| 1 | 1 | | REFERENCE TITLE: TPT; utilities classification; reporting State of Arizona Senate Fifty-seventh Legislature First Regular Session 2025 SB 1216 Introduced by Senator Angius An Act amending section 42-5063, Arizona Revised Statutes; relating to transaction privilege tax. (TEXT OF BILL BEGINS ON NEXT PAGE) |
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| 11 | 11 | | REFERENCE TITLE: TPT; utilities classification; reporting |
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| 12 | 12 | | State of Arizona Senate Fifty-seventh Legislature First Regular Session 2025 |
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| 13 | 13 | | SB 1216 |
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| 14 | 14 | | Introduced by Senator Angius |
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| 16 | 16 | | REFERENCE TITLE: TPT; utilities classification; reporting |
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| 26 | 26 | | State of Arizona |
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| 28 | 28 | | Senate |
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| 30 | 30 | | Fifty-seventh Legislature |
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| 32 | 32 | | First Regular Session |
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| 34 | 34 | | 2025 |
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| 42 | 42 | | SB 1216 |
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| 46 | 46 | | Introduced by |
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| 48 | 48 | | Senator Angius |
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| 66 | 66 | | An Act |
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| 70 | 70 | | amending section 42-5063, Arizona Revised Statutes; relating to transaction privilege tax. |
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| 76 | 76 | | (TEXT OF BILL BEGINS ON NEXT PAGE) |
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| 80 | 80 | | Be it enacted by the Legislature of the State of Arizona: Section 1. Section 42-5063, Arizona Revised Statutes, is amended to read: START_STATUTE42-5063. Utilities classification; definitions A. The utilities classification is comprised of the business of: 1. Producing and furnishing or furnishing to consumers natural or artificial gas and water. 2. Providing to retail electric customers ancillary services, electric distribution services, electric generation services, electric transmission services and other services related to providing electricity. B. The utilities classification does not include: 1. Sales of ancillary services, electric distribution services, electric generation services, electric transmission services and other services related to providing electricity, gas or water to a person who resells the services. 2. Sales of natural gas or liquefied petroleum gas used to propel a motor vehicle. 3. 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. 4. Sales of ancillary services, electric distribution services, electric generation services, electric transmission services and other services that are 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. 5. 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. 6. The leasing or renting of space to make attachments to utility poles as follows: (a) By a person that is engaged in business under this section. (b) To a person that is engaged in business under this section or section 42-5064 or that is a cable operator. C. The tax base for the utilities classification is the gross proceeds of sales or gross income derived from the business, but the following shall be deducted from the tax base: 1. Revenues received by a municipally owned utility in the form of fees charged 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. Revenues received by any person or persons owning a utility system in the form of reimbursement or contribution compensation 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. 3. Gross proceeds of sales or gross income derived from sales to: (a) Qualifying hospitals 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. 4. The portion of gross proceeds of sales or gross income that is derived from sales to a qualified environmental technology manufacturer, producer or processor as defined in section 41-1514.02 of a utility product and that is used directly in environmental technology manufacturing, producing or processing. This paragraph shall apply for twenty full consecutive calendar or fiscal years from the date the first paper manufacturing machine is placed in service. In the case of a qualified environmental technology manufacturer, producer or processor who does not manufacture paper, the time period shall begin with the date the first manufacturing, processing or production equipment is placed in service. 5. The portion of gross proceeds of sales or gross income attributable to transfers of electricity by any retail electric customer owning a solar photovoltaic energy generating system to an electric distribution system, if the electricity transferred is generated by the customer's system. 6. Gross proceeds of sales or gross income derived from sales of electricity, natural gas or liquefied petroleum gas to 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. 7. Gross proceeds of sales or gross income derived from sales of electricity or natural gas to 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. D. A person that is engaged in a business to which subsection A of this section applies shall keep the books of the business so as to show separately the gross proceeds of sales to residential customers and the gross proceeds of sales to nonresidential customers and shall report those amounts to the department on the return form prescribed by section 42-5014. D. e. For the purposes of this section: 1. "Ancillary services" means those services so designated in federal energy regulatory commission order 888 adopted in 1996 that include the services necessary to support the transmission of electricity from resources to loads while maintaining reliable operation of the transmission system according to good utility practice. 2. "Cable operator" has the same meaning prescribed in section 9-505 and includes a video service provider. 3. "Electric distribution service" means distributing electricity to retail electric customers through the use of electric distribution facilities. 4. "Electric generation service" means providing electricity for sale to retail electric customers but excluding electric distribution or transmission services. 5. "Electric transmission service" means transmitting electricity to retail electric customers or to electric distribution facilities so classified by the federal energy regulatory commission or, to the extent permitted by law, so classified by the Arizona corporation commission. 