| 67 | | - | Be it enacted by the Legislature of the State of Arizona: Section 1. Section 42-5040.01, Arizona Revised Statutes, as added by Laws 2024, chapter 142, section 1, is amended to read: START_STATUTE42-5040.01. Sourcing of tangible personal property; third-party service providers; certification A. Beginning on or before January 1, 2026 2028, the department shall establish a process by which a third-party provider that offers sourcing services to taxpayers for transactions involving tangible personal property may become certified in this state. A certified third-party service provider shall meet all of the requirements established by the department. B. The director shall: 1. Supervise and regulate all persons required by this section to obtain certification. 2. Establish minimum standards for certification and a quality assurance program for authorized third parties to ensure that a certified third-party service provider is complying with the minimum standards. 3. Post a list of certified third-party service providers on the department's website. 4. Adopt rules to administer and enforce this section. C. The director may: 1. Investigate and audit third-party service providers as necessary to ensure compliance with this section. 2. Require that a certified third-party service provider or any employees or agents of the certified third-party service provider be certified by the department to perform certain functions. D. A person may apply to the department to be a certified third-party service provider on a form prescribed and furnished by the director. The person shall include with the application all documents and fees prescribed by the director. The application shall contain, at a minimum: 1. The name, telephone number and address of the applicant and primary contact person. 2. Verification that the applicant meets the requirements prescribed by the director. 3. Other information the director requires. E. A taxpayer may use a certified third-party service provider to assist the taxpayer in sourcing transactions involving tangible personal property. A taxpayer that uses a certified third-party service provider for sourcing transactions involving tangible personal property is not liable for failing to pay the correct amount of tax due to an error in sourcing the transaction. The taxpayer is liable for failing to pay the correct amount of tax if the failure to pay the correct amount of tax was due to an error other than an error in sourcing the transaction. A certified third-party service provider is liable for the amount of tax the taxpayer failed to pay if the failure to pay the correct amount of tax was due to an error in sourcing the transaction, unless the error was due to incorrect information the certified third-party service provider received from the department. END_STATUTE Sec. 2. Section 42-5061, Arizona Revised Statutes, is amended to read: START_STATUTE42-5061. 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 apply 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 1. 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 O. 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 O. (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 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 O, 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 O, 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 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. (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 O, 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 June 30, 2024 December 31, 2026 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. 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. V. 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. W. 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. 3. Section 42-5159, Arizona Revised Statutes, is amended to read: START_STATUTE42-5159. 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. (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. 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, 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, 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 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. (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, 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 June 30, 2024 December 31, 2026 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. 4. Section 43-1183, Arizona Revised Statutes, is amended to read: START_STATUTE43-1183. Credit for contributions to school tuition organization A. Beginning from and after June 30, 2006, a credit is allowed against the taxes imposed by this title for the amount of voluntary cash contributions made by the taxpayer during the taxable year to a school tuition organization that is certified pursuant to chapter 15 of this title at the time of donation. B. The amount of the credit is the total amount of the taxpayer's contributions for the taxable year under subsection A of this section and is preapproved by the department of revenue pursuant to subsection D of this section. C. The department of revenue: 1. Shall not allow tax credits under this section and section 20-224.06 that exceed in the aggregate a combined total of $10,000,000 $135,000,000 in any fiscal year 2024-2025 and each fiscal year thereafter. Beginning in fiscal year 2007-2008, the aggregate dollar amount of the tax credit cap from the previous fiscal year shall be annually increased by twenty percent. Beginning in fiscal year 2020-2021, the aggregate dollar amount of the tax credit cap from the previous fiscal year shall be increased as follows: (a) For fiscal year 2020-2021, by fifteen percent. (b) For fiscal year 2021-2022, by ten percent. (c) For fiscal year 2022-2023, by five percent. (d) For fiscal year 2023-2024 and each fiscal year thereafter, by the greater of: (i) The percentage of the annual increase, if any, in the metropolitan Phoenix consumer price index published by the United States department of labor bureau of labor statistics. (ii) Two percent. 2. Shall preapprove tax credits under this section and section 20-224.06 subject to subsection D of this section. 3. Shall allow the tax credits under this section and section 20-224.06 on a first-come, first-served basis. D. For the purposes of subsection C, paragraph 2 of this section, before making a contribution to a school tuition organization, the taxpayer under this title or title 20 must notify the school tuition organization of the total amount of contributions that the taxpayer intends to make to the school tuition organization. Before accepting the contribution, the school tuition organization shall request preapproval from the department of revenue for the taxpayer's intended contribution amount. The department of revenue shall preapprove or deny the requested amount within twenty days after receiving the request from the school tuition organization. If the department of revenue preapproves the request, the school tuition organization shall immediately notify the taxpayer, and the department of insurance and financial institutions in the case of a credit under section 20-224.06, that the requested amount was preapproved by the department of revenue. In order to receive a tax credit under this subsection, the taxpayer shall make the contribution to the school tuition organization within twenty days after receiving notice from the school tuition organization that the requested amount was preapproved. If the school tuition organization does not receive the preapproved contribution from the taxpayer within the required twenty days, the school tuition organization shall immediately notify the department of revenue, and the department of insurance and financial institutions in the case of a credit under section 20-224.06, and the department of revenue shall no longer include this preapproved contribution amount when calculating the limit prescribed in subsection C, paragraph 1 of this section. E. If the allowable tax credit exceeds the taxes otherwise due under this title on the claimant's income, or if there are no taxes due under this title, the taxpayer may carry the amount of the claim not used to offset the taxes under this title forward for not more than five consecutive taxable years' income tax liability. F. Co-owners of a business, including corporate partners in a partnership and stockholders of an S corporation as defined in section 1361 of the internal revenue code, may each claim only the pro rata share of the credit allowed under this section based on the ownership interest. The total of the credits allowed all such owners may not exceed the amount that would have been allowed a sole owner. G. The credit allowed by this section is in lieu of any deduction pursuant to section 170 of the internal revenue code and taken for state tax purposes. H. A taxpayer shall not claim a credit under this section and also under section 43-1184 with respect to the same contribution. I. The tax credit is not allowed if the taxpayer designates the taxpayer's contribution to the school tuition organization for the direct benefit of any specific student. J. The department of revenue, with the cooperation of the department of insurance and financial institutions, shall adopt rules and publish and prescribe forms and procedures necessary for the administration of to administer this section. END_STATUTE Sec. 5. Section 43-1504, Arizona Revised Statutes, is amended to read: START_STATUTE43-1504. Special provisions; corporate donations for low-income scholarships; rules A. A school tuition organization that receives contributions from a corporation for the purposes of section 20-224.06 or 43-1183 must use at least ninety percent of those contributions to provide educational scholarships or tuition grants only to children whose family income does not exceed one hundred eighty-five percent of the income limit required to qualify a child for reduced-price lunches under the national school lunch and child nutrition acts (42 United States Code sections 1751 through 1793) and to whom any of the following applies: 1. Attended a governmental primary or secondary school as a full-time student as defined in section 15-901 or attended a preschool program that offers services to students with disabilities at a governmental school for at least ninety days of the prior fiscal year or one full semester and transferred from a governmental school to a qualified school. 2. Enroll in a qualified school in a kindergarten program or a preschool program that offers services to students with disabilities. 3. Are the dependent of a member of the armed forces of the United States who is stationed in this state pursuant to military orders. 4. Are homeschooled before enrolling in a qualified school. 5. Moved to this state from out of state before enrolling in a qualified school. 6. Participated in an Arizona empowerment scholarship account and did not renew the account or accept the scholarship in order to accept a scholarship or tuition grant under this section. 7. subject to subsection G of this section, Are placed in foster care pursuant to title 8, chapter 4 at any time before the student graduates from high school or obtains a general equivalency DIPLOMA and who meet all of the following criteria: (a) Are unable to attend a governmental primary or secondary school as a full-time student as defined in section 15-901. for the purposes of this subdivision, "unable to attend" means the student has been expelled or asked not to return due to the student's behavior or the school is not able to provide necessary services to the student. (b) have not attended a governmental primary or secondary school as a full-time student as defined in section 15-901 for at least ninety days of the prior fiscal year or one full semester before enrolling in a qualified school. (c) The qualified school in which the students are enrolling is only considered because a governmental primary or secondary school cannot meet the students' unique needs, such as severe medical or behavioral needs that require specialized programs. (d) are unable to receive other scholarships or tuition grants under this chapter or chapter 15 of this title in an amount that is equal to the cost of tuition to attend the qualified school. 7. 8. Received an educational scholarship or tuition grant under paragraph 1, 2, 3, 4, 5, or 6 or 7 of this subsection or chapter 16, article 1 of this title if the children continue to attend a qualified school in a subsequent year. B. A child is eligible to receive an educational scholarship or tuition grant under subsection A of this section if the child meets the criteria to receive a reduced-price lunch but does not actually claim that benefit. C. In 2021, a school tuition organization shall not issue an educational scholarship or a tuition grant for the purposes of section 20-224.06 or 43-1183 in an amount that exceeds $5,600 for students who are in a kindergarten program, a preschool program that offers services to students with disabilities or grades one through eight or $7,500 for students who are in grades nine through twelve. In each year after 2021, the limit amount for a scholarship or a grant under this subsection shall be increased by $200. D. A school tuition organization shall require that student beneficiaries use the educational scholarships or tuition grants on a full-time basis. If a child leaves the school before completing an entire school year, the school shall refund a prorated amount of the educational scholarship or tuition grant to the school tuition organization that issued the scholarship or grant. The school tuition organization shall allocate any refunds it receives under this subsection for educational scholarships or tuition grants. E. Students who receive an educational scholarship or tuition grant under this section shall be allowed to attend any qualified school of their parents' choice. F. The department of revenue, with the cooperation of the department of insurance and financial institutions, shall adopt rules and publish and prescribe forms and procedures necessary to administer this section. G. If a court of competent jurisdiction issues a final judgment that the aggregate tax credit limit prescribed in section 43-1183, subsection C, paragraph 1 is unenforceable and that judgment is no longer subject to further appeal or review, a school tuition organization shall not issue an educational scholarship or a tuition grant under subsection A, paragraph 7 or 8 of this section for children who received an educational scholarship or a tuition grant under subsection A, paragraph 7 of this section. END_STATUTE Sec. 6. Section 43-1603, Arizona Revised Statutes, is amended to read: START_STATUTE43-1603. Operational requirements for school tuition organizations; notice; qualified schools A. A certified school tuition organization must be established to receive contributions from taxpayers for the purposes of income tax credits under sections 43-1089 and 43-1089.03 and to pay educational scholarships or tuition grants to allow students to attend any qualified school of their parents' choice. B. To be eligible for certification and retain certification, the school tuition organization: 1. Must allocate at least ninety percent of its annual revenue from contributions made for the purposes of sections 43-1089 and 43-1089.03 for educational scholarships or tuition grants. 2. Shall not limit the availability of educational scholarships or tuition grants to only students of one school. 3. May allow donors to recommend student beneficiaries, but shall not award, designate or reserve scholarships solely on the basis of donor recommendations. 4. Shall not allow donors to designate student beneficiaries as a condition of any contribution to the organization, or facilitate, encourage or knowingly allow the exchange of beneficiary student designations in violation of section 43-1089, subsection F, section 43-1089.03, subsection F and section 43-1089.04, subsection E. 5. Shall include on the organization's website, if one exists, the percentage and total dollar amount of educational scholarships and tuition grants awarded during the previous fiscal year to: (a) Students whose family income meets the economic eligibility requirements established under the national school lunch and child nutrition acts (42 United States Code sections 1751 through 1793) for free or reduced-price lunches. (b) Students whose family income exceeds the threshold prescribed by subdivision (a) of this paragraph but does not exceed one hundred eighty-five percent of the economic eligibility requirements established under the national school lunch and child nutrition acts (42 United States Code sections 1751 through 1793) for free or reduced-price lunches. 