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The tax levied by this division does not apply to the storage or use in this city of tangible personal property acquired in this city, the gross income from the sale, rental, lease, or license of which were included in the measure of the tax imposed by division 4 of this chapter; provided, however, that any person who has acquired tangible personal property from a vendor in this city without paying the city privilege tax because of a representation to the vendor that the property was not subject to such tax, when such claim is not sustainable, may not claim the exclusion from such use tax provided by this section.
(Ord. No. 9840, § 5, 5-5-03)
The storage or use in this city of the following tangible personal property is exempt from the use tax imposed by this division:
(1) Tangible personal property brought into the city by an individual who was not a resident of the city at the time the property was acquired for his own use, if the first actual use of such property was outside the city, unless such property is used in conducting a business in this city.
(2) Tangible personal property, the value of which does not exceed the amount of one thousand dollars ($1,000.00) per item, acquired by an individual outside the limits of the city for his personal use and enjoyment.
(3) Charges for delivery, installation, or other customer services, as prescribed by regulation.
(4) Charges for repair services, as prescribed by regulation.
(5) Separately itemized charges for warranty, maintenance, and service contracts.
(6) Prosthetics.
(7) Income-producing capital equipment.
(8) Rental equipment and rental supplies.
(9) Mining and metallurgical supplies.
(10) Motor vehicle fuel and use fuel which are used upon the highways of this state and upon which a tax has been imposed under the provisions of A.R.S. title 28, chapter 16, article I or II.
(11) Tangible personal property purchased by:
(a) a construction contractor, but not an owner-builder, when such person holds a valid privilege license for engaging or continuing in the business of construction contracting, and where the property acquired is incorporated into any structure or improvement to real property in fulfillment of a construction contract.
(b) A person that is not subject to tax under Section 415(b)(12) and that has been provided a copy of a certificate under A.R.S. 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.
(12) Sales of motor vehicles to nonresidents of this state for use outside this state if the vendor ships or delivers the motor vehicle to a destination outside this state.
(13) Tangible personal property which directly enters into and becomes an ingredient or component part of a product sold in the regular course of the business of job printing, manufacturing, or publication of newspapers, magazines or other periodicals. Tangible personal property which is consumed or used up in a manufacturing, job printing, publishing, or production process is not an ingredient nor component part of a product.
(14) Rental, leasing, or licensing for use of film, tape, or slides by a theater or other person taxed under section 19-410, or by a radio station, television station, or subscription television system.
(15) Food served to patrons for a consideration by any person engaged in a business properly licensed and taxed under section 19-455, but not food consumed by owners, agents, or employees of such business.
(16) Tangible personal property acquired by a qualifying hospital, qualifying community health center or a qualifying health care organization, except when the property is in fact used in activities resulting in gross income from unrelated business income as that term is defined in 26 U.S.C. section 512.
(17) (Reserved).
(18) The following tangible personal property purchased by persons engaging or continuing in the business of farming, ranching, or feeding livestock, poultry or ratites:
a. Seed, fertilizer, fungicides, seed treating chemicals, and other similar chemicals.
b. Feed for livestock, poultry or ratites, including salt, vitamins, and other additives to such feed.
c. Livestock, poultry or ratites purchased or raised for slaughter, but not including livestock purchased or raised for production or use, such as milk cows, breeding bulls, laying hens, riding or work horses.
d. Neat animals, horses, asses, sheep, swine, or goats acquired for the purpose of becoming breeding or production stock, including the acquisition of breeding or ownership shares in such animals.
This exemption shall not be construed to include machinery, equipment, fuels, lubricants, pharmaceuticals, repair and replacement parts, or other items used or consumed in the running, maintenance, or repair of machinery, equipment, buildings, or structures used or consumed in the business of farming, ranching, or feeding of livestock, poultry or ratites.
(19) Groundwater measuring devices required by A.R.S. section 45-604.
(20) Paintings, sculptures, or similar works of fine art, provided that such works of fine art are purchased from the original artist; and provided further that “art creations”, such as jewelry, macrame, glasswork, pottery, woodwork, metalwork, furniture, and clothing, when such “art creations” have a dual purpose, both aesthetic and utilitarian, are not exempt, whether purchased from the artist or from another.
(21) Aircraft acquired for use outside the state, as prescribed by regulation.
