of such a
person in a manner described in section 42-5075, subsection P, if the
machinery and equipment are used directly and primarily to prevent, monitor,
control or reduce air, water or land pollution.

21. Machinery or equipment that enables a television
station to originate and broadcast or to receive and broadcast digital
television signals and that was purchased to facilitate compliance with the
telecommunications act of 1996 (P.L. 104-104; 110 Stat. 56; 47 United
States Code section 336) and the federal communications commission order issued
April 21, 1997 (47 Code of Federal Regulations part 73). This
paragraph does not exempt any of the following:

(a) Repair or replacement parts purchased for the
machinery or equipment described in this paragraph.

(b) Machinery or equipment purchased to replace
machinery or equipment for which an exemption was previously claimed and taken
under this paragraph.

(c) Any machinery or equipment purchased after the
television station has ceased analog broadcasting, or purchased after November
1, 2009, whichever occurs first.

22. Qualifying equipment that is purchased from and
after June 30, 2004 through December 31, 2028 by a qualified business
under section 41-1516 for harvesting or processing qualifying forest
products removed from qualifying projects as defined in section 41-1516. To
qualify for this deduction, the qualified business at the time of purchase must
present its certification approved by the department.

23. Computer data center equipment sold to the
owner, operator or qualified colocation tenant of a computer data center that
is certified by the Arizona commerce authority under section 41-1519 or
an authorized agent of the owner, operator or qualified colocation tenant
during the qualification period for use in the qualified computer data
center. For the purposes of this paragraph, "computer data
center", "computer data center equipment", "qualification
period" and "qualified colocation tenant" have the same meanings
prescribed in section 41-1519.

C. The deductions provided by subsection B of this
section do not include sales of:

1. Expendable materials. For the purposes
of this paragraph, expendable materials do not include any of the categories of
tangible personal property specified in subsection B of this section regardless
of the cost or useful life of that property.

2. Janitorial equipment and hand tools.

3. Office equipment, furniture and supplies.

4. Tangible personal property used in selling or
distributing activities, other than the telecommunications transmissions
described in subsection B, paragraph 16 of this section.

5. Motor vehicles required to be licensed by this
state, except buses or other urban mass transit vehicles specifically exempted
pursuant to subsection B, paragraph 12 of this section, without regard to the
use of such motor vehicles.

6. Shops, buildings, docks, depots and all other
materials of whatever kind or character not specifically included as exempt.

7. Motors and pumps used in drip irrigation systems.

8. Machinery and equipment or other tangible
personal property used by a contractor in performing a contract.

D. In addition to the deductions from the tax base
prescribed by subsection A of this section, there shall be deducted from the
tax base the gross proceeds of sales or gross income derived from sales of
machinery, equipment, materials and other tangible personal property used
directly and predominantly to construct a qualified environmental technology
manufacturing, producing or processing facility as described in section 41-1514.02. This
subsection applies for ten full consecutive calendar or fiscal years after the
start of initial construction.

E. In computing the tax base, gross proceeds of
sales or gross income from retail sales of heavy trucks and trailers does not
include any amount attributable to federal excise taxes imposed by 26 United
States Code section 4051.

F. If a person is engaged in an occupation or
business to which subsection A of this section applies, the person's books
shall be kept so as to show separately the gross proceeds of sales of tangible
personal property and the gross income from sales of services, and if not so
kept the tax shall be imposed on the total of the person's gross proceeds of
sales of tangible personal property and gross income from services.

G. If a person is engaged in the business of selling
tangible personal property at both wholesale and retail, the tax under this
section applies only to the gross proceeds of the sales made other than at
wholesale if the person's books are kept so as to show separately the gross
proceeds of sales of each class, and if the books are not so kept, the tax
under this section applies to the gross proceeds of every sale so made.

H. A person who engages in manufacturing, baling,
crating, boxing, barreling, canning, bottling, sacking, preserving, processing
or otherwise preparing for sale or commercial use any livestock, agricultural
or horticultural product or any other product, article, substance or commodity
and who sells the product of such business at retail in this state is deemed,
as to such sales, to be engaged in business classified under the retail
classification. This subsection does not apply to:

1. Agricultural producers who are owners,
proprietors or tenants of agricultural lands, orchards, farms or gardens where
agricultural products are grown, raised or prepared for market and who are
marketing their own agricultural products.

2. Businesses classified under the:

(a) Transporting classification.

(b) Utilities classification.

(c) Telecommunications classification.

(d) Pipeline classification.

(e) Private car line classification.

(f) Publication classification.

(g) Job printing classification.

(h) Prime contracting classification.

(i) Restaurant classification.

I. The gross proceeds of sales or gross income
derived from the following shall be deducted from the tax base for the retail
classification:

1. Sales made directly to the United States
government or its departments or agencies by a manufacturer, modifier,
assembler or repairer.

2. Sales made directly to a manufacturer, modifier,
assembler or repairer if such sales are of any ingredient or component part of
products sold directly to the United States government or its departments or
agencies by the manufacturer, modifier, assembler or repairer.

3. Overhead materials or other tangible personal
property that is used in performing a contract between the United States
government and a manufacturer, modifier, assembler or repairer, including
property used in performing a subcontract with a government contractor who is a
manufacturer, modifier, assembler or repairer, to which title passes to the
government under the terms of the contract or subcontract.

4. Sales of overhead materials or other tangible
personal property to a manufacturer, modifier, assembler or repairer if the
gross proceeds of sales or gross income derived from the property by the
manufacturer, modifier, assembler or repairer will be exempt under paragraph 3
of this subsection.

J. There shall be deducted from the tax base fifty
percent of the gross proceeds or gross income from any sale of tangible
personal property made directly to the United States government or its
departments or agencies that is not deducted under subsection I of this
section.

K. The department shall require every person
claiming a deduction provided by subsection I or J of this section to file on
forms prescribed by the department at such times as the department directs a
sworn statement disclosing the name of the purchaser and the exact amount of
sales on which the exclusion or deduction is claimed.

L. In computing the tax base, gross proceeds of
sales or gross income does not include:

1. A manufacturer's cash rebate on the sales price
of a motor vehicle if the buyer assigns the buyer's right in the rebate to the
retailer.

2. The waste tire disposal fee imposed pursuant to
section 44-1302.

M. There shall be deducted from the tax base the
amount received from sales of solar energy devices. The retailer
shall register with the department as a solar energy retailer. By
registering, the retailer acknowledges that it will make its books and records
relating to sales of solar energy devices available to the department for
examination.

N. In computing the tax base in the case of the sale
or transfer of wireless telecommunications equipment as an inducement to a
customer to enter into or continue a contract for telecommunications services
that are taxable under section 42-5064, 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.

O. For the purposes of this section, a sale of
wireless telecommunications 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 telecommunications services that are taxable under section 42-5064
is considered to be a sale for resale in the regular course of business.

P. Retail sales of prepaid calling cards or prepaid
authorization numbers for telecommunications services, including sales of
reauthorization of a prepaid card or authorization number, are subject to tax
under this section.

Q. For the purposes
of this section, the diversion of gas from a pipeline by a person engaged in
the business of:

1. 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.

2. Converting natural gas into liquefied natural
gas, for the sole purpose of fueling compressor equipment used in the
conversion process, is not a sale of gas to the operator of the compressor
equipment.

R. For the purposes of this section, the transfer of
title or possession of coal from an owner or operator of a power plant to a
person in the business of refining coal is not a sale of coal if both of the
following apply:

1. The transfer of title or possession of the coal
is for the purpose of refining the coal.

2. The title or possession of the coal is
transferred back to the owner or operator of the power plant after completion
of the coal refining process. For the purposes of this paragraph,
"coal refining process" means the application of a coal additive
system that aids in the reduction of power plant emissions during the
combustion of coal and the treatment of flue gas.

S. If a seller is entitled to a deduction pursuant
to subsection B, paragraph 16, subdivision (b) of this section, the
department may require the purchaser to establish that the requirements of
subsection B, paragraph 16, subdivision (b) of this section have been
satisfied. If the purchaser cannot establish that the requirements
of subsection B, paragraph 16, subdivision (b) of this section have been
satisfied, the purchaser is liable in an amount equal to any tax, penalty and
interest that the seller would have been required to pay under article 1 of
this chapter if the seller had not made a deduction pursuant to subsection B,
paragraph 16, subdivision (b) of this section. Payment of the amount
under this subsection exempts the purchaser from liability for any tax imposed
under article 4 of this chapter and related to the tangible personal property
purchased. The amount shall be treated as transaction privilege tax
to the purchaser and as tax revenues collected from the seller to designate the
distribution base pursuant to section 42-5029.