6. Must not award educational scholarships or tuition grants to students who are simultaneously enrolled in a district school or charter school and a qualified school. C. A school tuition organization shall include the following notice in any printed materials soliciting donations, in applications for scholarships and on its website, if one exists: Notice A school tuition organization cannot award, restrict or reserve scholarships solely on the basis of a donor's recommendation. A taxpayer may not claim a tax credit if the taxpayer agrees to swap donations with another taxpayer to benefit either taxpayer's own dependent. D. In evaluating applications and awarding, designating or reserving scholarships, a school tuition organization: 1. Shall not award, designate or reserve a scholarship solely on the recommendation of any person contributing money to the organization, but may consider the recommendation among other factors. 2. Shall consider the financial need of applicants. E. A taxpayer's contribution to a school tuition organization that exceeds the amount of the credit allowed by section 43-1089 but does not exceed the amount of the credit allowed by section 43-1089.03 is considered a contribution pursuant to section 43-1089.03. A school tuition organization must use at least ninety percent of contributions made pursuant to section 43-1089.03 for educational scholarships or tuition grants for students to whom any of the following applies: 1. Attended a governmental primary or secondary school as a full-time student as defined in section 15-901 or attended a preschool program that offers services to students with disabilities at a governmental school for at least ninety days of the prior fiscal year and transferred from a governmental school to a qualified school. 2. Enroll in a qualified school in a kindergarten program or a preschool program that offers services to students with disabilities. 3. Are the dependent of a member of the armed forces of the United States who is stationed in this state pursuant to military orders. 4. Are homeschooled before enrolling in a qualified school. 5. Moved to this state from out of state before enrolling in a qualified school. 6. Participated in an Arizona empowerment scholarship account and did not renew the account or accept the scholarship in order to accept a scholarship or tuition grant under this section. 7. Subject to subsection H of this section, are Placed in foster care pursuant to title 8, chapter 4 at any time before the student graduates from high school or obtains a general equivalency DIPLOMA and who meet all of the following criteria: (a) Are unable to attend a governmental primary or secondary school as a full-time student as defined in section 15-901. for the purposes of this subdivision, "unable to attend" means the student has been expelled or asked not to return due to the student's behavior or the school is not able to provide necessary services to the student. (b) have not attended a governmental primary or secondary school as a full-time student as defined in section 15-901 for at least ninety days of the prior fiscal year or one full semester before enrolling in a qualified school. (c) The qualified school in which the students are enrolling is only considered because a governmental primary or secondary school cannot meet the students' unique needs, such as severe medical or behavioral needs that require specialized programs. (d) are unable to receive other scholarships or tuition grants under this chapter or chapter 15 of this title in an amount that is equal to the cost of tuition to attend the qualified school. 7. 8. Received an educational scholarship or tuition grant under paragraph 1, 2, 3, 4, 5, or 6 or 7 of this subsection or under chapter 15 of this title if the student continues to attend a qualified school in a subsequent year. F. In awarding educational scholarships or tuition grants from contributions made pursuant to section 43-1089.03, a school tuition organization shall give priority to students and siblings of students on a waiting list for scholarships if the school tuition organization maintains a waiting list. G. If an individual educational scholarship or tuition grant exceeds the school's tuition, the amount in excess shall be returned to the school tuition organization that made the award or grant. The school tuition organization may allocate the returned monies as a multiyear award for that student and report the award pursuant to section 43-1604, subsection A, paragraph 5, subdivision (b) or may allocate the returned monies for educational scholarships or tuition grants for other students. H. If a court of competent jurisdiction issues a final judgment that the aggregate tax credit limit prescribed in section 43-1183, subsection C, paragraph 1 is unenforceable and that judgment is no longer subject to further appeal or review, a school tuition organization shall not issue an educational scholarship or a tuition grant under subsection E, paragraph 7 or 8 of this section for children who received an educational scholarship or a tuition grant under subsection E, paragraph 7 of this section. END_STATUTE Sec. 7. Property tax reduction; 2024 tax year; delayed repeal A. Each county board of supervisors that levied an additional tax pursuant to section 15-992, subsection B, Arizona Revised Statutes, as amended by Laws 2022, chapter 285, section 11, in a common school district not within a high school district in the 2023 tax year shall reduce the school district property tax levies in the 2024 tax year by the amount of the additional tax that was levied pursuant to section 15-992, subsection F, Arizona Revised Statutes, as added by Laws 2022, chapter 285, section 11, in the 2023 tax year, subject to the following: 1. The county board of supervisors shall reduce the additional tax levy prescribed by section 15-992, subsection F, Arizona Revised Statutes, as amended by Laws 2024, chapter 134, section 3, by an amount that is equal to the amount of the additional tax that was levied pursuant to section 15-992, subsection F, Arizona Revised Statutes, as added by Laws 2022, chapter 285, section 11, in the 2023 tax year. 2. If the amount of the additional tax that was levied pursuant to section 15-992, subsection F, Arizona Revised Statutes, as added by Laws 2022, chapter 285, section 11, in the 2023 tax year exceeds the tax levy amount prescribed by section 15-992, subsection F, Arizona Revised Statutes, as amended by Laws 2024, chapter 134, section 3, in the 2024 tax year, the county board of supervisors shall reduce the additional tax levy prescribed by section 15-992, subsection B, Arizona Revised Statutes, as amended by Laws 2024, chapter 134, section 3, by the amount of the exceedance. B. Notwithstanding section 15-992, Arizona Revised Statutes, as amended by Laws 2024, chapter 134, section 3, the amount to be levied pursuant to section 15-992, subsection B, Arizona Revised Statutes, as amended by Laws 2024, chapter 134, section 3, in the 2024 tax year shall be calculated without consideration of the property tax levy reductions prescribed in subsection A of this section. C. This section is repealed from and after December 31, 2026. Sec. 8. Tax anticipation notes; state indebtedness; delayed repeal; definitions A. A governing body of a taxing district that is subject to a tax judgment ordered in Qasimyar v. Maricopa County, Arizona Tax Court No. TX2016-000882 and that estimates a property tax rate increase of four percent or more from the 2023 property tax rate may: 1. Notwithstanding sections 35-465.02 and 35-465.04, Arizona Revised Statutes, issue tax anticipation notes pursuant to title 35, chapter 3, article 3.1, Arizona Revised Statutes, that mature and shall be paid on or before July 31 of the fourth fiscal year following the end of the fiscal year in which the notes are issued. 2. Request the state loan commissioners to issue bonds of the state to redeem or refund tax anticipation notes issued pursuant to paragraph 1 of this subsection in a manner that is consistent with section 35-429, Arizona Revised Statutes. B. This section is repealed from and after December 31, 2030. C. For the purposes of this section, "governing body" and "taxing district" have the same meanings prescribed in section 35-465, Arizona Revised Statutes. Sec. 9. School districts; tax judgments; state aid adjustments; tax anticipation notes; state indebtedness bonds; notice; delayed repeal A. The department of education shall: 1. Estimate the amount of state aid adjustments pursuant to section 15-915, Arizona Revised Statutes, for a prior year due to a change in assessed valuation that occurred as a result of a tax judgment ordered in Qasimyar v. Maricopa County, Arizona Tax Court No. TX2016-000882 for each school district that is subject to the judgment. 2. Send the estimates calculated pursuant to paragraph 1 of this subsection to each school district and to the property tax oversight commission established by section 42-17002, Arizona Revised Statutes, not later than August 1, 2024. 3. Notwithstanding section 15-915, subsection B, Arizona Revised Statutes, recalculate state aid for each prior year due to a change in assessed valuation that occurred as a result of a tax judgment ordered in Qasimyar v. Maricopa County, Arizona Tax Court No. TX2016-000882 for each school district that is subject to the judgment. 4. Report the recalculation amounts determined pursuant to paragraph 3 of this subsection to the joint legislative budget committee and the governor's office of strategic planning and budgeting. 5. Subject to review by the joint legislative budget committee, adjust state aid for each applicable school district. B. Each school district that is subject to a tax judgment ordered in Qasimyar v. Maricopa County, Arizona Tax Court No. TX2016-000882 shall: 1. Subtract the estimated amount of the state aid adjustment made pursuant to subsection A, paragraph 1 of this section from the amount of the tax judgment ordered for fiscal year 2024-2025. This is the maximum amount of a cash deficit resulting from the tax judgment that the school district may levy pursuant to section 15-992, subsection G, paragraph 10, Arizona Revised Statutes, in fiscal year 2024-2025. 2. Submit the amount calculated pursuant to paragraph 1 of this subsection to the property tax oversight commission established by section 42-17002, Arizona Revised Statutes, for approval not later than August 1, 2024. C. If the county school superintendent estimates that the 2024 property tax rate in a school district described in subsection A of this section will be four percent or more than the 2023 property tax rate for that school district, the school district may issue tax anticipation notes or request the loan commissioners of this state to issue bonds of the state, or both, pursuant to section 8 of this act. D. The county treasurer shall include the following statement in the tax bill for each school district that is subject to a tax judgment ordered in Qasimyar v. Maricopa County, Arizona Tax Court No. TX2016-000882: "Your tax rate includes an increase to cover the cost of property tax refunds ordered in class action litigation." E. Notwithstanding any other law, for fiscal year 2024-2025, a governing board of a school district that is subject to a tax judgment ordered in Qasimyar v. Maricopa County, Arizona Tax Court No. TX2016-000882 may use any portion of the school district's total ending cash balances as of June 30, 2023 from the school district's maintenance and operations fund or unrestricted capital outlay fund reported in the school district's annual financial report for fiscal year 2022-2023 pursuant to section 15-904, Arizona Revised Statutes, that was not included in the school district's adopted budget for fiscal year 2023-2024 pursuant to section 15-905, Arizona Revised Statutes, to pay property tax refunds in fiscal year 2024-2025. F. This section does not prevent a school district from levying sufficient property taxes to pay the required debt service on general obligation bonds. G. This section is repealed from and after December 31, 2030. Sec. 10. Legislative intent The legislature intends: 1. That in fiscal year 2024-2025 the fee prescribed in section 42-5041, subsection B, Arizona Revised Statutes, be assessed and collected pursuant to the following guidelines: (a) The total amount of fees for all counties, cities, towns, councils of governments and regional transportation authorities may not exceed $6,626,900 in fiscal year 2024-2025. (b) The share of fees assessed to all counties pursuant to subdivision (a) of this paragraph shall be in proportion to the aggregate amount of monies distributed to counties for the fiscal year two years preceding the current fiscal year pursuant to sections 42-5029, 42-6103, 42-6107, 42-6108, 42-6108.01, 42-6109, 42-6109.01, 42-6110, 42-6111 and 42-6112, Arizona Revised Statutes, as a percentage of aggregate distributions to all counties, cities, towns, councils of governments and regional transportation authorities located in a county with a population of more than eight hundred thousand persons for the fiscal year two years preceding the current fiscal year pursuant to sections 42-5029, 42-6001, 42-6103, 42-6105, 42-6106, 42-6107, 42-6108, 42-6108.01, 42-6109, 42-6109.01, 42-6110, 42-6111, 42-6112 and 43-206, Arizona Revised Statutes. (c) The share of fees assessed to all cities and towns pursuant to subdivision (a) of this paragraph shall be in proportion to the aggregate amount of monies distributed to cities and towns for the fiscal year two years preceding the current fiscal year pursuant to sections 42-5029, 42-6001 and 43-206, Arizona Revised Statutes, as a percentage of aggregate distributions to all counties, cities, towns, councils of governments and regional transportation authorities located in a county with a population of more than eight hundred thousand persons for the fiscal year two years preceding the current fiscal year pursuant to sections 42-5029, 42-6001, 42-6103, 42-6105, 42-6106, 42-6107, 42-6108, 42-6108.01, 42-6109, 42-6109.01, 42-6110, 42-6111, 42-6112 and 43-206, Arizona Revised Statutes. (d) The share of fees assessed to all councils of governments pursuant to subdivision (a) of this paragraph shall be in proportion to the aggregate amount of monies distributed to all councils of governments for the fiscal year two years preceding the current fiscal year pursuant to section 42-6105, Arizona Revised Statutes, as a percentage of aggregate distributions to all counties, cities, towns, councils of governments and regional transportation authorities located in a county with a population of more than eight hundred thousand persons for the fiscal year two years preceding the current fiscal year pursuant to sections 42-5029, 42-6001, 42-6103, 42-6105, 42-6106, 42-6107, 42-6108, 42-6108.01, 42-6109, 42-6109.01, 42-6110, 42-6111, 42-6112 and 43-206, Arizona Revised Statutes. (e) The share of fees assessed to all regional transportation authorities located in a county with a population of more than eight hundred thousand persons pursuant to subdivision (a) of this paragraph shall be in proportion to the aggregate amount of monies distributed to all regional transportation authorities located in a county with a population of more than eight hundred thousand persons for the fiscal year two years preceding the current fiscal year pursuant to section 42-6106, Arizona Revised Statutes, as a percentage of aggregate distributions to all counties, cities, towns, councils of governments and regional transportation authorities located in a county with a population of more than eight hundred thousand persons for the fiscal year two years preceding the current fiscal year pursuant to sections 42-5029, 42-6001, 42-6103, 42-6105, 42-6106, 42-6107, 42-6108, 42-6108.01, 42-6109, 42-6109.01, 42-6110, 42-6111, 42-6112 and 43-206, Arizona Revised Statutes. (f) Except as provided by sections 42-5033 and 42-5033.01, Arizona Revised Statutes, the population of a county as determined by the most recent United States decennial census plus any revision to the decennial census certified by the United States census bureau shall be used as the basis for apportioning monies pursuant to subdivision (b) of this paragraph. (g) Except as provided by sections 42-5033 and 42-5033.01, Arizona Revised Statutes, the population of a city or town as determined by the most recent United States decennial census plus any revision to the decennial census certified by the United States census bureau shall be used as the basis for apportioning monies pursuant to subdivision (c) of this paragraph. 2. That in fiscal year 2024-2025 the transfer prescribed in section 42-5041, subsection E, Arizona Revised Statutes, not exceed $803,600. 3. That in fiscal year 2024-2025 the transfer prescribed in section 42-5041, subsection F, Arizona Revised Statutes, not exceed $179,000. Sec. 11. Emergency This act is an emergency measure that is necessary to preserve the public peace, health or safety and is operative immediately as provided by law. |