(22) Food products sold by food producers as provided for by A.R.S. Sections 3-561, 3-562, and 3-563.
(23) (Reserved).
(24) Sales of food and drink to a person who is engaged in 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 such employees’ hours of employment.
(25) (Reserved).
(26) (Reserved).
(28) 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.
b. Electronic or digital media materials.
(29) Food, beverages, condiments, and accessories used for serving food and beverages to a commercial airline, as defined in A.R.S. § 42-5061(A)(49), that serves the food and beverages to its passengers, without additional charge, for consumption in flight. For the purposes of this subsection, “accessories” means paper plates, plastic eating utensils, napkins, paper cups, drinking straws, paper sacks or other disposable containers, or other items which facilitate the consumption of the food.
(30) Wireless telecommunication equipment that is held for sale or transfer to a customer as an inducement to enter into or continue a contract for telecommunication services that are taxable under section 19-470.
(31) Tangible personal property sold 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 transaction privilege tax under A.R.S. Section 42-5073.
(32) Alternative fuel as defined in A.R.S. section 1-215, by a used oil fuel burner who has received a Department of Environmental Quality permit to burn used oil or used oil fuel under A.R.S. section 49-426 or section 49-480.
(33) Food, beverages, condiments and accessories purchased by or for a public educational entity pursuant to any of the provisions of A.R.S. Title 15; including a regularly organized private or parochial school that offers an educational program for grade twelve (12) or under which may be attended in substitution for a public school pursuant to A.R.S. § 15-802; to the extent such items are to be prepared or served to individuals for consumption on the premises of a public educational entity during school hours. For the purposes of this subsection, “accessories” means paper plates, plastic eating utensils, napkins, paper cups, drinking straws, paper sacks or other disposable containers, or other items which facilitate the consumption of the food.
(35) The diversion of gas from a pipeline by a person engaged in the business of operating a natural or artificial gas pipeline, for the sole purpose of fueling compressor equipment to pressurize the pipeline, is not a sale of the gas to the operator of the pipeline.
(36) Food, beverages, condiments, and accessories purchased by or for a nonprofit charitable organization that has qualified as an exempt organization under 26 U.S.C section 501(c)(3) and regularly serves meals to the needy and indigent on a continuing basis at no cost. For the purposes of this subsection, “accessories” means paper plates, plastic eating utensils, napkins, paper cups, drinking straws, paper sacks or other disposable containers, or other items which facilitate the consumption of the food.
(37) Sales of motor vehicles that use alternative fuel if such 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 A.R.S. § 1-215.
(38) The storage, use, or consumption of tangible personal property in the city by a school district or charter school.
(39) 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.
(40) Magazines or other periodicals or other publications by this state to encourage tourist travel.
(41) Paper machine clothing, such as forming fabrics and dryer felts, sold to a paper manufacturer and directly used or consumed in paper manufacturing.
(42) 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 contractor or subcontract.
(43) Coal, petroleum, coke, natural gas, virgin fuel oil and electricity sold to a qualified environmental technology manufacturer, producer or processor as defined in A.R.S. § 41-1514.02 and directly used or consumed in the generation or provision of on-site power or energy solely for environmental technology manufacturing, producing or processing or environmental protection. This paragraph shall apply for twenty (20) 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 who does not manufacture paper, the time period shall begin with the date the first manufacturing, processing or production equipment is placed in service.
(44) 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 A.R.S. § 41-1514.02. This subsection applies for ten (10) full consecutive calendar or fiscal years after the start of initial construction.
(45) (Reserved).
(46) The transfer of title or possession of coal back and forth between an owner or operator of a power plant and a person who 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; and
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.
(47) Computer data center equipment purchased by the owner, operator, or qualified colocation tenant of a computer data center that is certified by the Arizona Commerce Authority under A.R.S. 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 A.R.S. Section 41-1519.
(48) (Reserved).
(49) The purchase manufacture, wholesale, or distribution to or among any wholesalers, distributors or retailers, of food items intended for human consumption as defined by rule adopted pursuant to A.R.S. Section 42-5106 or items prescribed by A.R.S. Section 42-5106, subsection D for home consumption or for consumption on the premises.