T. For the purposes of section 42-5032.01, the
department shall separately account for revenues collected under the retail
classification from businesses selling tangible personal property at retail:

1. On the premises of a multipurpose facility that
is owned, leased or operated by the tourism and sports authority pursuant to
title 5, chapter 8.

2. At professional football contests that are held
in a stadium located on the campus of an institution under the jurisdiction of
the Arizona board of regents.

U. For the purposes of section 42-5032.03 and
subject to section 48-4238, beginning October 1, 2025 and each month
thereafter through December 31, 2055, the department shall separately account
for revenues collected under the retail classification from each business
selling tangible personal property at retail on the premises of a major league
baseball facility or an adjacent building that is owned by a county stadium
district pursuant to title 48, chapter 26 and operated by the county stadium
district or the professional baseball franchise organization that occupies the
major league baseball

facility or adjacent
building. For the purposes of this subsection, "adjacent
building" and "major league baseball facility" have the same
meanings prescribed in section 48-4201.

V. In computing the tax base for the sale of a motor
vehicle to a nonresident of this state, if the purchaser's state of residence
allows a corresponding use tax exemption to the tax imposed by article 1 of
this chapter and the rate of the tax in the purchaser's state of residence is
lower than the rate prescribed in article 1 of this chapter or if the
purchaser's state of residence does not impose an excise tax, and the
nonresident has secured a special ninety day nonresident registration permit
for the vehicle as prescribed by sections 28-2154 and 28-2154.01,
there shall be deducted from the tax base a portion of the gross proceeds or
gross income from the sale so that the amount of transaction privilege tax that
is paid in this state is equal to the excise tax that is imposed by the
purchaser's state of residence on the nonexempt sale or use of the motor
vehicle.

W. For the purposes of this section:

1. "Agricultural aircraft" means an
aircraft that is built for agricultural use for the aerial application of
pesticides or fertilizer or for aerial seeding.

2. "Aircraft" includes:

(a) An airplane flight simulator that is approved by
the federal aviation administration for use as a phase II or higher flight
simulator under appendix H, 14 Code of Federal Regulations part 121.

(b) Tangible personal property that is permanently
affixed or attached as a component part of an aircraft that is owned or
operated by a certificated or licensed carrier of persons or property.

3. "Other accessories and related
equipment" includes aircraft accessories and equipment such as ground
service equipment that physically contact aircraft at some point during the
overall carrier operation.

4. "Selling at retail" means a sale for
any purpose other than for resale in the regular course of business in the form
of tangible personal property, but transfer of possession, lease and rental as
used in the definition of sale mean only such transactions as are found on
investigation to be in lieu of sales as defined without the words lease or
rental.

X. For the purposes of subsection I of this section:

1. "Assembler" means a person who unites
or combines products, wares or articles of manufacture so as to produce a
change in form or substance without changing or altering the component parts.

2. "Manufacturer" means a person who is
principally engaged in fabricating, producing or manufacturing products, wares
or articles for use from raw or prepared materials, imparting to those
materials new forms, qualities, properties and combinations.

3. "Modifier" means a person who reworks,
changes or adds to products, wares or articles of manufacture.

4. "Overhead materials" means tangible
personal property, the gross proceeds of sales or gross income derived from
that would otherwise be included in the retail classification, and that are
used or consumed in performing a contract, the cost of which is charged to an
overhead expense account and allocated to various contracts based on generally
accepted accounting principles and consistent with government contract
accounting standards.

5. "Repairer" means a person who restores
or renews products, wares or articles of manufacture.

6. "Subcontract" means an agreement
between a contractor and any person who is not an employee of the contractor
for furnishing supplies or services that, in whole or in part, are necessary to
perform one or more government contracts, or under which any portion of the
contractor's obligation under one or more government contracts is performed,
undertaken or assumed and that includes provisions causing title to overhead
materials or other tangible personal property used in performing the
subcontract to pass to the government or that includes provisions incorporating
such title passing clauses in a government contract into the subcontract.
END_STATUTE

Sec.
9. Section 42-5070, Arizona Revised Statutes, is amended to read:

START_STATUTE
42-5070.

Transient lodging classification; definition

A. The transient lodging classification is comprised
of the business of operating, for occupancy by transients, a hotel or motel,
including an inn, tourist home or house, dude ranch, resort, campground, studio
or bachelor hotel, lodging house, rooming house, apartment house, dormitory,
public or private club, mobile home or house trailer at a fixed location or
other similar structure, and also including a space, lot or slab that is
occupied or intended or designed for occupancy by transients in a mobile home
or house trailer furnished by them for such occupancy.

B. The transient lodging classification does not
include:

1. Operating a convalescent home or facility, home
for the aged, hospital, jail, military installation or fraternity or sorority
house or operating any structure exclusively by an association, institution,
governmental agency or corporation for religious, charitable or educational
purposes, if no part of the net earnings of the association, corporation or
other entity inures to the benefit of any private shareholder or individual.

2. A lease or rental of a mobile home or house
trailer at a fixed location or any other similar structure, and also including
a space, lot or slab that is occupied or intended or designed for occupancy by
transients in a mobile home or house trailer furnished by them for such
occupancy for thirty or more consecutive days.

3. Leasing or renting four or fewer rooms of an
owner-occupied residential home, together with furnishing
no
not
more than a breakfast meal, to transient lodgers at
no
not
more than a fifty percent average
annual occupancy rate.

4. The activities of any online
lodging marketplace, as defined in section 42-5076.

C. The tax base for the transient lodging
classification is the gross proceeds of sales or gross income derived from the
business, except that the tax base does not include
:

1.
the gross proceeds of sales
or gross income derived from business activity that is properly included in
another business classification under this article and that is taxable to the
person engaged in that business classification, but the gross proceeds of sales
or gross income to be deducted shall not exceed the consideration paid to the
person conducting the activity.

2. The gross proceeds or gross income
received by an online lodging operator, as defined in section 42-5076,
from any online lodging transactions, as defined in section 42-5076, for
which the online lodging operator has received documentation from a registered
online lodging marketplace, as defined in section 42-5076, pursuant to
section 42-5009, subsection P that the online lodging marketplace has
remitted or will remit the applicable tax to the department pursuant to section
42-5014, subsection E.

D. For the purposes of this section, the tax base
for the transient lodging classification does not include gross proceeds of
sales or gross income derived from:

1. Transactions or activities that are not limited
to transients and that would not be taxable if engaged in by a person not
subject to tax under this article.

2. Transactions or activities that are not limited
to transients and that would not be taxable if engaged in by a person subject
to taxation under section 42-5062 or 42-5073 due to an exclusion,
exemption or deduction.

3. Commissions paid to a person that is engaged in
transient lodging business subject to taxation under this section by a person
providing services or property to the customers of the person engaging in the
transient lodging business.

E. The department shall separately account for
revenues collected under the transient lodging classification for the purposes
of section 42-5029, subsection D, paragraph 4, subdivision (b).

F. For the purposes of this section,
"transient" means any person who either at the person's own expense
or at the expense of another obtains lodging space or the use of lodging space
on a daily or weekly basis, or on any other basis for less than thirty consecutive
days.
END_STATUTE

Sec. 10. Section 42-5071, Arizona Revised
Statutes, is amended to read:

START_STATUTE
42-5071.

Personal property rental classification; definitions

A. The personal property rental classification is
comprised of the business of leasing or renting tangible personal property for
a consideration and includes peer-to-peer car sharing. The tax does
not apply to:

1. Leasing or renting films, tapes or slides used by
theaters or movies, which are engaged in business under the amusement
classification, or used by television stations or radio stations.

2. Activities engaged in by the Arizona exposition
and state fair board or county fair commissions in connection with events
sponsored by such entities.

3. Leasing or renting tangible personal property by
a parent business entity to a subsidiary business entity or by a subsidiary
business entity to another subsidiary of the same parent business entity if
taxes were paid under this chapter on the gross proceeds or gross income
accruing from the initial sale of the tangible personal property.� For the
purposes of this paragraph, "subsidiary" means a business entity of
which at least eighty percent of the voting shares are owned by the parent
business entity.

4. Operating coin-operated washing, drying and
dry cleaning machines or coin-operated car washing machines at
establishments for the use of such machines.