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| 78 | + | Be it enacted by the Legislature of the State of Arizona: Section 1. Section 42-5040.01, Arizona Revised Statutes, as added by Laws 2024, chapter 142, section 1, is amended to read: START_STATUTE42-5040.01. Sourcing of tangible personal property; third-party service providers; certification A. Beginning on or before January 1, 2026 2028, the department shall establish a process by which a third-party provider that offers sourcing services to taxpayers for transactions involving tangible personal property may become certified in this state. A certified third-party service provider shall meet all of the requirements established by the department. B. The director shall: 1. Supervise and regulate all persons required by this section to obtain certification. 2. Establish minimum standards for certification and a quality assurance program for authorized third parties to ensure that a certified third-party service provider is complying with the minimum standards. 3. Post a list of certified third-party service providers on the department's website. 4. Adopt rules to administer and enforce this section. C. The director may: 1. Investigate and audit third-party service providers as necessary to ensure compliance with this section. 2. Require that a certified third-party service provider or any employees or agents of the certified third-party service provider be certified by the department to perform certain functions. D. A person may apply to the department to be a certified third-party service provider on a form prescribed and furnished by the director. The person shall include with the application all documents and fees prescribed by the director. The application shall contain, at a minimum: 1. The name, telephone number and address of the applicant and primary contact person. 2. Verification that the applicant meets the requirements prescribed by the director. 3. Other information the director requires. E. A taxpayer may use a certified third-party service provider to assist the taxpayer in sourcing transactions involving tangible personal property. A taxpayer that uses a certified third-party service provider for sourcing transactions involving tangible personal property is not liable for failing to pay the correct amount of tax due to an error in sourcing the transaction. The taxpayer is liable for failing to pay the correct amount of tax if the failure to pay the correct amount of tax was due to an error other than an error in sourcing the transaction. A certified third-party service provider is liable for the amount of tax the taxpayer failed to pay if the failure to pay the correct amount of tax was due to an error in sourcing the transaction, unless the error was due to incorrect information the certified third-party service provider received from the department. END_STATUTE Sec 2. Section 42-5061, Arizona Revised Statutes, is amended to read: START_STATUTE42-5061. 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 apply 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 1. 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 O. 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 O. (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 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 O, 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 O, 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 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. (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 O, 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 June 30, 2024 December 31, 2026 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. 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. V. 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. W. 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. 3. Section 42-5159, Arizona Revised Statutes, is amended to read: START_STATUTE42-5159. 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. (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. 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, 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, 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 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. (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, 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 June 30, 2024 December 31, 2026 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. 4. Section 43-1183, Arizona Revised Statutes, is amended to read: START_STATUTE43-1183. Credit for contributions to school tuition organization A. Beginning from and after June 30, 2006, a credit is allowed against the taxes imposed by this title for the amount of voluntary cash contributions made by the taxpayer during the taxable year to a school tuition organization that is certified pursuant to chapter 15 of this title at the time of donation. B. The amount of the credit is the total amount of the taxpayer's contributions for the taxable year under subsection A of this section and is preapproved by the department of revenue pursuant to subsection D of this section. C. The department of revenue: 1. Shall not allow tax credits under this section and section 20-224.06 that exceed in the aggregate a combined total of $10,000,000 $135,000,000 in any fiscal year 2024-2025 and each fiscal year thereafter. Beginning in fiscal year 2007-2008, the aggregate dollar amount of the tax credit cap from the previous fiscal year shall be annually increased by twenty percent. Beginning in fiscal year 2020-2021, the aggregate dollar amount of the tax credit cap from the previous fiscal year shall be increased as follows: (a) For fiscal year 2020-2021, by fifteen percent. (b) For fiscal year 2021-2022, by ten percent. (c) For fiscal year 2022-2023, by five percent. (d) For fiscal year 2023-2024 and each fiscal year thereafter, by the greater of: (i) The percentage of the annual increase, if any, in the metropolitan Phoenix consumer price index published by the United States department of labor bureau of labor statistics. (ii) Two percent. 2. Shall preapprove tax credits under this section and section 20-224.06 subject to subsection D of this section. 3. Shall allow the tax credits under this section and section 20-224.06 on a first-come, first-served basis. D. For the purposes of subsection C, paragraph 2 of this section, before making a contribution to a school tuition organization, the taxpayer under this title or title 20 must notify the school tuition organization of the total amount of contributions that the taxpayer intends to make to the school tuition organization. Before accepting the contribution, the school tuition organization shall request preapproval from the department of revenue for the taxpayer's intended contribution amount. The department of revenue shall preapprove or deny the requested amount within twenty days after receiving the request from the school tuition organization. If the department of revenue preapproves the request, the school tuition organization shall immediately notify the taxpayer, and the department of insurance and financial institutions in the case of a credit under section 20-224.06, that the requested amount was preapproved by the department of revenue. In order to receive a tax credit under this subsection, the taxpayer shall make the contribution to the school tuition organization within twenty days after receiving notice from the school tuition organization that the requested amount was preapproved. If the school tuition organization does not receive the preapproved contribution from the taxpayer within the required twenty days, the school tuition organization shall immediately notify the department of revenue, and the department of insurance and financial institutions in the case of a credit under section 20-224.06, and the department of revenue shall no longer include this preapproved contribution amount when calculating the limit prescribed in subsection C, paragraph 1 of this section. E. If the allowable tax credit exceeds the taxes otherwise due under this title on the claimant's income, or if there are no taxes due under this title, the taxpayer may carry the amount of the claim not used to offset the taxes under this title forward for not more than five consecutive taxable years' income tax liability. F. Co-owners of a business, including corporate partners in a partnership and stockholders of an S corporation as defined in section 1361 of the internal revenue code, may each claim only the pro rata share of the credit allowed under this section based on the ownership interest. The total of the credits allowed all such owners may not exceed the amount that would have been allowed a sole owner. G. The credit allowed by this section is in lieu of any deduction pursuant to section 170 of the internal revenue code and taken for state tax purposes. H. A taxpayer shall not claim a credit under this section and also under section 43-1184 with respect to the same contribution. I. The tax credit is not allowed if the taxpayer designates the taxpayer's contribution to the school tuition organization for the direct benefit of any specific student. J. The department of revenue, with the cooperation of the department of insurance and financial institutions, shall adopt rules and publish and prescribe forms and procedures necessary for the administration of to administer this section. END_STATUTE Sec. 5. Section 43-1504, Arizona Revised Statutes, is amended to read: START_STATUTE43-1504. Special provisions; corporate donations for low-income scholarships; rules A. A school tuition organization that receives contributions from a corporation for the purposes of section 20-224.06 or 43-1183 must use at least ninety percent of those contributions to provide educational scholarships or tuition grants only to children whose family income does not exceed one hundred eighty-five percent of the income limit required to qualify a child for reduced-price lunches under the national school lunch and child nutrition acts (42 United States Code sections 1751 through 1793) and to whom any of the following applies: 1. Attended a governmental primary or secondary school as a full-time student as defined in section 15-901 or attended a preschool program that offers services to students with disabilities at a governmental school for at least ninety days of the prior fiscal year or one full semester and transferred from a governmental school to a qualified school. 2. Enroll in a qualified school in a kindergarten program or a preschool program that offers services to students with disabilities. 3. Are the dependent of a member of the armed forces of the United States who is stationed in this state pursuant to military orders. 4. Are homeschooled before enrolling in a qualified school. 5. Moved to this state from out of state before enrolling in a qualified school. 6. Participated in an Arizona empowerment scholarship account and did not renew the account or accept the scholarship in order to accept a scholarship or tuition grant under this section. 7. subject to subsection G of this section, Are placed in foster care pursuant to title 8, chapter 4 at any time before the student graduates from high school or obtains a general equivalency DIPLOMA and who meet all of the following criteria: (a) Are unable to attend a governmental primary or secondary school as a full-time student as defined in section 15-901. for the purposes of this subdivision, "unable to attend" means the student has been expelled or asked not to return due to the student's behavior or the school is not able to provide necessary services to the student. (b) have not attended a governmental primary or secondary school as a full-time student as defined in section 15-901 for at least ninety days of the prior fiscal year or one full semester before enrolling in a qualified school. (c) The qualified school in which the students are enrolling is only considered because a governmental primary or secondary school cannot meet the students' unique needs, such as severe medical or behavioral needs that require specialized programs. (d) are unable to receive other scholarships or tuition grants under this chapter or chapter 15 of this title in an amount that is equal to the cost of tuition to attend the qualified school. 7. 8. Received an educational scholarship or tuition grant under paragraph 1, 2, 3, 4, 5, or 6 or 7 of this subsection or chapter 16, article 1 of this title if the children continue to attend a qualified school in a subsequent year. B. A child is eligible to receive an educational scholarship or tuition grant under subsection A of this section if the child meets the criteria to receive a reduced-price lunch but does not actually claim that benefit. C. In 2021, a school tuition organization shall not issue an educational scholarship or a tuition grant for the purposes of section 20-224.06 or 43-1183 in an amount that exceeds $5,600 for students who are in a kindergarten program, a preschool program that offers services to students with disabilities or grades one through eight or $7,500 for students who are in grades nine through twelve. In each year after 2021, the limit amount for a scholarship or a grant under this subsection shall be increased by $200. D. A school tuition organization shall require that student beneficiaries use the educational scholarships or tuition grants on a full-time basis. If a child leaves the school before completing an entire school year, the school shall refund a prorated amount of the educational scholarship or tuition grant to the school tuition organization that issued the scholarship or grant. The school tuition organization shall allocate any refunds it receives under this subsection for educational scholarships or tuition grants. E. Students who receive an educational scholarship or tuition grant under this section shall be allowed to attend any qualified school of their parents' choice. F. The department of revenue, with the cooperation of the department of insurance and financial institutions, shall adopt rules and publish and prescribe forms and procedures necessary to administer this section. G. If a court of competent jurisdiction issues a final, nonappealable judgment that the aggregate tax credit limit prescribed in section 43-1183, subsection C, paragraph 1 is unenforceable, a school tuition organization shall not issue an educational scholarship or a tuition grant under subsection A, paragraph 7 or 8 of this section for children who received an educational scholarship or a tuition grant under subsection A, paragraph 7 of this section. END_STATUTE Sec. 6. Section 43-1603, Arizona Revised Statutes, is amended to read: START_STATUTE43-1603. Operational requirements for school tuition organizations; notice; qualified schools A. A certified school tuition organization must be established to receive contributions from taxpayers for the purposes of income tax credits under sections 43-1089 and 43-1089.03 and to pay educational scholarships or tuition grants to allow students to attend any qualified school of their parents' choice. B. To be eligible for certification and retain certification, the school tuition organization: 1. Must allocate at least ninety percent of its annual revenue from contributions made for the purposes of sections 43-1089 and 43-1089.03 for educational scholarships or tuition grants. 2. Shall not limit the availability of educational scholarships or tuition grants to only students of one school. 3. May allow donors to recommend student beneficiaries, but shall not award, designate or reserve scholarships solely on the basis of donor recommendations. 4. Shall not allow donors to designate student beneficiaries as a condition of any contribution to the organization, or facilitate, encourage or knowingly allow the exchange of beneficiary student designations in violation of section 43-1089, subsection F, section 43-1089.03, subsection F and section 43-1089.04, subsection E. 5. Shall include on the organization's website, if one exists, the percentage and total dollar amount of educational scholarships and tuition grants awarded during the previous fiscal year to: (a) Students whose family income meets the economic eligibility requirements established under the national school lunch and child nutrition acts (42 United States Code sections 1751 through 1793) for free or reduced-price lunches. (b) Students whose family income exceeds the threshold prescribed by subdivision (a) of this paragraph but does not exceed one hundred eighty-five percent of the economic eligibility requirements established under the national school lunch and child nutrition acts (42 United States Code sections 1751 through 1793) for free or reduced-price lunches. 