6. "Other services" includes metering, meter reading services, billing and collecting services. 7. "Retail electric customer" means a person who purchases electricity for that person's own use, including use in that person's trade or business and not for resale, redistribution or retransmission. 8. "Utility pole" means any wooden, metal or other pole used for utility purposes and the pole's appurtenances that are attached or authorized for attachment by the person controlling the pole. END_STATUTE Sec. 2. Form revision; department of revenue; delayed repeal A. On or before the sixth month after the effective date of this act, the department of revenue shall revise the transaction privilege tax return form prescribed by section 42-5014, Arizona Revised Statutes, for the purposes of this act. B. This section is repealed from and after December 31, 2026. Sec. 3. Applicability This act applies to taxable periods beginning on or after the first day of the month following the sixth month after the general effective date. |
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| 82 | 82 | | Be it enacted by the Legislature of the State of Arizona: |
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| 84 | 84 | | Section 1. Section 42-5063, Arizona Revised Statutes, is amended to read: |
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| 85 | 85 | | |
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| 86 | 86 | | START_STATUTE42-5063. Utilities classification; definitions |
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| 88 | 88 | | A. The utilities classification is comprised of the business of: |
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| 90 | 90 | | 1. Producing and furnishing or furnishing to consumers natural or artificial gas and water. |
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| 92 | 92 | | 2. Providing to retail electric customers ancillary services, electric distribution services, electric generation services, electric transmission services and other services related to providing electricity. |
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| 93 | 93 | | |
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| 94 | 94 | | B. The utilities classification does not include: |
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| 96 | 96 | | 1. Sales of ancillary services, electric distribution services, electric generation services, electric transmission services and other services related to providing electricity, gas or water to a person who resells the services. |
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| 97 | 97 | | |
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| 98 | 98 | | 2. Sales of natural gas or liquefied petroleum gas used to propel a motor vehicle. |
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| 100 | 100 | | 3. 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. |
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| 101 | 101 | | |
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| 102 | 102 | | 4. Sales of ancillary services, electric distribution services, electric generation services, electric transmission services and other services that are 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. |
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| 103 | 103 | | |
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| 104 | 104 | | 5. 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. |
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| 106 | 106 | | 6. The leasing or renting of space to make attachments to utility poles as follows: |
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| 108 | 108 | | (a) By a person that is engaged in business under this section. |
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| 110 | 110 | | (b) To a person that is engaged in business under this section or section 42-5064 or that is a cable operator. |
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| 111 | 111 | | |
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| 112 | 112 | | C. The tax base for the utilities classification is the gross proceeds of sales or gross income derived from the business, but the following shall be deducted from the tax base: |
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| 114 | 114 | | 1. Revenues received by a municipally owned utility in the form of fees charged 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. |
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| 115 | 115 | | |
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| 116 | 116 | | 2. Revenues received by any person or persons owning a utility system in the form of reimbursement or contribution compensation 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. |
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| 117 | 117 | | |
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| 118 | 118 | | 3. Gross proceeds of sales or gross income derived from sales to: |
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| 120 | 120 | | (a) Qualifying hospitals as defined in section 42-5001. |
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| 122 | 122 | | (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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| 123 | 123 | | |
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| 124 | 124 | | 4. The portion of gross proceeds of sales or gross income that is derived from sales to a qualified environmental technology manufacturer, producer or processor as defined in section 41-1514.02 of a utility product and that is used directly in environmental technology manufacturing, producing or processing. This paragraph shall apply for twenty full consecutive calendar or fiscal years from the date the first paper manufacturing machine is placed in service. In the case of a qualified environmental technology manufacturer, producer or processor who does not manufacture paper, the time period shall begin with the date the first manufacturing, processing or production equipment is placed in service. |
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| 125 | 125 | | |
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| 126 | 126 | | 5. The portion of gross proceeds of sales or gross income attributable to transfers of electricity by any retail electric customer owning a solar photovoltaic energy generating system to an electric distribution system, if the electricity transferred is generated by the customer's system. |
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| 127 | 127 | | |