5. Leasing or renting tangible personal property for
incorporation into or comprising any part of a qualified environmental
technology facility as described in section 41-1514.02. This
paragraph shall apply for ten full consecutive calendar or fiscal years
following the initial lease or rental by each qualified environmental
technology manufacturer, producer or processor.

6. Leasing or renting aircraft, flight simulators or
similar training equipment to students or staff by nonprofit, accredited
educational institutions that offer associate or baccalaureate degrees in
aviation or aerospace related fields.

7. Leasing or renting photographs, transparencies or
other creative works used by this state on internet websites, in magazines or
in other publications that encourage tourism.

8. Leasing or renting certified ignition interlock
devices installed pursuant to the requirements prescribed by section 28-1461.�
For the purposes of this paragraph, "certified ignition interlock
device" has the same meaning prescribed in section 28-1301.

9.
The
Leasing or renting
of
space to make attachments to utility poles, as follows:

(a) By a person that is engaged in business under
section 42-5063 or 42-5064 or that is a cable operator.

(b) To a person that is engaged in business under
section 42-5063 or 42-5064 or that is a cable operator.

10. Leasing or renting billboards that are designed,
intended or used to advertise or inform and that are visible from any street,
road or other highway.

B. The tax base for the personal property rental
classification is the gross proceeds of sales or gross income derived from the
business, but the gross proceeds of sales or gross income derived from the
following shall be deducted from the tax base:

1. Reimbursements by the lessee to the lessor of a
motor vehicle for payments by the lessor of the applicable fees and taxes
imposed by sections 28-2003, 28-2352, 28-2402, 28-2481
and 28-5801, title 28, chapter 15, article 2 and article IX, section 11,
Constitution of Arizona, to the extent such amounts are separately identified
as such fees and taxes and are billed to the lessee.

2. Leases or rentals of tangible personal property
that, if it had been purchased instead of leased or rented by the lessee, would
have been exempt under:

(a) Section 42-5061, subsection A, paragraph
8, 9, 12, 13, 25, 29, 49 or 53.

(b) Section 42-5061, subsection B.

(c) Section 42-5061, subsection I, paragraph
1.

(d) Section 42-5061, subsection M.

3. Motor vehicle fuel and use fuel that are subject
to a tax imposed under title 28, chapter 16, article 1, sales of use fuel to a
holder of a valid single trip use fuel tax permit issued under section 28-5739
and sales of aviation fuel that are subject to the tax imposed under section 28-8344.

4. Leasing or renting a motor vehicle subject to and
on which the fee has been paid under title 28, chapter 16, article 4.

5. Amounts received by a motor vehicle dealer for
the first month of a lease payment if the lease and the lease payment for the
first month of the lease are transferred to a third-party leasing
company.

C. Sales of tangible personal property to be leased
or rented to a person engaged in a business classified under the personal
property rental classification are deemed to be resale sales.

D. In computing the tax base, the gross proceeds of
sales or gross income from the lease or rental of a motor vehicle does not
include any amount attributable to the car rental surcharge under section 5-839,
28-5810 or 48-4234.

E. Until December 31, 1988, leasing or renting
animals for recreational purposes is exempt from the tax imposed by this
section. Beginning January 1, 1989, the gross proceeds or gross income from
leasing or renting animals for recreational purposes is subject to taxation
under this section. Tax liabilities, penalties and interest paid for
taxable periods before January 1, 1989 shall not be refunded unless the
taxpayer requesting the refund provides proof satisfactory to the department
that the monies paid as taxes will be returned to the customer.

F. The tax base of the personal property rental
classification does not include the gross proceeds or gross income received by
a shared vehicle owner from a peer-to-peer car sharing program pursuant to
section 42-5009, subsection
R

q
.

G. For the purposes of this section:

1. "Cable operator" has the same meaning
prescribed in section 9-505 and includes a video service provider.

2. "Peer-to-peer car sharing"
has the same meaning prescribed in section 28-9601.

3. "Peer-to-peer car sharing
program" has the same meaning prescribed in section 28-9601.

4. "Shared vehicle owner" has the same
meaning prescribed in section 28-9601.

5. "Utility pole" means any wooden, metal
or other pole used for utility purposes and the pole's appurtenances that are
attached or authorized for attachment by the person controlling the pole.
END_STATUTE

Sec. 11.
Repeal

Section 42-5076, Arizona Revised
Statutes, is repealed.

Sec. 12. Section 42-5159, Arizona Revised
Statutes, as amended by Laws 2025, chapter 135, section 2 and chapter 247,
section 2, is amended to read:

START_STATUTE
42-5159.

Exemptions

A. The
tax levied by this article does not apply to the storage, use or consumption in
this state of the following described tangible personal property:

1. Tangible
personal property, sold in this state, the gross receipts from the sale of
which are included in the measure of the tax imposed by articles 1 and 2 of
this chapter.

2. Tangible personal
property, the sale or use of which has already been subjected to an excise tax
at a rate equal to or exceeding the tax imposed by this article under the laws
of another state of the United States. If the excise tax imposed by
the other state is at a rate less than the tax imposed by this article, the tax
imposed by this article is reduced by the amount of the tax already imposed by
the other state.

3. Tangible
personal property, the storage, use or consumption of which the constitution or
laws of the United States prohibit this state from taxing or to the extent that
the rate or imposition of tax is unconstitutional under the laws of the United
States.

4. Tangible personal property that directly enters
into and becomes an ingredient or component part of any manufactured,
fabricated or processed article, substance or commodity for sale in the regular
course of business.

5. Motor
vehicle fuel and use fuel, the sales, distribution or use of which in this
state is subject to the tax imposed under title 28, chapter 16, article 1, use
fuel that is sold to or used by a person holding a valid single trip use fuel
tax permit issued under section 28-5739, aviation fuel, the sales,
distribution or use of which in this state is subject to the tax imposed under
section 28-8344, and jet fuel, the sales, distribution or use of which in
this state is subject to the tax imposed under article 8 of this chapter.

6. Tangible
personal property brought into this state by an individual who was a
nonresident at the time the property was purchased for storage, use or
consumption by the individual if the first actual use or consumption of the
property was outside this state, unless the property is used in conducting a
business in this state.

7. Purchases
of implants used as growth promotants and injectable medicines, not already
exempt under paragraph 16 of this subsection, for livestock and poultry owned
by, or in possession of, persons who are engaged in producing livestock, poultry,
or livestock or poultry products, or who are engaged in feeding livestock or
poultry commercially. For the purposes of this paragraph,
"poultry" includes ratites.

8. Purchases of:

(a) Livestock and poultry to persons engaging in the
businesses of farming, ranching or producing livestock or poultry.

(b) Livestock
and poultry feed, salts, vitamins and other additives sold to persons for use
or consumption in the businesses of farming, ranching and producing or feeding
livestock or poultry or for use or consumption in noncommercial boarding of
livestock. For the purposes of this paragraph, "poultry"
includes ratites.

9. Propagative materials
for use in commercially producing agricultural, horticultural, viticultural or
floricultural crops in this state. For the purposes of this
paragraph, "propagative materials":

(a) Includes seeds,
seedlings, roots, bulbs, liners, transplants, cuttings, soil and plant
additives, agricultural minerals, auxiliary soil and plant substances,
micronutrients, fertilizers, insecticides, herbicides, fungicides, soil
fumigants, desiccants, rodenticides, adjuvants, plant nutrients and plant
growth regulators.

(b) Except for use in
commercially producing industrial hemp as defined in section 3-311, does
not include any propagative materials used in producing any part, including
seeds, of any plant of the genus cannabis.

10. Tangible personal property not exceeding $200 in
any one month purchased by an individual at retail outside the continental
limits of the
United States for the individual's own
personal use and enjoyment.

11. Advertising
supplements that are intended for sale with newspapers published in this state
and that have already been subjected to an excise tax under the laws of another
state in the United States that equals or exceeds the tax imposed by this
article.

12. Materials
that are purchased by or for publicly funded libraries
,
including school district libraries, charter school
libraries, community college libraries, state university libraries or federal,
state, county or municipal libraries
,
for use
by the public as follows:

(a) Printed
or photographic materials, beginning August 7, 1985.

(b) Electronic
or digital media materials, beginning July 17, 1994.

13. Tangible
personal property purchased by:

(a) A
hospital organized and operated exclusively for charitable purposes, no part of
the net earnings of which inures to the benefit of any private shareholder or
individual.