6. Must not award educational scholarships or tuition grants to students who are simultaneously enrolled in a district school or charter school and a qualified school. C. A school tuition organization shall include the following notice in any printed materials soliciting donations, in applications for scholarships and on its website, if one exists: Notice A school tuition organization cannot award, restrict or reserve scholarships solely on the basis of a donor's recommendation. A taxpayer may not claim a tax credit if the taxpayer agrees to swap donations with another taxpayer to benefit either taxpayer's own dependent. D. In evaluating applications and awarding, designating or reserving scholarships, a school tuition organization: 1. Shall not award, designate or reserve a scholarship solely on the recommendation of any person contributing money to the organization, but may consider the recommendation among other factors. 2. Shall consider the financial need of applicants. E. A taxpayer's contribution to a school tuition organization that exceeds the amount of the credit allowed by section 43-1089 but does not exceed the amount of the credit allowed by section 43-1089.03 is considered a contribution pursuant to section 43-1089.03. A school tuition organization must use at least ninety percent of contributions made pursuant to section 43-1089.03 for educational scholarships or tuition grants for students to whom any of the following applies: 1. Attended a governmental primary or secondary school as a full-time student as defined in section 15-901 or attended a preschool program that offers services to students with disabilities at a governmental school for at least ninety days of the prior fiscal year and transferred from a governmental school to a qualified school. 2. Enroll in a qualified school in a kindergarten program or a preschool program that offers services to students with disabilities. 3. Are the dependent of a member of the armed forces of the United States who is stationed in this state pursuant to military orders. 4. Are homeschooled before enrolling in a qualified school. 5. Moved to this state from out of state before enrolling in a qualified school. 6. Participated in an Arizona empowerment scholarship account and did not renew the account or accept the scholarship in order to accept a scholarship or tuition grant under this section. 7. Subject to subsection H of this section, are Placed in foster care pursuant to title 8, chapter 4 at any time before the student graduates from high school or obtains a general equivalency DIPLOMA and who meet all of the following criteria: (a) Are unable to attend a governmental primary or secondary school as a full-time student as defined in section 15-901. for the purposes of this subdivision, "unable to attend" means the student has been expelled or asked not to return due to the student's behavior or the school is not able to provide necessary services to the student. (b) have not attended a governmental primary or secondary school as a full-time student as defined in section 15-901 for at least ninety days of the prior fiscal year or one full semester before enrolling in a qualified school. (c) The qualified school in which the students are enrolling is only considered because a governmental primary or secondary school cannot meet the students' unique needs, such as severe medical or behavioral needs that require specialized programs. (d) are unable to receive other scholarships or tuition grants under this chapter or chapter 15 of this title in an amount that is equal to the cost of tuition to attend the qualified school. 7. 8. Received an educational scholarship or tuition grant under paragraph 1, 2, 3, 4, 5, or 6 or 7 of this subsection or under chapter 15 of this title if the student continues to attend a qualified school in a subsequent year. F. In awarding educational scholarships or tuition grants from contributions made pursuant to section 43-1089.03, a school tuition organization shall give priority to students and siblings of students on a waiting list for scholarships if the school tuition organization maintains a waiting list. G. If an individual educational scholarship or tuition grant exceeds the school's tuition, the amount in excess shall be returned to the school tuition organization that made the award or grant. The school tuition organization may allocate the returned monies as a multiyear award for that student and report the award pursuant to section 43-1604, subsection A, paragraph 5, subdivision (b) or may allocate the returned monies for educational scholarships or tuition grants for other students. H. If a court of competent jurisdiction issues a final, nonappealable judgment that the aggregate tax credit limit prescribed in section 43-1183, subsection C, paragraph 1 is unenforceable, a school tuition organization shall not issue an educational scholarship or a tuition grant under subsection E, paragraph 7 or 8 of this section for children who received an educational scholarship or a tuition grant under subsection E, paragraph 7 of this section. END_STATUTE Sec. 7. Property tax reduction; 2024 tax year; delayed repeal A. Each county board of supervisors that levied an additional tax pursuant to section 15-992, subsection B, Arizona Revised Statutes, as amended by Laws 2022, chapter 285, section 11, in a common school district not within a high school district in the 2023 tax year shall reduce the school district property tax levies in the 2024 tax year by the amount of the additional tax that was levied pursuant to section 15-992, subsection F, Arizona Revised Statutes, as added by Laws 2022, chapter 285, section 11, in the 2023 tax year, subject to the following: 1. The county board of supervisors shall reduce the additional tax levy prescribed by section 15-992, subsection F, Arizona Revised Statutes, as amended by Laws 2024, chapter 134, section 3, by an amount that is equal to the amount of the additional tax that was levied pursuant to section 15-992, subsection F, Arizona Revised Statutes, as added by Laws 2022, chapter 285, section 11, in the 2023 tax year. 2. If the amount of the additional tax that was levied pursuant to section 15-992, subsection F, Arizona Revised Statutes, as added by Laws 2022, chapter 285, section 11, in the 2023 tax year exceeds the tax levy amount prescribed by section 15-992, subsection F, Arizona Revised Statutes, as amended by Laws 2024, chapter 134, section 3, in the 2024 tax year, the county board of supervisors shall reduce the additional tax levy prescribed by section 15-992, subsection B, Arizona Revised Statutes, as amended by Laws 2024, chapter 134, section 3, by the amount of the exceedance. B. Notwithstanding section 15-992, Arizona Revised Statutes, as amended by Laws 2024, chapter 134, section 3, the amount to be levied pursuant to section 15-992, subsection B, Arizona Revised Statutes, as amended by Laws 2024, chapter 134, section 3, in the 2024 tax year shall be calculated without consideration of the property tax levy reductions prescribed in subsection A of this section. C. This section is repealed from and after December 31, 2026. Sec. 8. Tax anticipation notes; state indebtedness; delayed repeal; definitions A. A governing body of a taxing district that is subject to a tax judgment ordered in Qasimyar v. Maricopa County, Arizona Tax Court No. TX2016-000882 and that estimates a property tax rate increase of four percent or more from the 2023 property tax rate may: 1. Notwithstanding sections 35-465.02 and 35-465.04, Arizona Revised Statutes, issue tax anticipation notes pursuant to title 35, chapter 3, article 3.1, Arizona Revised Statutes, that mature and shall be paid on or before July 31 of the fourth fiscal year following the end of the fiscal year in which the notes are issued. 2. Request the state loan commissioners to issue bonds of the state to redeem or refund tax anticipation notes issued pursuant to paragraph 1 of this subsection in a manner that is consistent with section 35-429, Arizona Revised Statutes. B. This section is repealed from and after December 31, 2030. C. For the purposes of this section, "governing body" and "taxing district" have the same meanings prescribed in section 35-465, Arizona Revised Statutes. Sec. 9. School districts; tax judgments; state aid adjustments; tax anticipation notes; state indebtedness bonds; notice; delayed repeal A. The department of education shall: 1. Estimate the amount of state aid adjustments pursuant to section 15-915, Arizona Revised Statutes, for a prior year due to a change in assessed valuation that occurred as a result of a tax judgment ordered in Qasimyar v. Maricopa County, Arizona Tax Court No. TX2016-000882 for each school district that is subject to the judgment. 2. Send the estimates calculated pursuant to paragraph 1 of this subsection to each school district and to the property tax oversight commission established by section 42-17002, Arizona Revised Statutes, not later than August 1, 2024. 3. Notwithstanding section 15-915, subsection B, Arizona Revised Statutes, recalculate state aid for each prior year due to a change in assessed valuation that occurred as a result of a tax judgment ordered in Qasimyar v. Maricopa County, Arizona Tax Court No. TX2016-000882 for each school district that is subject to the judgment. 4. Report the recalculation amounts determined pursuant to paragraph 3 of this subsection to the joint legislative budget committee and the governor's office of strategic planning and budgeting. 5. Subject to review by the joint legislative budget committee, adjust state aid for each applicable school district. B. Each school district that is subject to a tax judgment ordered in Qasimyar v. Maricopa County, Arizona Tax Court No. TX2016-000882 shall: 1. Subtract the estimated amount of the state aid adjustment made pursuant to subsection A, paragraph 1 of this section from the amount of the tax judgment ordered for fiscal year 2024-2025. This is the maximum amount of a cash deficit resulting from the tax judgment that the school district may levy pursuant to section 15-992, subsection G, paragraph 10, Arizona Revised Statutes, in fiscal year 2024-2025. 2. Submit the amount calculated pursuant to paragraph 1 of this subsection to the property tax oversight commission established by section 42-17002, Arizona Revised Statutes, for approval not later than August 1, 2024. C. If the county school superintendent estimates that the 2024 property tax rate in a school district described in subsection A of this section will be four percent or more than the 2023 property tax rate for that school district, the school district may issue tax anticipation notes or request the loan commissioners of this state to issue bonds of the state, or both, pursuant to section 8 of this act. D. The county treasurer shall include the following statement in the tax bill for each school district that is subject to a tax judgment ordered in Qasimyar v. Maricopa County, Arizona Tax Court No. TX2016-000882: "Your tax rate includes an increase to cover the cost of property tax refunds ordered in class action litigation." E. Notwithstanding any other law, for fiscal year 2024-2025, a governing board of a school district that is subject to a tax judgment ordered in Qasimyar v. Maricopa County, Arizona Tax Court No. TX2016-000882 may use any portion of the school district's total ending cash balances as of June 30, 2023 from the school district's maintenance and operations fund or unrestricted capital outlay fund reported in the school district's annual financial report for fiscal year 2022-2023 pursuant to section 15-904, Arizona Revised Statutes, that was not included in the school district's adopted budget for fiscal year 2023-2024 pursuant to section 15-905, Arizona Revised Statutes, to pay property tax refunds in fiscal year 2024-2025. F. This section does not prevent a school district from levying sufficient property taxes to pay the required debt service on general obligation bonds. G. This section is repealed from and after December 31, 2030. Sec. 10. Legislative intent The legislature intends: 1. That in fiscal year 2024-2025 the fee prescribed in section 42-5041, subsection B, Arizona Revised Statutes, be assessed and collected pursuant to the following guidelines: (a) The total amount of fees for all counties, cities, towns, councils of governments and regional transportation authorities may not exceed $6,626,900 in fiscal year 2024-2025. (b) The share of fees assessed to all counties pursuant to subdivision (a) of this paragraph shall be in proportion to the aggregate amount of monies distributed to counties for the fiscal year two years preceding the current fiscal year pursuant to sections 42-5029, 42-6103, 42-6107, 42-6108, 42-6108.01, 42-6109, 42-6109.01, 42-6110, 42-6111 and 42-6112, Arizona Revised Statutes, as a percentage of aggregate distributions to all counties, cities, towns, councils of governments and regional transportation authorities located in a county with a population of more than eight hundred thousand persons for the fiscal year two years preceding the current fiscal year pursuant to sections 42-5029, 42-6001, 42-6103, 42-6105, 42-6106, 42-6107, 42-6108, 42-6108.01, 42-6109, 42-6109.01, 42-6110, 42-6111, 42-6112 and 43-206, Arizona Revised Statutes. (c) The share of fees assessed to all cities and towns pursuant to subdivision (a) of this paragraph shall be in proportion to the aggregate amount of monies distributed to cities and towns for the fiscal year two years preceding the current fiscal year pursuant to sections 42-5029, 42-6001 and 43-206, Arizona Revised Statutes, as a percentage of aggregate distributions to all counties, cities, towns, councils of governments and regional transportation authorities located in a county with a population of more than eight hundred thousand persons for the fiscal year two years preceding the current fiscal year pursuant to sections 42-5029, 42-6001, 42-6103, 42-6105, 42-6106, 42-6107, 42-6108, 42-6108.01, 42-6109, 42-6109.01, 42-6110, 42-6111, 42-6112 and 43-206, Arizona Revised Statutes. (d) The share of fees assessed to all councils of governments pursuant to subdivision (a) of this paragraph shall be in proportion to the aggregate amount of monies distributed to all councils of governments for the fiscal year two years preceding the current fiscal year pursuant to section 42-6105, Arizona Revised Statutes, as a percentage of aggregate distributions to all counties, cities, towns, councils of governments and regional transportation authorities located in a county with a population of more than eight hundred thousand persons for the fiscal year two years preceding the current fiscal year pursuant to sections 42-5029, 42-6001, 42-6103, 42-6105, 42-6106, 42-6107, 42-6108, 42-6108.01, 42-6109, 42-6109.01, 42-6110, 42-6111, 42-6112 and 43-206, Arizona Revised Statutes. (e) The share of fees assessed to all regional transportation authorities located in a county with a population of more than eight hundred thousand persons pursuant to subdivision (a) of this paragraph shall be in proportion to the aggregate amount of monies distributed to all regional transportation authorities located in a county with a population of more than eight hundred thousand persons for the fiscal year two years preceding the current fiscal year pursuant to section 42-6106, Arizona Revised Statutes, as a percentage of aggregate distributions to all counties, cities, towns, councils of governments and regional transportation authorities located in a county with a population of more than eight hundred thousand persons for the fiscal year two years preceding the current fiscal year pursuant to sections 42-5029, 42-6001, 42-6103, 42-6105, 42-6106, 42-6107, 42-6108, 42-6108.01, 42-6109, 42-6109.01, 42-6110, 42-6111, 42-6112 and 43-206, Arizona Revised Statutes. (f) Except as provided by sections 42-5033 and 42-5033.01, Arizona Revised Statutes, the population of a county as determined by the most recent United States decennial census plus any revision to the decennial census certified by the United States census bureau shall be used as the basis for apportioning monies pursuant to subdivision (b) of this paragraph. (g) Except as provided by sections 42-5033 and 42-5033.01, Arizona Revised Statutes, the population of a city or town as determined by the most recent United States decennial census plus any revision to the decennial census certified by the United States census bureau shall be used as the basis for apportioning monies pursuant to subdivision (c) of this paragraph. 2. That in fiscal year 2024-2025 the transfer prescribed in section 42-5041, subsection E, Arizona Revised Statutes, not exceed $803,600. 3. That in fiscal year 2024-2025 the transfer prescribed in section 42-5041, subsection F, Arizona Revised Statutes, not exceed $179,000. Sec. 11. Emergency This act is an emergency measure that is necessary to preserve the public peace, health or safety and is operative immediately as provided by law. |
