A.R.S. tit. 42 | Title 42 — Taxation

Chapter 1 Administration

Article 1 Department of Revenue

§ 42-1001 Definitions

In this title, unless the context otherwise requires:

"Board" or "state board" means either the state board of tax appeals or the state board of equalization, as applicable.
"Court" means the tax court or superior court, whichever is applicable.
"Department" means the department of revenue.
"Director" means the director of the department.
"Electronically send" or "send electronically" means to send by either email or the use of an electronic portal.
"Electronic portal" means a secure location on a website established by the department that requires the receiver to enter a password to access.
"Email" means:

(a) An electronic transmission of a message to an email address.

(b) If the message contains confidential information, the electronic transmission of a message to an email address using encryption software that requires the receiver to enter a password before the message can be retrieved and viewed.

"Internal revenue code" means the United States internal revenue code of 1986, as amended and in effect as of January 1, 2025, including those provisions that became effective during 2024 with the specific adoption of their retroactive effective dates but excluding all changes to the code enacted after January 1, 2025.

§ 42-1002 Department of revenue; director; appointments; compensation

A. There is established a department of revenue.

B. The direction, operation and control of the department are the responsibility of the director.

C. The director shall be appointed by the governor pursuant to section 38-211 and shall serve at the pleasure of the governor.

D. Compensation for the director and the personnel required by the department shall be established pursuant to section 38-611 and title 41, chapter 4, article 4.

§ 42-1003 Department organization; director's staff; deputy director; assistant directors; fingerprinting; consumer reports; definitions

A. The department consists of such divisions as the director deems necessary to achieve maximum efficiency, economy and effectiveness in administering and collecting taxes. The departmental organization shall provide for administering taxes as prescribed by law and for administrative services to the department, including data processing, accounting, records management, publications, collection of delinquent accounts, personnel services and budget and property control.

B. The director may divide the state into a reasonable number of districts and establish a full-time or part-time branch office or offices in each district as may be necessary. In establishing districts and branch offices, the director shall give due consideration to economy of administration and service to the taxpayers.

C. The director may employ, appoint and remove, in the manner prescribed by law, such officers, agents, branch office deputies and other staff personnel as the director deems necessary to assist in administering the department. The director's staff may perform such functions as the director prescribes, including budget development, legal research and analysis, tax research, departmental audit and public relations.

D. A deputy director of the department may be appointed by the director with the approval of the governor. The deputy director, if appointed, serves at the pleasure of the director with the approval of the governor. The deputy director shall assist the director in administering the department and has the duties and responsibilities as the director assigns.

E. The director, with the approval of the governor, may appoint an assistant director to head each division of the department. Any assistant director appointed is directly responsible for the functions performed by the assistant director's division. Each assistant director serves at the pleasure of the director with the approval of the governor.

F. The director may appoint other deputies or assistants to conduct hearings, prescribe administrative rules or perform any other duty prescribed for the department by law.

G. The director may require officers, agents, deputies and other employees designated by the director to give bond for the faithful performance of their duties in such an amount and with such sureties as the director determines or as prescribed by statute. The department shall pay all premiums on the bonds out of monies appropriated for the administration of the department.

H. The director and officers and employees designated by the director may administer an oath to any person or take the acknowledgement of any person in respect of any return or report required by law or the administrative rules of the department.

I. The director may reassign the administration of taxes and may assign and delegate the duties, powers and functions of the department among its divisions in order to achieve maximum efficiency, economy and effectiveness. The director or the deputy director, if any, shall enforce cooperation among the divisions in the provision and integration of all functions at all levels of the department.

J. The director may obtain a state and federal criminal records check for an applicant for employment for the purpose of hiring personnel or for any employee or contractor if the applicant, employee or contractor may receive or access federal tax information obtained from the internal revenue service in the course of employment with the department. Before making a final offer of employment or for purposes of screening an employee or contractor, the director shall require the applicant, employee or contractor to submit a full set of fingerprints. The director shall submit the fingerprints to the department of public safety for the purpose of obtaining a state and federal criminal records check pursuant to section 41-1750 and Public Law 92-544. The department of public safety may exchange this fingerprint data with the federal bureau of investigation. The department of revenue may disclose information obtained pursuant to this subsection only to members of the department's staff solely for employment purposes. An applicant, employee or contractor is not disqualified from employment under this subsection except in accordance with section 13-904, subsection E.

K. The director may obtain a consumer report for an applicant for employment for the purpose of hiring personnel whose job duties include distributing tax revenues pursuant to this title and title 43. Consumer report information may be obtained and used only in accordance with the fair credit reporting act (P.L. 90-321; 84 Stat. 1128; 15 United States Code sections 1681 through 1681x). The consumer report information shall not be the sole reason for the disqualification of the applicant.

L. For the purposes of this section:

"Applicant" means any person who seeks employment as a new hire or any employee of the department who seeks a transfer, a reclassification or a reassignment to a different position.
"Federal tax information" means returns and return information as defined in 26 United States Code section 6103(b) that the department receives directly from the internal revenue service or obtains through an internal revenue service-authorized secondary source and that are subject to the confidentiality protections and safeguarding requirements of the internal revenue code and corresponding federal regulations and guidance.

§ 42-1004 General powers and duties of the department; res judicata; remedies; enforcement; special collections account

A. The department shall administer and enforce this title, title 43 and other laws assigned to it and has all the powers and duties prescribed by law for such purposes. In all proceedings prescribed by law the department may act on behalf of this state. In addition, the department shall:

Formulate policies, plans and programs to effectuate the missions and purposes of the department.
Employ and remove personnel subject to title 41, chapter 4, article 4 and, as applicable, articles 5 and 6, determine the conditions of employment and prescribe the duties and powers of administrative, professional, technical, secretarial, clerical and other personnel as may be necessary in the performance of its duties, and contract for the services of outside advisors, consultants and aides as may be reasonably necessary.
Make contracts and incur obligations within the general scope of its activities and operations subject to the availability of its funds.
Contract with or assist other departments, agencies or institutions of the state, local, Indian tribal and federal governments in the furtherance of its purposes, objectives and programs.
Accept grants, matching funds and direct payments from public or private agencies for the conduct of programs which are consistent with the overall purposes and objectives of the department.
Provide information and advice within the scope of its duties subject to the laws on confidentiality of information and departmental rules adopted pursuant to such laws.
Advise with and make recommendations to the governor and the legislature on all matters concerning its objectives.
Have an official seal which shall be judicially noticed.
Provide an integrated, coordinated and uniform system of tax administration and revenue collection for the state, including a coordinated electronic method of collecting state and municipal transaction privilege and affiliated excise taxes.

B. The department may:

With the approval of the attorney general:

(a) Abate any balance owed by a taxpayer if the balance is uncollectible. Related liens, if any, are extinguished on abatement.

(b) Abate all or part of the unpaid portion of any tax if the director determines that the administration and collection costs involved would exceed the amount of the tax.

Offer publications relating to the administration of state taxes for sale at a price equal to the pro rata cost of publication and distribution. Monies received from the sale of publications shall be placed in a revenue publications revolving fund. Monies in the fund:

(a) Shall be used to meet publication and distribution expenses.

(b) Are exempt from the provisions of section 35-190 relating to lapsing of appropriations.

Enter into contingent fee contracts to collect delinquent state taxes, penalties, interest and other amounts owed to the department under title 43 and chapter 5, article 1 of this title, consistent with the requirements of chapter 2, article 1 of this title. No contract may be entered into for the hiring of auditors on a contingent fee basis except auditors that are hired to enforce title 44, chapter 3.

C. In the determination of any issue of law or fact under this title or title 43, neither the department, nor any officer or agency having any administrative duties under this title or title 43, nor any court is bound by the determination of any other executive officer or administrative agency of this state. In the determination of any case arising under this title or title 43, the rule of res judicata is applicable only if the liability involved is for the same year or period as was involved in another case previously determined under this title or title 43.

D. The remedies of this state provided for in this title and title 43 are cumulative, and no action taken by the department constitutes an election by this state to pursue any remedy to the exclusion of any other remedy provided by law.

E. The attorney general shall prosecute in the name of this state all actions necessary to enforce this title and title 43. The attorney general may defend all actions brought against this state or an officer or agency of this state arising under this title and title 43. The attorney general may delegate the prosecuting authority to any county attorney for prosecution in that county.

F. A special collections account is established in the state general fund. All monies collected pursuant to contracts authorized by subsection B, paragraph 3 of this section shall be deposited in the special collections account. The department shall pay from the account all fees and court costs provided for in the contracts authorized under subsection B, paragraph 3 of this section. The department shall allocate the remainder of the amounts collected under subsection B, paragraph 3 of this section to the state or the political subdivision in the proportion that the monies would have been distributed pursuant to chapter 5 of this title or section 43-206, respectively.

§ 42-1005 Powers and duties of director

A. The director shall be directly responsible to the governor for the direction, control and operation of the department and shall:

Make such administrative rules as he deems necessary and proper to effectively administer the department and enforce this title and title 43.
On or before November 15 of each year issue a written report to the governor and legislature concerning the department's activities during the year. In any election year a copy of this report shall be made available to the governor-elect and to the legislature-elect.
On or before December 15 of each year issue a supplemental report which shall also contain proposed legislation recommended by the department for the improvement of the system of taxation in the state.
In addition to the report required by paragraph 2 of this subsection, on or before November 15 of each year issue a written report to the governor and legislature detailing the approximate costs in lost revenue for all state tax expenditures in effect at the time of the report. For the purpose of this paragraph, "tax expenditure" means any tax provision in state law which exempts, in whole or in part, any persons, income, goods, services or property from the impact of established taxes including deductions, subtractions, exclusions, exemptions, allowances and credits.
Annually, on or before January 10, prepare and submit to the legislature a report containing a summary of all the revisions made to the internal revenue code during the preceding calendar year.
Provide such assistance to the governor and the legislature as they may require.
Delegate such administrative functions, duties or powers as he deems necessary to carry out the efficient operation of the department.

B. The director may enter into an agreement with the taxing authority of any state which imposes a tax on or measured by income to provide that compensation paid in that state to residents of this state is exempt in that state from liability for income tax, the requirement for filing a tax return and withholding tax from compensation. Compensation paid in this state to residents of that state is reciprocally exempt from the requirements of title 43.

§ 42-1006 Interrogatories to taxpayers; power to require information; classification

A. The director may prepare interrogatories to be propounded to taxpayers concerning matters relating to taxes, with an oath or affirmation annexed, which shall be fully answered by the taxpayers to whom they are submitted.

B. Any person who knowingly makes a false answer to any proper question submitted to him by the director or who knowingly fails to answer any question submitted, or to take or subscribe the oath or affirmation annexed thereto, is guilty of a class 2 misdemeanor.

C. The director may administer oaths or affirmations, issue subpoenas requiring attendance and testimony of witnesses, take evidence and require by subpoena duces tecum the production of books, papers and other documents which may be relevant to the powers and duties of the department.

D. The director may hold hearings to obtain information deemed necessary to carry out the powers and duties of the department. Hearings shall be held at a time and place and in the manner prescribed by the director, and notice of such hearing shall be given in the manner and form prescribed by the director.

E. In the case of refusal of the person to obey a subpoena issued by the director, the superior court, upon application by the director, shall issue to such person an order requiring him to appear before it and to produce evidence if so ordered, or give testimony, or to appear before the court and show cause why he should not be required to do so. Failure to obey such order of the court may be punished by the court as contempt.

§ 42-1007 Service of process upon the director

If an action is commenced against the department, a copy of the summons and the complaint or the notice of appeal, whichever is applicable, shall be served upon the director to effect service upon the department.

§ 42-1008 Employee, agent, contractor preparation of tax returns for compensation prohibited

An employee of the department of revenue, any individual acting as an agent or contractor of the department to perform any duties of the department or any manager or supervisor of an individual acting as an agent or contractor of the department shall not for compensation prepare or assist in preparing any tax return that is required to be filed with the federal, the state or a local government. A violation of this section is grounds for immediate dismissal or removal from any duties performed as an agent or contractor of the department as allowed by law.

§ 42-1009 Department of revenue tax system modernization project advisory committee; membership

(Rpld. 1/1/30)

The department of revenue tax system modernization project advisory committee is established and shall serve as the liaison between the department and the users of the tax system. The committee shall consist of the following members:

The director of the department of revenue or the director's designee who shall serve as the chairperson of the committee.
The director of the department of administration or the director's designee.
The auditor general or the auditor general's designee as a nonvoting member.
The director of the joint legislative budget committee or the director's designee as a nonvoting member.
The director of the governor's office of strategic planning and budgeting or the director's designee.
One member who represents a city or town in this state. The director of the department of revenue shall appoint this member.
One member who represents a county in this state. The director of the department of revenue shall appoint this member.
One member who represents the business community in this state. The director of the department of revenue shall appoint this member.
One member who is appointed by the president of the senate.
One member who is appointed by the speaker of the house of representatives.

Article 2 Reciprocity

§ 42-1051 Definitions

In this article, unless the context otherwise requires:

"State" means the District of Columbia and any state, territory or possession of the United States.
"Tax" means:

(a) Assessments lawfully made, whether based on a return or other disclosure of the taxpayer, upon the information and belief of the taxing authority, or otherwise.

(b) Penalties lawfully imposed pursuant to a taxing statute.

§ 42-1052 Suits to enforce state tax; comity

If authorized by the law of another state, the attorney general or any person authorized by him, or any appropriate officer of a political subdivision of this state, may bring suits in the courts of such other state to collect taxes legally due this state or the political subdivision.

§ 42-1053 Recognition and enforcement of other states' taxes

A. The officials of states which extend a comity to this state in authorizing suits as provided for in section 42-1052 may sue for the collection of such taxes in the courts of this state. A certificate issued by the secretary of state under the great seal of the state that such officers have authority to collect the tax is conclusive evidence of such authority.

B. The courts of this state shall recognize and enforce liabilities for taxes lawfully imposed by any other state, or the political subdivision thereof, which extends such comity to this state.

Article 3 General Administrative Provisions

§ 42-1101 Application

This article and chapter 2 of this title apply generally to the administration of income tax, withholding tax, transaction privilege tax, telecommunication services excise tax, county excise taxes and any other privilege excise tax administered by the department, severance tax, use tax, luxury tax, tax on water use and jet fuel excise and use tax.

§ 42-1101.01 Definitions

In this article, unless the context otherwise requires:

"Audit" means a review or examination of a taxpayer's accounts, financial information, books and records and any other document to ensure information is reported correctly on a return in accordance with this chapter and to verify the reported amount of tax is correct.
"Electronic return preparer" means a person who for compensation prepares an electronic return, statement or other document or prepares a substantial portion of an electronic return, statement or other document or transforms a paper version of a completed return, statement or other document to an electronic version of the same return, statement or other document for filing with the department. Electronic return preparer does not include a person who for compensation provides only computational and informational software used to prepare and file taxes.
"Electronic return transmitter" means a person who receives the electronic return, statement or other document from a taxpayer or electronic return preparer for ultimate transmittal to the department.
"Return preparer":

(a) Means any person that prepares a return, statement or other document or substantial portion of a return, statement or other document for compensation, regardless of the media used to prepare the return.

(b) Does not include a person because the person:

(i) Furnishes typing, reproducing or other mechanical assistance.

(ii) Prepares a return, statement or other document for an employer and is regularly and continuously employed by the employer.

(iii) Prepares as a fiduciary a return, statement or other document for any person.

(iv) Prepares a claim for refund or a return, statement or other document for a taxpayer in response to any notice of deficiency issued to the taxpayer or in response to any waiver of restriction after the commencement of an audit of the taxpayer.

(v) Furnishes computational and informational software used by the taxpayer to prepare the taxpayer's return, statement or other document.

(vi) Only prepares payment documents for payment made to the department pursuant to section 42-1129.

"Return, statement or other document" means any return, claim for refund, statement or other document that is required or authorized to be filed with the department pursuant to this title or title 43, including returns for any political subdivision of this state for which the department collects taxes.

§ 42-1102 Taxpayer bonds; definition

A. If the department deems it necessary to protect the revenues to be collected under this title and title 43, it may require a person liable for the tax to file a bond to secure the payment of the tax, penalty or interest, which may become due from that person. The bond shall be:

Issued by a surety company authorized to transact business in this state and approved by the director of the department of insurance and financial institutions of this state as to solvency and responsibility or composed of securities or cash that are deposited with, and kept in the custody of, the department.
Except as otherwise provided in this section, in the amount that the department prescribes by administrative rule to secure the payment of any tax, penalty or interest, which may become due from the person.

B. For the purposes of licenses to sell tobacco products issued under section 42-3401, the amount of the bond required under this section is the greater of $500 or four times the average monthly tax liability. For the purposes of determining the bond amount, the average monthly tax liability is equal to the average monthly tax due from the applicant for the preceding six consecutive months. If an applicant does not have a six-month payment history, the bond amount is a minimum of $500. If an applicant provides a surety bond and the bond lapses, the applicant shall deposit with the department cash or other security in an amount equal to the lapsed surety bond within five business days after the applicant's receipt of written notification by the department. The bond amount may be increased or decreased as necessary based on any reason listed in subsection D of this section or a change in the applicant's previous filing period, filing compliance record or payment history. If the bond amount is increased above the amount computed under this subsection, the applicant may request a hearing pursuant to subsection C of this section to show why the order increasing the bond amount is in error.

C. If the department determines that a person is to file a bond it shall notify the person to that effect, specifying the amount of the bond required. The person shall file the bond within five days after the giving of notice unless within that time the person requests in writing a hearing before the department at which time the department shall determine the necessity, propriety and amount of the bond. The determination is final unless within fifteen days after the giving of notice of the determination the person appeals the determination to the state board of tax appeals. The board shall decide on the appeal within fifteen days of its receipt. The bond, at any time without notice, may be applied to any tax, penalties or interest due, and for that purpose the securities may be sold at public or private sale without notice to the depositor.

D. For purposes of this section a bond may be required if:

After investigation of financial status, the department determines that an applicant for a new license would be unable to timely remit amounts due.
An applicant for a new license held a license for a prior business, and the remittance record for the prior business falls within one of the conditions in paragraph 5 of this subsection.
The department experienced collection problems while the applicant was engaged in business under a prior license.
The applicant is substantially similar to a person who would have been required to post a bond under paragraph 5 of this subsection or the person had a previous license that was revoked. An applicant is substantially similar if it is owned or controlled by persons who owned or controlled a previous licensee.
An existing licensee has had two or more delinquencies in remitting tax during the preceding twenty-four months if filing on a quarterly or less frequent basis or four or more delinquencies during the preceding twenty-four months if filing on a monthly or more frequent basis.

E. If a licensee who is required to post a bond or security maintains a good filing and payment record for a period of two years, the licensee may request that the department waive the continued bond or security requirement.

F. For the purposes of this section, "person" includes a firm, partnership, joint venture, association, corporation, sole proprietorship or other business or governmental entity subject to a tax administered by this article but does not include an individual subject to individual income tax.

§ 42-1103 Enjoining delinquent taxpayer from engaging or continuing in business

A. In order to ensure or to compel payment of taxes and to aid in enforcing this article, the director may apply to the tax court to enjoin any delinquent taxpayer or person who may be or may become liable for payment of any tax from engaging or continuing in business until the person ceases to be a delinquent taxpayer or complies with other requirements which are reasonably necessary to protect the revenues of this state and which are prescribed by the director.

B. On application for an injunction against a delinquent taxpayer, the court may forthwith issue an order temporarily restraining the taxpayer from doing business. The court shall hear the matter within three days and, on a showing by a preponderance of evidence that the taxpayer is delinquent and has been given notice of the hearing as required by law, the court may enjoin the taxpayer from engaging or continuing in business in this state until the taxpayer ceases to be delinquent. On issuing an injunction, the court may also order the sheriff to seal the taxpayer's business premises and may allow the taxpayer access to the premises only on the approval of the court.

C. On application for an injunction against a person other than a delinquent taxpayer, the court may issue an order temporarily restraining the person from engaging or continuing in business. The court shall hear the matter within three days and on a showing that the person has been given notice of the hearing as required by law, that demand has been made on the taxpayer to furnish security, that the taxpayer has not furnished security and that the director considers the collection from the primarily responsible person of the total amount of tax due or reasonably expected to become due to be in jeopardy, the court may forthwith enjoin the person from engaging or continuing in business until the person complies in full with the demand of the director for furnishing security.

D. The court shall not issue a temporary restraining order or injunction under this section against any person who has furnished security pursuant to section 42-1102, 42-5006 or 42-5007. On a showing to the court by any person against whom a temporary restraining order or injunction has issued under this section that the person has furnished such security, the court shall dissolve or set aside the temporary restraining order or injunction.

§ 42-1103.01 Action to enjoin return preparers

A. The director may apply to the tax court to enjoin any return preparer from engaging in business if the return preparer has:

Been subject to a civil or criminal penalty prescribed by section 42-1125 or 42-1127.
Misrepresented the preparer's experience or education.
Guaranteed the payment of any tax refund or the allowance of any tax credit.
Engaged in any other fraudulent or deceptive conduct that substantially interferes with the proper administration of this title or title 43.

B. On application by the director and after a hearing, the court may enjoin the return preparer from engaging in business as a return preparer.

§ 42-1103.02 Understatement of taxpayer's liability by return preparer; civil penalty; definition

A. The department may impose a civil penalty of two hundred fifty dollars against a return preparer who knew or reasonably should have known that an understatement of liability was on a return or claim for refund. The penalty under this subsection may be imposed only if there was not a realistic possibility that the position would be sustained on its merits and the position was not disclosed to the department in the return or in a statement attached to the return.

B. The department may impose a civil penalty of one thousand dollars against a return preparer who wilfully made an understatement of liability on a return or claim for refund.

C. A return preparer is required to only pay eighty-five per cent of the imposed penalty if the payment is made within thirty days from the date of the receipt of notification that the penalty was imposed. A return preparer may not appeal to the department pursuant to section 42-1251 if the return preparer fails to file the appeal within thirty days from the date of the receipt of notification that the penalty was imposed. If there is a final order or decision stating that the return preparer did not make an understatement of liability in a return or claim for refund, the department shall refund any penalty amount paid and interest to the return preparer.

D. For the purposes of this section, "understatement of liability" means any understatement of the net amount payable with respect to any imposed tax or any overstatement of the net amount creditable or refundable with respect to any tax.

§ 42-1103.03 Suspension from electronic filing program

A. The department may suspend an electronic return preparer from participating in the electronic filing program if the department determines that the electronic return preparer has failed to comply with any of the department's electronic filing program requirements, including requirements that are set forth in rules, manuals, rulings or procedures prescribed by the department for the program.

B. Within one hundred eighty days of the mailing date of the notice of suspension from the electronic filing program, the electronic return preparer may petition the department to review the action taken pursuant to section 42-1251. The petition shall set forth the reasons why the suspension should be lifted. Within fifteen days after the request for review, the department shall determine whether the suspension should be lifted.

C. Within thirty days after the department notifies the electronic return preparer of the determination under subsection B of this section, the electronic return preparer may bring a civil action in tax court for a determination under this subsection. Within twenty days after service of process is made on the department, the tax court shall determine whether the suspension should be lifted. If the electronic return preparer requests an extension of the twenty day period and establishes reasonable grounds why an extension should be granted, the court may grant an extension of not more than forty additional days. A determination made by the tax court under this subsection is final except as provided in section 12-170, subsection C.

§ 42-1104 Statute of limitation; exceptions

A. For the taxes to which this article applies, every notice of every additional tax due shall be prepared on forms prescribed by the department and mailed within four years after the report or return is required to be filed or within four years after the report or return is filed, whichever period expires later. For the purposes of this section, the requirement that the notice be mailed shall include methods allowed in lieu of mail under section 42-1108 or 42-1109.

B. The following are exceptions to the general rules prescribed by this section, and a deficiency assessment may be issued in any of the following cases:

The department may assess the tax or begin a proceeding in court for collecting the tax at any time:

(a) In the case of a false or fraudulent return with the intent to evade tax.

(b) In the case of failure to file a return for any tax administered under this title other than income tax and withholding tax.

(c) In the case of failure to file an income tax or withholding tax return if it is shown that the failure was due to an intent to evade tax.