(b) A
hospital operated by this state or a political subdivision of this state.

(c) A
licensed nursing care institution or a licensed residential care institution or
a residential care facility operated in conjunction with a licensed nursing
care institution or a licensed kidney dialysis center, which provides medical
services, nursing services or health related services and is not used or held
for profit.

(d) A
qualifying health care organization, as defined in section 42-5001, if
the tangible personal property is used by the organization solely to provide
health and medical related educational and charitable services.

(e) A
qualifying health care organization as defined in section 42-5001 if the
organization is dedicated to providing educational, therapeutic, rehabilitative
and family medical education training for blind and visually impaired children
and children with multiple disabilities from the time of birth to age twenty-one.

(f) A
nonprofit charitable organization that has qualified under section 501(c)(3) of
the United States internal revenue code and that engages in and uses such
property exclusively in programs for persons with mental or physical
disabilities if the programs are exclusively for training, job placement,
rehabilitation, or testing.

(g) A
person that is subject to tax under this chapter by reason of being engaged in
business classified under section 42-5075, or a subcontractor working
under the control of a person that is engaged in business classified under
section 42-5075, if the tangible personal property is any of the
following:

(i) Incorporated
or fabricated by the person into a structure, project, development or
improvement in fulfillment of a contract.

(ii) Incorporated
or fabricated by the person into any project described in section 42-5075,
subsection
O

P
.

(iii) Used
in environmental response or remediation activities under section 42-5075,
subsection B, paragraph 6.

(h) A
person that is not subject to tax under section 42-5075 and that has been
provided a copy of a certificate described in section 42-5009, subsection
L, if the property purchased is incorporated or fabricated by the person into
the real property, structure, project, development or improvement described in
the certificate.

(i) A
nonprofit charitable organization that has qualified under section 501(c)(3) of
the internal revenue code if the property is purchased from the parent or an
affiliate organization that is located outside this state.

(j) A
qualifying community health center as defined in section 42-5001.

(k) A
nonprofit charitable organization that has qualified under section 501(c)(3) of
the internal revenue code and that regularly serves meals to the needy and
indigent on a continuing basis at no cost.

(l) A
person engaged in business under the transient lodging classification if the
property is a personal hygiene item or articles used by human beings for food,
drink or condiment, except alcoholic beverages, which are furnished without
additional charge to and intended to be consumed by the transient during the
transient's occupancy.

(m) For
taxable periods beginning from and after June 30, 2001, a nonprofit charitable
organization that has qualified under section 501(c)(3) of the internal revenue
code and that provides residential apartment housing for
low-income
persons over sixty-two years of age in a facility
that qualifies for a federal housing subsidy, if the tangible personal property
is used by the organization solely to provide residential apartment housing for

low-income
persons over sixty-two years
of age in a facility that qualifies for a federal housing subsidy.

(n) A
qualifying health sciences educational institution as defined in section 42-5001.

(o) A
person representing or working on behalf of any person described in subdivision
(a), (b), (c), (d), (e), (f), (i), (j), (k), (m) or (n) of this paragraph, if
the tangible personal property is incorporated or fabricated into a project described
in section 42-5075, subsection
O

P
.

14. Commodities,
as defined by title 7 United States Code section 2, that are consigned for
resale in a warehouse in this state in or from which the commodity is
deliverable on a contract for future delivery subject to the rules of a commodity
market regulated by the United States commodity futures trading commission.

15. Tangible
personal property sold by:

(a) Any nonprofit organization organized and
operated exclusively for charitable purposes and recognized by the United
States internal revenue service under section 501(c)(3) of the internal revenue
code.

(b) A
nonprofit organization that is exempt from taxation under section 501(c)(3),
501(c)(4) or 501(c)(6) of the internal revenue code if the organization is
associated with a major league baseball team or a national touring professional
golfing association and no part of the organization's net earnings inures to
the benefit of any private shareholder or individual. This
subdivision does not apply to an organization that is owned, managed or
controlled, in whole or in part, by a major league baseball team, or its
owners, officers, employees or agents, or by a major league baseball
association or professional golfing association, or its owners, officers,
employees or agents, unless the organization conducted or operated exhibition
events in this state before January 1, 2018 that were exempt from transaction
privilege tax under section 42-5073.

(c) A
nonprofit organization that is exempt from taxation under section 501(c)(3),
501(c)(4), 501(c)(6), 501(c)(7) or 501(c)(8) of the internal revenue code if
the organization sponsors or operates a rodeo featuring primarily farm and
ranch animals and no part of the organization's net earnings inures to the
benefit of any private shareholder or individual.

16. Drugs
and medical oxygen, including delivery hose, mask or tent, regulator and tank,
if
prescribed by
a member of the medical, dental or
veterinarian profession who is licensed by law to administer such substances.

17. Prosthetic
appliances, as defined in section 23-501, prescribed or recommended by a
person who is licensed, registered or otherwise professionally credentialed as
a physician, dentist, podiatrist, chiropractor, naturopath, homeopath, nurse or
optometrist.

18. Prescription
eyeglasses and contact lenses.

19. Insulin,
insulin syringes and glucose test strips.

20. Hearing
aids as defined in section 36-1901.

21. Durable
medical equipment that has a centers for medicare and medicaid services common
procedure code, is designated reimbursable by medicare, is prescribed by a
person who is licensed under title 32, chapter 7, 13, 17 or 29, can withstand
repeated use, is primarily and customarily used to serve a medical purpose, is
generally not useful to a person in the absence of illness or injury and is
appropriate for use in the home.

22. Food,
as provided in and subject to the conditions of article 3 of this
chapter
and sections 42-5074 and 42-6017.

23. Items
purchased with United States department of agriculture coupons issued under the
supplemental nutrition assistance program pursuant to the food and nutrition
act of 2008 (P.L. 88-525; 78 Stat
.
703;
7 United States Code sections 2011 through 2036b) by the United States
department of agriculture food and nutrition service or food instruments issued
under section 17 of the child nutrition act (P.L. 95-627; 92 Stat.
3603; P.L. 99-661, section 4302; P.L. 111-296; 42 United
States Code section 1786).

24. Food
and drink provided without monetary charge by a taxpayer that is subject to
section 42-5074 to its employees for their own consumption on the
premises during the employees' hours of employment.

25. Tangible
personal property that is used or consumed in a business subject to section 42-5074
for human food, drink or condiment, whether simple, mixed or compounded.

26. Food,
drink or condiment and accessory tangible personal property that are acquired
for use by or provided to a school district or charter school if they are to be
either served or prepared and served to persons for consumption on the premises
of a public school in the school district or on the premises of the charter
school during school hours.

27. Lottery
tickets or shares purchased pursuant to title 5, chapter 5.1, article 1.

28. Textbooks,
sold by a bookstore, that are required by any state university or community
college.

29. Magazines,
other periodicals or other publications produced by this state to encourage
tourist travel.

30. Paper
machine clothing, such as forming fabrics and dryer felts, purchased by a paper
manufacturer and directly used or consumed in paper manufacturing.

31. Coal,
petroleum, coke, natural gas, virgin fuel oil and electricity purchased by a
qualified environmental technology manufacturer, producer or processor as
defined in section 41-1514.02 and directly used or consumed in
generating
or
providing
on-site
power or energy solely for environmental technology manufacturing, producing or
processing or environmental protection. This paragraph
applies
for twenty full consecutive calendar or fiscal years from
the date the first paper manufacturing machine is placed in
service. In the case of an environmental technology manufacturer,
producer or processor
that
does not
manufacture paper, the time period
begins
with
the date the first manufacturing, processing or production equipment is placed
in service.

32. Motor
vehicles that are removed from inventory by a motor vehicle dealer as defined
in section 28-4301 and that are provided to:

(a) Charitable
or educational institutions that are exempt from taxation under section
501(c)(3) of the internal revenue code.

(b) Public
educational institutions.

(c) State universities or affiliated
organizations of a state university if no part of the organization's net
earnings inures to the benefit of any private shareholder or individual.

33. Natural
gas or liquefied petroleum gas used to propel a motor vehicle.

34. Machinery,
equipment, technology or related supplies that are only useful to assist a
person with a physical disability as defined in section 46-191 or a
person who has a developmental disability as defined in section 36-551 or
has a head injury as defined in section 41-3201 to be more independent
and functional.

