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(a) The tax rate shall be at an amount equal to zero percent (0%) of the gross income from the business activity upon every person engaging or continuing in the business of "local advertising" by billboards, direct mail, radio, television, or by any other means. However, commission and fees retained by an advertising agency shall not be includable in gross income from "local advertising". All delivery or disseminating of information directly to the public or any portion thereof for a consideration shall be considered "local advertising", except the following:
(1) The advertising of a product or service which is sold or provided both within and without the state by more than one "commonly designated business entity" within the state, and in which the advertisement names either no "commonly designated business entity" within the state or more than one "commonly designated business entity". "Commonly designated business entity" means any person selling or providing any product or service to its customers under a common business name or style, even though there may be more than one (1) legal entity conducting business functions using the same or substantially the same business name or style by virtue of a franchise, license, or similar agreement.
(2) Advertising of a facility or of a service or activity in which neither the facility nor a business site carrying on such service or activity is located within the state.
(3) The advertising of a product which may only be purchased from an out-of-state supplier.
(4) Political advertising for United States Presidential and Vice Presidential candidates only.
(5) Advertising by means of product purchase coupons redeemable at any retail establishment carrying such product but not product coupons redeemable only at a single commonly designated business entity.
(6) Advertising transportation services where a substantial portion of the transportation activity of the business entity advertised involves interstate or foreign carriage.
(b) Reserved.
(Ord. No. 6674, § 3, 3-23-87; Ord. No. 7436, § 1, 6-18-90; Ord. No. 10949, § 3, 12-13-11)
(a) The tax rate shall be at an amount equal to two and six-tenths (2.6) percent of the gross income from the business activity upon every person engaging or continuing in the business of providing amusement that begins in the city or takes place entirely within the city, which includes the following type or nature of businesses:
(1) Operating or conducting theaters, movies, operas, shows of any type or nature, exhibitions, concerts, carnivals, circuses, amusement parks, menageries, fairs, races, contests, games, billiard or pool parlors, bowling alleys, skating rinks, tennis courts, golf courses, video games, pinball machines, public dances, dancehalls, sports events, jukeboxes, batting and driving ranges, animal rides, or any other business charging admission for exhibition, amusement, or entertainment.
(2) Health spas, fitness centers, dance studios, or other persons who charge for the use of premises for sports, athletic, other health-related activities or instruction, whether on a per-event use, or for long-term usage, such as membership fees.
(b) Deductions or exemptions. The gross proceeds of sales or gross income derived from the following sources is exempt from the tax imposed by this section:
(1) Reserved.
(2) Amounts retained by the Arizona Exposition and State Fair Board from ride ticket sales at the annual Arizona State Fair.
(3) Income received from a hotel business subject to tax under section 19-444, if all of the following apply:
(A) The hotel business receives gross income from a customer for the specific business activity otherwise subject to amusement tax.
(B) The consideration received by the hotel business is equal to or greater than the amount to be deducted under this subsection.
(C) The hotel business has provided an exemption certificate to the person engaging in business under this section.
(4) Income that is specifically included as the gross income of a business activity upon which another section of this article imposes a tax, that is separately stated to the customer and is taxable to the person engaged in that classification not to exceed consideration paid to the person conducting the activity.
(5) Income from arranging transportation connected to amusement activity that is separately stated to the customer, not to exceed consideration paid to the transportation business.
(6) Exhibition events in this state sponsored, conducted, or operated 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 state transaction privilege tax under A.R.S. Section 42-5073.
(7) Until March 1, 2017, the gross proceeds of sales or gross income derived from entry fees paid by participants for events that consist of a run, walk, swim or bicycle ride or a similar event, or any combination of these events.
(8) The gross proceeds of sales or gross income derived from entry fees paid by participants for events that are operated or conducted by nonprofit organizations that are exempt from taxation under Section 501(c)(3) of the Internal Revenue Code and of which no part of the organization's net earnings inures to the benefit of any private shareholder or individual, if the event consists of a run, walk, swim or bicycle ride or a similar event, or any combination of these events.