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| 104 | 115 | | |
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| 105 | 116 | | START_STATUTE42-5061. Retail classification; definitions |
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| 106 | 117 | | |
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| 107 | 118 | | 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: |
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| 108 | 119 | | |
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| 109 | 120 | | 1. Professional or personal service occupations or businesses that involve sales or transfers of tangible personal property only as inconsequential elements. |
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| 110 | 121 | | |
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| 111 | 122 | | 2. Services rendered in addition to selling tangible personal property at retail. |
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| 112 | 123 | | |
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| 113 | 124 | | 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. |
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| 114 | 125 | | |
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| 115 | 126 | | 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. |
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| 116 | 127 | | |
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| 117 | 128 | | 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. |
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| 118 | 129 | | |
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| 119 | 130 | | 6. Business activity that is properly included in any other business classification that is taxable under this article. |
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| 120 | 131 | | |
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| 121 | 132 | | 7. The sale of stocks and bonds. |
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| 122 | 133 | | |
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| 123 | 134 | | 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. |
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| 124 | 135 | | |
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| 125 | 136 | | 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. |
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| 126 | 137 | | |
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| 127 | 138 | | 10. Insulin, insulin syringes and glucose test strips. |
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| 128 | 139 | | |
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| 129 | 140 | | 11. Prescription eyeglasses or contact lenses. |
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| 130 | 141 | | |
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| 131 | 142 | | 12. Hearing aids as defined in section 36-1901. |
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| 132 | 143 | | |
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| 133 | 144 | | 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. |
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| 134 | 145 | | |
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| 135 | 146 | | 14. Sales of motor vehicles to nonresidents of this state for use outside this state if either of the following apply applies: |
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| 136 | 147 | | |
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| 137 | 148 | | (a) The motor vehicle dealer ships or delivers the motor vehicle to a destination out of this state. |
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| 138 | 149 | | |
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| 139 | 150 | | (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. |
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| 140 | 151 | | |
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| 141 | 152 | | 15. Food, as provided in and subject to the conditions of article 3 of this chapter and sections 42-5074 and 42-6017. |
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| 142 | 153 | | |
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| 143 | 154 | | 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). |
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| 144 | 155 | | |
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| 145 | 156 | | 17. Textbooks by any bookstore that are required by any state university or community college. |
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| 146 | 157 | | |
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| 147 | 158 | | 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. |
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| 148 | 159 | | |
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| 149 | 160 | | 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. |
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| 150 | 161 | | |
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| 151 | 162 | | 20. Lottery tickets or shares pursuant to title 5, chapter 5.1, article 1. |
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| 152 | 163 | | |
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| 153 | 164 | | 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: |
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| 154 | 165 | | |
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| 155 | 166 | | (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: |
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| 156 | 167 | | |
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| 157 | 168 | | (i) Items or intangibles that are sold to one or more persons, through which a value is not denominated in money. |
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| 158 | 169 | | |
|---|
| 159 | 170 | | (ii) Prepaid calling cards or prepaid authorization numbers for telecommunications services made taxable by subsection P of this section. |
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| 160 | 171 | | |
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| 161 | 172 | | (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. |
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| 162 | 173 | | |
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| 163 | 174 | | (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. |
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| 164 | 175 | | |
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| 165 | 176 | | 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. |
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| 166 | 177 | | |
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| 167 | 178 | | 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. |
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| 168 | 179 | | |
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| 169 | 180 | | 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. |
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| 170 | 181 | | |
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| 171 | 182 | | 25. Tangible personal property sold to: |
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| 172 | 183 | | |
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| 173 | 184 | | (a) A qualifying hospital as defined in section 42-5001. |
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| 174 | 185 | | |
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| 175 | 186 | | (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. |
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| 176 | 187 | | |
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| 177 | 188 | | (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. |
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| 178 | 189 | | |
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| 179 | 190 | | (d) A qualifying community health center as defined in section 42-5001. |
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| 180 | 191 | | |
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| 181 | 192 | | (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. |
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| 182 | 193 | | |
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| 183 | 194 | | (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. |
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| 184 | 195 | | |
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| 185 | 196 | | (g) A qualifying health sciences educational institution as defined in section 42-5001. |
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| 186 | 197 | | |
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| 187 | 198 | | (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 O. |
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| 188 | 199 | | |
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| 189 | 200 | | 26. Magazines or other periodicals or other publications by this state to encourage tourist travel. |
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| 190 | 201 | | |
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| 191 | 202 | | 27. Tangible personal property sold to: |
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| 192 | 203 | | |
|---|
| 193 | 204 | | (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: |
|---|
| 194 | 205 | | |
|---|
| 195 | 206 | | (i) Incorporated or fabricated by the person into any real property, structure, project, development or improvement as part of the business. |
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| 196 | 207 | | |
|---|
| 197 | 208 | | (ii) Incorporated or fabricated by the person into any project described in section 42-5075, subsection O. |
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| 198 | 209 | | |
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| 199 | 210 | | (iii) Used in environmental response or remediation activities under section 42-5075, subsection B, paragraph 6. |
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| 200 | 211 | | |
|---|
| 201 | 212 | | (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. |
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| 202 | 213 | | |
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| 203 | 214 | | 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. |
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| 204 | 215 | | |
|---|
| 205 | 216 | | 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. |
|---|
| 206 | 217 | | |
|---|
| 207 | 218 | | 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. |
|---|
| 208 | 219 | | |
|---|
| 209 | 220 | | 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. |
|---|
| 210 | 221 | | |
|---|
| 211 | 222 | | 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. |
|---|
| 212 | 223 | | |
|---|
| 213 | 224 | | 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": |
|---|
| 214 | 225 | | |
|---|
| 215 | 226 | | (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. |
|---|
| 216 | 227 | | |
|---|
| 217 | 228 | | (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. |
|---|
| 218 | 229 | | |
|---|
| 219 | 230 | | 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. |
|---|
| 220 | 231 | | |
|---|
| 221 | 232 | | 35. Sales of natural gas or liquefied petroleum gas used to propel a motor vehicle. |
|---|
| 222 | 233 | | |
|---|
| 223 | 234 | | 36. Paper machine clothing, such as forming fabrics and dryer felts, sold to a paper manufacturer and directly used or consumed in paper manufacturing. |
|---|
| 224 | 235 | | |
|---|
| 225 | 236 | | 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 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. |
|---|
| 226 | 237 | | |
|---|
| 227 | 238 | | 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. |
|---|
| 228 | 239 | | |
|---|
| 229 | 240 | | 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: |
|---|
| 230 | 241 | | |
|---|
| 231 | 242 | | (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. |
|---|
| 232 | 243 | | |
|---|
| 233 | 244 | | (b) "Personal property liquidator" means a person who is retained to conduct a sale in a personal property liquidation transaction. |
|---|
| 234 | 245 | | |
|---|
| 235 | 246 | | 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. |
|---|
| 236 | 247 | | |
|---|
| 237 | 248 | | 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. |
|---|
| 238 | 249 | | |
|---|
| 239 | 250 | | 42. Sales of: |
|---|
| 240 | 251 | | |
|---|
| 241 | 252 | | (a) Livestock and poultry to persons engaging in the businesses of farming, ranching or producing livestock or poultry. |
|---|
| 242 | 253 | | |
|---|
| 243 | 254 | | (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. |
|---|
| 244 | 255 | | |
|---|
| 245 | 256 | | 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. |
|---|
| 246 | 257 | | |
|---|
| 247 | 258 | | 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. |
|---|
| 248 | 259 | | |
|---|
| 249 | 260 | | 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. |
|---|
| 250 | 261 | | |
|---|
| 251 | 262 | | 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. |
|---|
| 252 | 263 | | |
|---|
| 253 | 264 | | 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: |
|---|
| 254 | 265 | | |
|---|
| 255 | 266 | | (a) Printed or photographic materials, beginning August 7, 1985. |
|---|
| 256 | 267 | | |
|---|
| 257 | 268 | | (b) Electronic or digital media materials, beginning July 17, 1994. |
|---|
| 258 | 269 | | |
|---|
| 259 | 270 | | 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. |
|---|
| 260 | 271 | | |
|---|
| 261 | 272 | | 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. |
|---|
| 262 | 273 | | |
|---|
| 263 | 274 | | 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. |
|---|
| 264 | 275 | | |
|---|
| 265 | 276 | | 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. |
|---|
| 266 | 277 | | |
|---|
| 267 | 278 | | 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. |
|---|
| 268 | 279 | | |
|---|
| 269 | 280 | | 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: |
|---|
| 270 | 281 | | |
|---|
| 271 | 282 | | (a) "Application services" means software applications provided remotely using hypertext transfer protocol or another network protocol. |
|---|
| 272 | 283 | | |
|---|
| 273 | 284 | | (b) "Curriculum design or enhancement" means planning, implementing or reporting on courses of study, lessons, assignments or other learning activities. |
|---|
| 274 | 285 | | |
|---|
| 275 | 286 | | 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. |
|---|
| 276 | 287 | | |
|---|
| 277 | 288 | | 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. |
|---|
| 278 | 289 | | |
|---|
| 279 | 290 | | 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. |
|---|
| 280 | 291 | | |
|---|
| 281 | 292 | | 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. |
|---|
| 282 | 293 | | |
|---|
| 283 | 294 | | 58. Sales of tangible personal property incorporated or fabricated into a project described in section 42-5075, subsection O, 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: |
|---|
| 284 | 295 | | |
|---|
| 285 | 296 | | (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. |
|---|
| 286 | 297 | | |
|---|
| 287 | 298 | | (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. |
|---|
| 288 | 299 | | |
|---|
| 289 | 300 | | (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. |
|---|
| 290 | 301 | | |
|---|
| 291 | 302 | | 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. |
|---|
| 292 | 303 | | |
|---|
| 293 | 304 | | 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. |
|---|
| 294 | 305 | | |
|---|
| 295 | 306 | | 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: |
|---|
| 296 | 307 | | |
|---|
| 297 | 308 | | 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. |
|---|
| 298 | 309 | | |
|---|
| 299 | 310 | | 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. |
|---|
| 300 | 311 | | |
|---|
| 301 | 312 | | 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 O, 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. |
|---|
| 302 | 313 | | |
|---|
| 303 | 314 | | 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. |