35. Liquid, solid or gaseous chemicals used in
manufacturing, processing, fabricating, mining, refining, metallurgical
operations, research and development and, beginning on January 1, 1999,
printing, if using or consuming the chemicals, alone or as part of an
integrated system of chemicals, involves direct contact with the materials from
which the product is produced for the purpose of causing or allowing a chemical
or physical change to occur in the materials as part of the production process. This
paragraph does not include chemicals that are used or consumed in activities
such as packaging, storage or transportation but does not affect any exemption
for such chemicals that is otherwise provided by this section. For
the purposes of this paragraph, "printing" means a commercial
printing operation and includes job printing, engraving, embossing, copying and
bookbinding.

36. Food, drink and condiment purchased for
consumption within the premises of any prison, jail or other institution under
the jurisdiction of the state department of corrections, the department of
public safety, the department of juvenile corrections or a county sheriff.

37. A
motor vehicle and any repair and replacement parts and tangible personal
property becoming a part of such motor vehicle sold to a motor carrier
that
is subject to a fee prescribed in title 28, chapter 16,
article 4 and
that
is engaged in the business
of leasing or renting such
a
property.

38. Tangible
personal property that is or directly enters into and becomes an ingredient or
component part of cards used as prescription plan identification cards.

39. Overhead
materials or other tangible personal property that is used in performing a
contract between the United States government and a manufacturer, modifier,
assembler or repairer, including property used in performing a subcontract with
a government contractor who is a manufacturer, modifier, assembler or repairer,
to which title passes to the government under the terms of the contract or
subcontract. For the purposes of this paragraph:

(a) "Overhead materials" means tangible
personal property, the gross proceeds of sales or gross income derived from
which would otherwise be included in the retail classification, that is used or
consumed in performing a contract, the cost of which is charged to an overhead
expense account and allocated to various contracts based on generally accepted
accounting principles and consistent with government contract accounting
standards.

(b) "Subcontract"
means an agreement between a contractor and any person who is not an employee
of the contractor for furnishing of supplies or services that, in whole or in
part, are necessary to
perform
one or more
government contracts, or under which any portion of the contractor's obligation
under one or more government contracts is performed, undertaken or assumed, and
that includes provisions causing title to overhead materials or other tangible
personal property used in
performing
the
subcontract to pass to the government or that includes provisions incorporating
such title passing clauses in a government contract into the subcontract.

40. Through
December 31, 1994, tangible personal property sold pursuant to a personal
property liquidation transaction, as defined in section 42-5061. From
and after December 31, 1994, tangible personal property sold pursuant to a
personal property liquidation transaction, as defined in section 42-5061,
if the gross proceeds of the sales were included in the measure of the tax
imposed by article 1 of this chapter or if the personal property liquidation
was a casual activity or transaction.

41. Wireless telecommunications equipment that is
held for sale or transfer to a customer as an inducement to enter into or
continue a contract for telecommunications services that are taxable under
section 42-5064.

42. Alternative
fuel, as defined in section 1-215, purchased by a used oil fuel burner
who has received a permit to burn used oil or used oil fuel under section 49-426
or 49-480.

43. Tangible
personal property purchased by a commercial airline and consisting of food,
beverages and condiments and accessories used for serving the food and
beverages, if those items are to be provided without additional charge to
passengers for consumption in flight. For the purposes of this
paragraph, "commercial airline" means a person holding a federal
certificate of public convenience and necessity or foreign air carrier permit
for air transportation to transport persons, property or United States mail in
intrastate, interstate or foreign commerce.

44. Alternative
fuel vehicles if the vehicle was manufactured as a diesel fuel vehicle and
converted to operate on alternative fuel and equipment that is installed in a
conventional diesel fuel motor vehicle to convert the vehicle to operate on an
alternative fuel, as defined in section 1-215.

45. Gas diverted from a pipeline, by a person
engaged in the business of:

(a) Operating a
natural or artificial gas pipeline, and used or consumed for the sole purpose
of fueling compressor equipment that pressurizes the pipeline.

(b) Converting natural gas into liquefied natural
gas, and used or consumed for the sole purpose of fueling compressor equipment
used in the conversion process.

46. Tangible
personal property that is excluded, exempt or deductible from transaction
privilege tax pursuant to section 42-5063.

47. Tangible
personal property purchased to be incorporated or installed as part of
environmental response or remediation activities under section 42-5075,
subsection B, paragraph 6.

48. Tangible
personal property sold by a nonprofit organization that is exempt from taxation
under section 501(c)(6) of the internal revenue code if the organization
produces, organizes or promotes cultural or civic related festivals or events
and no part of the organization's net earnings inures to the benefit of any
private shareholder or individual.

49. Prepared
food, drink or condiment donated by a restaurant as classified in section 42-5074,
subsection A to a nonprofit charitable organization that has qualified under
section 501(c)(3) of the internal revenue code and that regularly serves meals
to the needy and indigent on a continuing basis at no cost.

50. Application services
that are designed to assess or test student learning or to promote curriculum
design or enhancement purchased by or for any school district, charter school,
community college or state university. For the purposes of this paragraph:

(a) "Application
services" means software applications provided remotely using hypertext
transfer protocol or another network protocol.

(b) "Curriculum
design or enhancement" means planning, implementing or reporting on
courses of study, lessons, assignments or other learning activities.

51. Motor
vehicle fuel and use fuel to a qualified business under section 41-1516
for off-road use in harvesting, processing or transporting qualifying forest
products removed from qualifying projects as defined in section 41-1516.

52. Repair
parts installed in equipment used directly by a qualified business under
section 41-1516 in harvesting, processing or transporting qualifying
forest products removed from qualifying projects as defined in section 41-1516.

53. Renewable
energy credits or any other unit created to track energy derived from renewable
energy resources. For the purposes of this paragraph,
"renewable energy credit" means a unit created administratively by
the corporation commission or governing body of a public power entity to track
kilowatt hours of electricity derived from a renewable energy resource or the
kilowatt hour equivalent of conventional energy resources displaced by
distributed renewable energy resources.

54.
Coal
acquired from an owner or operator of a power plant by a person
that
is responsible for refining coal if both of the following
apply:

(a) The
transfer of title or possession of the coal is for the purpose of refining the
coal.

(b) The
title or possession of the coal is transferred back to the owner or operator of
the power plant after completion of the coal refining process. For
the purposes of this subdivision, "coal refining process" means the
application of a coal additive system that aids the reduction of power plant
emissions during the combustion of coal and the treatment of flue gas.

55. Tangible personal property incorporated or
fabricated into a project described in section 42-5075, subsection
O

P
, that is located within the
exterior boundaries of an Indian reservation for which the owner, as defined in
section 42-5075, of the project is an Indian tribe or an affiliated
Indian. For the purposes of this paragraph:

(a) "Affiliated
Indian" means an individual Native American Indian who is duly registered
on the tribal rolls of the Indian tribe for whose benefit the Indian
reservation was established.

(b) "Indian
reservation" means all lands that are within the limits of areas set aside
by the United States for the exclusive use and occupancy of an Indian tribe by
treaty, law or executive order and that are recognized as Indian reservations
by the United States department of the interior.

(c) "Indian tribe" means any organized
nation, tribe, band or community that is recognized as an Indian tribe by the
United States department of the interior and includes any entity formed under
the laws of the Indian tribe.

56.
Cash
equivalents, precious metal bullion and monetized bullion purchased by the
ultimate consumer, but coins or other forms of money for manufacture into
jewelry or works of art are subject to tax, and tangible personal property that
is purchased through the redemption of any cash equivalent by the holder as a
means of payment for goods that are subject to tax under this article is
subject to tax. For the purposes of this paragraph:

(a) "Cash
equivalents" means items, whether or not negotiable, that are sold to one
or more persons, through which a value denominated in money is purchased in
advance and that may be redeemed in full or in part for tangible personal
property, intangibles or services. Cash equivalents include gift
cards, stored value cards, gift certificates, vouchers, traveler's checks,
money orders or other tangible instruments or orders. Cash equivalents do not
include either of the following:

(i) Items that are sold to one or more persons
and through which a value is not denominated in money.

(ii) Prepaid
calling cards for telecommunications services.

(b) "Monetized
bullion" means coins and other forms of money that are manufactured from
gold, silver or other metals and that have been or are used as a medium of
exchange in this or another state, the United States or a foreign nation.

(c) "Precious metal
bullion" means precious metal, including gold, silver, platinum, rhodium
and palladium, that has been smelted or refined so that its value depends on
its contents and not on its form.