(9) Income from separately charged individual instruction. For the purposes of this paragraph "individual instruction" means exclusive personal attention of the provider for the entire duration of the separately charged period of instruction, training, coaching, or similar activity.
(c) The tax imposed by this section shall not include arranging an amusement activity as a service to a person’s customers if that person is not otherwise engaged in the business of operating or conducting an amusement themselves or through others. This exception does not apply to businesses that operate or conduct amusements pursuant to customer orders and send the billings and receive the payments associated with that activity, including when the amusement is performed by third party independent contractors. For the purposes of this paragraph, ‘arranging’ includes billing for or collecting amusement charges from a person’s customers on behalf of the persons providing the amusement.
(d) Notwithstanding the tax rate identified elsewhere in this section, an additional tax in an amount equal to one-tenth of one (0.1) percent of the gross income from any business activity taxable under this section is imposed pursuant to Chapter IV, Section 5 of the Charter of the City of Tucson.
(Ord. No. 6674, § 3, 3-23-87; Ord. No. 8440, § 8, 1-23-95; Ord. No. 10361, § 3, 12-19-06; Ord. No. 10685, § 3, 6-16-09, eff. 7-1-09; Ord. No. 11479, § 1, 8-8-17; Ord. No. 11485, eff. 8-8-17; Ord. No. 11518, eff. 1-23-18; Ord. No. 11936, § 2, 7-12-22)
Editor’s note – Section 16 of Ord. No. 10361, adopted Dec. 19, 2006, provides for an effective date on and after Jan. 1, 2007.
Section 3 of Ord. No. 11936, adopted July 12, 2022, provides for an effective date of Jan. 1, 2018, for subsection (b)(5); January 1, 2010, for subsection (b)(6); and August 6, 2016, for subsection (b)(7).
(a) Tax rate. The tax rate shall be at an amount equal to two and six-tenths (2.6) percent of the gross income from the business upon every construction contractor engaging or continuing in the business activity of construction contracting within the city.
(1) However, gross income from construction contracting shall not include charges related to groundwater measuring devices required by A.R.S. Section 45-604.
(2) (Reserved).
(3) Gross income from construction contracting shall not include gross income from the sale of manufactured buildings taxable under section 19-427.
(4) For taxable periods beginning from and after July 1, 2008, the portion of gross proceeds of sales or gross income attributable to the actual direct costs of providing architectural or engineering services that are incorporated in a contract is not subject to tax under this section. For the purposes of this subsection, "direct costs" means the portion of the actual costs that are directly expended in providing architectural or engineering services.
(5) Handyman exclusion. This classification does not include gross income from any work or operation performed by a person that is not required to be licensed by the registrar of contractors pursuant to A.R.S. Section 32-1121.
(b) Deductions and exemptions.
(1) Gross income derived from acting as a "subcontractor" shall be exempt from the tax imposed by this section.
(2) All construction contracting gross income subject to the tax and not deductible herein shall be allowed a deduction of thirty-five (35) percent.
(3) The gross proceeds of sales or gross income attributable to the purchase of machinery, equipment or other tangible personal property that is exempt from or deductible from privilege or use tax under:
a. Section 19-465, subsections (7) and (16);
b. Section 19-660, subsections (7) and (16);*
shall be exempt or deductible, respectively, from the tax imposed by this section.