If a taxpayer omits from gross income, gross receipts, gross proceeds of sales or Arizona adjusted gross income, as defined for purposes of chapter 5 of this title or title 43, an amount that is properly includible and that exceeds twenty-five percent of the amount of gross income stated in the return, the tax may be assessed at any time within six years after the return was filed.
If a taxpayer during a taxable year sells at a gain property used as the taxpayer's principal residence, the statutory period for assessing any deficiency attributable to any part of the gain does not expire before the expiration of four years after the date the taxpayer notifies the United States internal revenue service pursuant to the United States internal revenue code.
If a claim for credit or refund relates to an overpayment on account of the deductibility of a debt as one that became worthless, a loss from worthlessness of a security, an erroneous inclusion of an amount attributable to the recovery of a bad debt, prior tax or delinquency amount due to an adjustment of a bad debt deduction or a loss deduction from worthlessness of a security, the period of limitation is seven years after the date prescribed by law for filing the return for the year with respect to which the claim is made.
If a taxpayer fails to report a change or correction by the commissioner of internal revenue or other officer of the United States or other competent authority or fails to file an amended return as required by section 43-327, the department may assess any deficiency resulting from such adjustments within four years after the change, correction or amended return is reported to or filed with the United States internal revenue service regardless of any previous examinations by the department.
If a taxpayer is required to report a change or correction by the commissioner of internal revenue or other officer of the United States or other competent authority or to file an amended return as required by section 43-327 and does report the change or files the return, any deficiency resulting from the adjustments may be assessed within six months after the date the notice of amended return is filed with the department by the taxpayer, or within the period provided in subsection A of this section or paragraph 1 or 2 of this subsection, whichever period expires last.
Except as provided in paragraph 8 of this subsection, if a taxpayer agrees with the United States commissioner of internal revenue for an extension or renewals of the period for proposing and assessing deficiencies in federal income taxes for any year, the period for mailing a notice of a proposed income tax deficiency is four years after the return was filed or six months after the date of the expiration of the agreed period for assessing deficiencies in the federal income tax, whichever period expires later.
If a taxpayer agrees with the United States commissioner of internal revenue for a limited extension or renewals of the period for proposing and assessing deficiencies in federal income taxes for any year, then, solely with respect to those items specifically enumerated in this agreement, the period for mailing a notice of a proposed income tax deficiency, or claiming a refund, is four years after the return was filed or six months after the date of the expiration of the agreed period for assessing deficiencies in the federal income tax, whichever period expires later.
If, before the time prescribed for mailing a notice of a proposed deficiency assessment expires, the taxpayer consents in writing to an assessment after that time, the assessment may be made at any time before the period agreed on expires. The period agreed on may be extended by subsequent written agreements made before the period previously agreed on expires.
If a taxpayer fails to file a report or return for income tax or withholding tax, the department may assess the tax within seven years after the date the report or return was required to be filed.

C. Notwithstanding subsection A of this section and subsection B, paragraphs 1 and 2 of this section, a taxpayer who has a duty to collect use tax shall not be assessed tax pursuant to chapter 5, article 4 of this title for any retail sales to purchasers who were licensed pursuant to section 42-5005 or registered pursuant to section 42-5154 and who filed use tax returns for the reporting period in which the sale was made, if the reporting period in which the sale was made is more than four years from the notice of proposed deficiency. If, before this time limitation expires, the taxpayer consents in writing to an assessment after that time for the transactions, a subsequent assessment may include any transaction within the agreed extended period. The period agreed to may be extended by subsequent written agreements made before the period previously agreed to expires.

§ 42-1105 Taxpayer identification, verification and records; retention

A. The federal taxpayer identification number, assigned pursuant to section 6109 of the internal revenue code, is the taxpayer identifier for purposes of the taxes administered pursuant to this article. Each person who is required to make a return, statement or other document shall include the identifier in order to secure the person's proper identification. If the return, statement or other document is made, electronically or otherwise, by another person on behalf of the taxpayer, the taxpayer shall furnish the identifier to the other person, and the person shall furnish both the taxpayer's identifier and the person's own identifier with the return, statement or document.

B. The department may prescribe by administrative rule alternative methods for signing, subscribing or verifying a return, statement or other document required or authorized to be filed with the department that have the same validity and consequence as the actual signature or written declaration of the taxpayer or other person required to sign, subscribe or verify the return, statement or other document. While the department is adopting a rule prescribing alternative methods for signing, subscribing or verifying a return, statement or other document, the director, by tax ruling, may waive the requirement of a signature for a particular type or class of return, statement or other document required to be filed with the department. This subsection does not apply if the alternative method for signing a return, statement or other document is an electronic signature. The department shall accept or require electronic signatures in the manner prescribed in section 42-1131. For purposes of this subsection, "tax ruling" has the same meaning prescribed in section 42-2052.

C. A person who is a return preparer or an electronic return preparer shall furnish a completed copy of the return, statement or other document to the taxpayer no later than the time the return, statement or other document is presented for the taxpayer's signature.

D. Except as provided in section 42-3010, every person who is subject to the taxes administered pursuant to this article shall keep and preserve copies of filed tax returns, including any attachments to the tax return, any signature documents used for the tax return, suitable records and other books and accounts necessary to determine the tax for which the person is liable for the period prescribed in section 42-1104. The books, records and accounts shall be open for inspection at any reasonable time by the department or its authorized agent.

E. Except as provided in section 42-3010, a return preparer or electronic return preparer shall keep copies of the return, statement or other document for six years for transaction privilege and use tax returns and four years for all other returns, statements and other documents following the date on which the return, statement or other document was due to be filed or was presented to the taxpayer for signature, whichever is later.

F. Except as provided in section 42-3010, the department may require by administrative rule electronic return preparers to keep for each prepared return, statement or other document the following documents for six years for transaction privilege and use tax returns and four years for all other returns, statements and other documents following the later of either the date on which the return, statement or other document was due to be filed with the department or was presented to the taxpayer for signature:

The signature document or tax return form bearing the taxpayer's original signature in a manner prescribed by the department by administrative rule or tax ruling.
Any attachments to the return, statement or other document required to be submitted to the department if the return, statement or other document had not been electronically transmitted to the department.

G. The operator of a swap meet, flea market, fair, carnival, festival, circus or other transient selling event shall maintain a current list of vendors conducting business on the premises as sellers. The list shall include each vendor name, business name and business address. On written notice, the department may require an operator to submit a copy of the list at any time to the department.

H. For at least the period of time prescribed by section 42-1104, the department shall retain any return, statement or other document as a record pursuant to sections 41-151.14, 41-151.15, 41-151.16, 41-151.17 and 41-151.19. Anything submitted with the return, statement or other document that is not required, authorized or requested by the department is not part of the record and may be destroyed, unless it is, at the department's reasonable discretion, of more than de minimis value. Copies of original documents of which the department reasonably expects the taxpayer has retained any originals are presumed to be of de minimis value for purposes of this section. If the department determines that any document that is not required, authorized or requested by the department pursuant to this subsection is of more than de minimis value, within ten days after receipt the department shall notify the taxpayer in writing or by electronic means of its intent to destroy the document. If the taxpayer requests the return of any document included in the notice, the department shall immediately comply, although the director may require the taxpayer to pay any shipping costs to return the document. If the taxpayer does not request the return of the documents within thirty days after the date on the notice or the taxpayer consents to the destruction of the documents, whichever occurs first, the department may destroy the documents included in the notice.

§ 42-1105.01 Signatures; return preparers and electronic return preparers; definition

Any person who is a return preparer or an electronic return preparer shall sign the prepared return, statement or other document according to the department’s administrative rules or tax rulings. For the purposes of this section, "tax ruling" has the same meaning prescribed in section 42-2052.

§ 42-1105.02 Date of filing by electronic means; definitions

A. Any return, statement or other document that is electronically filed pursuant to an electronic filing program established by the department shall be deemed filed and received by the department on the date of the electronic postmark. If the taxpayer and the electronic return preparer or the electronic return transmitter are in different time zones, it is the taxpayer's time zone, as determined by the taxpayer’s address, that controls the timeliness of the electronically filed return, statement or other document. When a return, statement or other document has been electronically received on the host system of more than one electronic return preparer or electronic return transmitter during its ultimate transmission to the department, the return, statement or other document shall be deemed filed and received by the department on the date of the earliest electronic postmark.

B. Any return, statement or other document that is filed under subsection A of this section and that is not received by the department shall be deemed filed and received on the date of the electronic filing, as evidenced by the electronic postmark if the sender:

Establishes the date of the electronic filing.
Files a duplicate filing with the department within ten days after the department notifies the sender in writing of the nonreceipt of the filing.

C. If the due date of any return, statement or other document filed under subsection A of this section falls on a Saturday, Sunday or legal holiday, the filing shall be considered timely if it is performed on the next business day.

D. In this section, unless the context otherwise requires:

"Electronic filing program" means any program established by the department that authorizes the electronic filing of a return, statement or other document.
"Electronic postmark" means a record of the date and time in a particular time zone that the return, statement or other document is electronically received on the host system of the electronic return preparer or electronic return transmitter that participates in the transmission of the electronic return, statement or other document to the department.

§ 42-1105.03 Unauthorized disclosure; violation; classification

A return preparer, electronic return preparer or electronic return transmitter is guilty of a class 3 misdemeanor if the preparer or transmitter knowingly or recklessly discloses information related to a return, statement or other document to another person who is not authorized to receive that information under this title or title 43.

§ 42-1106 Time limitations for credit and refund claims

A. The period within which a claim for credit or refund may be filed, or credit or refund may be allowed or made if no claim is filed, is the period within which the department may make an assessment under section 42-1104.

B. If the total amount withheld under section 43-401 exceeds the amount of the tax on the employee's entire taxable income as computed under title 43, no refund, credit or offset may be made to the employee unless the employee files a return, in respect of which the tax withheld might be credited, within four years from the due date of the original return.

C. If a refund or credit of any overpayment of tax resulting from the amendments made to section 121(d)(9) of the internal revenue code by the military family tax relief act of 2003 (P.L. 108-121) is prevented by the operation of any law or rule of law, including res judicata, at any time before the close of the one year period beginning on November 11, 2003, the refund or credit may nevertheless be made or allowed if the claim is filed before the close of this period.

D. The failure to begin an action for refund or credit within the time specified in this section is a bar against the recovery of taxes by the taxpayer.

§ 42-1107 Extension of time for filing returns

A. The department, pursuant to administrative rule, may grant an automatic extension of time for filing an income tax return under title 43 if at least ninety percent of the tax liability disclosed by the taxpayer's return for the reporting period is paid and if the request for extension is received or mailed on or before the date the return is otherwise due to be filed. If at least ninety percent of the tax liability disclosed by the taxpayer's return for the reporting period has not been paid at the time of filing for the extension, the taxpayer is subject to a penalty of one-half of one percent of the tax not paid for each thirty-day period or fraction of a thirty-day period elapsing between the date the return is otherwise due to be filed and the date the tax is paid, not to exceed a total of twenty-five percent. If a taxpayer is subject to both of the penalties prescribed under this section and section 42-1125, the maximum combined penalty that may be imposed on the taxpayer under both sections shall not exceed twenty-five percent of the tax found to be remaining due. A taxpayer is not subject to the penalties prescribed under section 42-1125, subsection D if the taxpayer is subject to the penalties prescribed under this section. If in its judgment good cause exists, the department may grant a further extension or extensions of time for filing the return pursuant to administrative rule. Except as provided in subsection D of this section, an extension or extensions granted under this subsection may not aggregate more than six months after the due date provided for the filing of returns.

B. If the taxpayer has been granted an extension or extensions of time within which to file a federal income tax return for any taxable year, the taxpayer is deemed to have been granted the same extension of time for filing the Arizona income tax return if the taxpayer has paid at least ninety percent of the tax liability disclosed by the taxpayer's return for the reporting period. If at the time the taxpayer has been granted a federal extension or extensions the taxpayer is required to pay at least ninety percent under this section, the payment shall be in a manner prescribed by the department.

C. The department, for good cause, may extend the time for making any other return required by chapter 5, articles 1, 4 and 5 of this title, and may grant such reasonable additional time in which to make the return as it deems proper, but the time for filing the return shall not be extended beyond the first day of the third month next succeeding the regular due date of the return.

D. The due date for an income tax return for a taxpayer filing a corporate or exempt organization return that has been granted an extension or extensions pursuant to subsection A or B of this section is seven months after the initial due date provided for filing returns. This subsection does not include small business corporation returns filed under section 43-1126.

§ 42-1108 Audit; deficiency assessments; nonaudit adjustments; electronic filing

A. If a taxpayer fails to file a return required by this title or title 43, or if the department is not satisfied with the return or payment of the amount of tax required to be paid under either title, the department may examine any return, including any books, papers, records or memoranda relating to the return, to determine the correct amount of tax. This examination must occur within the time periods prescribed by section 42-1104 and may be accomplished through a detailed review of transactions or records or by a statistically valid sampling method.

B. The department shall give the taxpayer notice of its determination of a deficiency by mail or as prescribed by subsection C of this section, and the deficiency, plus penalties and interest, is final forty-five days after the date of receipt of the notice to the taxpayer unless an appeal is taken to the department. For individual income tax, the period is ninety days after the date of mailing. In the case of a joint income tax return, the notice may be a single joint notice mailed to the last known address, but if either spouse notifies the department that separate residences have been established, the department shall mail duplicate originals of the joint notice to each spouse.

C. The department may issue notice of its determination of a deficiency under subsection B of this section by using an electronic portal in lieu of mail, if all of the requirements of this subsection are met, after December 31, 2018 or when the department establishes the electronic portal, whichever is later. The use of the electronic portal in lieu of mail is subject to the following requirements and conditions:

The taxpayer agrees in writing to allow the department to use the electronic portal to issue notice of the department's determination of deficiency for specified tax periods. The agreement shall include an email address that the department may use to notify the taxpayer as required by paragraph 2 of this subsection. A taxpayer that provides an email address is certifying that the taxpayer regularly monitors that email address. If the taxpayer's email address changes, the taxpayer shall notify the department of a new email address.
The department shall notify the taxpayer, using the taxpayer's e-mail address, on the same day the notice of its determination of a deficiency is posted to the electronic portal.
The date of receipt for a notice provided by electronic portal is the later of the date the notice is posted to the electronic portal or the date the notification is received by the taxpayer. A notification sent by e-mail is considered to be received by the taxpayer on the day it is sent by the department.

D. If a deficiency is determined and the assessment becomes final, the department shall mail notice and demand to the taxpayer for the payment of the deficiency. Notwithstanding section 42-1125, subsection E, the deficiency assessed is due and payable at the expiration of ten days after the date of the notice and demand.

E. A certificate by the department of the mailing or e-mailing of the notices specified in this section is prima facie evidence of the assessment of the deficiency and the giving of the notices.

F. Any amount of tax in excess of that disclosed by the return due to a nonaudit adjustment, as listed in subsection G or H of this section, notice of which has been mailed to the taxpayer, is not a deficiency assessment within the meaning of this section. The taxpayer may not protest or appeal as in the case of a deficiency assessment, based on such a notice, and the assessment or collection of the amount of tax erroneously omitted in the return is not prohibited by this article.

G. An adjustment due to any of the following is considered a nonaudit adjustment:

An addition, subtraction, multiplication, division or other mathematical error shown on any return.
The failure of the taxpayer to properly compute the tax liability based on the taxable income reported on the return.
An incorrect usage or selection of information for a filed return from tax tables, schedules or similar documents provided by the department if the incorrect usage is apparent from the existence of other information on the return.
An entry on a return that is inconsistent with an entry on a schedule, form, statement, list or other document filed with the return.
An omission of information required on the return to substantiate an entry.
An entry on a return of a deduction or credit in an amount that exceeds a statutory limit if the limit is a monetary figure, a percentage, a ratio or a fraction and the items entered into the application of this limit appear on the return, including claiming a deduction or credit that is not authorized by statute for the taxable period.
Missing or incorrect taxpayer identification numbers for the purposes of claiming exemptions or credits.
An entry of a credit or deduction that requires a preapproval if the credit or deduction has not been preapproved or if the entry is for more than the preapproved amount.
An entry of a credit or deduction amount carried forward from a prior year that is outside of the statutory period allowed for the carryforward or is for an amount that is inconsistent with the taxpayer's prior year returns.

H. If a taxpayer that files its return electronically is allowed to input the information from a document into the electronic filing program instead of providing the actual document with the return, the department may request a copy of the document from the taxpayer at any time. If the taxpayer provides the document, the department may adjust the return to reflect the amounts on the document. If the taxpayer does not provide the requested document within the period provided by the department, the department may deny any deduction, credit or withholding that the document is intended to substantiate. An adjustment made pursuant to this subsection is considered a nonaudit adjustment under subsection G, paragraph 4 of this section, even though the actual document is not included with the electronically filed return if the department requests the document within sixty days after the due date of the return or the date on which the return was filed, whichever is later.

§ 42-1109 Failure to file return; false or fraudulent return; limited scope review; mandamus; order to produce documents; electronic portal

A. If a person who is required to file a report or return fails to do so within fifteen days after written demand by the department, the department shall proceed to obtain facts and information on which to base the tax, and for that purpose the department or its agent may examine the books, records and papers of the person and may take evidence on oath of any person who the department believes has facts or information pertinent to the inquiry. The director or the director's agent may administer the oath. As soon as the department procures the information, it shall hold a hearing to determine the amount of tax payable by the person. The department shall give at least ten days' notice in writing of the time and place of holding the hearing, which shall be mailed to the person's last known address or served personally. The levy of the tax is final after the hearing as to any person who fails or refuses to file a return.

B. If a taxpayer files a false or fraudulent return or fails or neglects to file a return within fifteen calendar days after written or electronic demand by the department, the department, at any time, may require a return or a supplementary return or may estimate the taxable income from any available information and may propose to assess the amount of tax, interest and penalties due. The provisions of this article relating to delinquent taxes apply to the tax, interest and penalties computed pursuant to this subsection. A proceeding in court to collect the tax, interest and penalties provided for in this subsection may be begun without assessment at any time. Notwithstanding section 42-1004, subsection C, the assessment of tax, interest or penalties under this subsection does not preclude subsequent deficiency assessments under section 42-1108.

C. The department may conduct a limited scope review of a filed individual income tax return if it discovers a discrepancy between amounts reported on the return and the information the department receives pursuant to section 43-412. In a notice to the taxpayer, the department may request records from a taxpayer in support of the taxpayer's filed returns and propose a tentative amount of tax, interest and penalties due on the basis of this additional information. The taxpayer shall have at least thirty calendar days to respond to this notice on a form prescribed by the department. A limited scope review under this subsection may be conducted only once per taxable year per taxpayer and shall not be considered an initial audit contact for purposes of section 42-2075 if any of the following applies:

The taxpayer provides documentation or an explanation that resolves the discrepancy between the originally filed return and the information received pursuant to section 43-412.
The taxpayer files an amended return that corrects the discrepancy.
The department, at the taxpayer's request, adjusts the return filed by the taxpayer based on an agreed amount. An adjustment made at the taxpayer's request under this paragraph is not considered an audit and does not preclude a future audit of the same year under section 42-1108.
The department notifies the taxpayer requesting the taxpayer to resolve the discrepancy by filing an amended return in order to avoid a possible future audit and reduce possible future penalties and interest. Any future audit shall be conducted pursuant to section 42-1108.

D. If an assessment is proposed under this section, the taxpayer has the right to protest the assessment, to have an oral hearing on the protest if requested and to appeal to the state board of tax appeals from the department's action on the protest. The taxpayer shall proceed under this section in the manner and within the time prescribed by article 6 of this chapter.

E. In addition to the remedies provided by subsection B of this section, if a taxpayer fails to file a return within sixty days after the time prescribed by this chapter, the department may petition the tax court to issue a writ of mandamus requiring the person to file a return. The petition shall be returnable not later than ten days after filing the petition. The petition shall be heard and determined on the return day or on such day thereafter as the court shall fix, having regard to the speediest possible determination of the case, consistent with the rights of the parties. The court shall provide at least ten days' written notice of the hearing to the taxpayer, which shall be mailed to the taxpayer's last known address or served on the taxpayer personally. The judgment shall include costs in favor of the prevailing party. Proceedings on such suits shall comply with the rules of procedure for special actions.

F. If a person wilfully refuses to make available any books, papers or records for examination by the department, or wilfully refuses to attend and testify, in connection with any proceedings instituted under subsection A of this section, the department may apply to the tax court for an order directing that person to produce the books, papers or records or to compel the person's attendance and testimony. If the books, papers or records required by the department are in the custody of a corporation, the order of the court may be directed to any principal officer of the corporation or its registered statutory agent. The failure to obey such an order of the court may be punished by the court as contempt.

G. The department may issue notice of its determination of deficiency under subsection B of this section by using an electronic portal in lieu of mail if all of the following requirements are met:

The taxpayer agrees in writing to allow the department to use the electronic portal to issue notice of the department's determination of deficiency for specified tax periods. The agreement shall include an email address that the department may use to notify the taxpayer as required by paragraph 2 of this subsection. A taxpayer that provides an email address is certifying that the taxpayer regularly monitors that email address. If the taxpayer's email address changes, the taxpayer shall notify the department of a new email address.
The department notifies the taxpayer via the email address when the notice of the department's determination of deficiency is posted to the electronic portal.
The email notification under paragraph 2 of this subsection is sent on the same day the notice of the department's determination of deficiency is posted to the electronic portal.
The date of receipt for a notice of the department's determination of deficiency is the later of the date the notice is posted to the electronic portal or the date the taxpayer receives the email notification required under paragraph 3 of this subsection. An email notification is deemed received by the taxpayer on the day it is sent by the department.

§ 42-1110 Successor liability for tax

A. The taxes administered pursuant to this article except estate and income taxes are a lien on the property of any person subject to this article who sells his business or stock of goods, or quits business, if the person fails to make a final return and payment of the tax within fifteen days after selling or quitting his business.

B. A person's successors or assigns shall withhold from the purchase money an amount sufficient to cover the taxes required to be collected and interest or penalties due and payable until the former owner produces a receipt from the department showing that the department has been paid or a certificate stating that no amount is due as then shown by the records of the department. The department shall respond to a request from the seller for a certificate within fifteen days by either providing the certificate or a written notice stating why the certificate cannot be issued. If a subsequent audit shows a deficiency arising before the sale of the business, the deficiency is an obligation of the seller and does not constitute a liability against the buyer who has received a certificate from the department. If the purchaser of a business or stock of goods fails to withhold sufficient purchase money as provided by this subsection, he is personally liable for payment of the amount of taxes required to be collected or paid by the former owner on account of the business so purchased, with interest and penalties accrued and unpaid by the former owner or assignors.

§ 42-1111 Jeopardy assessments

A. If the department believes that the collection of any assessment or deficiency of any tax administered pursuant to this article will be jeopardized by delay, whether or not the time otherwise prescribed by law for making a return and paying the tax has expired and notwithstanding other provisions of law, the department shall immediately mail, send electronically or issue notice of its finding and the information on which the finding is based to the taxpayer and demand immediate payment of the tax or deficiency declared to be in jeopardy, including interest, penalties and additions.

B. Jeopardy assessments are immediately due and payable, and the department may immediately begin proceedings for collection. The taxpayer, however, may stay collection and prevent the jeopardy assessment from becoming final by filing, within ten days after the date of mailing or delivery of the notice of jeopardy assessment, or within such additional time as the department may allow, a bond or other security in such amounts as the department may deem necessary, not exceeding the amount of the assessment including interest and penalties as to which the stay is desired. The taxpayer may proceed to appeal the assessment as provided in article 6 of this chapter.

C. If a bond or other security is not filed within the period prescribed by subsection B of this section, the department may treat the assessment as final for purposes of any collection proceedings. The taxpayer shall be afforded the appeal rights provided in article 6 of this chapter. The filing of a petition by the taxpayer under section 42-1251 does not stay the department's rights to pursue any collection proceedings.

D. In any proceeding brought to enforce payment of taxes made due and payable by this section:

The belief of the department under subsection A of this section, whether or not made after notice to the taxpayer, is for all purposes presumptive evidence that the assessment or collection of the tax or the deficiency was in jeopardy.
A certificate of the department of the mailing, electronic sending or issuing of the notice specified in this section is presumptive evidence that the notice was mailed, sent or issued.

E. The taxpayer may request an expedited review of the department's action pursuant to section 42-2061.

§ 42-1112 Enforcement powers and duties

In performing its duties pursuant to this article the department may:

Examine any books, papers, records or memoranda bearing on the matters required to be included in the return of any taxpayer.
Require from a taxpayer's consolidated return, filed under sections 1501 and 1502 of the United States internal revenue code copies of:

(a) The first page.

(b) Schedule J.

(d) The income statement spreadsheets.

Require the attendance of the taxpayer or of any other person having knowledge in the premises and for such purposes may:

(a) Take testimony.

(b) Require material proof for its information.

Issue subpoenas and subpoenas duces tecum, signed by the director or his designee, to be served on any person for the purposes of this section.

§ 42-1113 Closing agreements

The department or any person authorized in writing by the department may enter into a written agreement with a taxpayer relating to the liability of the taxpayer, or relating to the liability of the person or estate for whom he acts, in respect of any tax administered pursuant to this article for any taxable period. If an agreement is approved by the department within the time stated in the agreement, or later agreed to, it is final and conclusive, except on a showing of fraud, malfeasance or misrepresentation of a material fact. The case shall not be reopened as to the matters agreed on or the agreement modified by any officer, employee or agent of this state. In any suit, action or proceeding, the agreement, or any determination, assessment, collection, payment, abatement, refund or credit made pursuant to the agreement, shall not be annulled, modified, set aside or disregarded.