|---|
| 304 | 315 | | |
|---|
| 305 | 316 | | 5. Machinery and equipment used directly for energy storage for later electrical use. For the purposes of this paragraph: |
|---|
| 306 | 317 | | |
|---|
| 307 | 318 | | (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. |
|---|
| 308 | 319 | | |
|---|
| 309 | 320 | | (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. |
|---|
| 310 | 321 | | |
|---|
| 311 | 322 | | (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. |
|---|
| 312 | 323 | | |
|---|
| 313 | 324 | | 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. |
|---|
| 314 | 325 | | |
|---|
| 315 | 326 | | 7. Pipes or valves four inches in diameter or larger used to transport oil, natural gas, artificial gas, water 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. |
|---|
| 316 | 327 | | |
|---|
| 317 | 328 | | 8. Aircraft, navigational and communication instruments and other accessories and related equipment sold to: |
|---|
| 318 | 329 | | |
|---|
| 319 | 330 | | (a) A person: |
|---|
| 320 | 331 | | |
|---|
| 321 | 332 | | (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. |
|---|
| 322 | 333 | | |
|---|
| 323 | 334 | | (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. |
|---|
| 324 | 335 | | |
|---|
| 325 | 336 | | (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. |
|---|
| 326 | 337 | | |
|---|
| 327 | 338 | | (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. |
|---|
| 328 | 339 | | |
|---|
| 329 | 340 | | (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. |
|---|
| 330 | 341 | | |
|---|
| 331 | 342 | | (b) Any foreign government. |
|---|
| 332 | 343 | | |
|---|
| 333 | 344 | | (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. |
|---|
| 334 | 345 | | |
|---|
| 335 | 346 | | 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. |
|---|
| 336 | 347 | | |
|---|
| 337 | 348 | | 10. Railroad rolling stock, rails, ties and signal control equipment used directly to transport persons or property. |
|---|
| 338 | 349 | | |
|---|
| 339 | 350 | | 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. |
|---|
| 340 | 351 | | |
|---|
| 341 | 352 | | 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. |
|---|
| 342 | 353 | | |
|---|
| 343 | 354 | | 13. Groundwater measuring devices required under section 45-604. |
|---|
| 344 | 355 | | |
|---|
| 345 | 356 | | 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: |
|---|
| 346 | 357 | | |
|---|
| 347 | 358 | | (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. |
|---|
| 348 | 359 | | |
|---|
| 349 | 360 | | (b) "Self-powered implements" includes machinery and equipment that are electric-powered. |
|---|
| 350 | 361 | | |
|---|
| 351 | 362 | | 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. |
|---|
| 352 | 363 | | |
|---|
| 353 | 364 | | 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: |
|---|
| 354 | 365 | | |
|---|
| 355 | 366 | | (a) Any direct broadcast satellite television or data transmission service that operates pursuant to 47 Code of Federal Regulations part 25. |
|---|
| 356 | 367 | | |
|---|
| 357 | 368 | | (b) Any satellite television or data transmission facility, if both of the following conditions are met: |
|---|
| 358 | 369 | | |
|---|
| 359 | 370 | | (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. |
|---|
| 360 | 371 | | |
|---|
| 361 | 372 | | (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. |
|---|
| 362 | 373 | | |
|---|
| 363 | 374 | | 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: |
|---|
| 364 | 375 | | |
|---|
| 365 | 376 | | (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. |
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| 366 | 377 | | |
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| 367 | 378 | | (b) Does not include the building or other permanent, nonremovable component of the building that houses the clean room environment. |
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| 368 | 379 | | |
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| 369 | 380 | | 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. |
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| 370 | 381 | | |
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| 371 | 382 | | 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. |
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| 372 | 383 | | |
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| 373 | 384 | | 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 O, if the machinery and equipment are used directly and primarily to prevent, monitor, control or reduce air, water or land pollution. |
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| 374 | 385 | | |
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| 375 | 386 | | 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: |
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| 376 | 387 | | |
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| 377 | 388 | | (a) Repair or replacement parts purchased for the machinery or equipment described in this paragraph. |
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| 378 | 389 | | |
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| 379 | 390 | | (b) Machinery or equipment purchased to replace machinery or equipment for which an exemption was previously claimed and taken under this paragraph. |
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| 380 | 391 | | |
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| 381 | 392 | | (c) Any machinery or equipment purchased after the television station has ceased analog broadcasting, or purchased after November 1, 2009, whichever occurs first. |
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| 382 | 393 | | |
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| 383 | 394 | | 22. Qualifying equipment that is purchased from and after June 30, 2004 through June 30, 2024 December 31, 2026 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. |
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| 384 | 395 | | |
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| 385 | 396 | | 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. |
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| 386 | 397 | | |
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| 387 | 398 | | C. The deductions provided by subsection B of this section do not include sales of: |
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| 388 | 399 | | |
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| 389 | 400 | | 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. |
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| 390 | 401 | | |
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| 391 | 402 | | 2. Janitorial equipment and hand tools. |
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| 392 | 403 | | |
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| 393 | 404 | | 3. Office equipment, furniture and supplies. |
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| 394 | 405 | | |
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| 395 | 406 | | 4. Tangible personal property used in selling or distributing activities, other than the telecommunications transmissions described in subsection B, paragraph 16 of this section. |
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| 396 | 407 | | |
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| 397 | 408 | | 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. |
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| 398 | 409 | | |
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| 399 | 410 | | 6. Shops, buildings, docks, depots and all other materials of whatever kind or character not specifically included as exempt. |
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| 400 | 411 | | |
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| 401 | 412 | | 7. Motors and pumps used in drip irrigation systems. |
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| 402 | 413 | | |
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| 403 | 414 | | 8. Machinery and equipment or other tangible personal property used by a contractor in performing a contract. |
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| 404 | 415 | | |
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| 405 | 416 | | 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. |
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| 406 | 417 | | |
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| 407 | 418 | | 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. |
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| 408 | 419 | | |
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| 409 | 420 | | 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. |
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| 410 | 421 | | |
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| 411 | 422 | | 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. |
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| 412 | 423 | | |
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| 413 | 424 | | 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: |
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| 414 | 425 | | |
|---|
| 415 | 426 | | 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. |
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| 416 | 427 | | |
|---|
| 417 | 428 | | 2. Businesses classified under the: |
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| 418 | 429 | | |
|---|
| 419 | 430 | | (a) Transporting classification. |
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| 420 | 431 | | |
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| 421 | 432 | | (b) Utilities classification. |
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| 422 | 433 | | |
|---|
| 423 | 434 | | (c) Telecommunications classification. |
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| 424 | 435 | | |
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| 425 | 436 | | (d) Pipeline classification. |
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| 426 | 437 | | |
|---|
| 427 | 438 | | (e) Private car line classification. |
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| 428 | 439 | | |
|---|
| 429 | 440 | | (f) Publication classification. |
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| 430 | 441 | | |
|---|
| 431 | 442 | | (g) Job printing classification. |
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| 432 | 443 | | |
|---|
| 433 | 444 | | (h) Prime contracting classification. |
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| 434 | 445 | | |
|---|
| 435 | 446 | | (i) Restaurant classification. |
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| 436 | 447 | | |
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| 437 | 448 | | I. The gross proceeds of sales or gross income derived from the following shall be deducted from the tax base for the retail classification: |
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| 438 | 449 | | |
|---|
| 439 | 450 | | 1. Sales made directly to the United States government or its departments or agencies by a manufacturer, modifier, assembler or repairer. |
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| 440 | 451 | | |
|---|
| 441 | 452 | | 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. |
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| 442 | 453 | | |
|---|
| 443 | 454 | | 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. |
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| 444 | 455 | | |
|---|
| 445 | 456 | | 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. |
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| 446 | 457 | | |
|---|
| 447 | 458 | | 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. |
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| 448 | 459 | | |
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| 449 | 460 | | 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. |
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| 450 | 461 | | |
|---|
| 451 | 462 | | L. In computing the tax base, gross proceeds of sales or gross income does not include: |
|---|
| 452 | 463 | | |
|---|
| 453 | 464 | | 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. |
|---|
| 454 | 465 | | |
|---|
| 455 | 466 | | 2. The waste tire disposal fee imposed pursuant to section 44-1302. |
|---|
| 456 | 467 | | |
|---|
| 457 | 468 | | 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. |
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| 458 | 469 | | |
|---|
| 459 | 470 | | 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. |
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| 460 | 471 | | |
|---|
| 461 | 472 | | 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. |
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| 462 | 473 | | |
|---|
| 463 | 474 | | 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. |
|---|
| 464 | 475 | | |
|---|
| 465 | 476 | | Q. For the purposes of this section, the diversion of gas from a pipeline by a person engaged in the business of: |
|---|
| 466 | 477 | | |
|---|
| 467 | 478 | | 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. |
|---|
| 468 | 479 | | |
|---|
| 469 | 480 | | 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. |
|---|
| 470 | 481 | | |
|---|
| 471 | 482 | | 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: |
|---|
| 472 | 483 | | |
|---|
| 473 | 484 | | 1. The transfer of title or possession of the coal is for the purpose of refining the coal. |
|---|
| 474 | 485 | | |
|---|
| 475 | 486 | | 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. |
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| 476 | 487 | | |
|---|
| 477 | 488 | | 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. |
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| 478 | 489 | | |
|---|
| 479 | 490 | | 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: |
|---|
| 480 | 491 | | |
|---|
| 481 | 492 | | 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. |
|---|
| 482 | 493 | | |
|---|
| 483 | 494 | | 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. |
|---|
| 484 | 495 | | |
|---|
| 485 | 496 | | U. 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. |
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| 486 | 497 | | |
|---|
| 487 | 498 | | V. For the purposes of this section: |
|---|
| 488 | 499 | | |
|---|
| 489 | 500 | | 1. "Agricultural aircraft" means an aircraft that is built for agricultural use for the aerial application of pesticides or fertilizer or for aerial seeding. |
|---|
| 490 | 501 | | |
|---|
| 491 | 502 | | 2. "Aircraft" includes: |
|---|
| 492 | 503 | | |
|---|
| 493 | 504 | | (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. |
|---|
| 494 | 505 | | |
|---|
| 495 | 506 | | (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. |
|---|
| 496 | 507 | | |
|---|
| 497 | 508 | | 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. |
|---|
| 498 | 509 | | |
|---|
| 499 | 510 | | 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. |
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| 500 | 511 | | |
|---|
| 501 | 512 | | W. For the purposes of subsection I of this section: |
|---|
| 502 | 513 | | |
|---|
| 503 | 514 | | 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. |
|---|
| 504 | 515 | | |
|---|
| 505 | 516 | | 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. |
|---|
| 506 | 517 | | |
|---|
| 507 | 518 | | 3. "Modifier" means a person who reworks, changes or adds to products, wares or articles of manufacture. |
|---|
| 508 | 519 | | |
|---|
| 509 | 520 | | 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. |
|---|
| 510 | 521 | | |
|---|
| 511 | 522 | | 5. "Repairer" means a person who restores or renews products, wares or articles of manufacture. |
|---|
| 512 | 523 | | |
|---|
| 513 | 524 | | 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 |
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| 514 | 525 | | |
|---|
| 515 | 526 | | Sec. 3. Section 42-5159, Arizona Revised Statutes, is amended to read: |
|---|
| 516 | 527 | | |
|---|
| 517 | 528 | | START_STATUTE42-5159. Exemptions |
|---|
| 518 | 529 | | |
|---|
| 519 | 530 | | 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: |
|---|
| 520 | 531 | | |
|---|
| 521 | 532 | | 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. |
|---|
| 522 | 533 | | |
|---|
| 523 | 534 | | 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. |
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| 524 | 535 | | |
|---|
| 525 | 536 | | 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. |
|---|
| 526 | 537 | | |
|---|
| 527 | 538 | | 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. |
|---|
| 528 | 539 | | |
|---|
| 529 | 540 | | 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. |