(50) The purchase of any container or packaging used exclusively for transporting, protecting, or consuming food items intended for human consumption as defined by rule adopted pursuant to A.R.S. Section 42-5106 or items prescribed by A.R.S. Section 42-5106, subsection D for home consumption or for consumption on the premises.
(Ord. No. 9840, § 5, 5-5-03; Ord. No. 10361, § 15, 12-19-06; Ord. No. 10911, § 7, 8-9-11, eff. 9-30-09; Ord. No. 11183, § 5, 6-17-14, eff. 1-1-13*; Ord. No. 11936, § 17, 7-12-22)
*Editor’s note – Ord. No. 11183, § 18, adopted June 17, 2014, provides that the amendments made to Sec. 19-660(40) shall be effective from and after January 1, 2007.
Section 17 of Ord. No. 11936, adopted July 12, 2022, provides for the following effective dates per subsection: (11) January 1, 2015; (31) January 1, 2018; (46) July 24, 2014; (47) September 12, 2013; (48) December 1, 2017; (49) August 3, 2018; (50) August 3, 2018.
REGULATIONS-PRIVILEGE AND EXCISE TAXES
(a) Return required. For the purposes of proper administration of this article and to prevent evasion of taxes imposed, brokers shall be wherever necessary treated as taxpayers for all purposes, and shall file a return and remit the tax imposed on the activity on behalf of the principal. No deduction shall be allowed for any commissions or fees retained by such broker, except as provided in section 19-405, relating to advertising commissions.
(b) Brokers for Vendors. A broker acting for a seller, lessor or other similar person deriving gross income in a category upon which this article imposes a tax shall be liable for such tax, even if his principal would not be subject to the tax if he conducted such activity in his own behalf, by reason of the activity being deemed a "casual" one. For example:
(1) An auctioneer or other sales agent of tangible personal property is subject to the tax imposed upon retail sales, even if such sales would be deemed "casual" if his principal had sold such items himself.
(2) A property manager is subject to the tax imposed upon rental, leasing or licensing of real property, even if such rental, leasing or licensing would be deemed "casual" if his principal managed such real property himself.
(c) Brokers for Vendees. A broker acting solely for a buyer, lessee, tenant or other similar person who is a party to a transaction which may be subject to the tax, shall be liable for such tax and for filing a return in connection with such tax only to the extent his principal is subject to the tax.
(d) Liability of Broker and Principal. The liability of a broker does not relieve the principal of liability except upon presentation to the tax collector of proof of payment of the tax, and only to the extent of the correct payment. The broker shall be relieved of the responsibility to file and pay taxes upon the filing and correct payment of such taxes by the principal.
(e) Reserved.
(f) Location of Business. Retail sales by brokers acting for another person shall be deemed to have occurred at the regular business location of the broker, in a manner similar to that used to determine "out-of-city sales", provided an auctioneer is deemed to be engaged in business at the site of each auction.
(Ord. No. 6674, § 3, 3-23-87; Ord. No. 6938, § 19, 4-25-88)
(a) Delivery Charges. Delivery charges exist only when the total charges to the ultimate customer or consumer include, as separately charged to the ultimate customer, charges for delivery to the ultimate consumer, whether the place of delivery is within or without the city, and when the taxpayer's books and records show the separate delivery charges.
(1) Separate statement required. Identification to the customer or consumer that the listed price has "delivery included" or other similar expression is insufficient to show the delivery as a separate charge. Only the separately stated charge for the delivery shall be deemed a "delivery charge."
(2) Freight in. Charges for delivery from place of production or the manufacturer to the vendor either directly or through a chain of wholesalers or jobbers or other middlemen are deemed "freight in" and are not considered delivery.
(b) Installation. "Installation," as used in this definition, relates only to tangible personal property. Installation to real property is deemed construction contracting in this article. Examples of installation relating to tangible personal property are installing a radio in an automobile; applying sun screens on the windows of a boat; installing cabinets, carpeting or built-in appliances to a camper or motorized recreational vehicle.
(c) Exclusion. Repair of tangible personal property is not included in this definition. See regulation 19-465.1.