(4) The gross proceeds of sales or gross income that is derived from a contract entered into for the installation, assembly, repair or maintenance of income-producing capital equipment, as defined in section 19-110, that is deducted from the retail classification pursuant to section 19-465(7) that does not become a permanent attachment to a building, highway, road, railroad, excavation or manufactured building or other structure, project, development or improvement shall be exempt from the tax imposed by this section. If the ownership of the realty is separate from the ownership of the income-producing capital equipment, the determination as to permanent attachment shall be made as if the ownership was the same. The deduction provided in this paragraph does not include gross proceeds of sales or gross income from that portion of any contracting activity which consists of the development of, or modification to, real property in order to facilitate the installation, assembly, repair, maintenance or removal of the income-producing capital equipment. For purposes of this paragraph, "permanent attachment" means at least one (1) of the following:
a. To be incorporated into real property.
b. To become so affixed to real property that it becomes part of the real property.
c. To be so attached to real property that removal would cause substantial damage to the real property from which it is removed.
(5) The gross proceeds of sales or gross income received from a contract for the construction of an environmentally controlled facility for the raising of poultry for the production of eggs and the sorting, or cooling and packaging of eggs shall be exempt from the tax imposed under this section.
(6) The gross proceeds of sales or gross income that is derived from the installation, assembly, repair or maintenance of cleanrooms that are deducted from the tax base of the retail classification pursuant to section 19-465, subsection (7) shall be exempt from the tax imposed under this section.
(7) The gross proceeds of sales or gross income that is derived from a contract entered into with a person who is engaged in the commercial production of livestock, livestock products or agricultural, horticultural, viticultural or floricultural crops or products in this state for the construction, alteration, repair, improvement, movement, wrecking or demolition or addition to or subtraction from any building, highway, road, excavation, manufactured building or other structure, project, development or improvement used directly and primarily to prevent, monitor, control or reduce air, water or land pollution shall be exempt from the tax imposed under this section.
(8) The gross proceeds of sales or gross income received from a post construction contract to perform post-construction treatment of real property for termite and general pest control, including wood destroying organisms, shall be exempt from tax imposed under this section.
(9) Through December 31, 2009, the gross proceeds of sales or gross income received from a contract for constructing any lake facility development in a commercial enhancement reuse district that is designated pursuant to A.R.S. Section 9-499.08 if the contractor maintains the following records in a form satisfactory to the Arizona Department of Revenue and to the city:
(A) The certificate of qualification of the lake facility development issued by the city pursuant to A.R.S. Section 9-499.08, Subsection d.
(B) All state and local transaction privilege tax returns for the period of time during which the contractor received gross proceeds of sales or gross income from a contract to construct a lake facility development in a designated commercial enhancement reuse district, showing the amount exempted from state and local taxation.
(C) Any other information considered to be necessary.
(10) Any amount attributable to development fees that are incurred in relation to the construction, development or improvement of real property and paid by the taxpayer as defined in the model city tax code or by a contractor providing services to the taxpayer. For the purposes of this paragraph:
(A) The attributable amount shall not exceed the value of the development fees actually imposed.
(B) The attributable amount is equal to the total amount of development fees paid by the taxpayer or by a contractor providing services to the taxpayer and the total development fees credited in exchange for the construction of, contribution to or dedication of real property for providing public infrastructure, public safety or other public services necessary to the development. The real property must be the subject of the development fees.
(C) “Development fees” means fees imposed to offset capital costs of providing public infrastructure, public safety or other public services to a development and authorized pursuant to A.R.S. section 9-463.05, A.R.S. section 11-1102 or A.R.S. title 48 regardless of the jurisdiction to which the fees are paid.
(11) For taxable periods beginning from and after July 1, 2008, and ending before January 1, 2017, the gross proceeds of sales or gross income derived from a contract to provide and install a solar energy device. The contractor shall register with the Arizona Department of Revenue as a solar energy contractor. By registering, the contractor acknowledges that it will make its books and records relating to sales of solar energy devices available to the Department of Revenue and the city, as applicable, for examination.