§ 42-1114 Suit to recover taxes

A. The department may bring an action in the name of this state to recover the amount of any taxes, penalties, interest or other amounts owed by the taxpayer to the department that are due and unpaid. The department of law shall prosecute the action. In the action a writ of attachment may be issued and no bond or affidavit previous to issuing the attachment is required. In the action a certificate by the department of revenue showing the delinquency is prima facie evidence of the levy of the tax, of the delinquency and of the compliance by the department of revenue with all the provisions of law relating to the computation and levy of the tax.

B. The department of revenue may bring an appropriate action in any court of competent jurisdiction in the United States or any foreign country in the name of this state to recover the amount of any taxes, interest and penalties or any other amounts owed by the taxpayer to the department that are due. The department of law shall prosecute the action.

C. The action shall not commence more than ten years after the amount of taxes determined to be due becomes final unless the taxpayer and the department extend the ten year limitation or enforced collection has been stayed by operation of federal or state law. If enforced collection has been stayed, the period of limitations shall be extended by the period of time that the department was stayed from engaging in enforced collections.

§ 42-1115 Payment under protest

The department shall account for amounts paid under protest until any of the following occurs:

A final judgment is rendered and the time for appeal expires.
The action begun by the taxpayer is dismissed.
Thirty days have elapsed after the order of the department became final and during which time the taxpayer did not begin an action.
The department and the taxpayer agree in writing that the amount should no longer be considered to have been paid under protest.
The taxpayer has taken no action with respect to the protested amount for a period of sixty days.

§ 42-1116 Disposition of tax revenues

A. The department of revenue shall promptly deposit, pursuant to sections 35-146 and 35-147, all monies it collects from the taxes administered pursuant to this article except the telecommunication services excise tax, separately accounting for each type of tax and each tax classification within each type of tax. At the same time the department of revenue shall also furnish copies of the transmittal schedules to the director of the department of administration.

B. Except as provided by subsections C and D of this section, the department shall deposit all monies and remittances received under this section to the credit of the following specific funds and accounts:

Amounts sufficient to meet the requirements for tax refunds to the tax refund account established by section 42-1117.
Amounts sufficient to meet the requirements of urban revenue sharing to the urban revenue sharing fund established by section 43-206.
Amounts collected pursuant to chapter 5, articles 1 and 5 of this title to the transaction privilege and severance tax clearing account established by section 42-5029.
Amounts sufficient to meet the requirements of section 42-3104 to the corrections fund.
Amounts sufficient to meet the requirements of section 49-282, subsection B relating to the water quality assurance revolving fund.
All remaining monies to the state general fund.

C. From the monies and remittances received under this section, each month beginning July 2001 the state treasurer shall transmit to the tourism and sports authority, established by title 5, chapter 8, for deposit in its facility revenue clearing account established by section 5-834 one-twelfth of the amount reported by the department pursuant to section 43-209, subsection C.

D. Subject to section 48-4238, from the monies and remittances received under this section, each year beginning January 1, 2026 through December 31, 2056, the state treasurer, on instruction from the department, shall transmit eighty-two percent of the amount reported by the department pursuant to section 43-209, subsection D for the prior taxable year to the county stadium district established pursuant to title 48, chapter 26 for deposit in the county stadium district fund established pursuant to section 48-4231.

§ 42-1116.01 Department of revenue administrative fund

A. The department of revenue administrative fund is established consisting of monies from unclaimed property deposited in the fund pursuant to section 44-313.

B. The director shall administer the fund.

C. Subject to legislative appropriation, the director shall use monies in the fund solely for the administrative costs of the department.

§ 42-1116.02 Department of revenue tax fraud interdiction fund; uses

A. The department of revenue tax fraud interdiction fund is established consisting of fines collected pursuant to section 42-1127, subsection B, paragraphs 5 and 6.

B. The director shall administer the fund. Subject to legislative appropriation, the director shall:

Use fifty percent of the monies in the fund to detect violations and enhance tax fraud analytics used to detect violations pursuant to section 42-1127, subsection B.
Transfer fifty percent of the monies in the fund to the attorney general for prosecuting violations pursuant to section 42-1127, subsection B.

§ 42-1117 Tax refund account

A. A tax refund account is established in the state general fund. The director of the department of administration shall draw all amounts necessary to make refunds under this article from the tax refund account.

B. At any time during the fiscal year if it appears that the amount in the tax refund account exceeds the amount required for refunds, the director shall transfer the excess amount from the account to the state general fund. If the transfer reduces the amount in the tax refund account below the amount required for refunds, the director of the department of administration shall adjust the amount transferred for redeposit in the tax refund account to pay such refunds. Any amount remaining in the tax refund account on June 30 of each year exceeding five hundred thousand dollars shall be transferred from the account to the state general fund.

§ 42-1118 Refunds, credits, offsets and abatements

A. If the department determines that any amount of tax, penalty or interest has been paid in excess of the amount actually due, the department shall credit the excess amount against any tax administered pursuant to this article, including any penalty, interest or other amounts owed by the taxpayer to the department. If it is determined that the amount cannot be credited against a tax or installment of taxes due from the taxpayer, the department may:

Refund the entire amount of tax, interest and penalty, in a lump sum or in not more than five annual installments, to the taxpayer from whom it was collected.
Issue to the taxpayer a credit voucher for the entire amount of tax, interest and penalty collected, to be carried forward and applied against future tax liabilities until exhausted.
Refund part, and issue a credit voucher for the balance, of the tax, interest and penalties as provided in paragraphs 1 and 2 of this subsection.

B. If the total amount withheld from income under section 43-401 exceeds the amount of the tax on the employee's entire taxable income as computed under title 43, the department shall refund the amount of the excess deducted without requiring a filing of a refund claim as provided in this section. The failure of the department to make the refund does not limit the right of the taxpayer to file a claim for a refund pursuant to this section if the claim is not barred under section 42-1106. The department shall not refund amounts less than one dollar unless specifically requested by the taxpayer at the time the return or claim for refund is filed.

C. Any overpayment that may result from withholdings or estimates pursuant to section 43-401, 43-581 or 43-582 shall not be credited or refunded unless an Arizona income tax return has been filed for the tax year for which the withholdings or estimates were made.

D. The department shall give a vendor who has a duty to collect use tax pursuant to chapter 5, article 4 of this title and who has not collected that tax full credit or offset for any use tax, interest and penalty paid to the department by the purchaser when issuing a determination of a deficiency pursuant to section 42-1108. This credit or offset shall be computed from the date of the use tax payment by the purchaser. If the purchaser has been audited by the department for use tax for the period of the purchase, the purchaser is considered to have paid the use tax to the department. For other purchases, the vendor may submit an affirmation by a purchaser on a form prescribed by the department that use tax was paid on the purchase. A fully completed certificate, taken in good faith by the vendor, constitutes proof that the vendor is entitled to this credit or offset. The department may require a purchaser who has submitted the certificate to establish the accuracy and completeness of the information contained in the certificate. If the purchaser cannot establish the accuracy and completeness of the information, the purchaser is liable for a penalty equal to the amount of tax and interest that would have been paid by the seller and for the additional penalties pursuant to section 42-1125. Payment of the penalty relieves the purchaser of any responsibility for paying the use tax. The department may require this proof and may assess the purchaser within the later of the period of limitations set forth in section 42-1104 or one year from the date the notice of proposed deficiency is issued to the vendor if the purchaser does not establish the accuracy of the information contained in the certificate.

E. Each claim for refund shall be filed with the department in writing and shall identify the claimant by name, address and tax identification number. Each claim shall provide the amount of refund requested, the specific tax period involved and the specific grounds on which the claim is founded. Refunds are subject to setoff for debts pursuant to section 42-1122.

F. A motor vehicle manufacturer that repurchases a vehicle pursuant to section 44-1263 or for reasons of consumer satisfaction may apply for a refund of the taxes paid under chapter 5 of this title if that manufacturer has refunded the amount of tax to the consumer. A refund is allowed under this subsection only if the manufacturer provides satisfactory proof to the department that tax amounts attributed to the sale of the vehicle were collected from the consumer and that the manufacturer refunded an amount of tax to the consumer. Any refund provided under this subsection is in lieu of any refund on the vehicle that the dealer may otherwise be entitled to receive. A manufacturer must apply for a refund under this subsection within four years after repurchasing the vehicle. For the purposes of this subsection:

"Consumer" has the same meaning prescribed in section 44-1261.
"Motor vehicle manufacturer" means a corporation engaged in the business of producing passenger cars, trucks and multipurpose passenger vehicles as described in 49 Code of Federal Regulations section 571.3.
"Satisfactory proof" includes copies of checks and a purchase or lease agreement that lists the vehicle identification number and that itemizes the amount that was collected as tax from the consumer.

G. The department shall not imprint the full social security number or other taxpayer identifier used pursuant to section 42-1105 on any taxpayer refund check, voucher or other credit documentation issued to the taxpayer under this section.

H. If any amount has been erroneously determined to be due from any person but not yet collected, the department shall cancel the amount or amounts on its records.

I. If, with or after the filing of a protest or an appeal with the department, the state board of tax appeals or the court, a taxpayer pays the tax protested or appealed before the department, board or court acts upon the protest or the appeal, such body shall treat the protest or the appeal as a claim for refund or an appeal from the denial of a claim for refund filed under this section.

§ 42-1119 Denial of refund

A. If the department disallows any claim for refund, it shall notify the taxpayer accordingly. The department's action on the claim is final unless the taxpayer appeals to the department in writing within the time and in the manner prescribed by section 42-1251. If the department disallows interest on any claim for refund, it shall notify the taxpayer accordingly and thereafter the claim shall be treated as a claim for refund.

B. If the department fails to mail or electronically send notice of action on any claim for refund of tax or interest within six months after the claim is filed, the taxpayer, before the department's mailing or electronic notice of action on the refund claim, may consider the claim disallowed. The taxpayer may appeal to the department for a hearing pursuant to section 42-1251.

§ 42-1120 Overpayment and underpayment; spouses; trusts and estates

A. If an overpayment is made by a taxpayer for any taxable period and a deficiency is owing from the spouse of the taxpayer for the same period and both the taxpayer and the spouse notify the department in writing before the expiration of the time within which credit for the overpayment may be allowed that the overpayment may be credited against the deficiency, interest shall not be assessed on such portion of the deficiency as is extinguished by the credit or added to such portion of the overpayment as is applied against the deficiency for the period of time after the date the overpayment was made.

B. If the correction of an erroneous inclusion or deduction of an item or items in the computation of income of a trust, estate or individual for any year results in an overpayment of income tax for such year by the trust, estate or individual and also results in a deficiency for the same year for a grantor of such trust or beneficiary of such estate or trust or spouse or child of such individual or spouse of such child, the overpayment, if the period within which credit for the overpayment may be allowed has not expired, shall be credited on the deficiency if the period within which the deficiency may be proposed has not expired, and the balance, if any, shall be credited or refunded. Interest shall not be assessed on such portion of the deficiency as is extinguished by the credit for the period of time after the date the overpayment was made.

C. If the correction of an erroneous inclusion or deduction of an item or items in the computation of income of a grantor of a trust, beneficiary of an estate or trust, a child or spouse of a child, or a spouse for any year results in an overpayment of income taxes for such year by the grantor, beneficiary, child or spouse, and also results in a deficiency for the same year for the trust, estate or individual, the overpayment, if the period within which credit for the overpayment may be allowed has not expired, shall be credited on the deficiency, if the period within which the deficiency may be proposed has not expired, and the balance, if any, shall be credited or refunded. Interest shall not be assessed on the portion of the deficiency as is extinguished by the credit or added to such portion of the overpayment as is applied against the deficiency for the period of time after the date the overpayment was made.

D. This section is not intended, nor shall it be construed, as a limitation on the department's duty to offset or recoup barred assessments against overpayments.

§ 42-1121 Overpayment and underpayment in different tax years

A. If an overpayment is made by a taxpayer for any taxable period and a deficiency is owing from the same taxpayer for any other taxable period, the overpayment, if the period within which credit for the overpayment may be allowed has not expired, shall be credited on the deficiency if the period within which assessment of the deficiency may be proposed has not expired, and the balance, if any, shall be credited or refunded to the taxpayer. Interest shall not be assessed on the portion of the deficiency that is extinguished by the credit or added to such portion of the overpayment as is applied against the deficiency for the period of time after the date the overpayment was made. For the purposes of this section, the returns of a decedent and his estate shall be considered returns of the same taxpayer and the returns of the decedent and his estate filed for the year of death shall be considered returns for different taxable years.

B. If the correction of an erroneous inclusion or deduction of an item in the computation of income of any year results in an overpayment of income taxes for one year and a deficiency for another year, the overpayment, if the period within which credit for the overpayment may be allowed has not expired, shall be credited on the deficiency, if the period within which the deficiency may be proposed has not expired, and the balance, if any, shall be credited or refunded and in any case described by this section no interest may be assessed on the portion of the deficiency that is extinguished by the credit or added to such portion of the overpayment as is applied against the deficiency for the period of time after the date the overpayment was made.

C. This section is not intended, nor shall it be construed, as a limitation on the department's duty to offset or recoup barred assessments against overpayments.

§ 42-1122 Setoff for debts to state agencies, political subdivisions and courts; revolving fund; penalties; definitions

A. The department shall establish a liability setoff program by which refunds under section 42-1118 and title 43, chapters 10 and 11 may be used to satisfy debts that the taxpayer owes to this state, a political subdivision or a court. The program shall comply with the standards and requirements prescribed by this section.

B. If a taxpayer owes an agency, political subdivision or court a debt, the agency, political subdivision or court, by November 1 of each year, may notify the department, furnishing at least the state agency, court or program identifier, the taxpayer's first name, last name, middle initial or middle name and suffix and social security number and any other available identification that the agency, political subdivision or court deems appropriate of the debtor as shown on the records of the agency, political subdivision or court, and the amount of the debt.

C. The department shall match the information submitted by the agency, political subdivision or court by at least two items of identification of the taxpayer with taxpayers who qualify for refunds under section 42-1118 and shall:

Notify the agency, political subdivision or court of a potential match, the taxpayer's home address and any additional taxpayer identification numbers used by the taxpayer. Even if the taxpayer is not entitled to a refund, the department of revenue shall provide to:

(a) The court, the clerk of the court and the department of economic security, for child support and spousal maintenance purposes only, the home address of a taxpayer whose debt for overdue support is referred for setoff and any additional taxpayer identification numbers used by the taxpayer.

(b) The court the home address and any additional taxpayer identification numbers used by the taxpayer whose debt for a court obligation is referred for setoff and who is identified by the court as a probationer on absconder status.

Request final agency, political subdivision or court confirmation in writing or electronically as determined by the department within ten days after the match and of the continuation of the debt. If the agency, political subdivision or court fails to provide confirmation within forty-five days after the request, the department shall release the refund to the taxpayer.

D. An agency, political subdivision or court may submit updated information, additions, deletions and other changes on a quarterly or more frequent basis, at the convenience of the agency, political subdivision or court.

E. On confirmation pursuant to subsection C, paragraph 2 of this section, the agency or political subdivision shall notify the taxpayer, by mail to the most recent physical address or electronically to the most recent email address provided by the taxpayer to the department:

Of the intention to set off the debt against the refund due.
Of the taxpayer's right to appeal to the appropriate court or to request a review by the agency or political subdivision pursuant to agency or political subdivision rule, within thirty days after the physical or electronic mailing of the notice.

F. In addition, the taxpayer shall receive notice that if the refund is intercepted in error through no fault of the taxpayer, the taxpayer is entitled to the full refund plus interest and penalties from the agency, political subdivision or court as provided by subsection O of this section.

G. The basis for a request for review as provided by subsection E of this section shall not include the validity of the claim if its validity has been established at an agency hearing, by judicial review in a court of competent jurisdiction in this or any other state or by final administrative decision and shall state with specificity why the taxpayer claims the obligation does not exist or why the amount of the obligation is incorrect.

H. If, within thirty days after the physical or electronic mailing of the notice, the taxpayer requests a review by the agency or political subdivision or provides the agency or political subdivision with proof that an appeal has been taken to the appropriate court, the agency or political subdivision shall immediately notify the department and the setoff procedure shall be stayed pending resolution of the review or appeal.

I. If the department does not receive notice of a timely appeal, it shall draw and deliver a warrant in the amount of the available refund up to the amount of the debt in favor of the agency or political subdivision and notify the taxpayer of the action by physical mail or email.

J. Subsections E, G, H and I of this section do not apply to a debt imposed by a court except that the taxpayer shall receive notice of the intent to set off the debt against the refund due and the right to appeal to the court that imposed the debt within thirty days after the physical or electronic mailing of the notice. The basis for the request for review shall not include the validity of the claim and shall state with specificity why the taxpayer claims the obligation does not exist or why the obligation is incorrect.

K. If the setoff accounts for only a portion of the refund due, the remainder of the refund shall be sent to the taxpayer. A court shall not use this section to satisfy a judgment or payment of a fine or civil penalty until the judgment has become final or until the time to appeal the imposition of a fine or civil penalty has expired.

L. A revolving fund is established to recover and pay the cost of operating the setoff program under this section. Monies in the fund may also be used for the general operating expenses of the department. The department may prescribe a fee to be collected from each agency, political subdivision or court using the setoff procedure or from the taxpayer, and the amount shall be deposited in the fund. The amount of the fee shall reasonably reflect the actual cost of the service provided. Monies in the revolving fund are subject to legislative appropriation.

M. If agencies, political subdivisions or courts have two or more delinquent accounts for the same taxpayer, the refund may be apportioned among them pursuant to rules prescribed by the department of revenue, except that a setoff to the department of economic security for overdue support has priority over all other setoffs.

N. If the refund is insufficient to satisfy the entire debt, the remainder of the debt may be collected by the agency, political subdivision or court as provided by law or resubmitted for setoff against subsequent refunds.

O. In the case of a refund that is intercepted in error through no fault of the taxpayer under this section, the taxpayer shall be reimbursed by the agency, political subdivision or court with interest pursuant to section 42-1123. In addition, if all or part of a refund is intercepted in error due to an agency, political subdivision or court incorrectly identifying a taxpayer as a debtor through no fault of the taxpayer, the agency, political subdivision or court shall also pay the taxpayer a penalty as follows:

If the agency, political subdivision or court reimburses the taxpayer sixteen through one hundred eighty days after the agency, political subdivision or court receives notification that the refund was erroneously intercepted and the refund was received by the agency, political subdivision or court, the penalty is equal to ten percent of the amount of the refund that was intercepted.
If the agency, political subdivision or court reimburses the taxpayer one hundred eighty-one through three hundred sixty-five days after the agency, political subdivision or court receives notification that the refund was erroneously intercepted and the refund was received by the agency, political subdivision or court, the penalty is equal to fifteen percent of the amount of the refund that was intercepted.
If the agency, political subdivision or court fails to reimburse the taxpayer within three hundred sixty-five days after the agency, political subdivision or court receives notification that the refund was erroneously intercepted and the refund was received by the agency, political subdivision or court, the penalty is equal to twenty percent of the amount of the refund that was intercepted.

P. The time periods set forth in subsection O of this section shall be stayed during a review of an agency decision pursuant to section 25-522.

Q. Except as is reasonably necessary to accomplish the purposes of this section, the department shall not disclose under this section any information in violation of chapter 2, article 1 of this title.

R. An agency, political subdivision or court shall not enter into an agreement with a debtor for:

The assignment of any prospective refund to the agency, political subdivision or court in satisfaction of the debt.
Payment of the debt if the debt has been confirmed to the department for setoff under subsection C, paragraph 2 of this section.

S. If a tax refund is based on a joint income tax return and the department of economic security receives a written claim from the nonobligated spouse within forty-five days after the notice of a setoff for overdue child support, the setoff only applies to that portion of the refund due to the obligor. The nonobligated spouse shall provide to the department of economic security copies of both the obligated and nonobligated spouse's federal W-2 forms and evidence of estimated tax payments supporting the proportionate share of each spouse's payment of tax. The department of economic security shall retain the amount of the setoff refund due to the obligated spouse determined by a proration based on the tax payments of each spouse by estimated tax payment or tax withheld from wages.

T. For the purposes of this section:

"Agency" means:

(a) A department, agency, board, commission or institution of this state.

(b) A corporation that is under contract with this state and that provides a service that would otherwise be provided by a department, agency, board, commission or institution of this state if the contract specifically authorizes participation in the liability setoff program and the attorney general's office has reviewed the contract and approves such authorization. The participation in the liability setoff program shall be limited to debt related to the services the corporation provides for or on behalf of this state.

"Court" means all courts of record, justice courts and municipal courts.
"Debt":

(a) Means an amount over $50 that is owed to an agency, political subdivision or court by a taxpayer and may include a judgment in favor of this state or a political subdivision of this state, interest, penalties, charges, costs, fees, fines, civil penalties, surcharges, assessments, administrative charges or any other amount.

(b) Includes monies that are owed by a taxpayer for overdue support and that are referred to the department of economic security or the clerk of the court for collection.

"Overdue support" means a delinquency in court ordered payments for spousal maintenance or support of a child or for spousal maintenance to the parent with whom the child is living if child support is also being enforced pursuant to an assignment or application filed under 42 United States Code section 654(6) or other applicable law.
"Political subdivision" means a county or an incorporated city or town in this state.

§ 42-1123 Interest

A. If it is provided by law that interest applies as determined pursuant to this section, the department shall apply interest, compounded annually, in the same manner and at the same times as prescribed by section 6621 of the United States internal revenue code, except that the rate of interest for both overpayments and underpayments for all taxpayers is the federal short-term rate, determined pursuant to section 6621(b) of the internal revenue code, plus three percentage points.

B. On January 1 of each year the department shall add any interest outstanding as of that date to the principal amount of the tax. For purposes of this section the amount added to the principal is thereafter considered a part of the principal amount of the tax and accrues interest pursuant to this section.

C. If the tax, whether determined by the department or the taxpayer, or any portion of the tax is not paid on or before the date prescribed for its payment the department shall collect, as a part of the tax, interest on the unpaid amount at the rate determined pursuant to this section from the date prescribed for its payment until it is paid.

D. Interest on the amount assessed as a deficiency shall be assessed and paid at the same time as the deficiency at the rate determined pursuant to this section from the date prescribed for the payment of the tax to the date the deficiency is assessed. If any portion of the deficiency is paid before the date it is assessed, interest shall accrue on that portion only to the date paid.

E. If the time for filing a return is extended, the department shall collect, as part of such tax, interest on any unpaid balance at the rate determined pursuant to this section from the date on which the payment should have been made if no extension had been granted until the date the tax is paid.

F. Except in the case of a jeopardy assessment, collection of which has been stayed by the posting of a bond, if a deficiency or any interest is not paid in full within ten days from the date of notice and demand from the department, the department shall collect as a part of the tax interest on the unpaid tax or interest at the rate determined pursuant to this section from the date of the notice and demand until it is paid.

G. If an original return filed with the department shows that the taxpayer is entitled to a refund, interest is not allowed on the amount to be refunded if the refund is paid within sixty days of the last day for filing the return or sixty days from the filing of the return, whichever is later. If the department does not pay the amount of the refund due within sixty days after the date established in this subsection, the department shall pay the interest on the amount at the rate prescribed in this section from the sixty-first day to the issued date of the refund warrant. The department's annual budget shall separately state the amount necessary to satisfy the requirements of this subsection.

H. In the case of an amended return, claim for refund or refund determined through audit, interest shall be allowed and paid, with respect to any tax, from the date prescribed for the payment of that tax to the issue date of the refund warrant, but in the case of an original return of tax which is filed after the last date prescribed for filing the return and paying such tax, determined with regard to extensions, no interest may be allowed or paid for any day before the date on which the return is filed or the tax paid, whichever is later. A payment not made incident to a bona fide and orderly discharge of an actual liability or one reasonably assumed to be imposed by law is not an overpayment for the purposes of this subsection and interest is not payable on the payment.

I. If a credit or refund of any part of an overpayment would be barred under section 42-1106, subsection A, except for the provisions of section 42-1104, subsection B, paragraph 4, interest shall not be allowed or paid with respect to such part of the overpayment for any period beginning after the expiration of the period of limitation provided in section 42-1106, subsection A for filing a claim for credit or refund of such part of the overpayment and ending at the expiration of six months after the date on which the claim was filed or, if no claim was filed and the overpayment was found by the department, ending at the time the appeal was filed with the board.

J. In any judgment of any court rendered for any overpayment, interest shall be allowed at the rate determined pursuant to this section on the amount of the overpayment from the date of the payment or collection to the date of allowance of credit on account of such judgment or to a date determined by the department preceding the date of the refund warrant by not more than thirty days.