(d) Direct Customer Services. "Direct customer services" means services other than repair rendered directly to the customer. Services or labor provided by any person prior to the transfer of tangible personal property to the customer or consumer are not included in this definition. In the following examples, the requirements of subsection (e) below are referred to by the words "identify" or "identification":
(1) A retailer sells a customer a one hundred dollar ($100.00) "plug-in" appliance, with a twenty-five dollar ($25.00) delivery and installation charge. If the retailer identifies the twenty-five dollar ($25.00) delivery and installation charge, it is a charge for direct customer services.
(2) A caterer charges his customer one thousand dollars ($1,000.00) for the food and drink served, three hundred dollars ($300.00) for setup and site cleanup, and five hundred dollars ($500.00) for bartender and waiters. If all charges are properly identified, only the three hundred dollars ($300.00) for setup and cleanup is a charge for direct customer services, and the one thousand five hundred dollars ($1,500.00) for food and service is restauranting gross income.
(3) Persons engaged in engraving on wood metal, stone, etc., or persons engaged in retouching photographs or paintings may consider such charges for labor as direct customer services.
(4) All charges by a photographer resulting in the sale of a photograph (sitting charges, developing, making enlargements, retouching, etc.) for services that occur prior to transfer of tangible personal property are not direct customer services.
(5) An equipment rental company charging twenty-five dollars ($25.00) for delivery may consider such delivery charge as a charge for direct customer service only if such charge is properly identified.
(6) Even if identified, charges for labor incurred in the production of any manufactured article or of a custom-made article (jewelry, artwork, tailoring, draperies, etc.) are not included in this definition, as such labor occurs prior to the transfer of property.
(e) Recordkeeping Requirements.
(1) Any person who engages in transactions involving these services must:
a. Separately bill, invoice or charge the customer for such services in a manner by which the customer or consumer may readily identify the specific dollar amount of the service charge; and
b. Maintain business books and records in a manner in which the separate charge for such services can be clearly identified, to the satisfaction of the tax collector.
(2) Rendering a statement to a customer for a transaction involving such services and the transfer of tangible personal property which only indicates the total amount of the charges with words such as "services included" or, "charge includes labor and parts" or similar a expression does not satisfy the requirements of this subsection.
(Ord. No. 6674, § 3, 3-23-87)
When in the opinion of the tax collector it is necessary for efficient administration of this article, he may regard any salesman, representative, peddler, canvasser or agent of any dealer, distributor, supervisor or employer under whom he operates or from whom he obtains tangible personal property for sale, rental, lease or license as a retailer for the purposes of this article, irrespective of whether he is making sales, rentals, leases or licenses on his own behalf or on behalf of others. The tax collector may also regard such dealer, distributor, supervisor or employer as a retailer for the purposes of this article.
(Ord. No. 6674, § 3, 3-23-87)
Sales to Native Americans or tribal councils by vendors located within the city shall be deemed sales within the city, unless all of the following conditions exist:
(1) The vendor has properly accounted for such sales, in a manner similar to the recordkeeping requirements for out-of-city sales; and
(2) All of the following elements of the sale exist:
a. Solicitation and placement of the order occurs on the reservation; and
b. Delivery is made to the reservation; and
c. Payment originates from the reservation.
(Ord. No. 6938, § 20, 4-25-88; Ord. No. 9322, § 14, 11-22-99)
The following activities are considered remediation contracting and are exempt:
(1) Excavation, transportation, treatment, and/or disposal of contaminated soil for purposes of site remediation (rather than characterization);
(2) Installation of groundwater extraction and/or injection wells for purposes of groundwater remediation;
(3) Installation of pumps and piping into groundwater extraction wells for remediation purposes;
(4) Installation of vapor extraction wells for the purpose of soil or groundwater remediation;
(5) Construction of remediation systems, such as groundwater treatment plants, vapor extraction systems, or air injection systems;
(6) Connection of remediation systems to utilities;
(7) Abandonment of groundwater or vapor extraction wells;
(8) Removal/demolition of remediation systems;
(9) Capping/closure construction activities; and
(10) Service or handling charges for subcontracted remediation contracting activities.
(Ord. No. 9004, § 1(3), 1-5-98)
Editors Note: Ordinance No. 8794, § 2, adopted January 6, 1997, repealed regulation 19-100.5 in its entirety. Formerly, such regulation pertained to remediation contracting and derived from Ord. No. 8793, § 2, 1-6-97. Subsequently, Ord. No. 9004, § 1, adopted January 5, 1998, added a new regulation to read as herein set out.
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