(12) The gross proceeds of sales or gross income derived from a contract with the owner of real property or improvements to real property for the maintenance, repair, replacement, or alteration of existing property is not subject to tax under this section if the contract does not include modification activities, except as specified in this paragraph. The gross proceeds of sales or gross income derived from a de minimis amount of modification activity does not subject the contract or any part of the contract to tax under this section. for the purposes of this paragraph:
a. Any term not defined in this paragraph that is defined in A.R.S. Section 42-5075 has the same meaning prescribed in A.R.S. Section 42-5075.
b. Tangible personal property that is incorporated or fabricated into a project described in this subsection may be subject to the amount prescribed in section 19-415.1.
c. Each contract is independent of any other contract, except that any change order that directly relates to the scope of work of the original contract shall be treated the same as the original contract under this Article, regardless of the amount of modification activities included in the change order. If a change order does not directly relate to the scope of work of the original contract, the change order shall be treated as a new contract, with the tax treatment of any subsequent change order to follow the tax treatment of the contract to which the scope of work of the subsequent change order directly relates.
d. This paragraph does not apply to a contract that primarily involves surface or subsurface improvements to land and that is subject to A.R.S. Title 28, Chapter 19, 20 or 22 or A.R.S. Title 34, Chapter 2 or 6 even if the contract also includes vertical improvements. If a city or town imposes a tax on contracts that are subject to procurement processes under those provisions, the city or town shall include in the request for proposals a notice to bidders when those projects are subject to the tax. This subdivision does not apply to contracts with:
1. Community facilities districts, fire districts, county television improvement districts, community park maintenance districts, cotton pest control districts, hospital districts, pest abatement districts, health service districts, agricultural improvement districts, county free library districts, county jail districts, county stadium districts, special health care districts, public health services districts, theme park districts, regional attraction districts or revitalization districts.
2. Any special taxing district not specified in item 1 of this subdivision if the district does not substantially engage in the modification, maintenance, repair, replacement, or alteration of surface or subsurface improvements to land.
(13) The gross proceeds of sales or gross income derived from a contract entered into for the construction of a mixed waste processing facility that is located on a municipal solid waste landfill and that is constructed for the purpose of recycling solid waste or producing renewable energy from landfill waste. For the purposes of this paragraph:
a. "Mixed waste processing facility" means a solid waste facility that is owned, operated, or used for the treatment, processing or disposal of solid waste, recyclable solid waste, conditionally exempt small quantity generator waste or household hazardous waste. For the purposes of this subdivision, "conditionally exempt small quantity generator waste", "household hazardous waste" and "solid waste facility" have the same meanings prescribed in A.R.S. Section 49-701, except that solid waste facility does include a site that stores, treats, or processes paper, glass, wood, cardboard, household textiles, scrap metal, plastic, vegetative waste, aluminum, steel or other recyclable material.
b. "Municipal solid waste landfill" has the same meaning prescribed in A.R.S. Section 49-701.
c. "Recycling" means collecting, separating, cleansing, treating, and reconstituting recyclable solid waste that would otherwise become solid waste, but does not include incineration or other similar processes.
d. "Renewable energy" has the same meaning prescribed in A.R.S. Section 41-1511.
(c) Subcontractor means a construction contractor performing work for either:
(1) A construction contractor who has provided the subcontractor with a written declaration that he is liable for the tax for the project and has provided the subcontractor his city privilege license number.
(2) An owner-builder who has provided the subcontractor with a written declaration that:
a. The owner-builder is improving the property for sale; and
b. The owner-builder is liable for the tax for such construction contracting activity; and
c. The owner-builder has provided the contractor his city privilege license number.
(3) A person selling new manufactured buildings who has provided the subcontractor with a written declaration that he is liable for the tax for the site preparation and set-up; and provided the subcontractor his city privilege license number.
"Subcontractor" also includes a construction contractor performing work for another subcontractor as defined above.
(d) Notwithstanding the tax rate identified elsewhere in this section, an additional tax in an amount equal to one-tenth of one (0.1) percent of the gross income from any business activity taxable under this section is imposed pursuant to Chapter IV, Section 5 of the Charter of the City of Tucson.