B. In
addition to the exemptions allowed by subsection A of this section, the
following categories of tangible personal property are also exempt:

1. Machinery,
or equipment, used directly in manufacturing, processing, fabricating, job
printing, refining or metallurgical operations. The terms
"manufacturing", "processing", "fabricating",
"job printing", "refining" and "metallurgical" as
used in this paragraph refer to and include those operations commonly
understood within their ordinary meaning. "Metallurgical operations"
includes leaching, milling, precipitating, smelting and refining.

2. Machinery,
or equipment, used directly in the process of extracting ores or minerals from
the earth for commercial purposes, including equipment required to prepare the
materials for extraction and handling, loading or transporting such extracted
material to the surface.� "Mining" includes underground, surface and
open pit operations for extracting ores and minerals.

3. Tangible personal property sold to persons
engaged in business classified under the telecommunications classification
under section 42-5064, including a person representing or working on
behalf of such a person in a manner described in section 42-5075,
subsection
O

P
, and consisting
of central office switching equipment, switchboards, private branch exchange
equipment, microwave radio equipment and carrier equipment including optical
fiber, coaxial cable and other transmission media that are components of
carrier systems.

4. Machinery,
equipment or transmission lines used directly in producing or transmitting
electrical power, but not including distribution.� Transformers and control
equipment used at transmission substation sites constitute equipment used in producing
or transmitting electrical power.

5. Machinery and equipment used directly for energy
storage for later electrical use. For the purposes of this paragraph:

(a) "Electric utility scale" means a
person that is engaged in a business activity described in section 42-5063,
subsection A or such person's equipment or wholesale electricity suppliers.

(b) "Energy storage" means commercially
available technology for electric utility scale that is capable of absorbing
energy, storing energy for a period of time and thereafter dispatching the
energy and that uses mechanical, chemical or thermal processes to store energy.

(c) "Machinery and equipment used
directly" means all machinery and equipment that are used for electric
energy storage from the point of receipt of such energy in order to facilitate
storage of the electric energy to the point where the electric energy is
released.

6.
Neat
animals, horses, asses, sheep, ratites, swine or goats used or to be used as
breeding or production stock, including sales of breedings or ownership shares
in such animals used for breeding or production.

7.
Pipes
or valves four inches in diameter or larger used to transport oil, natural gas,
artificial gas, water
, wastewater
or coal
slurry, including compressor units, regulators, machinery and equipment,
fittings, seals and any other part that is used in operating the pipes or
valves.

8.
Aircraft,
navigational and communication instruments and other accessories and related
equipment sold to:

(a) A
person:

(i) Holding,
or exempted by federal law from obtaining, a federal certificate of public
convenience and necessity for use as, in conjunction with or becoming part of
an aircraft to be used to transport persons for hire in intrastate, interstate
or foreign commerce.

(ii) That is certificated or licensed under federal
aviation administration regulations (14 Code of Federal Regulations part 121 or
135) as a scheduled or unscheduled carrier of persons for hire for use as or in
conjunction with or becoming part of an aircraft to be used to transport
persons for hire in intrastate, interstate or foreign commerce.

(iii) Holding
a foreign air carrier permit for air transportation for use as or in
conjunction with or becoming a part of aircraft to be used to transport
persons, property or United States mail in intrastate, interstate or foreign
commerce.

(iv) Operating
an aircraft to transport persons in any manner for compensation or hire, or for
use in a fractional ownership program that meets the requirements of federal
aviation administration regulations (14 Code of Federal Regulations part 91,
subpart K), including as an air carrier, a foreign air carrier or a commercial
operator or under a restricted category, within the meaning of 14 Code of
Federal Regulations, regardless of whether the operation or aircraft is
regulated or certified under part 91, 119, 121, 133, 135, 136 or 137, or
another part of 14 Code of Federal Regulations.

(v) That
will lease or otherwise transfer operational control, within the meaning of
federal aviation administration operations specification A008, or its
successor, of the aircraft, instruments or accessories to one or more persons
described in item (i), (ii), (iii) or (iv) of this subdivision, subject to
section 42-5009, subsection
Q

P
.

(b) Any
foreign government.

(c) Persons
who are not residents of this state and who will not use such property in this
state other than in removing such property from this state. This
subdivision also applies to corporations that are not incorporated in this state,
regardless of maintaining a place of business in this state, if the principal
corporate office is located outside this state and the property will not be
used in this state other than in removing the property from this state.

9.
Machinery,
tools, equipment and related supplies used or consumed directly in repairing,
remodeling or maintaining aircraft, aircraft engines or aircraft component
parts by or on behalf of a certificated or licensed carrier of persons or property.

10.
Rolling
stock, rails, ties and signal control equipment used directly to transport
persons or property.

11.
Machinery
or equipment used directly to drill for oil or gas or used directly in the
process of extracting oil or gas from the earth for commercial purposes.

12.
Buses
or other urban mass transit vehicles that are used directly to transport
persons or property for hire or pursuant to a governmentally adopted and
controlled urban mass transportation program and that are sold to bus companies
holding a federal certificate of convenience and necessity or operated by any
city, town or other governmental entity or by any person contracting with such
governmental entity as part of a governmentally adopted and controlled program
to provide urban mass transportation.

13.
Groundwater
measuring devices required under section 45-604.

14.
Machinery
and equipment consisting of agricultural aircraft, tractors,
off-highway
vehicles,
tractor-drawn implements, self-powered
implements, machinery and equipment necessary for extracting milk, and
machinery and equipment necessary for cooling milk and livestock, and drip
irrigation lines not already exempt under paragraph
7
of this subsection and that are used for
commercially

producing
agricultural,
horticultural, viticultural and floricultural crops and products in this
state. For the purposes of this paragraph:

(a) "Off-highway vehicles" means off-highway
vehicles as defined in section 28-1171 that are modified at the time of
sale to function as a tractor or to tow tractor-drawn implements and that
are not equipped with a modified exhaust system to increase horsepower or speed
or an engine that is more than one thousand cubic centimeters or that have a
maximum speed of fifty miles per hour or less.

(b) "Self-powered
implements" includes machinery and equipment that are electric-powered.

15.
Machinery or equipment used in research and
development. For the purposes of this paragraph, "research and
development" means basic and applied research in the sciences and
engineering, and designing, developing or testing prototypes, processes or new
products, including research and development of computer software that is
embedded in or an integral part of the prototype or new product or that is
required for machinery or equipment otherwise exempt under this section to
function effectively. Research and development do not include
manufacturing quality control, routine consumer product testing, market
research, sales promotion, sales service, research in social sciences or
psychology, computer software research that is not included in the definition
of research and development, or other nontechnological activities or technical
services.

16.
Tangible
personal property that is used by either of the following to receive, store,
convert, produce, generate, decode, encode, control or transmit
telecommunications information:

(a) Any
direct broadcast satellite television or data transmission service that
operates pursuant to 47 Code of Federal Regulations part 25.

(b) Any
satellite television or data transmission facility, if both of the following
conditions are met:

(i) Over
two-thirds of the transmissions, measured in megabytes, transmitted by
the facility during the test period were transmitted to or on behalf of one or
more direct broadcast satellite television or data transmission services that
operate pursuant to 47 Code of Federal Regulations part 25.

(ii) Over two-thirds of the transmissions,
measured in megabytes, transmitted by or on behalf of those direct broadcast
television or data transmission services during the test period were
transmitted by the facility to or on behalf of those services.

For the purposes of subdivision
(b) of this paragraph, "test period" means the three hundred sixty-five
day period beginning on the later of the date on which the tangible personal
property is purchased or the date on which the direct broadcast satellite
television or data transmission service first transmits information to its
customers.

17.
Clean
rooms that are used for manufacturing, processing, fabrication or research and
development, as defined in paragraph
15
of
this subsection, of semiconductor products. For the purposes of this
paragraph, "clean room" means all property that comprises or creates
an environment where humidity, temperature, particulate matter and
contamination are precisely controlled within specified parameters, without
regard to whether the property is actually contained within that environment or
whether any of the property is affixed to or incorporated into real
property. Clean room:

(a) Includes
the integrated systems, fixtures, piping, movable partitions, lighting and all
property that is necessary or adapted to reduce contamination or to control
airflow, temperature, humidity, chemical purity or other environmental conditions
or manufacturing tolerances, as well as the production machinery and equipment
operating in conjunction with the clean room environment.