|---|
| 530 | 541 | | |
|---|
| 531 | 542 | | 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. |
|---|
| 532 | 543 | | |
|---|
| 533 | 544 | | 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. |
|---|
| 534 | 545 | | |
|---|
| 535 | 546 | | 8. Purchases of: |
|---|
| 536 | 547 | | |
|---|
| 537 | 548 | | (a) Livestock and poultry to persons engaging in the businesses of farming, ranching or producing livestock or poultry. |
|---|
| 538 | 549 | | |
|---|
| 539 | 550 | | (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. |
|---|
| 540 | 551 | | |
|---|
| 541 | 552 | | 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": |
|---|
| 542 | 553 | | |
|---|
| 543 | 554 | | (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. |
|---|
| 544 | 555 | | |
|---|
| 545 | 556 | | (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. |
|---|
| 546 | 557 | | |
|---|
| 547 | 558 | | 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. |
|---|
| 548 | 559 | | |
|---|
| 549 | 560 | | 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. |
|---|
| 550 | 561 | | |
|---|
| 551 | 562 | | 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: |
|---|
| 552 | 563 | | |
|---|
| 553 | 564 | | (a) Printed or photographic materials, beginning August 7, 1985. |
|---|
| 554 | 565 | | |
|---|
| 555 | 566 | | (b) Electronic or digital media materials, beginning July 17, 1994. |
|---|
| 556 | 567 | | |
|---|
| 557 | 568 | | 13. Tangible personal property purchased by: |
|---|
| 558 | 569 | | |
|---|
| 559 | 570 | | (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. |
|---|
| 560 | 571 | | |
|---|
| 561 | 572 | | (b) A hospital operated by this state or a political subdivision of this state. |
|---|
| 562 | 573 | | |
|---|
| 563 | 574 | | (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. |
|---|
| 564 | 575 | | |
|---|
| 565 | 576 | | (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. |
|---|
| 566 | 577 | | |
|---|
| 567 | 578 | | (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. |
|---|
| 568 | 579 | | |
|---|
| 569 | 580 | | (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. |
|---|
| 570 | 581 | | |
|---|
| 571 | 582 | | (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: |
|---|
| 572 | 583 | | |
|---|
| 573 | 584 | | (i) Incorporated or fabricated by the person into a structure, project, development or improvement in fulfillment of a contract. |
|---|
| 574 | 585 | | |
|---|
| 575 | 586 | | (ii) Incorporated or fabricated by the person into any project described in section 42-5075, subsection O. |
|---|
| 576 | 587 | | |
|---|
| 577 | 588 | | (iii) Used in environmental response or remediation activities under section 42-5075, subsection B, paragraph 6. |
|---|
| 578 | 589 | | |
|---|
| 579 | 590 | | (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. |
|---|
| 580 | 591 | | |
|---|
| 581 | 592 | | (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. |
|---|
| 582 | 593 | | |
|---|
| 583 | 594 | | (j) A qualifying community health center as defined in section 42-5001. |
|---|
| 584 | 595 | | |
|---|
| 585 | 596 | | (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. |
|---|
| 586 | 597 | | |
|---|
| 587 | 598 | | (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. |
|---|
| 588 | 599 | | |
|---|
| 589 | 600 | | (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. |
|---|
| 590 | 601 | | |
|---|
| 591 | 602 | | (n) A qualifying health sciences educational institution as defined in section 42-5001. |
|---|
| 592 | 603 | | |
|---|
| 593 | 604 | | (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. |
|---|
| 594 | 605 | | |
|---|
| 595 | 606 | | 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. |
|---|
| 596 | 607 | | |
|---|
| 597 | 608 | | 15. Tangible personal property sold by: |
|---|
| 598 | 609 | | |
|---|
| 599 | 610 | | (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. |
|---|
| 600 | 611 | | |
|---|
| 601 | 612 | | (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. |
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| 602 | 613 | | |
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| 603 | 614 | | (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. |
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| 604 | 615 | | |
|---|
| 605 | 616 | | 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. |
|---|
| 606 | 617 | | |
|---|
| 607 | 618 | | 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. |
|---|
| 608 | 619 | | |
|---|
| 609 | 620 | | 18. Prescription eyeglasses and contact lenses. |
|---|
| 610 | 621 | | |
|---|
| 611 | 622 | | 19. Insulin, insulin syringes and glucose test strips. |
|---|
| 612 | 623 | | |
|---|
| 613 | 624 | | 20. Hearing aids as defined in section 36-1901. |
|---|
| 614 | 625 | | |
|---|
| 615 | 626 | | 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. |
|---|
| 616 | 627 | | |
|---|
| 617 | 628 | | 22. Food, as provided in and subject to the conditions of article 3 of this chapter and sections 42-5074 and 42-6017. |
|---|
| 618 | 629 | | |
|---|
| 619 | 630 | | 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). |
|---|
| 620 | 631 | | |
|---|
| 621 | 632 | | 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. |
|---|
| 622 | 633 | | |
|---|
| 623 | 634 | | 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. |
|---|
| 624 | 635 | | |
|---|
| 625 | 636 | | 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. |
|---|
| 626 | 637 | | |
|---|
| 627 | 638 | | 27. Lottery tickets or shares purchased pursuant to title 5, chapter 5.1, article 1. |
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| 628 | 639 | | |
|---|
| 629 | 640 | | 28. Textbooks, sold by a bookstore, that are required by any state university or community college. |
|---|
| 630 | 641 | | |
|---|
| 631 | 642 | | 29. Magazines, other periodicals or other publications produced by this state to encourage tourist travel. |
|---|
| 632 | 643 | | |
|---|
| 633 | 644 | | 30. Paper machine clothing, such as forming fabrics and dryer felts, purchased by a paper manufacturer and directly used or consumed in paper manufacturing. |
|---|
| 634 | 645 | | |
|---|
| 635 | 646 | | 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. |
|---|
| 636 | 647 | | |
|---|
| 637 | 648 | | 32. Motor vehicles that are removed from inventory by a motor vehicle dealer as defined in section 28-4301 and that are provided to: |
|---|
| 638 | 649 | | |
|---|
| 639 | 650 | | (a) Charitable or educational institutions that are exempt from taxation under section 501(c)(3) of the internal revenue code. |
|---|
| 640 | 651 | | |
|---|
| 641 | 652 | | (b) Public educational institutions. |
|---|
| 642 | 653 | | |
|---|
| 643 | 654 | | (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. |
|---|
| 644 | 655 | | |
|---|
| 645 | 656 | | 33. Natural gas or liquefied petroleum gas used to propel a motor vehicle. |
|---|
| 646 | 657 | | |
|---|
| 647 | 658 | | 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. |
|---|
| 648 | 659 | | |
|---|
| 649 | 660 | | 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. |
|---|
| 650 | 661 | | |
|---|
| 651 | 662 | | 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. |
|---|
| 652 | 663 | | |
|---|
| 653 | 664 | | 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. |
|---|
| 654 | 665 | | |
|---|
| 655 | 666 | | 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. |
|---|
| 656 | 667 | | |
|---|
| 657 | 668 | | 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: |
|---|
| 658 | 669 | | |
|---|
| 659 | 670 | | (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. |
|---|
| 660 | 671 | | |
|---|
| 661 | 672 | | (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. |
|---|
| 662 | 673 | | |
|---|
| 663 | 674 | | 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. |
|---|
| 664 | 675 | | |
|---|
| 665 | 676 | | 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. |
|---|
| 666 | 677 | | |
|---|
| 667 | 678 | | 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. |
|---|
| 668 | 679 | | |
|---|
| 669 | 680 | | 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. |
|---|
| 670 | 681 | | |
|---|
| 671 | 682 | | 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. |
|---|
| 672 | 683 | | |
|---|
| 673 | 684 | | 45. Gas diverted from a pipeline, by a person engaged in the business of: |
|---|
| 674 | 685 | | |
|---|
| 675 | 686 | | (a) Operating a natural or artificial gas pipeline, and used or consumed for the sole purpose of fueling compressor equipment that pressurizes the pipeline. |
|---|
| 676 | 687 | | |
|---|
| 677 | 688 | | (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. |
|---|
| 678 | 689 | | |
|---|
| 679 | 690 | | 46. Tangible personal property that is excluded, exempt or deductible from transaction privilege tax pursuant to section 42-5063. |
|---|
| 680 | 691 | | |
|---|
| 681 | 692 | | 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. |
|---|
| 682 | 693 | | |
|---|
| 683 | 694 | | 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. |
|---|
| 684 | 695 | | |
|---|
| 685 | 696 | | 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. |
|---|
| 686 | 697 | | |
|---|
| 687 | 698 | | 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: |
|---|
| 688 | 699 | | |
|---|
| 689 | 700 | | (a) "Application services" means software applications provided remotely using hypertext transfer protocol or another network protocol. |
|---|
| 690 | 701 | | |
|---|
| 691 | 702 | | (b) "Curriculum design or enhancement" means planning, implementing or reporting on courses of study, lessons, assignments or other learning activities. |
|---|
| 692 | 703 | | |
|---|
| 693 | 704 | | 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. |
|---|
| 694 | 705 | | |
|---|
| 695 | 706 | | 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. |
|---|
| 696 | 707 | | |
|---|
| 697 | 708 | | 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. |
|---|
| 698 | 709 | | |
|---|
| 699 | 710 | | 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: |
|---|
| 700 | 711 | | |
|---|
| 701 | 712 | | (a) The transfer of title or possession of the coal is for the purpose of refining the coal. |
|---|
| 702 | 713 | | |
|---|
| 703 | 714 | | (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. |
|---|
| 704 | 715 | | |
|---|
| 705 | 716 | | 55. Tangible personal property incorporated or fabricated into a project described in section 42-5075, subsection O, 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: |
|---|
| 706 | 717 | | |
|---|
| 707 | 718 | | (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. |
|---|
| 708 | 719 | | |
|---|
| 709 | 720 | | (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. |
|---|
| 710 | 721 | | |
|---|
| 711 | 722 | | (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. |
|---|
| 712 | 723 | | |
|---|
| 713 | 724 | | 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: |
|---|
| 714 | 725 | | |
|---|
| 715 | 726 | | (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: |
|---|
| 716 | 727 | | |
|---|
| 717 | 728 | | (i) Items that are sold to one or more persons and through which a value is not denominated in money. |
|---|
| 718 | 729 | | |
|---|
| 719 | 730 | | (ii) Prepaid calling cards for telecommunications services. |
|---|
| 720 | 731 | | |
|---|
| 721 | 732 | | (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. |
|---|
| 722 | 733 | | |
|---|
| 723 | 734 | | (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. |
|---|
| 724 | 735 | | |
|---|
| 725 | 736 | | B. In addition to the exemptions allowed by subsection A of this section, the following categories of tangible personal property are also exempt: |
|---|
| 726 | 737 | | |
|---|
| 727 | 738 | | 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. |
|---|
| 728 | 739 | | |
|---|
| 729 | 740 | | 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. |
|---|
| 730 | 741 | | |
|---|
| 731 | 742 | | 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, 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. |
|---|
| 732 | 743 | | |
|---|
| 733 | 744 | | 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. |
|---|
| 734 | 745 | | |
|---|
| 735 | 746 | | 5. Machinery and equipment used directly for energy storage for later electrical use. For the purposes of this paragraph: |
|---|
| 736 | 747 | | |
|---|
| 737 | 748 | | (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. |
|---|
| 738 | 749 | | |
|---|
| 739 | 750 | | (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. |
|---|
| 740 | 751 | | |
|---|
| 741 | 752 | | (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. |
|---|
| 742 | 753 | | |
|---|
| 743 | 754 | | 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. |
|---|
| 744 | 755 | | |
|---|
| 745 | 756 | | 7. Pipes or valves four inches in diameter or larger used to transport oil, natural gas, artificial gas, water 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. |
|---|
| 746 | 757 | | |
|---|
| 747 | 758 | | 8. Aircraft, navigational and communication instruments and other accessories and related equipment sold to: |
|---|
| 748 | 759 | | |
|---|
| 749 | 760 | | (a) A person: |
|---|
| 750 | 761 | | |
|---|
| 751 | 762 | | (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. |
|---|
| 752 | 763 | | |
|---|
| 753 | 764 | | (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. |
|---|
| 754 | 765 | | |
|---|
| 755 | 766 | | (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. |
|---|
| 756 | 767 | | |
|---|
| 757 | 768 | | (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. |
|---|
| 758 | 769 | | |
|---|
| 759 | 770 | | (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. |
|---|
| 760 | 771 | | |
|---|
| 761 | 772 | | (b) Any foreign government. |
|---|
| 762 | 773 | | |
|---|
| 763 | 774 | | (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. |
|---|
| 764 | 775 | | |
|---|
| 765 | 776 | | 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. |
|---|
| 766 | 777 | | |
|---|
| 767 | 778 | | 10. Rolling stock, rails, ties and signal control equipment used directly to transport persons or property. |
|---|
| 768 | 779 | | |
|---|
| 769 | 780 | | 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. |
|---|
| 770 | 781 | | |
|---|
| 771 | 782 | | 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. |
|---|
| 772 | 783 | | |
|---|
| 773 | 784 | | 13. Groundwater measuring devices required under section 45-604. |
|---|
| 774 | 785 | | |
|---|
| 775 | 786 | | 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: |
|---|
| 776 | 787 | | |
|---|
| 777 | 788 | | (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. |
|---|
| 778 | 789 | | |
|---|
| 779 | 790 | | (b) "Self-powered implements" includes machinery and equipment that are electric-powered. |
|---|
| 780 | 791 | | |
|---|
| 781 | 792 | | 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. |
|---|
| 782 | 793 | | |
|---|
| 783 | 794 | | 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: |
|---|
| 784 | 795 | | |
|---|
| 785 | 796 | | (a) Any direct broadcast satellite television or data transmission service that operates pursuant to 47 Code of Federal Regulations part 25. |
|---|
| 786 | 797 | | |
|---|
| 787 | 798 | | (b) Any satellite television or data transmission facility, if both of the following conditions are met: |
|---|
| 788 | 799 | | |
|---|
| 789 | 800 | | (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. |
|---|
| 790 | 801 | | |
|---|
| 791 | 802 | | (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. |
|---|
| 792 | 803 | | |
|---|
| 793 | 804 | | 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. |
|---|
| 794 | 805 | | |
|---|
| 795 | 806 | | 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: |
|---|
| 796 | 807 | | |
|---|
| 797 | 808 | | (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. |
|---|
| 798 | 809 | | |
|---|
| 799 | 810 | | (b) Does not include the building or other permanent, nonremovable component of the building that houses the clean room environment. |
|---|
| 800 | 811 | | |
|---|
| 801 | 812 | | 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. |
|---|
| 802 | 813 | | |
|---|
| 803 | 814 | | 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. |
|---|
| 804 | 815 | | |
|---|
| 805 | 816 | | 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, if the machinery and equipment are used directly and primarily to prevent, monitor, control or reduce air, water or land pollution. |
|---|
| 806 | 817 | | |
|---|
| 807 | 818 | | 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: |
|---|
| 808 | 819 | | |
|---|
| 809 | 820 | | (a) Repair or replacement parts purchased for the machinery or equipment described in this paragraph. |
|---|
| 810 | 821 | | |
|---|
| 811 | 822 | | (b) Machinery or equipment purchased to replace machinery or equipment for which an exemption was previously claimed and taken under this paragraph. |