(Ord. No. 6674, § 3, 3-23-87; Ord. No. 7446, § 2.4, 7-2-90; Ord. No. 8440, § 9, 1-23-95; Ord. No. 9322, § 2, 11-22-99; Ord. No. 9652, § 1, 1-14-02; Ord. No. 10040, § 2, 9-20-04; Ord. No. 10361, § 4, 12-19-06; Ord. No. 10524, § 2, 5-13-08, eff. 7-1-08; Ord. No. 10754, § 1, 1-20-10, eff. 9-1-06; Ord. No. 10911, § 2, 8-9-11, eff. 7-29-10; Ord. No. 11479, § 1, 8-8-17; Ord. No. 11485, eff. 8-8-17; Ord. No. 11518, eff. 1-23-18; Ord. No. 11936, § 4, 7-12-22)
Editor’s note – Section 4 of Ord. No. 11936, adopted July 12, 2022, provides for an effective date of Jan. 1, 2015.
(a) A person that is either a prime contractor subject to tax under section 19-415 or a subcontractor working under the control of such a prime contractor, that purchases tangible personal property, the purchase price of which was excluded from the tax base under the retail classification under section 19-465(11) or was excluded from the use tax under section 19-660(11) at the time of purchase, and that incorporates or fabricates the tangible personal property into a project described in section 19-415(b)(12) and A.R.S. Section 42-5075, subsection O is liable for an amount equal to any tax that a seller would have been required to pay under Section 19-460 and A.R.S. Title 42, Chapter 5 as follows:
1. The amount of liability shall be calculated and reported based on the location of the project and the taxes imposed under Section 19-460 and A.R.S. Title 42, Chapter 5.
2. All deductions, exemptions, and exclusions for the cost of tangible personal property provided in section 19-415 apply to the tangible personal property incorporated or fabricated into the project.
4. The amount of liability shall be reported within the reporting period that includes the month in which the person incorporates or fabricates the tangible personal property into the project.
5. The person is not liable for the amount if the contractor who hired the person executes and provides to the person a certificate stating that the contractor providing the certificate is liable for any amount due under this subsection. The Department of Revenue shall prescribe the form of the certificate. If the person has reason to believe that the information contained on the certificate is erroneous or incomplete, the city may disregard the certificate. The contractor providing the certificate is liable for the amount that otherwise would be due from the person under this subsection.
(b) A person that purchased tangible personal property, the purchase price of which was excluded from the tax base under section 19-465(k) or was excluded from the use tax under section 19-660(k) at the time of purchase, whose transaction privilege tax license has been canceled and that subsequently uses, consumes, sells or discards the tangible personal property is liable for an amount of tax determined under this subsection. For the purposes of this subsection:
1. If the tangible personal property is incorporated or fabricated into a project described in section 19-415(b)(12) and A.R.S. section 42-5075, subsection O, or otherwise used or consumed by the person, the amount of liability shall be calculated and reported based on the person's purchase price of the tangible personal property, the location of the project, use or consumption and the taxes imposed under section 19-460 and A.R.S. Title 42, Chapter 5.
2. If the tangible personal property is sold in a manner that is not subject to tax under this article or is discarded, the amount shall be calculated and reported based on the payment received by the person, the location of the person's principal place of business in this state and the taxes imposed under section 19-460 and A.R.S. Title 42, Chapter 5.
3. The person is not liable under this subsection for any amount if the person discards the tangible personal property and does not receive payment of any kind.
4. The amount of liability shall be reported on or before the business day preceding the last business day of the month following the month in which the person uses the tangible personal property in a manner described in paragraph 1 or 2 of this subsection. No amount is due under this subsection at any time that the person stores the tangible personal property without using it in a manner described in paragraph 1 or 2 of this subsection.