(b) Does
not include the building or other permanent, nonremovable component of the
building that houses the clean room environment.

18.
Machinery
and equipment that are used directly in feeding poultry,
environmentally
controlling
housing for poultry,
moving
eggs within a production and packaging facility or sorting
or cooling eggs.� This exemption does not apply to vehicles used for
transporting eggs.

19.
Machinery
or equipment, including related structural components
and containment
structures
, that is employed in connection with
manufacturing, processing, fabricating, job printing, refining, mining, natural
gas pipelines, metallurgical operations, telecommunications, producing or
transmitting electricity or research and development and that is used directly
to meet or exceed rules or regulations adopted by the federal energy regulatory
commission, the United States environmental protection agency, the United
States nuclear regulatory commission, the Arizona department of environmental
quality or a political subdivision of this state to prevent, monitor, control
or reduce land, water or air pollution.
For the purposes of this
paragraph, "containment structure" means a structure that prevents,
monitors, controls or reduces noxious or harmful discharge into the
environment.

20.
Machinery
and equipment that are used in
commercially producing
livestock, livestock products or agricultural,
horticultural, viticultural or floricultural crops or products in this state,
including production by a person representing or working on behalf of such a
person in a manner described in section 42-5075, subsection
O

P
, if the machinery and equipment are used directly and
primarily to prevent, monitor, control or reduce air, water or land pollution.

21.
Machinery
or equipment that enables a television station to originate and broadcast or to
receive and broadcast digital television signals and that was purchased to
facilitate compliance with the telecommunications act of 1996 (P.L. 104-104;
110 Stat. 56; 47 United States Code section 336) and the federal communications
commission order issued April 21, 1997 (47 Code of Federal Regulations part
73). This paragraph does not exempt any of the following:

(a) Repair
or replacement parts purchased for the machinery or equipment described in this
paragraph.

(b) Machinery
or equipment purchased to replace machinery or equipment for which an exemption
was previously claimed and taken under this paragraph.

(c) Any
machinery or equipment purchased after the television station has ceased analog
broadcasting, or purchased after November 1, 2009, whichever occurs first.

22.
Qualifying
equipment that is purchased from and after June 30, 2004 through
December
31, 2028
by a qualified business under section 41-1516
for harvesting or processing qualifying forest products removed from qualifying
projects as defined in section 41-1516. To qualify for this
exemption, the qualified business must obtain and present its certification
from the Arizona commerce authority at the time of purchase.

23.
Machinery,
equipment, materials and other tangible personal property used directly and
predominantly to construct a qualified environmental technology manufacturing,
producing or processing facility as described in section 41-1514.02. This
paragraph applies for ten full consecutive calendar or fiscal years after the
start of initial construction.

24. Computer data center
equipment sold to the owner, operator or qualified colocation tenant of a
computer data center that is certified by the Arizona commerce authority under
section 41-1519 or an authorized agent of the owner, operator or
qualified colocation tenant during the qualification period for use in the
qualified computer data center. For the purposes of this paragraph,
"computer data center", "computer data center equipment",
"qualification period" and "qualified colocation tenant"
have the same meanings prescribed in section 41-1519.

C. The
exemptions provided by subsection B of this section do not include:

1. Expendable
materials. For the purposes of this paragraph, expendable materials
do not include any of the categories of tangible personal property specified in
subsection B of this section regardless of the cost or useful life of that
property.

2. Janitorial
equipment and hand tools.

3. Office
equipment, furniture and supplies.

4. Tangible
personal property used in selling or distributing activities, other than the
telecommunications transmissions described in subsection B, paragraph
16

of this section.

5. Motor
vehicles required to be licensed by this state, except buses or other urban
mass transit vehicles specifically exempted pursuant to subsection B, paragraph

12
of this section, without regard to the use
of such motor vehicles.

6. Shops,
buildings, docks, depots and all other materials of whatever kind or character
not specifically included as exempt.

7. Motors
and pumps used in drip irrigation systems.

8. Machinery
and equipment or tangible personal property used by a contractor in
performing

a contract.

D. The
following shall be deducted in computing the purchase price of electricity by a
retail electric customer from a utility business:

1. Revenues
received from sales of ancillary services, electric distribution services,
electric generation services, electric transmission services and other services
related to providing electricity to a retail electric customer who is located
outside this state for use outside this state if the electricity is delivered
to a point of sale outside this state.

2. Revenues received from providing electricity,
including ancillary services, electric distribution services, electric
generation services, electric transmission services and other services related
to providing electricity with respect to which the transaction privilege tax
imposed under section 42-5063 has been paid.

E. The
tax levied by this article does not apply to the purchase of solar energy
devices from a retailer that is registered with the department as a solar
energy retailer or a solar energy contractor.

F. The
following shall be deducted in computing the purchase price of electricity by a
retail electric customer from a utility business:

1. Fees
charged by a municipally owned utility to persons constructing residential,
commercial or industrial developments or connecting residential, commercial or
industrial developments to a municipal utility system or systems if the fees
are segregated and used only for capital expansion, system enlargement or debt
service of the utility system or systems.

2. Reimbursement
or contribution compensation to any person or persons owning a utility system
for property and equipment installed to provide utility access to, on or across
the land of an actual utility consumer if the property and equipment become the
property of the utility. This deduction shall not exceed the value of such
property and equipment.

G. The
tax levied by this article does not apply to the purchase price of electricity,
natural gas or liquefied petroleum gas by:

1. A qualified manufacturing or smelting
business. A utility that claims this deduction shall report each
month, on a form prescribed by the department, the name and address of each
qualified manufacturing or smelting business for which this deduction is
taken. This paragraph applies to gas transportation
services. For the purposes of this paragraph:

(a) "Gas
transportation services" means the services of transporting natural gas to
a natural gas customer or to a natural gas distribution facility if the natural
gas was purchased from a supplier other than the utility.

(b) "Manufacturing"
means the performance as a business of an integrated series of operations that
places tangible personal property in a form, composition or character different
from that in which it was acquired and transforms it into a different product
with a distinctive name, character or use. Manufacturing does not
include job printing, publishing, packaging, mining, generating electricity or
operating a restaurant.

(c) "Qualified manufacturing or smelting
business" means one of the following:

(i) A business that
manufactures or smelts tangible products in this state, of which at least
fifty-one percent of the manufactured or smelted products will be exported out
of state for incorporation into another product or sold out of state for a
final sale.

(ii) A
business that derives at least fifty-one percent of its gross income from
the sale of manufactured or smelted products manufactured or smelted by the
business.

(iii)
A
business that uses at least
fifty-one percent of its square footage in this state for manufacturing
or smelting and business activities directly related to manufacturing or
smelting.

(iv) A
business that employs at least fifty-one percent of its workforce in this
state in manufacturing or smelting and business activities directly related to
manufacturing or smelting.

(v) A
business that uses at least fifty-one percent of the value of its
capitalized assets in this state, as reflected on the business's books and
records, for manufacturing or smelting and business activities directly related
to manufacturing or smelting.

(d) "Smelting"
means to melt or fuse a metalliferous mineral, often with an accompanying
chemical change, usually to separate the metal.

2. A
business that operates an international operations center in this state and
that is certified by the Arizona commerce authority pursuant to
section
41-1520.

H. A city or town may exempt proceeds from sales of
paintings, sculptures or similar works of fine art if such works of fine art
are sold by the original artist. For the purposes of this
subsection, fine art does not include an art creation such as jewelry, macrame,
glasswork, pottery, woodwork, metalwork, furniture or clothing if the art
creation has a dual purpose, both aesthetic and utilitarian, whether sold by
the artist or by another person.

I. For the
purposes of subsection B of this section:

1. "Agricultural
aircraft" means an aircraft that is built for agricultural use for the
aerial application of pesticides or fertilizer or for aerial seeding.

2. "Aircraft"
includes:

(a) An
airplane flight simulator that is approved by the federal aviation
administration for use as a phase II or higher flight simulator under appendix
H, 14 Code of Federal Regulations part 121.

(b) Tangible
personal property that is permanently affixed or attached as a component part
of an aircraft that is owned or operated by a certificated or licensed carrier
of persons or property.

3. "Other
accessories and related equipment" includes aircraft accessories and
equipment such as ground service equipment that physically contact aircraft at
some point during the overall carrier operation.