|---|
| 812 | 823 | | |
|---|
| 813 | 824 | | (c) Any machinery or equipment purchased after the television station has ceased analog broadcasting, or purchased after November 1, 2009, whichever occurs first. |
|---|
| 814 | 825 | | |
|---|
| 815 | 826 | | 22. Qualifying equipment that is purchased from and after June 30, 2004 through June 30, 2024 December 31, 2026 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. |
|---|
| 816 | 827 | | |
|---|
| 817 | 828 | | 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. |
|---|
| 818 | 829 | | |
|---|
| 819 | 830 | | 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. |
|---|
| 820 | 831 | | |
|---|
| 821 | 832 | | C. The exemptions provided by subsection B of this section do not include: |
|---|
| 822 | 833 | | |
|---|
| 823 | 834 | | 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. |
|---|
| 824 | 835 | | |
|---|
| 825 | 836 | | 2. Janitorial equipment and hand tools. |
|---|
| 826 | 837 | | |
|---|
| 827 | 838 | | 3. Office equipment, furniture and supplies. |
|---|
| 828 | 839 | | |
|---|
| 829 | 840 | | 4. Tangible personal property used in selling or distributing activities, other than the telecommunications transmissions described in subsection B, paragraph 16 of this section. |
|---|
| 830 | 841 | | |
|---|
| 831 | 842 | | 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. |
|---|
| 832 | 843 | | |
|---|
| 833 | 844 | | 6. Shops, buildings, docks, depots and all other materials of whatever kind or character not specifically included as exempt. |
|---|
| 834 | 845 | | |
|---|
| 835 | 846 | | 7. Motors and pumps used in drip irrigation systems. |
|---|
| 836 | 847 | | |
|---|
| 837 | 848 | | 8. Machinery and equipment or tangible personal property used by a contractor in performing a contract. |
|---|
| 838 | 849 | | |
|---|
| 839 | 850 | | D. The following shall be deducted in computing the purchase price of electricity by a retail electric customer from a utility business: |
|---|
| 840 | 851 | | |
|---|
| 841 | 852 | | 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. |
|---|
| 842 | 853 | | |
|---|
| 843 | 854 | | 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. |
|---|
| 844 | 855 | | |
|---|
| 845 | 856 | | 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. |
|---|
| 846 | 857 | | |
|---|
| 847 | 858 | | F. The following shall be deducted in computing the purchase price of electricity by a retail electric customer from a utility business: |
|---|
| 848 | 859 | | |
|---|
| 849 | 860 | | 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. |
|---|
| 850 | 861 | | |
|---|
| 851 | 862 | | 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. |
|---|
| 852 | 863 | | |
|---|
| 853 | 864 | | G. The tax levied by this article does not apply to the purchase price of electricity, natural gas or liquefied petroleum gas by: |
|---|
| 854 | 865 | | |
|---|
| 855 | 866 | | 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: |
|---|
| 856 | 867 | | |
|---|
| 857 | 868 | | (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. |
|---|
| 858 | 869 | | |
|---|
| 859 | 870 | | (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. |
|---|
| 860 | 871 | | |
|---|
| 861 | 872 | | (c) "Qualified manufacturing or smelting business" means one of the following: |
|---|
| 862 | 873 | | |
|---|
| 863 | 874 | | (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. |
|---|
| 864 | 875 | | |
|---|
| 865 | 876 | | (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. |
|---|
| 866 | 877 | | |
|---|
| 867 | 878 | | (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. |
|---|
| 868 | 879 | | |
|---|
| 869 | 880 | | (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. |
|---|
| 870 | 881 | | |
|---|
| 871 | 882 | | (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. |
|---|
| 872 | 883 | | |
|---|
| 873 | 884 | | (d) "Smelting" means to melt or fuse a metalliferous mineral, often with an accompanying chemical change, usually to separate the metal. |
|---|
| 874 | 885 | | |
|---|
| 875 | 886 | | 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. |
|---|
| 876 | 887 | | |
|---|
| 877 | 888 | | 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. |
|---|
| 878 | 889 | | |
|---|
| 879 | 890 | | I. For the purposes of subsection B of this section: |
|---|
| 880 | 891 | | |
|---|
| 881 | 892 | | 1. "Agricultural aircraft" means an aircraft that is built for agricultural use for the aerial application of pesticides or fertilizer or for aerial seeding. |
|---|
| 882 | 893 | | |
|---|
| 883 | 894 | | 2. "Aircraft" includes: |
|---|
| 884 | 895 | | |
|---|
| 885 | 896 | | (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. |
|---|
| 886 | 897 | | |
|---|
| 887 | 898 | | (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. |
|---|
| 888 | 899 | | |
|---|
| 889 | 900 | | 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. |
|---|
| 890 | 901 | | |
|---|
| 891 | 902 | | 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 |
|---|
| 892 | 903 | | |
|---|
| 893 | 904 | | Sec. 4. Section 43-1183, Arizona Revised Statutes, is amended to read: |
|---|
| 894 | 905 | | |
|---|
| 895 | 906 | | START_STATUTE43-1183. Credit for contributions to school tuition organization |
|---|
| 896 | 907 | | |
|---|
| 897 | 908 | | A. Beginning from and after June 30, 2006, a credit is allowed against the taxes imposed by this title for the amount of voluntary cash contributions made by the taxpayer during the taxable year to a school tuition organization that is certified pursuant to chapter 15 of this title at the time of donation. |
|---|
| 898 | 909 | | |
|---|
| 899 | 910 | | B. The amount of the credit is the total amount of the taxpayer's contributions for the taxable year under subsection A of this section and is preapproved by the department of revenue pursuant to subsection D of this section. |
|---|
| 900 | 911 | | |
|---|
| 901 | 912 | | C. The department of revenue: |
|---|
| 902 | 913 | | |
|---|
| 903 | 914 | | 1. Shall not allow tax credits under this section and section 20-224.06 that exceed in the aggregate a combined total of $10,000,000 $135,000,000 in any fiscal year 2024-2025 and each fiscal year thereafter. Beginning in fiscal year 2007-2008, the aggregate dollar amount of the tax credit cap from the previous fiscal year shall be annually increased by twenty percent. Beginning in fiscal year 2020-2021, the aggregate dollar amount of the tax credit cap from the previous fiscal year shall be increased as follows: |
|---|
| 904 | 915 | | |
|---|
| 905 | 916 | | (a) For fiscal year 2020-2021, by fifteen percent. |
|---|
| 906 | 917 | | |
|---|
| 907 | 918 | | (b) For fiscal year 2021-2022, by ten percent. |
|---|
| 908 | 919 | | |
|---|
| 909 | 920 | | (c) For fiscal year 2022-2023, by five percent. |
|---|
| 910 | 921 | | |
|---|
| 911 | 922 | | (d) For fiscal year 2023-2024 and each fiscal year thereafter, by the greater of: |
|---|
| 912 | 923 | | |
|---|
| 913 | 924 | | (i) The percentage of the annual increase, if any, in the metropolitan Phoenix consumer price index published by the United States department of labor bureau of labor statistics. |
|---|
| 914 | 925 | | |
|---|
| 915 | 926 | | (ii) Two percent. |
|---|
| 916 | 927 | | |
|---|
| 917 | 928 | | 2. Shall preapprove tax credits under this section and section 20-224.06 subject to subsection D of this section. |
|---|
| 918 | 929 | | |
|---|
| 919 | 930 | | 3. Shall allow the tax credits under this section and section 20-224.06 on a first-come, first-served basis. |
|---|
| 920 | 931 | | |
|---|
| 921 | 932 | | D. For the purposes of subsection C, paragraph 2 of this section, before making a contribution to a school tuition organization, the taxpayer under this title or title 20 must notify the school tuition organization of the total amount of contributions that the taxpayer intends to make to the school tuition organization. Before accepting the contribution, the school tuition organization shall request preapproval from the department of revenue for the taxpayer's intended contribution amount. The department of revenue shall preapprove or deny the requested amount within twenty days after receiving the request from the school tuition organization. If the department of revenue preapproves the request, the school tuition organization shall immediately notify the taxpayer, and the department of insurance and financial institutions in the case of a credit under section 20-224.06, that the requested amount was preapproved by the department of revenue. In order to receive a tax credit under this subsection, the taxpayer shall make the contribution to the school tuition organization within twenty days after receiving notice from the school tuition organization that the requested amount was preapproved. If the school tuition organization does not receive the preapproved contribution from the taxpayer within the required twenty days, the school tuition organization shall immediately notify the department of revenue, and the department of insurance and financial institutions in the case of a credit under section 20-224.06, and the department of revenue shall no longer include this preapproved contribution amount when calculating the limit prescribed in subsection C, paragraph 1 of this section. |
|---|
| 922 | 933 | | |
|---|
| 923 | 934 | | E. If the allowable tax credit exceeds the taxes otherwise due under this title on the claimant's income, or if there are no taxes due under this title, the taxpayer may carry the amount of the claim not used to offset the taxes under this title forward for not more than five consecutive taxable years' income tax liability. |
|---|
| 924 | 935 | | |
|---|
| 925 | 936 | | F. Co-owners of a business, including corporate partners in a partnership and stockholders of an S corporation as defined in section 1361 of the internal revenue code, may each claim only the pro rata share of the credit allowed under this section based on the ownership interest. The total of the credits allowed all such owners may not exceed the amount that would have been allowed a sole owner. |
|---|
| 926 | 937 | | |
|---|
| 927 | 938 | | G. The credit allowed by this section is in lieu of any deduction pursuant to section 170 of the internal revenue code and taken for state tax purposes. |
|---|
| 928 | 939 | | |
|---|
| 929 | 940 | | H. A taxpayer shall not claim a credit under this section and also under section 43-1184 with respect to the same contribution. |
|---|
| 930 | 941 | | |
|---|
| 931 | 942 | | I. The tax credit is not allowed if the taxpayer designates the taxpayer's contribution to the school tuition organization for the direct benefit of any specific student. |
|---|
| 932 | 943 | | |
|---|
| 933 | 944 | | J. The department of revenue, with the cooperation of the department of insurance and financial institutions, shall adopt rules and publish and prescribe forms and procedures necessary for the administration of to administer this section. END_STATUTE |
|---|
| 934 | 945 | | |
|---|
| 935 | 946 | | Sec. 5. Section 43-1504, Arizona Revised Statutes, is amended to read: |
|---|
| 936 | 947 | | |
|---|
| 937 | 948 | | START_STATUTE43-1504. Special provisions; corporate donations for low-income scholarships; rules |
|---|
| 938 | 949 | | |
|---|
| 939 | 950 | | A. A school tuition organization that receives contributions from a corporation for the purposes of section 20-224.06 or 43-1183 must use at least ninety percent of those contributions to provide educational scholarships or tuition grants only to children whose family income does not exceed one hundred eighty-five percent of the income limit required to qualify a child for reduced-price lunches under the national school lunch and child nutrition acts (42 United States Code sections 1751 through 1793) and to whom any of the following applies: |
|---|
| 940 | 951 | | |
|---|
| 941 | 952 | | 1. Attended a governmental primary or secondary school as a full-time student as defined in section 15-901 or attended a preschool program that offers services to students with disabilities at a governmental school for at least ninety days of the prior fiscal year or one full semester and transferred from a governmental school to a qualified school. |
|---|
| 942 | 953 | | |
|---|
| 943 | 954 | | 2. Enroll in a qualified school in a kindergarten program or a preschool program that offers services to students with disabilities. |
|---|
| 944 | 955 | | |
|---|
| 945 | 956 | | 3. Are the dependent of a member of the armed forces of the United States who is stationed in this state pursuant to military orders. |
|---|
| 946 | 957 | | |
|---|
| 947 | 958 | | 4. Are homeschooled before enrolling in a qualified school. |
|---|
| 948 | 959 | | |
|---|
| 949 | 960 | | 5. Moved to this state from out of state before enrolling in a qualified school. |
|---|
| 950 | 961 | | |
|---|
| 951 | 962 | | 6. Participated in an Arizona empowerment scholarship account and did not renew the account or accept the scholarship in order to accept a scholarship or tuition grant under this section. |
|---|
| 952 | 963 | | |
|---|
| 953 | 964 | | 7. subject to subsection G of this section, Are placed in foster care pursuant to title 8, chapter 4 at any time before the student graduates from high school or obtains a general equivalency DIPLOMA and who meet all of the following criteria: |
|---|
| 954 | 965 | | |
|---|
| 955 | 966 | | (a) Are unable to attend a governmental primary or secondary school as a full-time student as defined in section 15-901. for the purposes of this subdivision, "unable to attend" means the student has been expelled or asked not to return due to the student's behavior or the school is not able to provide necessary services to the student. |
|---|
| 956 | 967 | | |
|---|
| 957 | 968 | | (b) have not attended a governmental primary or secondary school as a full-time student as defined in section 15-901 for at least ninety days of the prior fiscal year or one full semester before enrolling in a qualified school. |
|---|
| 958 | 969 | | |
|---|
| 959 | 970 | | (c) The qualified school in which the students are enrolling is only considered because a governmental primary or secondary school cannot meet the students' unique needs, such as severe medical or behavioral needs that require specialized programs. |
|---|
| 960 | 971 | | |
|---|
| 961 | 972 | | (d) are unable to receive other scholarships or tuition grants under this chapter or chapter 15 of this title in an amount that is equal to the cost of tuition to attend the qualified school. |
|---|
| 962 | 973 | | |
|---|
| 963 | 974 | | 7. 8. Received an educational scholarship or tuition grant under paragraph 1, 2, 3, 4, 5, or 6 or 7 of this subsection or chapter 16, article 1 of this title if the children continue to attend a qualified school in a subsequent year. |
|---|
| 964 | 975 | | |
|---|
| 965 | 976 | | B. A child is eligible to receive an educational scholarship or tuition grant under subsection A of this section if the child meets the criteria to receive a reduced-price lunch but does not actually claim that benefit. |
|---|
| 966 | 977 | | |
|---|
| 967 | 978 | | C. In 2021, a school tuition organization shall not issue an educational scholarship or a tuition grant for the purposes of section 20-224.06 or 43-1183 in an amount that exceeds $5,600 for students who are in a kindergarten program, a preschool program that offers services to students with disabilities or grades one through eight or $7,500 for students who are in grades nine through twelve. In each year after 2021, the limit amount for a scholarship or a grant under this subsection shall be increased by $200. |
|---|
| 968 | 979 | | |
|---|
| 969 | 980 | | D. A school tuition organization shall require that student beneficiaries use the educational scholarships or tuition grants on a full-time basis. If a child leaves the school before completing an entire school year, the school shall refund a prorated amount of the educational scholarship or tuition grant to the school tuition organization that issued the scholarship or grant. The school tuition organization shall allocate any refunds it receives under this subsection for educational scholarships or tuition grants. |
|---|
| 970 | 981 | | |
|---|
| 971 | 982 | | E. Students who receive an educational scholarship or tuition grant under this section shall be allowed to attend any qualified school of their parents' choice. |
|---|
| 972 | 983 | | |
|---|
| 973 | 984 | | F. The department of revenue, with the cooperation of the department of insurance and financial institutions, shall adopt rules and publish and prescribe forms and procedures necessary to administer this section. |
|---|
| 974 | 985 | | |
|---|