6. This subsection does not apply to tangible personal property that is incorporated or fabricated into any project under a contract that would otherwise be excluded from the tax base under section 19-415 and A.R.S. Section 42-5075, without regard to section 19-415(B)(12) and A.R.S. Section 42-5075, subsection O.
7. The person is not liable for the amount if the contractor who hired the person executes and provides to the person a certificate stating that the contractor providing the certificate is liable for any amount due under this subsection for tangible personal property incorporated or fabricated into a project described in A.R.S. Section 42-5075, subsection O. The Department shall prescribe the form of the certificate. If the person has reason to believe that the information contained on the certificate is erroneous or incomplete, the Department may disregard the certificate. The contractor providing the certificate is liable for the amount that otherwise would be due from the person under this subsection.
(c) A person that fails to report or pay any amount due under subsection a or b of this section is liable for interest in a manner consistent with A.R.S. Section 42-1123 and penalties in a manner consistent with A.R.S. Section 42-1125.
(d) If a person has paid an amount described in this section on tangible personal property that the person reasonably believed to be described under section 19-415(B)(12) A.R.S. Section 42-5075, subsection O and a final determination is made that section 19-415(B)(12) and A.R.S. Section 42-5075, subsection O does not apply, the person is entitled to an offset for the amount paid under this section against the amount of tax liability assessed under this article.
(Ord. No. 11936, § 5, 7-12-22)
Editor’s note – Section 5 of Ord. No. 11936, adopted July 12, 2022, provides for an effective date of Jan. 1, 2015.
(a) Tax rate. The tax shall be equal to two and six-tenths (2.6) percent of the gross income from the business activity upon every person engaging or continuing in business as a speculative builder within the city.
(1) The gross income of a speculative builder considered taxable shall include the total selling price from the sale of improved real property at the time of closing of escrow or transfer of title.
(2) “Improved real property” means any real property:
a. Upon which a new structure has been substantially completed; or
b. Where improvements have been made to land containing no structure (such as paving or landscaping); or
c. Which has been reconstructed as provided by section 19-416.2; or
d. Where water, power, and streets have been constructed to the property line.
For the purpose of paragraph a, once a structure has been deemed "substantially complete" subsequent improvements to the structure shall not be considered for the purpose of determining the date on which a sale transaction would be taxable under this section.
(3) “Sale of improved real property” includes any form of transaction, whether characterized as a lease or otherwise, which in substance is a transfer of title of, or equitable ownership in, improved real property and includes any lease of the property for a term of thirty (30) years or more (with all options for renewal being included as a part of the term). In the case of multiple unit projects, “sale” refers to the sale of the entire project or to the sale of any individual parcel or unit.
(4) "Partially improved real property", as used in this section, means any improved real property, as defined in subsection (a)(2) above, being developed for sale, where the improvement to such property is not substantially complete at the time of the sale.
(b) Exclusions.
(1) In cases involving reconstruction contracting, the speculative builder may exclude from gross income the prior value allowed for reconstruction contracting in determining his taxable gross income, as provided by section 19-416.2.
(2) Neither the cost nor the fair market value of the land which constitutes part of the improved real property sold may be excluded or deducted from gross income subject to the tax imposed by this section.
(3) Reserved.
(4) A speculative builder may exclude gross income from the sale of partially improved real property as defined in (a)(4) above to another speculative builder only if all of the following conditions are satisfied:
a. The speculative builder purchasing the partially improved real property has a valid municipal privilege tax license for construction contracting as a speculative builder; and
b. At the time of the transaction, the purchaser provides the seller with a properly completed written declaration that the purchaser assumes liability for and will pay all privilege taxes which would otherwise be due the city at the time of sale of the partially improved real property; and
c. The seller also:
1. Maintains proper records of such transactions in a manner similar to the requirements provided in this chapter relating to sales for resale; and
2. Retains a copy of the written declaration provided by the buyer for the transaction; and
3. Is properly licensed with the city as a speculative builder.
(5) For taxable periods beginning from and after July 1, 2008, the portion of gross proceeds of sales or gross income attributable to the actual direct costs of providing architectural or engineering services that are incorporated in a contract is not subject to tax under this section. For the purposes of this subsection, “direct costs” means the portion of the actual costs that are directly expended in providing architectural or engineering services.