J. For
the purposes of
subsection D of this section, "ancillary services", "electric
distribution service", "electric generation service",
"electric transmission service" and "other services" have
the same meanings prescribed in section 42-5063.
END_STATUTE

Sec. 13.
Repeal

Section 42-5159, Arizona Revised
Statutes, as amended by Laws 2025, chapter 251, section 13, is repealed.

Sec. 14.
Repeal

Sections 42-6009 and 42-6013, Arizona
Revised Statutes, are repealed.

Sec. 15. Section 42-6102, Arizona Revised
Statutes, is amended to read:

START_STATUTE
42-6102.

Administration; exception

A. Unless the context otherwise requires, chapter 5,
article 1 of this title governs the administration of the taxes imposed by this
article, except that:

1. A separate license is not required for the taxes
imposed by this article, and the taxes due under this article shall be
included, reported and paid with the transaction privilege tax.

2. A separate bond is not required of employees of
the department in administering this article.

3. The taxes imposed by this article may be included
without segregation in any notice and lien filed for unpaid transaction
privilege taxes.

B. The taxes imposed pursuant to this article do not
apply to the gross proceeds of sales or gross income derived pursuant to
contracts entered into before the date of the election to authorize the tax by
prime contractors
and owner builders
who are classified
under
sections

section
42-5075

and 42-5076
unless the contract contains a provision

which
that
entitles the contractor
to recover the amount of the tax from a purchaser.� In order to qualify for
this exemption the contractor shall provide sufficient documentation, in a
manner and form prescribed by the department, to verify that a contract was
entered into before the date of the election to authorize the tax.
END_STATUTE

Sec. 16. Section 42-6108, Arizona Revised
Statutes, is amended to read:

START_STATUTE
42-6108.

Tax on hotels

A. The board of supervisors of a county having a
population of less than two million five hundred thousand but more than five
hundred thousand persons may levy and, if levied, the department shall collect
a tax on the gross proceeds of sales or gross income from the business of every
person engaging or continuing in the county in a business taxed under chapter 5
of this title and classified under section 42-5070
or 42-5076
.�
The tax shall be levied under this section beginning January 1 or July 1,
whichever date first occurs at least three months after the county resolution
approving the tax levy. The rate of tax shall not exceed six
per cent
percent
.

B. The tax only applies in unincorporated areas of
the county.�

C. At the end of each month the state treasurer
shall transmit the net revenues collected pursuant to this section to the
treasurer of the county levying the tax.� The county shall use:

1. Not more than thirty-four percent of these
revenues for the purposes set forth in section 48-4204, subsection A, as
financial participation by the county as required by that subsection.

2. Not more than sixteen percent of these revenues
for the purposes of economic development under section 11-254.04.� Any
increase in tax imposed under this section shall not constitute a new tax for
the purposes of section 11-254.04, subsection B.

3. All remaining revenues to promote and enhance
tourism through the recognized tourism promotion agency in the county.
END_STATUTE

Sec. 17. Section 42-6108.01, Arizona Revised
Statutes, is amended to read:

START_STATUTE
42-6108.01.

Tax on hotels

A. The qualified electors residing in a county
having a population of less than two million but more than five hundred
thousand persons, by majority vote at an election held in the county, may levy
and, if levied, the department of revenue shall collect a tax on the gross
proceeds of sales or gross income from the business of every person engaging or
continuing in a business taxed under chapter 5 of this title and classified
under section 42-5070
or 42-5076
within the
county.� A tax under this section:

1. Is in addition to taxes imposed by chapter 5 of
this title and section 42-6108 and any tax imposed by a city or town in
the county.

2. Applies in both incorporated and unincorporated
areas of the county.

B. If levied, the tax shall be levied under this
section beginning on the first day of the first month beginning ninety days
after the election to levy the tax.� The tax shall be in effect for thirty
years.� The tax may be extended by majority vote of the qualified electors
residing in the county at an election held in the county for a period of not
more than ten years.

C. The rate of the tax is one
per cent
percent
of the tax base prescribed by section 42-5070
or 42-5076
.

D. Each month the state treasurer shall credit the
net revenues collected pursuant to this section to the tourism fund established
by section 41-2306.
END_STATUTE

Sec. 18. Section 42-12003, Arizona Revised Statutes, is amended to read:

START_STATUTE
42-12003.

Class three property; definition

A. For the purposes
of taxation, class three is established consisting of:

1. Real and personal property and improvements to
the property that are used for residential purposes and
is

occupied by the owner as the owner's primary residence as described in section
42-12053, that are not otherwise included in class one, two, four, six,
seven or eight and that are valued at full cash value.

2. Real and personal property that is used for
residential purposes and occupied by a relative of the owner, as described in
section 42-12053, as the relative's primary residence, that is not
otherwise included in class one, two, four, six, seven or eight and that is
valued at full cash value.

3. Real and personal property that is
used for residential purposes and occupied by the owner as the owner's primary
residence, as described in section 42-12053, who also uses the property
for lease or rent to lodgers.

B. For the purposes of this section, a homesite that
is included in class three may include:

1. Up to ten acres on a single parcel of real
property on which the residential improvement is located.

2. More than ten, but not more than forty, acres on
a single parcel of real property on which the residential improvement is
located if it is zoned exclusively for residential purposes or contains legal
restrictions or physical conditions that prevent the division of the parcel.�

C. For the purposes of this section, "physical
conditions" means topography, mountains, washes, rivers, roads or any
other configuration that limits the residential usable land area.
END_STATUTE

Sec. 19. Section 42-12004, Arizona Revised
Statutes, is amended to read:

START_STATUTE
42-12004.

Class four property

A. For the purposes of taxation, class four is
established consisting of:

1. Real and personal property and improvements to
the property that are used for residential purposes, including residential
property that is owned in foreclosure by a financial institution, that is not
otherwise included in another classification and that is valued at full cash
value.� The homesite that is included in class four may include:

(a) Up to ten acres on a single parcel of real
property on which the residential improvement is located.

(b) More than ten, but not more than forty, acres on
a single parcel of real property on which the residential improvement is
located if it is zoned exclusively for residential purposes or contains legal
restrictions or physical conditions that prevent the division of the parcel.�
For the purposes of this subdivision, "physical conditions" means
topography, mountains, washes, rivers, roads or any other configuration that
limits the residential usable land area.

2. Real and personal property and improvements to
the property that are used for residential purposes and solely leased or
rented, that are not included in class one, two, three, six, seven or eight and
that are valued at full cash value.

3. Child care facilities that are licensed under
title 36, chapter 7.1 and that are valued at full cash value.

4. Real and personal property and improvements to
property that are used to operate nonprofit residential housing facilities that
are structured to house or care for persons with disabilities or who are at
least sixty-two years of age and that are valued at full cash value.

5. Real and personal property and improvements that
are used to operate licensed residential care institutions or licensed nursing
care institutions that provide medical services, nursing services or health-related
services and that are structured to house or care for persons with disabilities
or who are at least sixty-two years of age and that are valued at full
cash value.

6. Real and personal property consisting of not more
than eight rooms of residential property that are leased or rented to transient
lodgers, together with furnishing not more than a breakfast meal, by the owner
who resides on the property and that is valued at full cash value.

7. Real and personal property that consists of
residential dwellings maintained for occupancy by agricultural employees as a
condition of employment or as a convenience to the employer, that is not
included in class three and that is valued at full cash value. The
land associated with these dwellings shall be valued as agricultural land
pursuant to chapter 13, article 3 of this title.

8. Real property and improvements to property
constituting common areas that are valued pursuant to chapter 13, article 9 of
this title.

9. Real and personal property that is defined as
timeshare property by section 32-2197 and valued pursuant to chapter 13,
article 10 of this title, except for any property used for commercial,
industrial or transient occupancy purposes and included in class one to the
extent of that use.

10. Real and personal property and
improvements that are used for residential purposes and that are leased or
rented to lodgers, except for:

(a) Property occupied by the owner of
the property as the owner's primary residence and included in class three.

(b) Property used for commercial
purposes and included in class one.

11.

10.
Low-income multifamily residential rental
properties that are valued pursuant to chapter 13, article 13 of this title.

12.

11.
Real and personal property and improvements to
property of a guest ranch that meets the requirements prescribed in chapter 13,
article 12 of this title and that is included in the Arizona dude ranch
heritage trail program established by section 41-867 and that are valued
at full cash value.

B. Subsection A, paragraphs 4 and 5 of this section
do not limit eligibility for exemption from taxation under chapter 11, article
3 of this title.
END_STATUTE