§ 42-1124 Failure to affix stamps or pay or account for tax; forfeiture of commodity; sale of forfeited commodity; effect of seizure and sale; request for administrative hearing; definitions

A. If the department or its authorized agents or representatives discover any luxury subject to tax under chapter 3 of this title to which official stamps have not been affixed as required or on which the tax has not been paid or accounted for, the department or its agent or representative may seize and take possession of the luxury, and it is deemed forfeited to this state. Except as provided in subsection D or E of this section, the department, within a reasonable time thereafter, pursuant to a notice posted on the premises or by publication in a newspaper of general circulation in the county where the sale is to take place, not fewer than five days before the date of sale, shall offer for sale and sell the forfeited luxuries. The department shall pay the proceeds of the sale into the state general fund. The sale shall take place in the county that is most convenient and economical. The department need not offer any property for sale if, in its opinion, the probable cost of sale exceeds the value of the property.

B. The seizure and sale do not relieve any person from the penalties provided for violating this title.

C. The department of revenue may enter into an interagency agreement with the department of transportation for the purpose of carrying out tobacco enforcement under chapter 3 of this title at ports of entry.

D. All tobacco products that are seized for violations under this title shall be forfeited to this state. All tobacco products that are forfeited to this state pursuant to section 13-3711, 36-798.06 or 42-3461 or section 44-7111, section 6(b) shall be destroyed. If a distributor defrauds this state by knowingly and intentionally failing to keep or make any record, return, report or inventory pertaining to tobacco products, by refusing to pay any luxury tax for tobacco products subject to tax under chapter 3 of this title or by attempting to evade or defeat any requirement of this title, the distributor shall forfeit to this state all fixtures, equipment and all other materials and personal property that are located on the premises of the distributor. Alternatively, at the request of the department, the distributor may be enjoined by an action commenced by the attorney general or a county attorney in the name of the state from engaging or continuing in any business for which a tax is imposed by this chapter until the tax has been paid and until the person has complied with this title.

E. The department may sell or otherwise dispose of any tobacco products forfeited to this state on such conditions as it deems most advantageous and just under the circumstances, unless the tobacco products are forfeited pursuant to section 13-3711, 36-798.06 or 42-3461 or section 44-7111, section 6(b). The department shall deposit the proceeds of any sales made pursuant to this subsection in the state general fund.

F. The department shall give notice of the seizure and forfeiture of tobacco products described in this section by personal service or by certified mail to all persons known by the department to have any right, title or interest in the property. Notice shall include a description of the tobacco products seized, the reason for the seizure and the time and place of the seizure. For seizures of cigarettes of more than sixty-one cartons of two hundred cigarettes each or the equivalent in cigarette count, the department shall post and maintain an online notice of seizure and forfeiture on its website for a period of at least six months, beginning not later than ten business days after the date of the personal service of the notice to a person or the date of the mailing of the notice. The online notice shall display the date on which the department posts the notice to the website, which shall serve as the date of publication of the notice.

G. Any person whose legal rights, duties or privileges are determined by the notice of seizure and forfeiture may file a request for an administrative hearing with the department on a form prescribed by the department. The request for an administrative hearing shall contain a statement of the petitioner's interest in the tobacco products and an explanation of why the release or recovery of the tobacco products is warranted on the ground that the tobacco products were erroneously or illegally seized.

H. The seizure and forfeiture of tobacco products by the department is an appealable agency action as defined in section 41-1092 and is governed by title 41, chapter 6, article 10 and section 42-1251, except that:

A request for an administrative hearing that is filed under subsection G of this section is deemed to be timely filed if the request is filed with the department within ten days after the date of personal service on the petitioner or the date of mailing the notice to the petitioner. Any person not served personally or by mail shall file the request within ten days after the date of publication of the notice. The failure of a person to file a timely request constitutes a bar to that person's right to any interest in the tobacco products, except insofar as the rights of that person may be established in an action filed by the department under this chapter.
If a request for an administrative hearing is not filed with the department at the expiration of ten days after the notice has been personally served, mailed or published, the department's determination is final. If a timely request for an administrative hearing has been filed with the department, the department shall request a hearing by the office of administrative hearings and the department shall suspend action until the final order of the department has been issued. An order that is issued by the office of administrative hearings is the final order of the department thirty days after the petitioner receives the decision unless a decision by the director is issued pursuant to section 42-1251. If the director issues a decision, that decision is the final order of the department.

I. For the purposes of this section, "cigarette", "distributor" and "tobacco products" have the same meanings prescribed in section 42-3001.

§ 42-1125 Civil penalties; definition

A. If a taxpayer fails to make and file a return for a tax administered pursuant to this article on or before the due date of the return or the due date as extended by the department, unless it is shown that the failure is due to reasonable cause and not due to wilful neglect, four and one-half percent of the tax required to be shown on the return shall be added to the tax for each month or fraction of a month elapsing between the due date of the return and the date on which it is filed. The total penalty shall not exceed twenty-five percent of the tax found to be remaining due. The penalty so added to the tax is due and payable on notice and demand from the department. For the purpose of computing the penalty imposed under this subsection, the amount required to be shown as tax on a return shall be reduced by the amount of any part of the tax that is paid on or before the beginning of the month and by the amount of any credit against the tax that may be claimed on the return. If the amount required to be shown as tax on a return is less than the amount shown as tax on the return, the penalty described in this subsection shall be applied by substituting the lower amount.

B. If a taxpayer fails or refuses to file a return on notice and demand by the department, the taxpayer shall pay a penalty of twenty-five percent of the tax, which is due and payable on notice and demand by the department, in addition to any penalty prescribed by subsection A of this section, unless it is shown that the failure is due to reasonable cause and not due to wilful neglect. This penalty is payable on notice and demand from the department.

C. If a taxpayer fails or refuses to furnish any information requested in writing by the department, the department may add a penalty of twenty-five percent of the amount of any deficiency tax assessed by the department concerning the assessment of which the information was required, unless it is shown that the failure is due to reasonable cause and not due to wilful neglect.

D. If a person fails to pay the amount shown as tax on any return within the time prescribed, a penalty of one-half of one percent, not to exceed a total of ten percent, shall be added to the amount shown as tax for each month or fraction of a month during which the failure continues, unless it is shown that the failure is due to reasonable cause and not due to wilful neglect. If the department determines that the person's failure to pay was due to reasonable cause and not due to wilful neglect and that a payment agreement pursuant to section 42-2057 is appropriate, the department shall not impose the penalty unless the taxpayer fails to comply with the payment agreement. If the taxpayer is also subject to a penalty under subsection A of this section for the same tax period, the total penalties under subsection A of this section and this subsection shall not exceed twenty-five percent. For the purpose of computing the penalty imposed under this subsection:

The amount shown as tax on a return shall be reduced by the amount of any part of the tax that is paid on or before the beginning of that month and by the amount of any credit against the tax that may be claimed on the return.
If the amount shown as tax on a return is greater than the amount required to be shown as tax on that return, the penalty shall be applied by substituting the lower amount.

E. If a person fails to pay any amount required to be shown on any return that is not so shown within twenty-one calendar days after the date of notice and demand, a penalty of one-half of one percent, not to exceed a total of ten percent, shall be added to the amount of tax for each month or fraction of a month during which the failure continues, unless it is shown that the failure is due to reasonable cause and not due to wilful neglect. If the taxpayer is also subject to penalty under subsection A of this section for the same tax period, the total penalties under subsection A of this section and this subsection shall not exceed twenty-five percent. For the purpose of computing the penalty imposed under this subsection, any amount required to be shown on any return shall be reduced by the amount of any part of the tax that is paid on or before the beginning of that month and by the amount of any credit against the tax that may be claimed on the return.

F. In the case of a deficiency, for which a determination is made of an additional amount due, that is due to negligence but without intent to defraud, the person shall pay a penalty of ten percent of the amount of the deficiency.

G. If part of a deficiency is due to fraud with intent to evade tax, fifty percent of the total amount of the tax, in addition to the deficiency, interest and other penalties provided in this section, shall be assessed, collected and paid as if it were a deficiency.

H. If the amount, whether determined by the department or the taxpayer, required to be withheld by the employer pursuant to title 43, chapter 4 is not paid to the department on or before the date prescribed for its remittance, the department may add a penalty of twenty-five percent of the amount required to be withheld and paid, unless it is shown that the failure is due to reasonable cause and not due to wilful neglect.

I. A person who, with or without intent to evade any requirement of this article or any lawful administrative rule of the department of revenue under this article, fails to file a return or to supply information required under this article or who, with or without such intent, makes, prepares, renders, signs or verifies a false or fraudulent return or statement or supplies false or fraudulent information shall pay a penalty of not more than $1,000. This penalty shall be recovered by the department of law in the name of this state by an action in any court of competent jurisdiction.

J. If the taxpayer files what purports to be a return of any tax administered pursuant to this article but that is frivolous or that is made with the intent to delay or impede the administration of the tax laws, that person shall pay a penalty of $500.

K. If any person who is required to file or provide an information return under this title or title 43 or who is required to file or provide a return or report under chapter 3 of this title fails to file the return or report at the prescribed time or in the manner required, or files a return or report that fails to show the information required, that person shall pay a penalty of $100 for each month or fraction of a month during which the failure continues unless it is shown that the failure is due to reasonable cause and not due to wilful neglect. The total penalties for each return or report under this subsection shall not exceed $500.

L. If it appears to the superior court that proceedings before it have been instituted or maintained by a taxpayer primarily for delay or that the taxpayer's position is frivolous or groundless, the court may award damages in an amount not to exceed $1,000 to this state. Damages so awarded shall be collected as a part of the tax.

M. A person who is required under section 43-413 to furnish a statement to an employee and who wilfully furnishes a false or fraudulent statement, or who wilfully fails to furnish a statement required by section 43-413, is for each such failure subject to a penalty of $50.

N. A person who is required to collect or truthfully account for and pay a tax administered pursuant to this article, including any luxury privilege tax, and who wilfully fails to collect the tax or truthfully account for and pay the tax, or wilfully attempts in any manner to evade or defeat the tax or its payment, is, in addition to other penalties provided by law, liable for a penalty equal to the total amount of the tax evaded, not collected or not accounted for and paid. Except as provided in subsections U, V and W of this section, no other penalty under this section relating to failure to pay tax may be imposed for any offense to which this subsection applies.

O. For reporting periods beginning from and after February 28, 2011, if a taxpayer who is required under section 42-1129 to pay by electronic funds transfer fails to do so, that taxpayer shall pay a penalty of five percent of the amount of the payment not made by electronic funds transfer unless it is shown that the failure is due to reasonable cause and not due to wilful neglect. For the reporting periods beginning on July 1, 2015, the penalty in this subsection applies to any taxpayer who is required under section 42-3053 to pay by electronic funds transfer and fails to do so unless it is shown that the failure is due to reasonable cause and not due to wilful neglect.

P. Unless due to reasonable cause and not to wilful neglect:

A person who fails to provide that person's taxpayer identification number in any return, statement or other document as required by section 42-1105, subsection A shall pay a penalty of $5 for each such failure.
A person, when filing any return, statement or other document for compensation on behalf of a taxpayer, who fails to include that person's own taxpayer identification number and the taxpayer's identification number shall pay a penalty of $50 for each such failure.
A person, when filing any return, statement or other document without compensation on behalf of a taxpayer, who fails to include that person's own taxpayer identification number and the taxpayer's identification number is not subject to a penalty.

No other penalty under this section may be imposed if the only violation is failure to provide taxpayer identification numbers.

Q. If a taxpayer fails to pay the full amount of estimated tax required by title 43, chapter 5, article 6, a penalty is assessed equal to the amount of interest that would otherwise accrue under section 42-1123 on the amount not paid for the period of nonpayment, not exceeding ten percent of the amount not paid. The penalty prescribed by this subsection is in lieu of any other penalty otherwise prescribed by this section and in lieu of interest prescribed by section 42-1123.

R. Beginning January 1, 2015, if a taxpayer continues in business without timely renewing a municipal privilege tax license as prescribed in section 42-5005, subsection D, a civil penalty of up to $25 shall be added to the renewal fee for each jurisdiction.

S. The department of law, with the consent of the department of revenue, may compromise any penalty for which it may bring an action under this section.

T. Penalties shall not be assessed under subsection D of this section on additional amounts of tax paid by a taxpayer at the time the taxpayer voluntarily files an amended return. This subsection does not apply if:

The taxpayer is under audit by the department.
The amended return was filed on demand or request by the department.

U. In addition to other penalties provided by law, a person who knowingly and intentionally does not comply with any requirement under chapter 3 of this title relating to tobacco products shall pay a penalty of $1,000. A person who knowingly and intentionally does not pay any luxury tax that relates to tobacco products imposed by chapter 3 of this title shall pay a penalty that is equal to ten percent of the amount of the unpaid tax.

V. A manufacturer or importer or a distributor, as defined in section 42-3001, who knowingly and intentionally sells or possesses cigarettes with false manufacturing labels or cigarettes with counterfeit tax stamps, or who obtains cigarettes through the use of a counterfeit license, shall pay the following penalties:

For a first violation involving two thousand or more cigarettes, $1,000.
For a subsequent violation involving two thousand or more cigarettes, $5,000.

W. The civil penalties in this section are in addition to any civil penalty under chapter 3, article 10, 11 or 12 of this title.

X. Notwithstanding subsection A of this section:

And except as provided by paragraph 2 of this subsection, the penalty imposed on a taxpayer that fails to make and file a return for tax administered pursuant to chapter 5 or 6 of this title on or before the due date of the return or the due date as extended by the department, unless it is shown that the failure is due to a reasonable cause and not due to wilful neglect, is four and one-half percent of the tax required to be shown on the return, or $25, whichever is greater. The penalty shall be added to the tax for each month or fraction of a month elapsing between the due date of the return and the date on which it is filed. The total penalty may not exceed twenty-five percent of the tax required to be shown on the return, or $100, whichever is greater.
The penalty imposed on a taxpayer that is required under section 42-5014 to file electronically and that fails to do so is five percent of the tax required to be shown on the return, or $25, whichever is greater, unless the failure is due to a reasonable cause and not due to wilful neglect.
For the purposes of this subsection, "tax required to be shown on the return" means the total tax liability before deducting payments.

Y. Notwithstanding subsection B of this section, the penalty imposed on a taxpayer that fails to file a return pursuant to chapter 5 or 6 of this title on notice and demand by the department is twenty-five percent of the tax, or $100, whichever is greater. The penalty is due and payable on notice and demand by the department, in addition to any penalty prescribed by subsection A of this section, unless it is shown that the failure is due to a reasonable cause and not due to wilful neglect.

Z. For the purposes of this section, and only as applied to the taxes imposed by chapter 5, articles 1 through 6 and chapter 6, articles 1, 2 and 3 of this title, "reasonable cause" means a reasonable basis for the taxpayer to believe that the tax did not apply to the business activity or the storage, use or consumption of the taxpayer's tangible personal property in this state.

§ 42-1125.01 Civil penalties for return preparers, electronic filing and payment participants

A. If a return preparer or electronic return preparer fails to furnish a completed copy of any return, statement or other document to the taxpayer when the return, statement or other document is presented for the taxpayer’s signature, the return preparer shall pay a penalty of fifty dollars unless it is shown that the failure is due to reasonable cause and not due to wilful neglect. The maximum penalty amount for a return preparer under this subsection during any calendar year shall not exceed twenty-five thousand dollars.

B. If a return preparer or electronic return preparer fails to sign any return, statement or other document, the return preparer or electronic return preparer shall pay a penalty of fifty dollars unless it is shown that the failure is due to reasonable cause and not due to wilful neglect. The maximum penalty amount for a return preparer or electronic return preparer under this subsection during any calendar year shall not exceed twenty-five thousand dollars.

C. If a return preparer or electronic return preparer fails to furnish the preparer's identifying number on any return, statement or other document, the return preparer or electronic return preparer shall pay a penalty of fifty dollars unless it is shown that the failure is due to reasonable cause and not due to wilful neglect. The maximum penalty amount for a return preparer or electronic return preparer under this subsection during any calendar year shall not exceed twenty-five thousand dollars.

D. If a return preparer or electronic return preparer fails to retain a copy of any return, statement or other document for six years for transaction privilege and use tax returns and four years for all other returns, statements or other documents following the later of either the date on which the return, statement or other document was due to be filed with the department or was presented to the taxpayer for signature, the return preparer or electronic return preparer shall pay a penalty of fifty dollars unless it is shown that the failure is due to reasonable cause and not due to wilful neglect. The maximum penalty amount for a return preparer or electronic return preparer under this subsection during any calendar year shall not exceed twenty-five thousand dollars.

E. If a return preparer or electronic return preparer fraudulently endorses or negotiates any check that is issued to a taxpayer, the return preparer or electronic return preparer shall pay a penalty of five hundred dollars.

F. An electronic return preparer or electronic return transmitter that fails to comply with any electronic filing program requirement shall pay a penalty of fifty dollars for each failure unless it is shown that the failure is due to reasonable cause and not due to wilful neglect. The maximum penalty amount for a return preparer, electronic return preparer or electronic return transmitter under this subsection during any calendar year shall not exceed twenty-five thousand dollars.

G. The penalties provided in this section are in addition to other penalties provided by law.

H. All penalties are payable on notice and demand from the department.

I. This section applies to all taxes administered by the department.

§ 42-1126 Fee for bad checks; definition

A. The department may charge and collect a fee of $50 from a taxpayer that offers a check, draft, negotiable order of withdrawal or similar instrument, or an electronic funds transfer, automated clearing house debit or automated clearing house credit drawn on a bank or other depository institution in full or partial payment of a tax if the instrument, transfer, debit or credit is not paid or is dishonored by the institution.

B. For the purposes of this section, "tax" includes any tax, penalty, interest or fee administered pursuant to this article.

§ 42-1127 Criminal violation; classification; place of trial; definitions

A. It is a class 4 felony to:

Corruptly or by force or threats of force or injury:

(a) Attempt to intimidate, impede or injure an employee of the department acting in an official capacity.

(b) Obstruct, impede or attempt to obstruct or impede the administration of this title or title 43.

Attempt by means of bribery, misrepresentation, intimidation or force or threats of force to obstruct, delay or prevent the communication of information or testimony relating to a violation of this title or title 43 to an employee or officer of the department, or knowingly injure another personally or injure the person's property on account of the person giving, personally or by any other person, any such information or testimony to an employee of the department.
Make, forge, alter or counterfeit with the intent to defraud a stamp or meter impression prepared or prescribed by the department under chapter 3 of this title, or to knowingly utter, publish, pass or tender as true a false, altered, forged or counterfeited stamp or meter impression, or to use a stamp provided for and required by chapter 3 of this title which has already once been used, with the intent to evade the tax imposed by chapter 3 of this title.
Tamper with, or cause to be tampered with, any metering machine authorized to be used under chapter 3 of this title.

B. A first-time violation of this subsection may be designated as a class 1 misdemeanor, but otherwise it is a class 5 felony to:

Knowingly fail to pay any tax administered pursuant to this article due or believed due by the taxpayer with intent to evade the tax.
Knowingly prepare, present or aid, procure or advise in preparing or presenting any return, affidavit, claim or other document which is fraudulent or is false as to any material matter, whether or not the falsity or fraud is with the knowledge or consent of the taxpayer authorized or required to present the return, affidavit, claim or document.
Simulate or falsely or fraudulently execute or sign any license or other required document, or cause the license or document to be falsely or fraudulently executed or advise or aid in such execution, with the intent to conceal or cover up a material fact relating to a tax administered pursuant to this article.
Knowingly fail to file a return or supply required information, or falsify or conceal a material fact, document or record, make a false, fictitious or fraudulent statement or representation or make or use a false writing or document knowing it to contain a false, fictitious or fraudulent statement or entry, with intent that the department rely on the false, fictitious or fraudulent statement or entry in determining tax liability under this article.
Purchase, install or use any automated sales suppression device or service or zapper or phantom-ware with the intent to defeat or evade any tax administered pursuant to this article that is due or believed to be due by the taxpayer. In addition, a person that is convicted of a violation of this paragraph:

(a) Is subject to a fine of not more than one hundred thousand dollars or, if a corporation, not more than five hundred thousand dollars. Monies paid as fines shall be deposited in the department of revenue tax fraud interdiction fund established by section 42-1116.02.

(b) Is liable for all taxes, fees, penalties and interest due as a result of the person's use of the automated sales suppression device or service or zapper or phantom-ware.

(c) Shall forfeit all profits associated with the person's purchase or use of the automated sales suppression device or service or zapper or phantom-ware.

Sell, license, purchase, install, transfer, sell as a service, manufacture, develop or possess any automated sales suppression device or service or zapper or phantom-ware knowing that the purpose of the device is to defeat or evade any tax administered pursuant to this article. In addition, a person that is convicted of a violation of this paragraph:

(b) Is liable for all taxes, fees, penalties and interest due as a result of the person's use of the automated sales suppression device or service or zapper or phantom-ware.

(c) Shall forfeit all profits associated with the person's sale or use of the automated sales suppression device or service or zapper or phantom-ware.

C. A distributor as defined in section 42-3001 who violates section 42-3452, subsection A, paragraph 2 is guilty of a class 1 misdemeanor. If the distributor is convicted of a second violation of section 42-3452, subsection A, paragraph 2, the department may revoke the distributor's license issued pursuant to section 42-3401.

D. A distributor as defined in section 42-3001 who violates any provision of section 42-3401, section 42-3452, subsection A, paragraph 1 or section 42-3456 is guilty of a class 1 misdemeanor. If the distributor is a licensee under section 42-3401 and is convicted of a second violation of section 42-3456, the department may revoke the distributor's license.

E. It is a class 3 felony for any person to:

Except as provided in section 42-3457, transport, in an unstamped or unlawfully stamped condition, for the purpose of sale ten thousand or more cigarettes that were subject to the tax imposed by chapter 3, article 2, 6, 7 or 9 of this title.
Wilfully sell or offer for sale, in an unstamped or unlawfully stamped condition, ten thousand or more cigarettes that were subject to the tax imposed by chapter 3, article 2, 6 or 7 of this title.
Wilfully sell or offer for sale off an Indian reservation ten thousand or more cigarettes that are stamped for on-reservation sales.

F. For the purposes of subsection E of this section, the possession or transportation in this state at any time by any person, other than a licensed distributor, as defined in section 42-3001, of ten thousand or more cigarettes in an unstamped or unlawfully stamped condition, other than in interstate shipment consistent with federal contraband cigarette trafficking laws (18 United States Code chapter 114), is presumptive evidence that the cigarettes:

Are possessed or transported for the purpose of sale.
Are subject to the taxes imposed by chapter 3, article 2, 6, 7 or 9 of this title.

G. A person who knowingly sells a luxury on which the tax has not been paid or accounted for as required by chapter 3 of this title is guilty of a class 1 misdemeanor.

H. A retailer who possesses any package, bottle or other container containing a luxury that does not bear the stamps required to be affixed by chapter 3 of this title is guilty of a class 1 misdemeanor.

I. A person is guilty of a class 3 misdemeanor who:

Is engaged in the business of selling a luxury, either at wholesale or retail, and who knowingly refuses or fails to produce on demand by the department invoices of all luxuries the person purchased or received within two years immediately before the demand, unless the person shows by satisfactory proof that the person is unable to do so for reasons beyond the person's control.
Makes a false entry on an invoice, package or container of luxuries, or who with intent to avoid the taxes imposed by chapter 3 of this title presents a false entry for inspection of the department.
Knowingly prevents or hinders the department from making a full inspection of any place where a luxury is sold or stored, or knowingly prevents or hinders the inspection of invoices, books, records or papers required to be kept.
Violates any provision of this article or an administrative rule adopted by the department for which no other penalty is prescribed.

J. The place of trial for the offenses enumerated in this section is in the county of residence or principal place of business of the defendant or defendants. If the defendant has no residence or principal place of business in this state, the trial shall be held in Maricopa county.

K. A person who defrauds this state by violating any requirement under chapter 3 of this title, with criminal intent to evade any such requirement, is guilty of a class 4 felony and shall pay a penalty of three times the retail value of the cigarettes involved.

L. A person who knowingly violates any requirement under chapter 3 of this title, with the criminal intent to evade any such requirement, is guilty of a class 6 felony.

M. A person who knowingly sells or offers to sell off an Indian reservation more than two thousand but less than ten thousand cigarettes that are stamped for on-reservation sales, with the criminal intent to evade the tax imposed by chapter 3 of this title, is guilty of a class 5 felony.

N. Any distributor, as defined in section 42-3001, who sells or possesses more than two thousand cigarettes with false manufacturing labels or cigarettes with counterfeit tax stamps, with the criminal intent to evade any requirement under chapter 3 of this title, is guilty of a class 5 felony and shall pay a penalty of:

For a first violation involving two thousand or more cigarettes, two thousand dollars or three times the retail value of the cigarettes, whichever is greater.
For a subsequent violation involving two thousand or more cigarettes, fifty thousand dollars or three times the retail value of the cigarettes, whichever is greater.