(c) Occurrence of liability. Tax liability for speculative builders occurs at close of escrow or transfer of title, whichever occurs earlier, and is subject to the following provisions, relating to exemptions, deductions and tax credits:
(1) Exemptions.
a. The gross proceeds of sales or gross income attributable to the purchase of machinery, equipment or other tangible personal property that is exempt from or deductible from privilege or use tax under:
1. Section 19-465, subsections (7) and (16).
2. Section 19-660, subsections (7) and (16).*
shall be exempt or deductible, respectively, from the tax imposed by this section.
b. The gross proceeds of sales or gross income received from a contract for the construction of an environmentally controlled facility for the raising of poultry for the production of eggs and the sorting, or cooling and packaging of eggs shall be exempt from the tax imposed under this section.
c. The gross proceeds of sales or gross income that is derived from the installation, assembly, repair or maintenance of cleanrooms that are deducted from the tax base of the retail classification pursuant to section 19-465, subsection (7) shall be exempt from the tax imposed under this section.
d. The gross proceeds of sales or gross income that is derived from a contract entered into with a person who is engaged in the commercial production of livestock, livestock products or agricultural, horticultural, viticultural or floricultural crops or products in this state for the construction, alteration, repair, improvement, movement, wrecking or demolition or addition to or subtraction from any building, highway, road, excavation, manufactured building or other structure, project, development or improvement used directly and primarily to prevent, monitor, control or reduce air, water or land pollution shall be exempt from the tax imposed under this section.
e. Any amount attributable to development fees that are incurred in relation to the construction, development or improvement of real property and paid by the taxpayer as defined in the model city tax code or by a contractor providing services to the taxpayer shall be exempt from the tax imposed under this section. For the purposes of this paragraph:
1. The attributable amount shall not exceed the value of the development fees actually imposed.
2. The attributable amount is equal to the total amount of development fees paid by the taxpayer or by a contractor providing services to the taxpayer and the total development fees credited in exchange for the construction of, contribution to or dedication of real property for providing public infrastructure, public safety or other public services necessary to the development. The real property must be the subject of the development fees.
3. “Development fees” means fees imposed to offset capital costs of providing public infrastructure, public safety or other public services to a development and authorized pursuant to A.R.S. section 9-463.05, A.R.S. section 11-1102 or A.R.S. title 48 regardless of the jurisdiction to which the fees are paid.
f. The gross proceeds of sales or gross income that is derived from the value of existing tenant leases in place at the time of the sale shall be exempt from tax imposed under this section. The value of the in-place leases shall be determined as of the close of escrow or transfer of title as follows:
1. For a residential lease the value of the in-place lease is the total value of all expected lease receipts through the end of the current lease term multiplied by a factor of 1.5. Expected lease receipts includes non-refundable deposits and excludes all refundable deposits regardless of whether the refundable deposit may be forfeited.
2. For a commercial lease the value of the in-place lease is the present value of the expected lease receipts through the end of the current lease term or first option of either party to terminate the lease, whichever is less. The discount rate used to calculate the present value shall be the 100% Mid-term Applicable Federal Rate published by the Internal Revenue Service associated with the payment terms of the lease related to the month preceding the close of escrow plus three (3) percentage points.
A transaction, whether characterized as a lease or otherwise, which in substance is a transfer of title of or equitable ownership in improved real property, including any lease of the property for a term of thirty (30) years or more (with all options for renewal being included as a part of the term) is deemed to be a sale of improved real property pursuant to subsection (a)(3) of this section and is not considered an in-place lease.