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| 128 | 128 | | 6. Gross proceeds of sales or gross income derived from sales of electricity, natural gas or liquefied petroleum gas to 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: |
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| 129 | 129 | | |
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| 130 | 130 | | (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. |
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| 131 | 131 | | |
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| 132 | 132 | | (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. |
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| 133 | 133 | | |
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| 134 | 134 | | (c) "Qualified manufacturing or smelting business" means one of the following: |
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| 135 | 135 | | |
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| 136 | 136 | | (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. |
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| 137 | 137 | | |
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| 138 | 138 | | (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. |
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| 139 | 139 | | |
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| 140 | 140 | | (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. |
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| 141 | 141 | | |
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| 142 | 142 | | (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. |
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| 143 | 143 | | |
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| 144 | 144 | | (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. |
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| 145 | 145 | | |
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| 146 | 146 | | (d) "Smelting" means to melt or fuse a metalliferous mineral, often with an accompanying chemical change, usually to separate the metal. |
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| 147 | 147 | | |
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| 148 | 148 | | 7. Gross proceeds of sales or gross income derived from sales of electricity or natural gas to 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. |
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| 149 | 149 | | |
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| 150 | 150 | | D. A person that is engaged in a business to which subsection A of this section applies shall keep the books of the business so as to show separately the gross proceeds of sales to residential customers and the gross proceeds of sales to nonresidential customers and shall report those amounts to the department on the return form prescribed by section 42-5014. |
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| 152 | 152 | | D. e. For the purposes of this section: |
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| 154 | 154 | | 1. "Ancillary services" means those services so designated in federal energy regulatory commission order 888 adopted in 1996 that include the services necessary to support the transmission of electricity from resources to loads while maintaining reliable operation of the transmission system according to good utility practice. |
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| 155 | 155 | | |
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| 156 | 156 | | 2. "Cable operator" has the same meaning prescribed in section 9-505 and includes a video service provider. |
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| 157 | 157 | | |
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| 158 | 158 | | 3. "Electric distribution service" means distributing electricity to retail electric customers through the use of electric distribution facilities. |
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| 159 | 159 | | |
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| 160 | 160 | | 4. "Electric generation service" means providing electricity for sale to retail electric customers but excluding electric distribution or transmission services. |
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| 161 | 161 | | |
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| 162 | 162 | | 5. "Electric transmission service" means transmitting electricity to retail electric customers or to electric distribution facilities so classified by the federal energy regulatory commission or, to the extent permitted by law, so classified by the Arizona corporation commission. |
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| 163 | 163 | | |
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| 164 | 164 | | 6. "Other services" includes metering, meter reading services, billing and collecting services. |
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| 165 | 165 | | |
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| 166 | 166 | | 7. "Retail electric customer" means a person who purchases electricity for that person's own use, including use in that person's trade or business and not for resale, redistribution or retransmission. |
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| 167 | 167 | | |
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| 168 | 168 | | 8. "Utility pole" means any wooden, metal or other pole used for utility purposes and the pole's appurtenances that are attached or authorized for attachment by the person controlling the pole. END_STATUTE |
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| 170 | 170 | | Sec. 2. Form revision; department of revenue; delayed repeal |
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| 171 | 171 | | |
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| 172 | 172 | | A. On or before the sixth month after the effective date of this act, the department of revenue shall revise the transaction privilege tax return form prescribed by section 42-5014, Arizona Revised Statutes, for the purposes of this act. |
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| 173 | 173 | | |
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| 174 | 174 | | B. This section is repealed from and after December 31, 2026. |
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| 175 | 175 | | |
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| 176 | 176 | | Sec. 3. Applicability |
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| 177 | 177 | | |
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| 178 | 178 | | This act applies to taxable periods beginning on or after the first day of the month following the sixth month after the general effective date. |
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