O. For the purposes of this section:

"Automated sales suppression device" means a computer software program that falsifies the electronic records of electronic cash registers and other point-of-sale systems, including transaction data and transaction reports.
"Electronic cash register" means an electronic or computer system that records a register or supporting data for the purpose of computing, storing or processing retail sales and other transaction data.
"Luxury" means any article, object or device on which a tax is imposed under chapter 3 of this title.
"Phantom-ware" means hidden or concealed computer software or hardware of an electronic cash register or other point-of-sale system that can create a second set of records or eliminate or manipulate transaction records that may or may not be preserved in digital formats in order to misrepresent the existence or the true record of a transaction in the electronic cash register.
"Point-of-sale system" means an electronic device that is used to process card payments at retail locations.
"Transaction data" means data relating to a commercial transaction that includes data identifying each purchased item, the price for each item, a taxability determination for each item, a segregated tax amount for each taxed item, the amount of cash or credit tendered, the net amount of change returned to the customer, the date and time of the purchase, the name, address and identification number of the vendor and the receipt or invoice number of the transaction.
"Transaction report" means any means or method of reporting, displaying or generating transaction data.
"Zapper":

(a) Means a computer software program that falsifies the electronic records of electronic cash registers or other point-of-sale systems, including, but not limited to, transaction data and transaction reports.

(b) Includes the software program, any device that carries the software program or an internet link to the software program.

§ 42-1128 Recovery of collection costs

A. A taxpayer who fails to pay any delinquent taxes, penalties or interest for a tax administered under this article is liable for all costs and expenses incurred by the department to collect the delinquent taxes, penalties and interest. The department may collect these expenses and costs at the time of collecting the delinquent taxes, penalties and interest.

B. For the purposes of this section, expenses include contingent fees paid pursuant to section 42-1004, subsection B, paragraph 3.

§ 42-1129 Payment of tax by electronic funds transfer

A. The department may require by rule, consistent with the state treasurer's cash management policies, that any tax administered pursuant to this article, except for individual income tax or as required under section 42-3053, be paid on or before the payment date prescribed by law in monies that are immediately available to this state on the date of the transfer as provided by subsection B of this section by any taxpayer that owes:

$20,000 or more for any taxable year beginning before January 1, 2019.
$10,000 or more for any taxable year beginning from and after December 31, 2018 through December 31, 2019.
$5,000 or more for any taxable year beginning from and after December 31, 2019 through December 31, 2020.
$500 or more for any taxable year beginning from and after December 31, 2020.

B. A payment in immediately available monies shall be made by electronic funds transfer, with the state treasurer's approval, that ensures the availability of the monies to this state on the date of payment.

C. A taxpayer may apply to the director, on a form prescribed by the department, for an annual waiver from the electronic payment requirement prescribed by subsection B of this section. The application must be received by the department on or before December 31. The director may grant the waiver, which may be renewed, if any of the following applies:

The taxpayer has no computer.
The taxpayer has no internet access.
Any other circumstance considered to be worthy by the director exists, including the taxpayer having a sustained record of timely payments and no delinquent tax account with the department.

D. The taxpayer shall furnish evidence as prescribed by the department that an electronic payment was remitted on or before the due date. For the purposes of determining the timeliness of electronic payments made under this section, an electronic payment is deemed to have been made at the date and time, consistent with section 1-242, that the taxpayer successfully authorizes the electronic funds transfer from the taxpayer's financial institution to the department as evidenced by an electronic payment confirmation issued by any of the following:

The department.
The taxpayer's financial institution.
A vendor certified by the department.

E. A taxpayer who is required to pay by electronic funds transfer but who fails to do so may be subject to the civil penalties prescribed by section 42-1125, subsection O.

F. A failure to make a timely payment in immediately available monies as prescribed pursuant to this section is subject to the civil penalties prescribed by section 42-1125, subsection D.

§ 42-1130 Temporary tax relief for out-of-state employees and out-of-state businesses; disaster recovery; notice; definitions

A. An out-of-state employee who is in this state on a temporary basis solely for the purpose of performing disaster recovery from a declared disaster during a disaster period is not required to file, remit, withhold or pay state or local income taxes for or during a disaster period.

B. An out-of-state business that is in this state on a temporary basis solely for the purpose of performing disaster recovery from a declared disaster during a disaster period is not required to file, remit, withhold or pay state or local tax as follows:

Income tax for or during the disaster period.
Use tax on any infrastructure brought temporarily into this state for or during the disaster period.
Property tax on any property brought temporarily into this state for or during the disaster period.

C. If the out-of-state business is part of a unitary group filing a combined return, the unitary group filing a combined return is not required to make any filings under subsection B, paragraph 1 of this section related to the disaster recovery of the out-of-state business under subsection B of this section. For the apportionment of income pursuant to title 43, disaster recovery by an out-of-state business does not increase the amount of income apportioned to this state.

D. On request, an out-of-state business that enters this state shall provide the department with notice that it is in this state for the purpose of performing disaster recovery. The notice shall include the business's name, state of domicile, principal business address, federal tax identification number, date of entry and contact information.

E. On request, a registered business shall provide the notice required by subsection D of this section for any out-of-state business affiliate that enters this state. The notice shall include the contact information for the registered business.

F. For the purposes of this section:

"Declared disaster" means a state of emergency declared by the governor, a presidential declaration of a federal major disaster or emergency in this state or a disaster or emergency event in this state that is designated by the division of emergency management and that requires disaster recovery under this section.
"Disaster period" means a period that is within ten calendar days of the date of issuance of the declared disaster and that extends for a period of sixty calendar days after the end of the declared disaster or any longer period authorized by the governor.
"Disaster recovery" means repairing, renovating, installing, building, rendering services or other business activities that relate to infrastructure that has been damaged, impaired or destroyed by a declared disaster.
"Infrastructure" means property and equipment owned or used by communications networks, electric generation, transmission and distribution systems and gas distribution systems, water pipelines, public roads and bridges and related support facilities that service multiple customers or citizens of this state and includes buildings, offices, lines, poles, pipes, structures and equipment.
"Out-of-state business" means a business entity that existed as an operating entity before the declared disaster, including an affiliate solely by common ownership of a registered business, whose services are requested by a registered business in this state or by the state or a local government for the purpose of performing disaster recovery in this state and that meets all of the following conditions:

(a) Is not present in this state.

(b) Does not conduct business in this state.

(d) Does not make any tax filings in this state.

"Out-of-state employee" means an employee who does not work in this state except for performing disaster recovery during a disaster period.
"Registered business" means a business entity that is currently registered to do business in this state and that was a registered business before the declared disaster.

§ 42-1131 Electronic signatures; definition

A. The department shall accept or require an electronic signature to serve as a functional equivalent of a written signature on a document that is submitted to the department. The electronic signature has the same force and effect as a written signature.

B. An electronic signature must meet all of the following requirements:

Be executed or adopted by a person with the intent to sign the document so as to indicate the person's approval of the information contained in the document.
Be attached to or logically associated with the information contained in the document being signed.
Be capable of reliable identification and authentication of the person as the signer. Identification and authentication may be accomplished through additional security procedures or processes if reliably correlated to the electronic signature.
Be linked to the document in a manner that would invalidate the electronic signature if the document is changed.
Be linked to the document so as to preserve its integrity as an accurate and complete record for the full retention period of the document.
Be compatible with standards and technology for electronic signatures that are generally used in commerce and industry and by state governments.

C. For documents that are signed electronically, the department shall prescribe the following:

The type of electronic signature required.
The manner and format in which the electronic signature must be affixed to the electronic record.

D. Notwithstanding any other provision of this section, the department's use and acceptance of electronic signatures are subject to the standards and requirements of title 44, chapter 26, article 3.

E. For the purposes of this section, "electronic signature" has the same meaning prescribed in section 44-7002.

Article 4 Liens and Priorities of Tax Claims

§ 42-1151 Lien

A. If any tax, interest, penalty or other amount owed by the taxpayer to the department that the department is required to collect is not paid by a taxpayer when due, such unpaid amounts constitute a lien upon all property and rights to property, whether real or personal, belonging to the taxpayer or acquired by the taxpayer from the date the amounts are assessed or the date the return prescribing the liability is filed until the liability for the assessed amounts is satisfied.

B. The lien prescribed in this section is not valid against the following until the notice of the lien is filed as prescribed in section 42-1152:

A mechanic's lienholder who holds a lien pursuant to title 33, chapter 7, article 6. The lien exists on the later of the date the lien becomes valid against subsequent purchasers without actual notice or the date the lienholder begins to furnish the services, labor or materials.
A purchaser who, for adequate and full consideration in money or money's worth, acquires an interest in property, other than a lien or security interest, which is valid against subsequent purchasers without actual notice. Any of the following which is not a lien or security interest is an interest in property:

(a) A lease of property.

(b) A written executory contract to purchase or lease property.

(d) An option to review or extend a lease of property.

A holder of a security interest in property acquired by contract to secure payment or performance of an obligation or to indemnify against loss or liability. A security interest exists:

(a) If the property exists and the interest has become protected against a subsequent judgment lien arising out of an unsecured obligation.

(b) To the extent that the holder has parted with money or money's worth.

A judgment lien creditor.

C. Although a notice of lien has been filed as prescribed by section 42-1152, the lien is not valid against:

Personal property purchased in casual sale as provided in section 6323 of the internal revenue code.
Residential property subject to a mechanic's lien for certain repairs and improvements as provided in section 6323 of the internal revenue code.

§ 42-1152 Filing of lien; notice; recording

A. The notice prescribed in section 42-1151, subsection B may be filed by the department against the taxpayer's real property located in any county by recording a notice of lien in the form prescribed by subsection C of this section in the office of the county recorder.

B. The notice prescribed in section 42-1151, subsection B may be filed by the department against the taxpayer's personal property or rights to personal property located within this state by recording a notice of lien in the form prescribed by subsection C of this section in the office of the secretary of state.

C. A notice of lien recorded under this section shall specify the nature of the tax, the amount of tax, interest and penalty and other amounts owed by the taxpayer to the department that are due, the taxable periods for which such amounts are due and the name and last known address of the taxpayer liable for such amounts.

§ 42-1153 Release or subordination of lien

A. The department, at any time, may release all or any portion of the property subject to the lien from the lien or subordinate the lien to other liens if it determines that either:

The taxes are sufficiently secured by a lien on other property of the taxpayer.
The release or subordination of the lien will not endanger or jeopardize the collection of such taxes.

B. In its discretion and at any time, the department may withdraw a notice of lien that was recorded pursuant to this article if the department determines that any of the following conditions applies:

The department's interests are best served by withdrawing the notice.
Filing the lien was premature or otherwise in violation of the department's administrative procedures.
Withdrawing the notice will facilitate collecting the outstanding amount of taxes, interest and penalties.
The taxpayer has entered into an installment payment agreement, unless the agreement provides otherwise.

C. If any lien imposed by section 42-1151 has been satisfied and a notice of the lien had been recorded by the department pursuant to section 42-1152, the department shall issue a release of the lien to the person against whom the lien was claimed. The department shall record the lien release in any county where the original lien was recorded and in the office of the secretary of state if applicable.

D. If a balance owed by a taxpayer has been abated pursuant to section 42-1004, subsection B, paragraph 1, subdivision (a), the department is not required to record a release of the lien under this section, but on the taxpayer's written request, the department shall provide a certificate of release to the taxpayer.

E. A certificate by the department to the effect that any property has been released from the lien or that the lien has been subordinated to other liens is conclusive evidence that the property has been released or that the lien has been subordinated as provided in the certificate.

§ 42-1154 Priority of tax claim

A. The amounts required to be collected by the department, with interest and penalties, shall be satisfied first in any of the following cases:

If the person is insolvent.
If the person makes a voluntary assignment of assets.
If the estate of the person in the hands of executors, administrators or heirs is insufficient to pay all debts due from the deceased.
If the estate and effects of an absconding, concealed or absent person required to pay any amount under this title are levied upon by process of law.

B. This section does not give this state a preference over any recorded lien which was recorded prior to the time the department recorded a notice of lien pursuant to section 42-1152.

§ 42-1155 Voluntary liens on property; security for delinquent taxes

The department may accept voluntary liens on real or personal property pledged by any person as security for any tax which the department is required to collect which is not paid by a taxpayer when due. A voluntary lien shall be perfected and treated in all respects the same as any other lien under this article.

Article 5 Seizure of Property for Collection of Taxes

§ 42-1201 Levy and distraint; definition

A. If a person liable to pay any tax neglects or refuses to pay the tax, the department may collect the tax, interest, penalty, other amounts owed to the department and such other sums as are sufficient to cover the expenses of the levy, by levy upon:

All property and rights to property, except property exempt under section 42-1204, belonging to the person or on which there is a lien as provided in article 4 of this chapter or section 42-17153 for the payment of the tax.
The accrued salary or wages of any officer, employee or elected official of this state or its political subdivisions, or any agency or instrumentality of this state or its political subdivisions, by serving a notice of levy on:

(a) The department of administration in the case of state wages or salaries.

(b) The chief disbursing officer of a political subdivision of the state in the case of wages or salaries paid by the political subdivision.

B. The levy shall not be made more than ten years after the amount of tax determined to be due becomes final. The taxpayer and the department may extend the ten year limitation prescribed by this subsection for any length of time by executing a written agreement before the expiration of the ten year limitation. If enforced collection has been stayed by operation of federal or state law, the period of limitations shall be extended by the period of time that the department was stayed from engaging in enforced collections.

C. As used in this chapter, "levy" includes the power of distraint and seizure by any means. Except as otherwise provided in subsection E or F of this section, a levy extends only to property possessed and obligations existing at the time of the levy or within twenty-one days after the date of the levy. In any case in which the department may levy upon property or rights to property, it may seize and sell the property or rights to the property, whether real or personal, tangible or intangible.

D. If any property or right to property upon which a levy has been made under subsection A of this section is not sufficient to satisfy the claim of the department for which the levy is made, the department may as often as may be necessary proceed to levy in like manner upon any other property liable to levy of the person against whom such claim exists, until the amount due, together with all expenses, is fully paid.

E. The effect of a levy on salary or wages payable to or received by a taxpayer is continuous from the date the levy is first made until the liability out of which the levy arose is satisfied or becomes unenforceable.

F. With respect to a levy described in subsection E of this section, the department shall promptly release the levy when the liability out of which the levy arose is satisfied or becomes unenforceable and shall promptly notify the person upon whom the levy was made that the levy has been released.

§ 42-1202 Surrender of property subject to levy; definition

A. Except as otherwise provided in subsection B of this section, any person in possession of, or obligated with respect to, property or rights to property subject to levy upon which a levy has been made shall, upon demand of the department, surrender such property or rights to property or discharge such obligation to the department, except such part of the property or rights to property as is, at the time of such demand, subject to an attachment or execution under any judicial process.

B. A levy on an organization with respect to a life insurance or endowment contract issued by such organization, without necessity for the surrender of the contract document, constitutes a demand by the department for payment of the amount described in this subsection and the exercise of the right of the person against whom the tax is assessed to the advance of such amount. Such organization shall pay over the amount within ninety days after service of notice of levy. The notice shall include a certification by the department that a copy of the notice has been mailed to the person against whom the tax is assessed at the person's last known address. The levy is deemed to be satisfied if such organization pays over to the department the amount which the person against whom the tax is assessed could have received from the organization on the date prescribed in this subsection for the satisfaction of the levy, increased by the amount of any advance, including contractual interest, made to such person on or after the date the organization had actual notice or knowledge of the existence of the lien with respect to which the levy is made, other than an advance, including contractual interest, made automatically to maintain the contract in force under an agreement entered into before the organization has such notice or knowledge. The satisfaction of a levy under this subsection is without prejudice to any civil action for the enforcement of any lien imposed by this chapter with respect to the contract.

C. A person who fails or refuses to surrender any property or rights to property, subject to levy, upon demand by the department, is liable in person and estate to this state in a sum equal to the value of the property or rights to property not so surrendered, but not exceeding the amount of taxes for the collection of which such levy has been made, with costs and interest on such sum at the rate determined pursuant to section 42-1123 from the date of such levy, or, in the case of a levy described in section 42-1201, subsection E or F, from the date such person would otherwise have been obligated to pay such amounts to the taxpayer. Any amount, other than costs, recovered under this subsection shall be credited against the tax liability for the collection of which the levy was made.

D. A person in possession of or obligated with respect to property or rights to property subject to levy upon which a levy has been made who, upon demand by the department, surrenders the property or rights to property, or discharges the obligation, to the department or who pays a liability under subsection C of this section is discharged from any obligation or liability to the delinquent taxpayer with respect to such property or rights to property arising from the surrender or payment. In the case of a levy which is satisfied pursuant to subsection B of this section, the organization is also discharged from any obligation or liability to any beneficiary arising from such surrender or payment.

E. As used in this section, "person" includes an officer or employee of a corporation, an officer, employee or elected official of this state or its political subdivisions, or any agency or instrumentality of this state or its political subdivisions, or a member or employee of a partnership, who as such officer, employee, elected official or member is under a duty to surrender the property or rights to property, or to discharge the obligation.

§ 42-1203 Production of books

If a levy has been made or is about to be made on any property, or right to property, any person having custody or control of any books or records containing evidence or statements relating to the property or right to property subject to levy shall, upon demand of the department, exhibit such books or records to the department.

§ 42-1204 Property exempt from levy

A. The following property is exempt from levy:

Wearing apparel and school books as are necessary for the taxpayer or members of his family.
So much of the fuel, provisions, furniture, personal effects, arms for personal use, livestock and poultry as provided for in section 6334 of the internal revenue code.
The books and tools necessary for the trade, business or profession of the taxpayer as provided for in section 6334 of the internal revenue code.
Mail, addressed to any person, which has not been delivered to the addressee.
If the taxpayer is required by judgment of a court of competent jurisdiction, entered prior to the date of levy, to contribute to the support of his minor children, so much of his salary, wages or other income as is necessary to comply with such judgment.
Any amount payable to or received by an individual as wages or salary for personal services, or as income derived from other sources, during any period, to the extent that the total of such amounts payable to or received by him during such period does not exceed the applicable exempt amount determined under subsection D of this section.

B. The officer seizing property of the type described in subsection A of this section shall appraise and set aside to the owner the amount of such property declared to be exempt. If the taxpayer objects at the time of the seizure to the valuation fixed by the officer making the seizure, the department shall summon three disinterested individuals who shall make the valuation.

C. Notwithstanding any other law of this state, no property or rights to property shall be exempt from the levy provided in this article other than the property specifically made exempt by subsection A of this section.

D. The following wages, salary and other income payable to or received by an individual are exempt from levy under subsection A, paragraph 6 of this section:

In the case of an individual who is paid or receives all wages, salary and other income on a weekly basis, the amount of such compensation received during any week which is exempt from levy is the amount determined pursuant to section 6334(d) of the internal revenue code and which is verified in such manner as set forth in section 6334.
In the case of any individual not described in paragraph 1 of this subsection, the amount of the wages, salary and other income payable to or received during any applicable pay period or other fiscal period, as determined under rules prescribed by the department, which is exempt from levy under subsection A, paragraph 6 of this section is an amount, determined under such rules, which as nearly as possible will result in the same total exemption from levy for such individual over a period of time as the individual would have under paragraph 1 of this subsection if, during such period of time, the individual were paid or received such wages, salary and other income on a regular weekly basis.

§ 42-1205 Notice and sale of seized property

A. Except as otherwise provided in this section, the notice of sale and sale of property seized by the department under this article shall be conducted in the manner and the time provided in title 12, chapter 9, article 7, relating to the sale of property under execution.

B. Real property may be redeemed in the manner provided by title 12, chapter 8, article 11.

C. The department shall notify the taxpayer of the date, time and location of the sale of the property or right to property with a description of the property or right to property to be sold. The notice shall be given in person, left at the taxpayer's dwelling or usual place of business or sent by first class mail or by e-mail to the taxpayer's last known address at least ten days before the day of the sale. If the property or right to property is perishable, the department shall give notice of the sale to the taxpayer in the manner and within the time limits as are reasonable considering the character and condition of the property.

§ 42-1206 Authority to release levy and return property

A. The department may under prescribed rules release the levy upon all or part of the property or rights to property levied upon if the department determines that such action will facilitate the collection of the liability. Such release shall not operate to prevent any subsequent levy.

B. If the department determines that property has been wrongfully levied upon, the department may return:

The specific property levied upon.
An amount of money equal to the amount of money levied upon.
An amount of money equal to the amount of money received by this state from a sale of such property.

C. Property may be returned at any time. An amount equal to the amount of money levied upon or received from such sale may be returned at any time before the expiration of nine months from the date of such levy.

D. In its discretion and at any time, the department may release a levy or return property levied on if the department determines that any of the following conditions applies:

The levy was premature or otherwise in violation of the department's administrative procedures.
The taxpayer has entered into an installment payment agreement, unless the agreement provides otherwise.
The department's interests are best served by the release or return.

§ 42-1207 Financial institutions data match; prohibited disclosure; civil liability; fee; definition

A. The department may enter into agreements with financial institutions that conduct business in this state to develop and operate a data match system to assist the department in the collection of delinquent taxes, penalties and interest. The data match system shall use automated data exchange procedures to the maximum extent possible.

B. Any data exchanges between financial institutions and the department under an agreement pursuant to subsection A shall occur quarterly. The data exchanges shall include the name, address of record, social security number or other taxpayer identification number and any other identifying information for each delinquent taxpayer who maintains an account at the institution and who owes delinquent taxes as identified by the department by name and social security number or other taxpayer identification number.

C. The department or its agent may only disclose a person's financial record under this section in order to enforce the collection of a person's delinquent tax obligation.

D. A department employee who knowingly or negligently discloses a person's financial records in violation of subsection C is subject to civil liability in an amount equal to the greater of either:

One thousand dollars for each act of unauthorized disclosure of a financial record with respect to which the department employee is found liable.
The sum of the actual damages sustained by the plaintiff as a result of the unauthorized disclosure and, in the case of a wilful disclosure or a disclosure that is the result of gross negligence, punitive damages, including costs and attorney fees.

E. The department may pay a reasonable fee to a financial institution for conducting a data match. The fee shall not exceed the actual costs incurred by the financial institution.

F. For the purposes of this section, "financial institution" means state and federally chartered banks, trust companies, federal and state savings and loan associations, federal and state credit unions, consumer lenders, international banking facilities and financial institution holding companies, insurance companies, benefit associations, safe deposit companies, money market mutual funds and similar institutions authorized to do business in this state and any party affiliated with these financial institutions.

Article 6 Tax Appeals

§ 42-1251 Appeal to the department; hearing

A. Except in the case of individual income taxes, a person from whom an amount is determined to be due under article 3 of this chapter may apply to the department by a petition in writing within forty-five days after the notice of a proposed assessment made pursuant to section 42-1109, subsection B or the notice required by section 42-1108, subsection B is received, or within such additional time as the department may allow, for a hearing, correction or redetermination of the action taken by the department. In the case of individual income taxes, the period is ninety days after the date the notice is mailed. The petition shall set forth the reasons why the hearing, correction or redetermination should be granted and the amount in which any tax, interest and penalties should be reduced. If only a portion of the deficiency assessment is protested, all unprotested amounts of tax, interest and penalties must be paid at the time the protest is filed. The department shall consider the petition and grant a hearing, if requested. To represent the taxpayer at the hearing or to appear on the taxpayer's behalf is deemed not to be the practice of law.

B. Except in the case of individual income taxes, at any time during which an appeal to the department under subsection A of this section is pending, a person that has conferred with a designated appeals officer of the department to clarify any fact or legal issue in dispute and to discuss the availability of additional documentation that may assist in resolving outstanding issues may bypass the hearing process before the department's hearing officer or the office of administrative hearings and either:

Appeal to the state board of tax appeals by filing a notice of appeal in writing pursuant to section 42-1253, subsection A.
Bring an action in tax court by filing a notice of appeal in writing pursuant to section 42-1254, subsection C.

C. If the department fails to schedule a meeting within forty-five days after the time a person files a written request with the department to confer with a designated appeals officer about bypassing the hearing process before the department's hearing officer or the office of administrative hearings, the person may bypass the meeting and appeal directly to the state board of tax appeals or bring an action in tax court.

D. If the taxpayer does not file a petition for hearing, correction, redetermination or appeal within the period provided by subsection A, B or C of this section, the amount determined to be due becomes final at the expiration of the period. The taxpayer is deemed to have waived and abandoned the right to question the amount determined to be due, unless the taxpayer pays the total deficiency assessment, including interest and penalties. The taxpayer may then file a claim for refund pursuant to section 42-1118 within six months after paying the deficiency assessment or within the time limits prescribed by section 42-1106, whichever period expires later.

E. All orders or decisions made on the filing of a petition for a hearing, correction or redetermination under subsection A of this section become final thirty days after notice has been received by the petitioner, unless the petitioner appeals the order or decision to the state board of tax appeals.

§ 42-1251.01 Appeals of suspension, revocation or refusal to renew liquor licenses; hearings; definition

A. A suspension, revocation or refusal to renew a liquor license by the director of the department of liquor licenses and control pursuant to section 4-210, subsection A, paragraph 5 are considered a contested case.