(2) Deductions.
a. All state and county taxes associated with the project and reported and paid to the Department of Revenue by a contractor constructing the improvements on the property shall be deducted from the selling price.
b. All amounts subject to the tax shall be allowed a deduction in the amount of thirty-five (35) percent.
c. The gross proceeds of sales or gross income that is derived from a contract entered into for the installation, assembly, repair or maintenance of income-producing capital equipment, as defined in section 19-110, that is deducted from the retail classification pursuant to section 19-465(7), that does not become a permanent attachment to a building, highway, road, railroad, excavation or manufactured building or other structure, project, development or improvement shall be exempt from the tax imposed by this section. If the ownership of the realty is separate from the ownership of the income- producing capital equipment, the determination as to permanent attachment shall be made as if the ownership was the same. The deduction provided in this paragraph does not include gross proceeds of sales or gross income from that portion of any contracting activity which consists of the development of, or modification to, real property in order to facilitate the installation, assembly, repair, maintenance or removal of the income- producing capital equipment. For purposes of this paragraph, “permanent attachment” means at least one (1) of the following:
1. To be incorporated into real property.
2. To become so affixed to real property that it becomes part of the real property.
3. To be so attached to real property that removal would cause substantial damage to the real property from which it is removed.
d. For taxable periods beginning from and after July 1, 2008, and ending before January 1, 2017, the gross proceeds of sales or gross income derived from a contract to provide and install a solar energy device. The contractor shall register with the Department of Revenue as a solar energy contractor. By registering, the contractor acknowledges that it will make its books and records relating to sales of solar energy devices available to the Department of Revenue and the city, as applicable, for examination.
(3) Tax credits. The following tax credits are available to owner-builders or speculative builders, not to exceed the tax liability against which such credits apply, provided such credits are documented to the satisfaction of the tax collector:
a. A tax credit equal to the amount of city privilege or use tax, or the equivalent excise tax, paid directly to a taxing jurisdiction or as a separately itemized charge paid directly to the vendor with respect to the tangible personal property incorporated into the said structure or improvement to real property undertaken by the owner-builder or speculative builder.
b. A tax credit equal to the amount of privilege taxes paid to this city, or charged separately to the speculative builder, by a construction contractor, on the gross income derived by said person from the construction of any improvement to the real property.
c. A tax credit equal to the amount of privilege taxes paid to this city by any speculative builder on the gross income derived by said person from the sale of improved real property pursuant to subsections (a)(2)(B) or (a)(2)(D) of this section against the gross income of any speculative builder from the sale of improved real property pursuant to subsection (a)(2)(A).
d. No credits provided herein may be claimed until such time that the gross income against which said credits apply is reported.
(d) Notwithstanding the tax rate identified elsewhere in this section, an additional tax in an amount equal to one-tenth of one (0.1) percent of the gross income from any business activity taxable under this section is imposed pursuant to Chapter IV, Section 5 of the Charter of the City of Tucson.
(Ord. No. 6674, § 3, 3-23-87; Ord. No. 6938, § 9, 4-25-88; Ord. No. 7446, § 2.6, 7-2-90; Ord. No. 9322, § 3, 11-22-99; Ord. No. 9652, § 2, 1-14-02; Ord. No. 10040, § 1, 9-20-04; Ord. No. 10361, § 5, 12-19-06; Ord. No. 10524, § 3, 5-13-08, eff. 7-1-08; Ord. No. 10754, § 2, 1-20-10, eff. 9-1-06; Ord. No. 10911, § 3, 8-9-11, eff. 7-29-10; Ord. No. 11479, § 1, 8-8-17; Ord. No. 11485, eff. 8-8-17; Ord. No. 11518, eff. 1-23-18; Ord. No. 11936, § 6, 7-12-22)
Editor’s note – Section 6 of Ord. No. 11936, adopted July 12, 2022, provides for an effective date of April 1, 2019.
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