B. The aggrieved party may appeal the suspension, revocation or refusal to renew by the director pursuant to section 4-210, subsection A, paragraph 5 based on a contention that the business is either:

Not delinquent on any taxes, penalties or interest owed to this state or a political subdivision of this state.
Delinquent on its taxes, penalties and interest for less than one hundred twenty days.
Delinquent on its taxes, penalties and interest in an amount that totals $250 or less.

C. The aggrieved party shall file the appeal in writing with the department of revenue within fifteen days after service of the notice of the decision of the director. The decision of the director is suspended until the determination of any appeal by the office of administrative hearings.

D. An administrative law judge shall conduct a hearing on the appeal pursuant to title 41, chapter 6, article 10 and may accept any relevant and material evidence and testimony and may exercise the actions prescribed by section 4-112, subsection F or section 12-2212. At the hearing, an attorney for or a corporate officer or employee of a corporation may represent the corporation.

E. A decision issued by the director is not final for purposes of appeal to the superior court until a decision has been issued by the office of administrative hearings.

F. The office of administrative hearings may affirm, reverse or modify any decision issued by the director.

G. For the purposes of this section, "director" means the director of the department of liquor licenses and control.

§ 42-1252 State board of tax appeals

A. The state board of tax appeals is established as an independent agency which shall not in any way be subject to the supervision or control of the department of revenue. The board shall have full power to hear and decide all appeals from decisions of the department of revenue.

B. The state board shall consist of three members appointed by the governor pursuant to section 38-211. Members shall be residents of this state.

C. Members shall be selected on the basis of their knowledge of and experience in taxation. Not more than two members may be primarily engaged in the same occupation or profession. The board shall handle all matters entrusted by law to it dealing with income taxation, estate taxation, transaction privilege, use and luxury taxation and any other taxation assigned to it by law and shall hear and decide appeals from the department of revenue on such matters.

D. Not more than two members of the board shall be members of the same political party. No member of the board shall hold any other public office under the laws of this state or any of its political subdivisions. No member shall be a candidate for an elective office under the laws of this state, nor of any other state. No member of the board shall hold any position of trust nor provide or engage in any occupation or business which would corruptly conflict with the duties of a member of the board, nor take part directly or indirectly in any election campaign in the interest of any political party or other organization or any candidate or measure to be voted on by the people. This subsection does not prohibit a person from properly and lawfully engaging in a business or profession.

E. The term of board members is six years. The member of the board having the shortest term remaining shall act as chairperson if that member has served on the board at least two years. If the member having the shortest term remaining does not qualify to act as chairperson or if two or more members have an equal right by virtue of their remaining terms to serve as chairperson, the board shall elect a chairperson. A member may not be appointed for more than two terms.

F. Each member of the board shall receive:

One hundred fifty dollars per day for time spent in the performance of official duties.
Such travel and other expenses as provided by law for other state officers.

G. The governor may remove any member for cause.

H. Subject to title 41, chapter 4, article 4, the board shall appoint a clerk, hearing officers and such other employees as it deems necessary to carry out its duties. The hearing officer qualifications shall be the same as the selection criteria for the members as prescribed by this section. Notwithstanding section 41-192, subsection D, upon request of the board, the attorney general shall designate, for such time and purposes as the board requires, an attorney, acceptable to the board, whose compensation shall be fixed and paid by the board.

I. The board shall hold hearings and meetings at the call of the chairperson or a majority of the board and otherwise as may be prescribed by the rules of the board as required to carry out its duties. The principal office of the board shall be at the capitol, but the board may sit or hold hearings at any other place within the state. A majority of the board constitutes a quorum for making orders and decisions or transacting other official business, and the board may act even though one position on the board is vacant. The board shall keep a record of its proceedings.

J. In conducting the business of the board:

The board may not act if more than one position is vacant.
One or more members or a hearing officer of the board may hold hearings and take testimony to be reported for action by the board when authorized by rule or order of the board.

§ 42-1253 Appeal to state board of tax appeals; definition

A. Except for the provisions of section 42-1251, subsection B and section 42-1254, subsection C that provide for an option to bypass all or part of the administrative appeals process in certain tax disputes, a person aggrieved by a final decision or order of the department under section 42-1251, article 3 of this chapter or section 42-2065, 42-2068, 42-2069, 42-2074, 42-2201 or 42-2202 may appeal to the state board of tax appeals by filing a notice of appeal in writing within thirty days after the decision or order from which the appeal is taken has become final.

B. The board shall take testimony and examine documentary evidence as necessary to determine the appeal, all pursuant to administrative rules to govern such appeals.

C. On determining the appeal the board shall issue a decision consistent with its determination. The board's decision is final on the expiration of thirty days from the date when notice of its action is received by the taxpayer, unless either the department or the taxpayer brings an action in tax court as provided in section 42-1254.

D. If the amount in any single dispute before the board is less than twenty-five thousand dollars, a taxpayer may be represented in that dispute before the board by:

A certified public accountant.
A person who is enrolled to practice before the United States internal revenue service and is recognized as an enrolled agent.
Any other person who is authorized by the taxpayer under a properly executed power of attorney and who was previously or is currently retained by the taxpayer for purposes other than representation in a hearing before the board.

E. If a practitioner who represents a taxpayer before the board pursuant to subsection D of this section fails to comply with an order or rule of the board, the board may impose sanctions including one or both of the following:

Order that the stipulation of the facts proposed by the department of revenue be accepted.
Suspend the practitioner from further practice before the board either for a specific period of time or until the board removes the suspension.

F. For the purposes of this section, "practitioner" means a person, other than a party, who files documents with or appears before the board in connection with a matter before the board.

§ 42-1254 Appeal to tax court

A. The department or a taxpayer aggrieved by a decision of the state board of tax appeals may bring an action in tax court.

B. If the department is aggrieved by a decision of the board and the amount in dispute is less than five thousand dollars, the department may not bring an action in tax court unless the department determines that the decision of the board involves an issue of substantial significance to the state. A taxpayer aggrieved by a determination of the department that an issue is of substantial significance to the state may file a motion with the tax court to dismiss the action brought by the department on the grounds that the determination constitutes an abuse of discretion.

C. Except in the case of individual income tax cases in which the amount in dispute is less than five thousand dollars, a person who is aggrieved by a final decision or order of the department under section 42-1251 or article 3 of this chapter, in lieu of appealing to the state board of tax appeals under section 42-1253, may bring an action in tax court by filing a notice of appeal in writing within thirty days after the decision or order from which the appeal is taken has become final. In addition, as provided by section 42-1251, subsections B and C, a person may bypass all or part of the administrative appeals process in certain tax disputes by bringing an action in tax court by filing a notice of appeal in writing within the time prescribed by section 42-1251, subsection B.

D. Any appeal that is taken to tax court pursuant to this section is subject to the following provisions:

An injunction, writ of mandamus or other legal or equitable process may not issue in an action in any court in this state against an officer of this state to prevent or enjoin the collection of any tax, penalty or interest.
The action shall not begin more than thirty days after the order or decision of the board or department becomes final. Failure to bring the action within thirty days after the order or decision of the board or department becomes final constitutes a waiver of the protest and a waiver of all claims against this state arising from or based on the illegality in the tax, penalties and interest at issue, except that within the time limits set forth in section 42-1106, a taxpayer who fails to bring an action within thirty days may pay the tax under protest stating the grounds of objection to the legality of the tax and then file a claim for refund of the taxes paid. The refund claim shall then be governed by section 42-1119 and this section.
The tax court shall hear and determine the appeal as a trial de novo.
Either party to such an action may appeal to the court of appeals or supreme court as provided by law.
If a final judgment is rendered in favor of the taxpayer in the action, the amount or such portion of the judgment as may be necessary shall first be credited to any taxes, penalties and interest due from the plaintiff taxpayer, and the amount of the balance remaining due the taxpayer shall be certified by the department of revenue to the department of administration, with a certified copy of the final judgment and a claim for refund authenticated by the department of revenue. On receipt, the department of administration shall draw a warrant payable to the taxpayer in an amount equal to the amount of the tax found by the judgment to be illegal, minus the amount of any taxes, penalties and interest due from the taxpayer. The department of administration shall draw a separate warrant payable to the taxpayer in an amount equal to the interest and other costs recovered against the department of revenue by the judgment, which shall be paid from the appropriate tax account.

§ 42-1255 Burden of proof

The department has the burden of proof by a preponderance of the evidence in any administrative or judicial proceeding regarding any factual issue that is relevant to ascertaining the tax liability of a taxpayer. This section does not abrogate any provision of this title or title 43 that requires a taxpayer to substantiate an item of income or expense. This section applies to a factual issue if a preponderance of the evidence demonstrates that:

The taxpayer asserts a reasonable dispute regarding the issue.
The taxpayer has fully cooperated with the department regarding the issue including providing, within a reasonable period of time, access to and inspection of all witnesses, information and documents within the taxpayer's control, as reasonably requested by the department.
The taxpayer has kept and maintained records as required by this title, by title 43 or by the department.

Article 7 Military Reuse Zones

§ 42-1301 Designating military reuse zone; term; renewal

A. After executing a lease with a term of fifteen years or longer for the use or occupancy of real property or improvements that are located on a closed military facility with a runway that is at least eight thousand feet long at closing or after title to any part of a closed military facility with a runway that is at least eight thousand feet long at closing is transferred to this state or to another public or private entity, the governor, after consulting with the director, may designate the property as a military reuse zone. Only properties that were used for operational and training purposes of the active uniformed services of the United States qualify for consideration as a military reuse zone.

B. The governor shall set a termination date for the military reuse zone that is not more than ten years after the date the zone is designated. During the last year before termination the governor may renew the military reuse zone for one term of ten years. Thereafter, the legislature and the governor by joint resolution may renew the military reuse zone for additional ten-year terms.

§ 42-1302 Tax incentives; conditions

A. A prime contractor may qualify for an exemption from transaction privilege tax with respect to activities in a military reuse zone as provided, and subject to the terms and conditions prescribed, by section 42-5075, subsection B, paragraph 4.

B. Taxable property in a military reuse zone that is devoted to providing aviation or aerospace services or to manufacturing, assembling or fabricating aviation or aerospace products qualifies for assessment as class six property as provided, and subject to the terms and conditions prescribed, by sections 42-12006 and 42-15006.

C. To qualify for a tax incentive described in subsection A or B of this section, the taxpayer shall provide to the department information relating to the amount of tax benefits the taxpayer receives each year for each year in which the taxpayer claims the incentives on forms prescribed by the department. If the taxpayer fails to provide the required information, the department shall immediately revoke the taxpayer's certification of eligibility.

D. Taxpayers who qualify for tax incentives under subsection B of this section shall be certified by the department as eligible for a five-year period, subject to termination in the event of changed circumstances rendering the taxpayer no longer eligible.

§ 42-1303 Duties of department of revenue; annual report

The department shall administer this article and shall:

Monitor the implementation and operation of this article and continually evaluate the progress made in the military reuse zone.
Assist an employer or prospective employer in a zone to obtain the benefits of any incentive authorized by this article.
Submit an annual written report to the governor evaluating the effectiveness of the program with respect to each zone, stating the amount of foregone tax revenue due to the incentives offered pursuant to section 42-1302, reporting any abuses and presenting any suggestions to improve the program. The report is due on or before March 1, beginning in the first full calendar year after the zone is established and ending in the first full calendar year after the zone is terminated.
Adopt rules as necessary to administer this article.
Provide information regarding military reuse zones on request and conduct informational and instructional seminars and training.

Chapter 2 Taxpayer Protection and Services

Article 1 Confidentiality of Taxpayer Information

§ 42-2001 Definitions

In this article, unless the context otherwise requires:

"Confidential information":

(a) Includes the following information whether it concerns individual taxpayers or is aggregate information for specifically identified taxpayers:

(i) Returns and reports filed with the department for income tax, withholding tax, transaction privilege tax, luxury tax, use tax, property tax, excise tax on marijuana and severance tax.

(ii) Applications to receive a license or registration for transaction privilege tax, luxury tax, use tax, excise tax on marijuana and withholding tax.

(iii) Information discovered concerning taxes and receipts by the department, whether or not by compulsory process.

(iv) Return information obtained from the United States internal revenue service and United States bureau of alcohol, tobacco and firearms.

(v) Information supplied at the special request of the department by a taxpayer that the taxpayer requests to be held in confidence.

(vi) Guidelines, standards or procedures that are established by the department for, or other information relating to, selecting returns or taxpayers for examination or settling or compromising any tax liability.

(vii) A taxpayer's identity, the nature, source or amount of the taxpayer's income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, overassessments or tax payments, whether the taxpayer's return was, is being or will be examined or subject to investigation, collection or processing or any other data received by, recorded by, prepared by, furnished to or collected by the department with respect to a return or with respect to the termination, or possible existence, of liability of any person for any tax, penalty or interest imposed pursuant to this title or title 43.

(viii) Information supplied by an employee to an employer regarding the employee's election to have the employee's withholding tax reduced for the purposes of contributions to qualifying charitable organizations, qualified school tuition organizations or public schools pursuant to section 43-401, subsection G.

(b) Does not include information that is otherwise a public record.

"Report" includes a notice of insurance payments, a request for a release of a bank account and an inventory of a safe deposit box.
"Return" includes any form prescribed by the department and any supporting schedules, attachments and lists.
"Tax administration" includes assessment, collection, investigation, litigation, statistical gathering functions, enforcement, policy making functions or management of those functions of the tax revenue laws of this state.
"Tax official" means a nonelected employee or the nonelected employee's designee or agent who is responsible for tax administration.
"Taxpayer", with respect to a joint return, means either party.

§ 42-2002 Disclosure of confidential information prohibited

A. A person, including a former employee or agent of the department or the office of administrative hearings or a person previously having an administrative duty for the department or the office of administrative hearings, who has received confidential information while an employee or agent of the department or the office of administrative hearings, while performing an administrative duty for the department or the office of administrative hearings, shall not disclose that information except as provided in this article.

B. A person who has received confidential information pursuant to an exception under section 42-2003, subsection B or G shall not disclose that information except as provided in this article.

C. Confidential information may not be disclosed relating to applications for cannabis or controlled substance tax licenses or payments under prior law.

D. Confidential information shall not be disclosed if the department determines that disclosure would seriously impair any civil or criminal tax investigation or if the disclosure would be contrary to section 6103(d), 6103(p)(8) or 7213 of the internal revenue code.

§ 42-2003 Authorized disclosure of confidential information

A. Confidential information relating to:

A taxpayer may be disclosed to the taxpayer, its successor in interest or a designee of the taxpayer who is authorized in writing by the taxpayer. A principal corporate officer of a parent corporation may execute a written authorization for a controlled subsidiary. If a taxpayer elects to file an Arizona small business income tax return under section 43-302, a written authorization by the taxpayer to allow the department to disclose personal income tax information to a designee includes the corresponding Arizona small business income tax return.
A corporate taxpayer may be disclosed to any principal officer, any person designated by a principal officer or any person designated in a resolution by the corporate board of directors or other similar governing body. If a corporate officer signs a statement under penalty of perjury representing that the officer is a principal officer, the department may rely on the statement until the statement is shown to be false. For the purposes of this paragraph, "principal officer" includes a chief executive officer, president, secretary, treasurer, vice president of tax, chief financial officer, chief operating officer or chief tax officer or any other corporate officer who has the authority to bind the taxpayer on matters related to state taxes.
A partnership may be disclosed to any partner of the partnership. This exception does not include disclosure of confidential information of a particular partner unless otherwise authorized.
A limited liability company may be disclosed to any member of the company or, if the company is manager-managed, to any manager.
An estate may be disclosed to the personal representative of the estate and to any heir, next of kin or beneficiary under the will of the decedent if the department finds that the heir, next of kin or beneficiary has a material interest that will be affected by the confidential information.
A trust may be disclosed to the trustee or trustees, jointly or separately, and to the grantor or any beneficiary of the trust if the department finds that the grantor or beneficiary has a material interest that will be affected by the confidential information.
A government entity may be disclosed to the head of the entity or a member of the governing board of the entity, or any employee of the entity who has been delegated the authorization in writing by the head of the entity or the governing board of the entity.
Any taxpayer may be disclosed if the taxpayer has waived any rights to confidentiality either in writing or on the record in any administrative or judicial proceeding.
The name and taxpayer identification numbers of persons issued direct payment permits may be publicly disclosed.
Any taxpayer may be disclosed during a meeting or telephone call if the taxpayer is present during the meeting or telephone call and authorizes the disclosure of confidential information.

B. Confidential information may be disclosed to:

Any employee of the department whose official duties involve tax administration.
The office of the attorney general solely for its use in preparation for, or in an investigation that may result in, any proceeding involving tax administration before the department or any other agency or board of this state, or before any grand jury or any state or federal court.
The department of liquor licenses and control for its use in determining whether a spirituous liquor licensee has paid all transaction privilege taxes and affiliated excise taxes incurred as a result of the sale of spirituous liquor, as defined in section 4-101, at the licensed establishment and imposed on the licensed establishments by this state and its political subdivisions.
Other state tax officials whose official duties require the disclosure for proper tax administration purposes if the information is sought in connection with an investigation or any other proceeding conducted by the official. Any disclosure is limited to information of a taxpayer who is being investigated or who is a party to a proceeding conducted by the official.
The following agencies, officials and organizations, if they grant substantially similar privileges to the department for the type of information being sought, pursuant to statute and a written agreement between the department and the foreign country, agency, state, Indian tribe or organization:

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

(b) A state tax official of another state.

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

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

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

The auditor general, in connection with any audit of the department subject to the restrictions in section 42-2002, subsection D.
Any person to the extent necessary for effective tax administration in connection with:

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

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

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

(a) Regarding income tax or withholding tax.

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

The United States treasury inspector general for tax administration for the purpose of reporting a violation of internal revenue code section 7213A (26 United States Code section 7213A), unauthorized inspection of returns or return information.
The financial management service of the United States treasury department for use in the treasury offset program.
The United States treasury department or its authorized agent for use in the state income tax levy program and in the electronic federal tax payment system.
The Arizona commerce authority for its use in:

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

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

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

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

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

A prosecutor for purposes of section 32-1164, subsection C.
The office of the state fire marshal for use in determining compliance with and enforcing title 37, chapter 9, article 5.
The department of transportation for its use in administering taxes, surcharges and penalties prescribed by title 28.
The Arizona health care cost containment system administration for its use in administering nursing facility provider assessments.
The department of administration risk management division and the office of the attorney general if the information relates to a claim against this state pursuant to section 12-821.01 involving the department of revenue.
Another state agency if the taxpayer authorizes the disclosure of confidential information in writing, including an authorization that is part of an application form or other document submitted to the agency.
The department of economic security for its use in determining whether an employer has paid all amounts due under the unemployment insurance program pursuant to title 23, chapter 4.
The department of health services for its use in determining the following:

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

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

The Arizona department of agriculture for the purpose of ascertaining compliance with the licensing provisions in title 3.
The office of economic opportunity for the purpose of performing the duties and obligations to or on behalf of this state prescribed by title 41, chapter 53.

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

One or more of the following circumstances must apply:

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

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

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

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

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

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

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

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

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

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

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

(i) The transaction privilege tax license number.

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

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

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

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

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

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

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

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

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

The state treasurer in order to comply with the requirements of section 42-5029, subsection A, paragraph 3.
The joint legislative income tax credit review committee, the joint legislative budget committee staff and the legislative staff in order to comply with the requirements of section 43-221.

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

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

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

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

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

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

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

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

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

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

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

Any public health control law relating to tobacco sales as provided under title 36, chapter 6, article 14.
Any law relating to reduced cigarette ignition propensity standards as provided under title 37, chapter 9, article 5.
Sections 44-7101 and 44-7111, the master settlement agreement referred to in those sections and all agreements regarding disputes under the master settlement agreement.

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

The treatment of an item reflected on such a return is or may be related to the resolution of an issue in the proceeding.
Such a return or the return information relates or may relate to a transactional relationship between a person who is a party to the proceeding and the taxpayer that directly affects the resolution of an issue in the proceeding.
The method of payment of the taxpayer's withholding tax liability or the method of filing the taxpayer's withholding tax return is an issue for the period.

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

Federal, state or local agencies located in this state for the purposes of enforcement of the statutes or agreements specified in subsection S of this section or for the purposes of enforcement of corresponding laws of other states.
Indian tribes located in this state for the purposes of enforcement of the statutes or agreements specified in subsection S of this section.
A court, arbitrator, data clearinghouse or similar entity for the purpose of assessing compliance with or making calculations required by the master settlement agreement or agreements regarding disputes under the master settlement agreement, and with counsel for the parties or expert witnesses in any such proceeding, if the information otherwise remains confidential.

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

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

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

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

Is not subject to disclosure pursuant to title 39, relating to public records.
May not be disclosed to any agency of this state or of any county, city, town or other political subdivision of this state.

§ 42-2004 Violation; classification

A disclosure of confidential information in violation of this article is a class 1 misdemeanor. A knowing disclosure of confidential information in violation of this article is a class 6 felony.

Article 2 Taxpayers' Bill of Rights

§ 42-2051 Arizona taxpayer assistance office; taxpayer problem resolution officer; duties

A. The Arizona taxpayer assistance office is established as an office in the department. The employees of the office shall be selected by the director. The manager of the taxpayer assistance office is the taxpayer problem resolution officer. The office reports directly to the director's office. The employees of the office may include employees of the department and may also include residents of this state with knowledge of taxation.

B. The office shall assist taxpayers in:

Obtaining easily understandable tax information and information on audits, corrections and appeals procedures of the department.
Answering questions regarding preparing and filing returns with the department.
Locating documents or payments filed with or submitted to the department by taxpayers.

C. The office shall also:

Receive and evaluate complaints of improper, abusive or inefficient service by employees of the department and recommend to the director appropriate action to correct such service.
Identify policies and practices of the department that might be barriers to the equitable treatment of taxpayers and recommend alternatives to the director.
Provide expeditious service to taxpayers whose problems are not resolved through normal channels.
Negotiate with department personnel to resolve the most complex and sensitive taxpayer problems.
Take action to stop or prohibit the department from taking an action against a taxpayer.
Participate and represent taxpayers' interests and concerns in planning meetings, reviewing instructions and formulating department policies and procedures.
Compile data each year on the number and type of taxpayer complaints and evaluate the actions taken to resolve complaints.
Survey taxpayers each year to obtain their evaluation of the quality of service provided by the department.
Monitor the number and type of seizures of property under chapter 1, article 5 of this title.
Notify and recommend appropriate action to the director if the office determines that a seizure has occurred or will occur which has subjected or will subject the taxpayer to a seizure of property without affording a reasonable opportunity for discussion of alternative methods of payment of the obligation.
Perform other functions which relate to taxpayer assistance as prescribed by the director.

D. Actions taken by the office may be reviewed only by the director upon request of the department or a taxpayer. The director may modify action taken by the office.

§ 42-2052 Erroneous advice or misleading statements by the department; abatement of penalties and interest; definitions

A. Notwithstanding sections 42-1123 and 42-1125, no interest or penalty may be assessed on an amount assessed as a deficiency if either:

The deficiency assessed is directly attributable to erroneous written advice furnished to the taxpayer by an employee of the department acting in an official capacity in response to a specific request from the taxpayer and not from the taxpayer's failure to provide adequate or accurate information.
All of the following are true:

(a) A tax return form or tax ruling prepared by the department contains a statement that, if followed by a taxpayer, would cause the taxpayer to misapply this title or title 43.

(b) The taxpayer reasonably relies on the statement.

B. Each employee of the department, at the time any oral advice is given to any person, shall inform the person that the department is not bound by such oral advice.

C. For purposes of this section:

"Tax return form" includes the instructions that the department prepares for use with the tax return form whether the form or instructions are provided on paper or by electronic means.
"Tax ruling" means a statement issued by the director and denominated as a tax ruling or a tax procedure.

§ 42-2053 Procedures involving taxpayer interviews

A. On the request of a taxpayer, and under circumstances prescribed by the department, an employee of the department, in connection with any interview with the taxpayer that relates to a deficiency in payment of any tax owed to the department, shall:

Conduct the interview in the place of business of the taxpayer, or at the department office closest to the taxpayer's residence.
Conduct the interview at a reasonable time which imposes no unusual hardship on the taxpayer.
Allow the taxpayer to record the interview.

B. An employee of the department may record an interview with a taxpayer that relates to a deficiency in payment of any tax owed to the department. The employee shall inform the taxpayer of the recording before the interview begins. On written request by the taxpayer, the department shall provide a transcript of the recording, if the taxpayer reimburses the department for the cost of providing the transcript.

C. Before beginning any interview relating to a deficiency in the payment of any tax owed to the department an employee of the department shall provide the taxpayer with information regarding the taxpayer's rights and the audit, corrections and appeals procedures of the department relating to the taxpayer's deficiency.

§ 42-2054 Disclosure of taxpayer information

On the written request of a taxpayer, information relating to the taxpayer may be disclosed, if the disclosure does not violate article 1 of this chapter.

§ 42-2055 Taxpayer assistance orders

A. The problem resolution officer, with or without a formal written request from a taxpayer, may issue a taxpayer assistance order that suspends or stays an action or proposed action by the department if, in the problem resolution officer's determination, a taxpayer is suffering or will suffer a significant hardship due to the manner in which the department administers the tax laws.

B. A taxpayer assistance order may require the department to release the taxpayer's property that has been levied on, cease any action or refrain from taking any action to enforce state tax laws against the taxpayer pending resolution of the issue or issues giving rise to the order.

C. The director or the problem resolution officer may modify, reverse or rescind a taxpayer assistance order. A taxpayer assistance order is binding on the department until it is reversed or rescinded.

D. The running of the applicable period of limitations for any action that is the subject of a taxpayer assistance order is suspended from the date the taxpayer applies for the order or the date the order is issued, whichever is earlier, until the order's expiration date, modification date or rescission date, if any. Interest that would otherwise accrue on an outstanding tax obligation is not affected by the issuance of a taxpayer assistance order.

E. A taxpayer assistance order may not be used:

To contest the merits of a tax liability.
As a substitute for informal protest procedures or administrative or judicial proceedings to review a deficiency assessment, collection action or denial of a refund claim.

§ 42-2056 Closing agreements in cases of extensive taxpayer misunderstanding or misapplication; attorney general approval; rules; definition

A. If the department determines that noncompliance with tax obligations results from extensive misunderstanding or misapplication of provisions of this title or title 43 it may enter into closing agreements with those taxpayers under the following terms and conditions:

Extensive misunderstanding or misapplication of the tax laws occurs if the department determines that more than sixty per cent of the persons in the affected class have failed to properly account for their taxes owing to the same misunderstanding or misapplication of the tax laws.
The department shall make an initial determination as to the existence of an affected class of taxpayers. After a review of the taxpayer's request, the department may determine that there has not been an extensive misunderstanding or misapplication of the tax laws by an affected class of taxpayers. At that time, the department will notify the taxpayer that the request is denied.
The department shall publicly declare the nature of the possible misunderstanding or misapplication and the proposed definition of the class of affected taxpayers and shall conduct a public hearing to hear testimony regarding the extent of the misunderstanding or misapplication and the definition of the affected class. Within sixty days after close of the public hearing, the department shall notify the attendees at the public hearing and publish a public notice on its website stating whether relief will be granted.
If, after the public hearing, the department determines that a class of affected taxpayers has failed to comply with their tax obligations because of extensive misunderstanding or misapplication of the tax laws it shall issue a tax ruling announcing that finding and publish the ruling in a newspaper of general circulation.
A closing agreement under this section may abate some or all of the penalties, interest and tax that the taxpayers have failed to remit, or the agreement may provide for the prospective treatment of the matter as to the class of affected taxpayers. Notwithstanding section 42-1113, all taxpayers in the class shall be offered the opportunity to enter into a similar agreement for the same tax periods.
Taxpayers in the affected class who have properly accounted for their tax obligations for these tax periods shall be offered the opportunity to enter into a similar closing agreement providing for a pro rata credit or refund of their taxes previously paid, subject to section 42-1104, subsection A and section 42-1106, subsection A.
The closing agreement shall require the taxpayers to properly account for and pay such taxes in the future. If a taxpayer fails to comply with that requirement, the agreement is voidable by the department and the department may assess the taxpayer for the delinquent taxes. The department may issue such a proposed assessment within six months after the date that it declares the agreement void or within the period prescribed by section 42-1104, whichever is later.

B. A person who filed a written request for relief under this section but has been denied relief as the result of the department's determination that the elements of subsection A, paragraph 3 of this section have not been established may appeal that determination pursuant to the same procedure as provided in chapter 1, article 6 of this title. A person who files an appeal under this subsection, who also has another appeal pending pursuant to chapter 1, article 6 of this title on a matter solely related to the matter at issue in the department's determination under this section, may petition the relevant appellate forum to hold that appeal in abeyance pending the resolution of the person's appeal pursuant to this section, and the agency, tribunal or court must grant the petition.

C. Before entering into closing agreements pursuant to this section, the department shall secure the approval of the attorney general of the tax ruling and the agreements. The department may not enter into the agreements without such approval from the attorney general.

D. After a closing agreement has been signed pursuant to this section, and subject to the taxpayer's compliance with the requirements of subsection A, paragraph 6 of this section, it is final and conclusive except on a showing of fraud, malfeasance or misrepresentation of a material fact. The case shall not be reopened as to the matters agreed on, and the agreement shall not be modified by any officer, employee or agent of the state. The agreement or any determination, assessment, collection, payment abatement, refund or credit made pursuant to the agreement shall not be annulled, modified, set aside or disregarded in any suit, action or proceeding.

E. The department shall report in writing its activities under this section to the governor, the president of the senate and the speaker of the house of representatives on or before February 1 of each year.

F. The department may adopt rules to implement this section.

G. For the purposes of this section, "affected class" means taxpayers who are similarly situated and directly affected by the department's position in a tax matter. For transaction privilege or use tax purposes, affected class may include taxpayers in the same industry code under the North American industrial classification system code, if applicable to the tax matter or taxpayers that directly compete with each other. For the purposes of this section, affected class shall not be broadly described unless such description increases the number of taxpayers who are eligible for relief.

§ 42-2057 Agreement for installment payments of tax

A. The department may enter into an agreement with a taxpayer to allow the taxpayer to satisfy a liability for any tax by means of installment payments. The department may require a taxpayer who requests an installment payment agreement to complete a financial report in such form and manner as the department may prescribe.

B. The department, without notice, may alter, modify or terminate an installment payment agreement if the taxpayer:

Fails to pay an installment at the time the installment payment is due under the agreement.
Fails to pay any other tax liability at the time the liability is due.
Fails to file any tax report or return at the time the report or return is due.
Fails to furnish any information requested by the department within thirty days after the request.
Fails to notify the department of a material improvement in the taxpayer's financial condition above the income previously reported in the most recent income statement within thirty days after the material improvement.
Provides inaccurate, false or incomplete information to the department.

C. Notwithstanding any installment payment agreement, the department may offset any tax refunds against the liabilities provided for in the installment payment agreement, may file and fully enforce any tax liens and may engage in collection activities involving the sale of assets.

D. The department, without notice, may terminate an installment payment agreement if the department believes that the collection of tax to which the payment agreement pertains is in jeopardy.

E. If the department determines that the financial condition of a taxpayer has improved, the department may alter, modify or terminate the agreement by providing notice to the taxpayer at least thirty days before the effective date of the action. The notice shall include the reasons why the department believes the alteration, modification or termination is appropriate.

F. An installment payment agreement shall remain in effect for the term of the agreement except as otherwise provided in this section.

G. A taxpayer who is aggrieved by a decision of the department to refuse to enter into an installment payment agreement or to alter, modify or terminate an agreement entered into pursuant to this section may petition the office of taxpayer assistance to review that determination. The office of taxpayer assistance may stay such alteration, modification or termination pending its review and may modify or nullify the determination.

H. The department and the taxpayer may modify any installment payment agreement at any time by entering into a new or modified agreement.

I. The department may adopt rules to implement this section.

§ 42-2058 Basis for evaluating employee performance

A. The department shall establish procedures to monitor the performance of department employees that include, if applicable, using evaluations obtained from taxpayers.

B. Fair and equitable treatment of taxpayers is a criterion for evaluating employee performance, including being free of favoritism or bias, reasonable and consistent with the laws of this state and the rules, procedures and rulings of the department.

C. The department shall not evaluate an employee on the basis of taxes assessed or collected by that employee.

§ 42-2059 Additional audits or proposed assessments prohibited; exceptions

A. When the department completes an audit or the findings of a managed audit are accepted by the director or approved on appeal and a deficiency has been completely determined under section 42-1108 or chapter 1, article 6 of this title, the taxpayer's liability for the particular tax for the period subjected to the audit is fixed and determined, and an additional audit may not be conducted except under the following circumstances:

A taxpayer files a claim for refund under section 42-1251, subsection C or any other provision authorizing a claim for refund. Any departmental audit of the claim is limited to the issues presented on the claim for refund.
Changes or corrections are required to be reported to the department by section 43-327. The department may audit any such reports or any periods for which a report was required notwithstanding this section and may determine a tax deficiency or a refund.
If the taxpayer failed to disclose material information during the audit, or falsified books or records or otherwise engaged in an action that prevented the department from conducting an accurate audit, the applicability of this subsection may be part of a subsequent protest and may be contested by the taxpayer pursuant to chapter 1, article 6 of this title.
If a managed audit is completed under the terms of a limited managed audit agreement, the department may audit the issues not covered by the limited managed audit agreement within the statute of limitations prescribed by section 42-1104.

B. If the department issues a notice of proposed assessment of taxes imposed by chapter 5, article 1 or 4 of this title or title 43, chapter 10, the department may not increase the amount of the proposed assessment except in one or more of the following circumstances:

The taxpayer made a material misrepresentation of facts.
The taxpayer failed to disclose a material fact to the auditor.
The department requested information and the taxpayer fails to provide that information to the department.
After issuing the notice of proposed assessment but before the assessment becomes final the tax court, court of appeals or supreme court issues a decision, the application of which causes the tax initially proposed to increase.

C. Subsection B of this section does not apply to changes or corrections that are required to be reported to the department by section 43-327.

§ 42-2060 Refund if items of income transfer from one year to another

A. Notwithstanding any statute of limitations provided in this title or title 43:

Any overpayment of taxes that is paid pursuant to title 43, that is due a taxpayer for any year and that results from a transfer of items of income or deductions, or both, to or from another year for the same taxpayer, or for the same year for a related taxpayer described in sections 42-1120, 42-1121 and 43-645, shall be allowed as an offset in computing any deficiency in tax for any year resulting from the transfer of such income or deductions, or both, but no refund shall be allowed unless the overpayment is certified to the director of the department of administration or a claim for refund is filed within the time otherwise provided for in this title.
An overpayment due an S corporation, as defined in section 1361 of the internal revenue code, for any year that results from an improper inclusion of income is allowed as an offset in computing any deficiency in an overlapping year for the shareholders of the S corporation.

B. The offsets provided by subsection A of this section shall not be allowed after the expiration of seven years from the due date of the return on which the overpayment is determined.

§ 42-2061 Expedited review of jeopardy assessments

A. Within thirty days after the day on which the department furnishes the written notice described in section 42-1111, subsection A, the taxpayer may request the department to review the action taken as provided in section 42-1251. Within fifteen days after the request for review, the department shall determine whether both the jeopardy determination and the amount assessed are reasonable.

B. Within thirty days after the department notifies the taxpayer of the determination under subsection A of this section, the taxpayer may bring a civil action in tax court for a determination under this subsection. Within twenty days after service of process is made on the state, the tax court shall determine whether both the jeopardy determination and the amount assessed are reasonable. If the taxpayer requests an extension of the twenty day period and establishes reasonable grounds why an extension should be granted, the court may grant an extension of not more than forty additional days. If the court determines that either the jeopardy determination or the amount assessed is unreasonable, the court may order the department to abate the assessment, to redetermine any part of the amount assessed or to take such other action as the court finds to be appropriate. A determination made by the tax court under this subsection is final except as provided in section 12-170, subsection C.

§ 42-2062 Abatement of penalties and fees; definition

A. If a taxpayer has been assessed a penalty or fee pursuant to section 42-1107, 42-1125, 42-1126, 43-581 or 43-582, the department, on written application by the taxpayer, shall abate the penalty or fee if it determines that the conduct, or lack of conduct, that caused the assessment to be imposed was due to reasonable cause and not due to wilful neglect.

B. If, before an assessment is issued, a taxpayer applies in writing requesting waiver of a penalty or fee that may be assessed pursuant to section 42-1107, 42-1125, 42-1126, 43-581 or 43-582, the department shall not assess that penalty or fee if it determines that the conduct, or lack of conduct, that would cause the assessment was due to reasonable cause and not due to wilful neglect.

C. For the purpose of this section, and only as applied to the taxes imposed by chapter 5, articles 1 through 6 and chapter 6, article 3 of this title, "reasonable cause" includes situations in which the taxpayer had a reasonable basis to believe that the tax did not apply to the business activity or the storage, use or consumption of the taxpayer's tangible personal property in this state.

§ 42-2063 Department responsibilities; decision deadlines; definition

A. The department shall attempt to issue a decision from the hearing officer within ninety days after the date of a formal hearing or after the last post-hearing brief is due, whichever is later. If the department expects the decision to be delayed, the department shall notify the taxpayer or his designated representative of the proposed issue date.

B. The department shall attempt to issue a decision by the director on any pending appeal to the director within ninety days after the last brief is due. If the department expects the decision to be delayed, the department shall notify the taxpayer or his designated representative of the proposed issue date.

C. The department shall provide a written document to each new transaction privilege tax licensee that provides information regarding the collection, reporting and payment of taxes in the appropriate tax classification.

D. For purposes of this section "designated representative" means an individual who has been authorized in writing to represent another person before the department of revenue.

§ 42-2064 Reimbursement of fees and other costs; definitions

A. A taxpayer who is a prevailing party may be reimbursed for reasonable fees and other costs related to an administrative proceeding that is brought by or against the department in connection with an assessment, determination, collection or refund of any tax listed in section 42-1101. For the purposes of this subsection, a taxpayer is considered to be a prevailing party only if both of the following are true:

The department's position was not substantially justified.
The taxpayer prevails as to the most significant issue or set of issues.

B. Reimbursement under this section may be denied if any of the following circumstances apply:

During the course of the proceeding the taxpayer unduly and unreasonably protracted the final resolution of the matter.
The reason that the taxpayer prevailed is due to an intervening change in the applicable law.

C. The taxpayer shall present an itemization of the reasonable fees and other costs to the taxpayer problem resolution officer within thirty days after the conclusion of the administrative proceedings. The taxpayer problem resolution officer shall determine the validity of the fees and other costs within thirty days after receiving the itemization. The taxpayer problem resolution officer's decision is considered the department's final decision or order and is subject to appeal to the state board under section 42-1253.

D. The department of revenue shall pay the fees and other costs awarded as provided in this section from any monies appropriated for such purpose. If the department of revenue does not pay the fees and other costs within thirty days after demand by a person who has received an award pursuant to this section, and if no further review or appeals of the award are pending, the person may file a claim for the fees and other costs with the department of administration, which shall pay the claim within thirty days, in the same manner as an uninsured property loss under title 41, chapter 3.1, article 1. If, at the time the department of revenue failed to pay the award, it had appropriated monies either designated or assignable for the purpose of paying such awards, the legislature shall reduce the department of revenue's operating appropriation for the following year by the amount of the award and appropriate the amount of the reduction to the department of administration, risk management division, as reimbursement for the loss.

E. Reimbursement to a taxpayer under this section shall not exceed seventy-five thousand dollars or actual monies spent, whichever is less. The reimbursable attorney or other representative fees shall not exceed three hundred fifty dollars per hour or actual monies spent, whichever is less, unless the state board of tax appeals determines that an increase in the cost of living or a special factor such as the limited availability of qualified attorneys for the proceeding involved justifies a higher fee.

F. For each calendar year beginning from and after December 31, 2015, the income dollar amounts for maximum awards made pursuant to subsection E of this section shall be adjusted by the attorney general according to the average annual change in the metropolitan phoenix consumer price index published by the United States bureau of labor statistics. The revised dollar amounts shall be raised to the nearest whole dollar. The income dollar amounts may not be revised below the amounts prescribed in the prior calendar year.

G. The department shall adopt administrative rules to implement this section.

H. Notwithstanding any provision of title 12, chapter 3, article 5, a taxpayer who is a prevailing party may only be reimbursed pursuant to this section.

I. For the purposes of this section:

"Administrative proceeding" means any review proceeding or appeal pursuant to section 42-1251 that is conducted under the authority of section 42-1003 and an appeal to the state board of tax appeals pursuant to section 42-1253.
"Reasonable fees and other costs" means fees and other costs that are based on prevailing market rates for the kind and quality of the furnished services, but not exceeding the amounts actually spent for expert witnesses, the cost of any study, analysis, report, test or project that is found to be necessary to prepare the party's case and necessary fees for attorneys or other representatives.

§ 42-2065 Abatement of interest for errors or delays caused by the department

A. The director, in the director's discretion, may abate all or part of any assessment if additional interest has accrued on:

A deficiency due to any unreasonable error or delay by an officer or employee of the department acting in the employee's official capacity.
Any payment of tax to the extent that any error or delay in the payment is attributable to an officer or employee of the department being unreasonably erroneous or dilatory.

B. The director may consider an error or delay only if no significant aspect of the error or delay can be attributed to the taxpayer and after the department has contacted the taxpayer in writing with respect to the deficiency or payment.

C. The director's decision is considered to be the department's final decision or order and is subject to appeal to the state board pursuant to section 42-1253.

§ 42-2066 Statute of limitations on tax debts

A taxpayer's obligations for any tax, interest or penalty required to be collected by the department for any tax period are extinguished, if not previously satisfied, ten years after the amount of tax determined to be due becomes final unless one of the following circumstances applies:

The department has commenced a suit to collect the debt pursuant to section 42-1114.
The taxpayer has agreed in writing to extend this time period before the time period expires.
Enforced collection has been stayed by the operation of federal or state law during the period. The period of limitations prescribed by this section is extended by the period of time that the department was stayed from engaging in enforced collections.

§ 42-2067 Limitation on the use of pseudonyms by department employees

A. Employees of the department shall not use pseudonyms when interacting with the public unless the director or the director's designee first determines on written request that the use of the pseudonym is appropriate. The employee's request must include adequate justification for the use of a pseudonym, such as protection of personal safety.

B. The director shall maintain a list of the persons who are authorized to use pseudonyms.

§ 42-2068 Suspension of running of period of limitations during taxpayer disability

A. Notwithstanding section 42-1106, the running of the statute of limitations for refunds is suspended if an individual, as defined in section 43-104, is financially disabled and eligible for equitable tolling of the statute of limitations for refunds under section 6511(h) of the internal revenue code. The department shall suspend the statute of limitations during any period of a qualifying individual's life that the individual is financially disabled.

B. A determination under this section may be appealed pursuant to section 42-1251 or 42-1253.

§ 42-2069 Taxpayer communications with practitioners; confidentiality; definitions

A. With respect to tax advice, the same common law protections of confidentiality that apply to a communication between a taxpayer and an attorney also apply to a communication between a taxpayer and a federally authorized tax practitioner to the extent that the communication would be considered to be a privileged communication if it were between a taxpayer and an attorney.

B. Subsection A of this section may only be asserted in:

A noncriminal tax matter before the department.
A proceeding before the state board of tax appeals.
A noncriminal tax proceeding in court.

C. The department may deny an individual coverage under this privilege if it determines that a practitioner has engaged in activities or practices involving matters before the department that, if they involved matters before the United States internal revenue service, would result in the practitioner losing the authorization to practice before the internal revenue service. A practitioner aggrieved by a determination to deny the privilege may appeal that determination pursuant to section 42-1253 or 42-1254.

D. For the purposes of this section:

"Federally authorized tax practitioner" means an individual who is authorized under federal law to practice before the United States internal revenue service if the practice is subject to federal regulation under 31 United States Code section 330. Federally authorized tax practitioner includes any person who is engaged in practice with one or more federally authorized tax practitioners and who is subject to the same standards of practice and ethics requirements as a federally authorized tax practitioner.
"Tax advice" means advice given by an individual with respect to a matter that is within the scope of the individual's authority to practice as a federally authorized tax practitioner.

§ 42-2070 Prohibited audit techniques

The department shall not use financial status or economic reality examination techniques to determine the existence of unreported income of any taxpayer, except in the following circumstances:

The director may authorize the use of financial status or economic reality examination techniques in criminal investigations.
The director may accept amended returns due after any federal adjustment required pursuant to section 43-327 in which the change or correction was determined by the commissioner of internal revenue or other officer of the United States or other competent authority using financial status or economic reality techniques.
The director may authorize a deficiency assessment pursuant to section 42-1108 if the taxpayer fails to report a change or correction pursuant to section 43-327 in which the commissioner of internal revenue or other officer of the United States or other competent authority used financial status or economic reality techniques and the department receives the change or correction through its exchange agreement with the internal revenue service.

§ 42-2071 Reimbursement of bank costs caused by erroneous tax levies

A. If the department of revenue issues a levy in error, or erroneously causes one or more checks or other negotiable instruments to be returned to the issuer by the issuer’s bank or financial institution, the taxpayer is entitled to reimbursement for reasonable bank charges, not to exceed five hundred dollars per incident.

B. A taxpayer who claims reimbursement under this section shall file a claim with the department of revenue. The department of revenue shall transmit the claim to the department of administration where it shall be evaluated and paid, if verified, pursuant to title 41, chapter 3.1.

C. By filing a claim under this section, a taxpayer authorizes the department of revenue to provide the department of administration with any relevant information regarding the circumstances and events that are relevant to the claim. The department of administration is subject to the requirements of article 1 of this chapter.

§ 42-2072 Stay of enforcement actions pending offer in compromise

A. A taxpayer who is unable to pay all of a liability may make an offer in compromise for abatement of part of the liability on the grounds that the remainder is uncollectible pursuant to section 42-1004, subsection B, paragraph 1.

B. While the offer is under consideration by the department and the attorney general, the department shall not levy on the taxpayer or any holder of the taxpayer's assets unless the department finds that collection otherwise possibly would be jeopardized by a delay. A taxpayer who is aggrieved by a decision to levy while an offer in compromise is pending may appeal that decision to the problem resolution officer, and the decision of the problem resolution officer is final as to both the department and the taxpayer.

§ 42-2073 Report of employee misconduct; definition

A. On or before March 1 of each year, beginning in 2001, the director shall submit a detailed report of employee misconduct verified as valid to the governor, the speaker of the house of representatives and the president of the senate. The report shall include:

All categories of instances involving the misconduct of employees of the department during the preceding calendar year.
The disposition during the preceding calendar year of any instances of misconduct, without regard to the year of misconduct.
The primary activity the employee was engaged in when the misconduct occurred.
The nature of the misconduct,
The number of incidents received by category and the disposition of those incidents, including the number of employees reprimanded, terminated or prosecuted.

B. Incidents that are subject to reporting include only written complaints and complaints received by telephone through management channels.

C. In collecting data for the report, the director or the director's designee shall maintain records of taxpayer complaints of misconduct verified as valid by department employees on an individual basis. The individual employee records shall be used to prepare the report but shall not be listed in the report. The department shall use the individual records in evaluating the performance of the individual employee.

D. The director shall create and adopt a uniform procedure by which the department shall evaluate complaints of employee misconduct for the purposes of verifying the complaint as valid.

E. For purposes of this section "verified as valid" means any report of employee misconduct that has been reviewed pursuant to subsection D and determined by the department to be in violation of any one of the following:

The laws of the United States or this state.
Policies adopted by the state of Arizona.
Policies adopted by the department.

§ 42-2074 Equitable relief from joint and several liability

A. The director may relieve an individual from joint and several liability under the following circumstances:

Taking into account all of the facts and circumstances, it is inequitable to hold the individual liable for all or part of any unpaid tax or any deficiency.
Relief is not available to the individual under section 42-2201 or 42-2202.

B. The director's decision is considered to be the department's final decision or order and is subject to appeal to the state board of tax appeals under section 42-1253.

§ 42-2075 Audit duration; applicability; initial audit contact

A. An audit of a taxpayer's return or claim for refund shall not exceed two years after the date of initial audit contact to the issuance of a notice of proposed deficiency assessment or proposed overpayment, except:

An audit of a fraudulent tax return.
An audit delayed as the result of the taxpayer's bankruptcy proceeding.
An audit in which the department has issued a letter to the taxpayer or the taxpayer's representative citing the potential imposition of the penalty described in section 42-1125, subsection C for the taxpayer's failure or refusal to provide information pursuant to the department's written request.
An audit involving proceedings concerning the enforcement or validity of a subpoena or subpoena duces tecum issued pursuant to section 42-1006, subsection C.
An audit involving a proceeding under section 42-2056.
An audit in which a taxpayer has filed a petition pursuant to section 43-1148, but only in relation to the effect of the petition request.
An audit in which the taxpayer provides a written request to extend the audit beyond the two-year period. A request for extension under this paragraph is not a substitute for a waiver of the statute of limitations pursuant to section 42-1104, subsection B, paragraph 9. However, a waiver of the statute of limitations is considered to be a written request to extend the audit beyond the two-year period under this paragraph.

B. This section applies to audits conducted by the department and to audits conducted by the department and cities and towns pursuant to section 42-6002.

C. For the purposes of subsection A of this section, an initial audit contact occurs:

For a field audit, on the date of the first meeting between the taxpayer or the taxpayer's representative and a member of the department's audit staff.
For a desk or office audit or a review conducted pursuant to section 42-1109, on the date of the first letter to the taxpayer regarding the audit or review. A letter is not considered to be regarding the audit or review if the letter is only requesting one or more of the following:

(a) The required filing of a tax return.

(b) A copy of the taxpayer's federal return.

(d) Documentation to resolve an inconsistency within the return or a discrepancy between the return and other information that is received from a third party or that is otherwise already in the department's possession, if the adjustment of the return due to the inconsistency or discrepancy would be considered a nonaudit adjustment under section 42-1108, subsection G or H.

(e) Information that was left out of the taxpayer's return because a submitted form was incomplete.

(f) Replacements for documents that are not legible.

§ 42-2076 Audit results; documentation

At the time when the department issues a deficiency assessment or denies all or part of a claim for refund, the department shall also provide the taxpayer and, if applicable, the taxpayer's authorized representative with a written explanation of all adjustments made, including the specific statutory, regulatory and judicial bases for the adjustments.

§ 42-2077 Distribution of tax decisions; definitions

A. Beginning October 1, 2006, the agencies listed in this section shall provide tax decisions to the law libraries of Maricopa county, the Arizona state university college of law, the university of Arizona college of law, the state law library and the Arizona state library, archives and public records as follows:

Each redacted tax decision issued during the preceding calendar quarter shall be provided by:

(a) The department of revenue.

(b) The office of administrative hearings.

(d) The department of economic security.

(e) The department of transportation.

Each tax decision issued during the preceding calendar quarter shall be provided by the state board of tax appeals.

B. At the same time as the decisions are issued pursuant to subsection A, each agency shall publish the decisions on its official web site.

C. Any person may file an original action in tax court, or in superior court in any county against an agency listed in subsection A, paragraphs 1 and 2, to enforce this section.

D. The supreme court shall adopt rules to establish a procedure to distribute tax memorandum decisions to the general public and determine what memorandum decisions are appropriate for distribution. A memorandum decision is a written disposition of a matter by a court in this state that is not intended for publication as defined by rule 28(2)(4) of the Arizona rules of civil appellate procedure.

E. For the purposes of this section:

"Redacted tax decision" means a tax decision that has the name, identification number and address of the taxpayer, the amount of tax, penalty and interest in dispute and other information that will allow identification of the taxpayer deleted from the text of the decision.
"Tax" includes any tax arising under title 5, chapters 1, 2, 3 and 4, title 23, chapters 4 and 6, titles 20, 28, 43 and 48 and this title.
"Tax decision" means a ruling, decision, opinion, minute entry, under advisement ruling, memorandum decision or any other written resolution of a state, county or municipal tax dispute or appeal that involves a substantive or significant technical or procedural issue and includes actions taken by:

(a) The department of revenue hearing officer.

(b) The office of administrative hearings.

(d) The state board of tax appeals.

(e) The department of economic security appeals board.

(f) The department of transportation.

§ 42-2078 New interpretation or application of law; affirmative defense; definition

A. Unless expressly authorized by law, the department shall not apply any newly enacted law retroactively or in a manner that will penalize a taxpayer for complying with prior law.

B. If the department adopts a new interpretation or application of any provision of this title or title 43 or determines that any of those provisions applies to a new or additional category or type of taxpayer, and the change in interpretation or application is not due to a change in the law:

The change in interpretation or application applies prospectively unless it is favorable to taxpayers.
The department shall not assess any tax, penalty or interest retroactively based on the change in interpretation or application.
The change is an affirmative defense in any administrative or judicial action for retroactive assessment of tax, interest and penalties to taxable periods before the new interpretation or application was adopted.

C. Tax liabilities, penalties and interest paid before a new interpretation or application of chapter 5 of this title by the department shall not be refunded unless the taxpayer requesting the refund provides evidence satisfactory to the department that the amounts will be refunded to the person who paid an added charge to cover the tax.

D. For the purposes of this section, "new interpretation or application" includes policies and procedures adopted by administrative rule, tax ruling, tax procedure or instructions to a tax return.

§ 42-2079 Suspension of liabilities by reason of disasters, terroristic or military actions or states of emergency; definitions

A. Notwithstanding sections 42-1107 and 42-1123, the director shall specify a period of up to one year to extend any due date and suspend any penalty or interest that would ordinarily accrue during that time for any affected taxpayer in any of the following circumstances:

Section 7508A of the internal revenue code relating to disasters and terroristic and military actions applies.
The governor has declared a state of emergency pursuant to section 26-303, subsection D.

B. Notwithstanding section 42-1123, interest shall not accrue on any unpaid tax during the time determined under subsection A of this section for any affected taxpayer.

C. For the purposes of this section:

"Affected taxpayer" means:

(a) An individual whose principal residence is located in a covered area.

(b) A business entity or sole proprietor whose principal place of business is located in a covered area.

(c) An individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a covered area.

(d) An individual, business entity or sole proprietor whose records necessary to meet a tax filing or paying deadline are maintained in a covered area.

(e) The spouse of an affected taxpayer, solely with regard to a joint return of the husband and wife.

(f) Any other person determined by the director to be affected pursuant to subsection A of this section.

"Covered area" means a geographical area to which subsection A of this section applies.

§ 42-2080 Rulings, procedures, notices and other administrative announcements; notice; public comment; records; confidentiality; exceptions

A. The department may issue draft rulings, procedures, notices and administrative announcements that apply to tax laws and regulations, either generally or for a specific set of facts, and that otherwise do not change the substance and meaning of a statute or rule. Except for private taxpayer rulings issued pursuant to section 42-2101, the department shall allow for and accept written public comments on the draft ruling, procedure, notice or administrative announcement as prescribed by this section. A ruling, procedure, notice or administrative announcement becomes final and effective thirty days after the ruling, procedure, notice or administrative announcement is issued for public comment and review unless the department withdraws the ruling, procedure, notice or administrative announcement. The department may amend the draft ruling, procedure, notice or administrative announcement in response to public comments received during the thirty-day period.

B. The department shall establish and maintain on its website a publicly accessible record of all draft and final rulings, procedures, notices and administrative announcements and shall prominently announce additions, modifications and other changes to this record on the department website's home page.

C. A draft ruling, procedure, notice or administrative announcement that applies to tax laws and regulations is not considered final and effective unless the ruling, procedure, notice or administrative announcement contains all of the following:

The subject matter of the draft ruling, procedure, notice or administrative announcement.
A citation to all statutes, rules and published administrative rulings relating to the draft ruling, procedure, notice or administrative announcement.
The name and contact information of department personnel with whom persons may communicate regarding the draft ruling, procedure, notice or administrative announcement.
The date on which the draft ruling, procedure, notice or administrative announcement was proposed.
The date on which the draft ruling, procedure, notice or administrative announcement will become final and effective.
A statement of whether public comments on the draft ruling, procedure, notice or administrative announcement were received and where the written comments and the department's response to those comments are available for inspection.
The signature of the director.

D. Before a draft ruling, procedure, notice or administrative announcement is effective and final pursuant to subsection A of this section, the department shall consider any public comments received on the draft ruling, procedure, notice or administrative announcement. If the department chooses not to incorporate a public comment into the final ruling, procedure, notice or administrative announcement, the department shall respond to the comment explaining the basis for the department's decision and preserve that response as a public record.

E. The director shall ensure that any public records required by this section comply with the confidentiality requirements prescribed by article 1 of this chapter.

F. This section does not apply to department actions that are subject to title 41, chapters 6 and 6.1, private taxpayer rulings issued pursuant to section 42-2101, tax forms and instructions, routine notices that remind taxpayers of normal filing obligations and other routine department communications that do not substantively apply to and interpret tax laws and regulations.

G. The court shall decide all questions of law without deference to any determination that is made by the department. Notwithstanding section 41-1092, paragraph 3, any final agency action taken pursuant to this section is an appealable agency action under title 41, chapter 6, article 10 that may be appealed within thirty days after the effective date of the ruling, procedure, notice or administrative announcement.

Article 3 Private Taxpayer Rulings

§ 42-2101 Private taxpayer rulings; request; revocation or modification; taxpayer information ruling; definitions

A. The department may issue private taxpayer rulings to taxpayers and potential taxpayers on request. Each request shall be in writing and shall:

State the name, address and, if applicable, taxpayer identifying number of the taxpayer or potential taxpayer who requests the ruling.
Describe all facts that are relevant to the requested ruling.
State whether, to the best knowledge of the taxpayer or potential taxpayer, the issue or related issues are being considered by the department in connection with an active audit, protest or appeal that involves the taxpayer or potential taxpayer and whether the same request has been or is being submitted to another taxing authority for a ruling.
Be signed by the taxpayer or potential taxpayer who makes the request or by an authorized representative of the taxpayer or potential taxpayer.

B. A taxpayer ruling request that complies with subsection A, paragraphs 2 and 3 of this section and that is signed by a representative of a taxpayer or potential taxpayer shall be considered a request for a taxpayer information ruling instead of a private taxpayer ruling.

C. A private taxpayer ruling or taxpayer information ruling may be revoked or modified by either:

A change or clarification in the law that was applicable at the time the ruling was issued, including changes or clarifications caused by legislation, adopted administrative rules and court decisions.
Actual written notice by the department to the last known address of the taxpayer or potential taxpayer of the revocation or modification of the private taxpayer ruling or taxpayer information ruling if the taxpayer identifying information has been disclosed to the department pursuant to subsection E of this section. If taxpayer identifying information has not been disclosed, written notice by the department to the last known address of the taxpayer representative who requested the ruling constitutes notice to the taxpayer or potential taxpayer.

D. With respect to the taxpayer or prospective taxpayer to whom the private taxpayer ruling was issued, the revocation or modification of a private taxpayer ruling shall not be applied retroactively to tax periods or tax years before the effective date of the revocation or modification, and the department shall not assess any penalty or tax attributable to erroneous advice that it furnished to the taxpayer or potential taxpayer in the private taxpayer ruling if:

The taxpayer reasonably relied on the private taxpayer ruling.
The penalty or tax did not result either from a failure by the taxpayer to provide adequate or accurate information or from a change in the information.

E. Subsection D of this section applies to a taxpayer information ruling if the taxpayer or potential taxpayer provides its name, address, identifying number, if applicable, and authorization pursuant to section 42-2003, subsection A, paragraph 1 for the representative of the taxpayer or potential taxpayer before the date the department publishes the ruling. The department shall notify the representative of the taxpayer or potential taxpayer of the proposed publication date. If the director has determined that the taxpayer information ruling should not be published pursuant to subsection M of this section, subsection D of this section applies if the taxpayer or potential taxpayer provides the identifying information before the date specified by the department on issuing the taxpayer information ruling to the representative. If the taxpayer or potential taxpayer does not provide the department with the identifying information and representative authorization before the proposed publication date, or for an unpublished ruling, the date specified by the department, the taxpayer information ruling is not binding on the department for the purpose of abating interest, penalty or tax.

F. A private taxpayer ruling or taxpayer information ruling may not be relied on, cited or introduced into evidence in any proceeding by a taxpayer other than the taxpayer who has received the private taxpayer ruling.

G. A taxpayer may apply for an administrative hearing to determine the propriety of a retroactive application of a revoked or modified private taxpayer ruling by filing a written petition with the department pursuant to section 42-1251 within forty-five days after receiving written notice of the department's intent to retroactively apply a revoked or modified private taxpayer ruling. This subsection applies to a taxpayer information ruling if the taxpayer has disclosed the taxpayer's identifying information pursuant to subsection E of this section.

H. A private taxpayer ruling or taxpayer information ruling constitutes the department's interpretation of the law or rules only as they apply to the taxpayer making, and the particular facts contained in, the request.

I. A private taxpayer ruling or taxpayer information ruling may be issued only if no tax has accrued with respect to the transactions, events or facts contained in the request. The department may issue a private taxpayer ruling or taxpayer information ruling addressing a taxpayer's ongoing business activities, except that the ruling applies only to transactions that occur or tax liabilities that accrue from and after the date the taxpayer receives the ruling.

J. Within thirty days after receiving a written request pursuant to subsection A of this section, the department shall meet with the requestor to discuss the facts and circumstances pertaining to the request, at a time and place designated by the department, unless the requestor waives this meeting. The department shall issue private taxpayer rulings or taxpayer information rulings within ninety days after receiving the written request, unless the department and the requestor agree to delay the ruling. If the ruling is expected to be delayed, the department shall notify the requestor of the basis for the proposed delay and the proposed date of issuance. Pursuant to subsection A of this section, the department may decline to issue a ruling, and this subsection does not require the department to issue a ruling. If the department declines to issue a ruling, the department shall issue appropriate written assistance or advice that explains the reason the department is declining to issue a ruling and provide a general discussion of relevant tax principles or applications.

K. The department shall provide the requestor with a draft of the private taxpayer ruling or taxpayer information ruling at least thirty days before issuing the ruling pursuant to subsection J of this section. If requested by the requestor, the department shall meet with the requestor within fourteen days after providing the draft ruling, at a time and place designated by the department, to discuss the contents of the draft ruling.

L. The department shall maintain the private taxpayer ruling or taxpayer information ruling as a public record and make it available at a reasonable cost for public inspection and copying. The text of private taxpayer or taxpayer information rulings is open to public inspection subject to the confidentiality requirements prescribed by article 1 of this chapter.

M. At the time of making a private taxpayer ruling or taxpayer information ruling request, a taxpayer or potential taxpayer may submit a written request that the ruling not be published due to concerns about confidentiality or other disclosed reasons. If the director determines that the ruling should not be published and the taxpayer requests that the ruling be kept confidential, the ruling shall be deemed confidential for the purpose of section 39-121.01, subsection D, paragraph 2. If the director determines that the ruling should be published and the taxpayer requests that the ruling be kept confidential, the taxpayer may withdraw the ruling request, and the department shall not proceed with a ruling if the request is withdrawn. Notwithstanding section 41-1092.02, the decision of the director to publish is not an appealable agency action as defined in section 41-1092 and is not subject to appeal by the taxpayer.

N. For the purposes of this section:

"Private taxpayer ruling" means a written determination by the department issued on or after September 21, 1991 that interprets and applies one or more statutes contained in this title or title 43 and any applicable administrative rules that the department has adopted to the specific prospective facts described in the request for a private taxpayer ruling.
"Taxpayer information ruling" means a written determination by the department issued on or after September 26, 2008 that interprets and applies one or more statutes contained in this title or title 43 and any applicable administrative rules that the department has adopted to the specific prospective facts described in a request for a taxpayer information ruling.

Article 4 Business Identification and Licensing Forms

§ 42-2151 Providing business and employer identifiers, licenses, numbers and other forms

A. The department of revenue and the department of economic security shall cooperatively prepare and provide a single form by which any person desiring to engage in business may obtain:

Employer identification numbers for income tax withholding and unemployment insurance purposes.
Transaction privilege tax licenses.
Any other identification numbers and licenses deemed practical.

B. The department of revenue shall:

Make the form available at its office or by physical mail or e-mail.
Specify all fees necessary to obtain tax identification numbers and licenses.
Process all forms it receives by forwarding appropriate copies to the department of economic security.
Deposit, pursuant to sections 35-146 and 35-147, in the state general fund all monies it receives from the fees it obtains for tax identification numbers and licenses.

§ 42-2152 List of agencies having authority over starting and conducting business

The department of revenue shall:

Obtain and keep on file a list of the agencies, boards, commissions and departments, their addresses and telephone numbers and the subjects over which they have authority.
Provide a copy of this list to any person requesting a form under section 42-2151.
On request, provide any person with copies of any of the forms commonly in use which it has on file.

§ 42-2153 Questionnaire of proposed business

The department of revenue shall:

Develop a questionnaire that a person desiring to engage in business may fill out and return to the department. The questionnaire shall elicit information about the nature, size, form and operations of the proposed business.
Forward copies of all questionnaires it receives to each agency, board, commission or department on the list prepared under section 42-2152, with a notice that the agency, board, commission or department should contact the person responding if the proposed business appears to fall within its authority.

§ 42-2154 Limitation on requirements of article

This article does not:

Require any person to utilize the forms or procedures provided for in this article.
Eliminate other registration and licensing efforts by the department of revenue and the department of economic security.

Article 5 Innocent and Injured Spouses

§ 42-2201 Election for relief from joint and several liability; definition

A. Notwithstanding section 43-301, subsection C and section 43-562, after filing a joint income tax return pursuant to section 43-309, a taxpayer may seek relief from joint and several liability under the following circumstances:

There is an understatement of tax attributable to erroneous items of one of the taxpayers filing the joint return.
The taxpayer making an election under this section establishes that in signing the return the taxpayer did not know, and had no reason to know, that there was an understatement.
Taking into account all of the facts and circumstances, it is inequitable to hold that taxpayer liable for the deficiency attributable to the understatement.

B. If a taxpayer qualifies for relief under subsection A of this section, the relief extends to the amount of liability for tax, interest and penalties that is attributable to the understatement.

C. If a taxpayer would qualify for relief under subsection A of this section except that under subsection A, paragraph 2 the taxpayer establishes that in signing the return the taxpayer did not know, and had no reason to know, the extent of the understatement, the relief extends only to the extent the liability for tax, interest and penalties is attributable to the portion of the understatement of which the taxpayer did not know and had no reason to know.

D. The department shall make any determination under this section without regard to community property laws.

E. An election made by an individual under this section after the department has collected tax attributable to the erroneous items is considered to be a claim for refund pursuant to section 42-1118. The individual making an election after making the payment shall make the election within six months after making the payment or within the time limits prescribed by section 42-1106, whichever period expires later.

F. A taxpayer may appeal a determination under this section pursuant to section 42-1251 or 42-1253.

G. Except in the case of a jeopardy assessment under section 42-1111, the department shall not levy or proceed in court to collect any tax for taxable years from which the taxpayer is claiming relief under this section until all determinations are final. The period of limitations under section 42-1104 is suspended for the same period for which collection activities are suspended.

H. The department shall notify and allow the other joint filer to participate in any administrative proceeding under this section.

I. For the purposes of this section, "understatement" has the same meaning prescribed by section 6662(d)(2)(A) of the internal revenue code.

§ 42-2202 Separate liability election; definition

A. Notwithstanding section 43-301, subsection C and section 43-562, a taxpayer who filed a joint income tax return under section 43-309 for a taxable year and who meets the following requirements may elect to limit the taxpayer's liability pursuant to this section with respect to a deficiency assessed for that return:

At the time the election is filed, the electing taxpayer is no longer married to, or is legally separated from, the spouse with whom the taxpayer filed the joint return.
The electing taxpayer was not a member of the same household as the spouse with whom the joint return was filed at any time during the twelve month period ending on the date the election is filed.

B. If the department grants relief under this section, the taxpayer's liability for any deficiency assessed with respect to the return shall not exceed the portion of the deficiency properly allocable to the electing taxpayer.

C. The department shall allocate a deficiency under this section as follows:

The portion of any deficiency allocated to an individual under this section is the amount that bears the same ratio to the deficiency as the net amount of items taken into account in computing the deficiency and allocable to the individual under subsection D of this section bears to the net amount of all items taken into account in computing the deficiency.
If all or part of a deficiency is attributable to the disallowance of a credit, and that credit is allocated to one individual under subsection D of this section, the deficiency or portion shall be allocated to that individual. That amount shall not be taken into account under paragraph 1 of this subsection.

D. For the purposes of this section, items giving rise to the deficiency shall be allocated as follows:

Any item giving rise to a deficiency on a joint return shall be allocated to the individuals filing the return in the same manner as it would have been allocated if the individuals had filed separate returns for the taxable year, without regard to community property laws.
An item otherwise allocable to an individual under paragraph 1 of this subsection shall be allocated to the other individual filing the joint return to the extent the item gave rise to a tax benefit on the joint return to the other individual.
The director may provide for allocation of any item in a different manner if the department establishes that the different allocation is appropriate due to fraud of one or both individuals.

E. If the tax liability of the taxpayer's child is included on the joint return:

The child's liability shall be disregarded in computing the liability of either spouse.
The child's liability shall be allocated appropriately between the spouses.

F. Any deficiency that is assessed with respect to the return shall not exceed the portion of the deficiency properly allocable to the individual.

G. Each electing individual under this section has the burden of proof with respect to establishing the portion of any deficiency allocable to that individual.

H. An election under this section is invalid if the department demonstrates that assets were transferred between individuals filing a joint return as part of a fraudulent scheme by those individuals.

I. If the department demonstrates that an individual making an election under this section had actual knowledge at the time the individual signed the return of any item giving rise to all or part of a deficiency that is not allocable to that individual under subsection E of this section, the election does not apply to that deficiency. This subsection does not apply if the individual with actual knowledge establishes that the return was signed under duress.

J. Any determination under this section shall be made without regard to community property laws.

K. An election made by an individual under this section after the department has collected tax attributable to the deficiency is considered to be a claim for refund pursuant to section 42-1118. The individual making an election after making the payment must make the election within six months after making the payment or within the time limits prescribed by section 42-1106, whichever period expires later.

L. A taxpayer may appeal a determination under this section pursuant to section 42-1251 or 42-1253.

M. Except in the case of a jeopardy assessment under section 42-1111, the department may not levy or proceed in court to collect any tax for taxable years from which the taxpayer is claiming relief under this section until all determinations are final. The period of limitations under section 42-1104 is suspended for the same period for which collection activities are suspended.

N. The department shall notify and allow the other joint filer to participate in any administrative proceeding under this section.

O. The portion of the deficiency for which the electing individual is liable, without regard to this subsection, shall be increased by the value of any disqualified asset, as defined in section 6015(c)(4)(B) of the internal revenue code, transferred to the individual.

P. For the purposes of this section, "deficiency" has the same meaning prescribed by section 6211 of the internal revenue code.

§ 42-2203 Protection from application of joint overpayment against spouse's delinquencies or debts; recovery of protected monies; appeal

A. Notwithstanding section 42-1122, at the time of filing a joint income tax return pursuant to section 43-309, a taxpayer may apply to the department for protection of the taxpayer's share of any overpayment or refund from setoff for the past due state taxes, child support, spousal maintenance or other obligations of the taxpayer's spouse that are ordered by a court or owed to an agency of this state.

B. The department shall receive applications for protection under this section in a form and manner prescribed by the department.

C. If the department grants relief under this section, the amount of the claimant's protected share:

Is determined by a proration based on each spouse's estimated tax payments or taxes withheld from wages. For purposes of this proration, estimated payments will be divided evenly between spouses unless it is clearly demonstrated by the taxpayers that a portion of the estimated payments were for income that is not community property.
May not exceed the portion of the entire refund or overpayment with respect to the joint return properly allocable to the claimant. The claimant has the burden of proving the portion properly allocable to the claimant.

D. If monies protected under subsection A of this section have already been distributed to an agency or political subdivision, the claimant shall file with the appropriate agency or political subdivision a request for recovery of the protected amount pursuant to section 42-1122.

E. A taxpayer may appeal a determination under this section pursuant to section 42-1251 or 42-1253.

Article 6 Protection of Computer Software Source Code

§ 42-2251 Definitions

In this article, unless the context otherwise requires:

"Computer software executable code" includes:

(a) Any object code, machine code or other code that is readable by a computer when loaded into its memory and used directly by the computer to execute instructions.

(b) Any related user manuals.

"Computer software source code" includes:

(a) The code written by a programmer using a programming language that is comprehensible to appropriately trained persons and is not capable of directly being used to give instructions to a computer.

(b) Related programmers’ notes, design documents, memoranda and similar documentation.

"Owner", with respect to any software, includes the developer of the software.
"Related person" has the same meaning prescribed by section 267 or 707(b) of the internal revenue code.
"Return" has the same meaning prescribed by section 42-2001.
"Software" includes computer software source code and computer software executable code.
"Tax-related computer software source code" means the computer source code for any computer software program intended for accounting, tax return preparation or compliance or tax planning.

§ 42-2252 Protection from order to produce computer software source code; exceptions

A. Except as provided in section 42-2253, the department shall not issue any subpoena duces tecum under section 42-1006 or 42-1112 or commence any proceeding or action to enforce any subpoena duces tecum to produce any computer software source code.

B. Subsection A of this section does not apply to:

An inquiry into any offense connected with administering or enforcing this title or title 43.
A tax-related computer software source code acquired or developed by the taxpayer or a related person primarily for the internal use by the taxpayer or related person rather than for commercial distribution.
Communications between the owner of the tax-related computer software source code and the taxpayer or related person.
Tax-related computer software source code that is required to be provided or made available pursuant to any other provision of this title or title 43.

§ 42-2253 Authorized subpoenas

A. Notwithstanding section 42-2252, the department may issue a subpoena duces tecum for computer software if:

The department is unable to otherwise reasonably ascertain the correctness of any item on a return from either:

(a) The taxpayer's books, papers, records or other data.

(b) The computer software executable code and any modifications of the computer software executable code to which the source code relates and any associated data that, when executed, produces the output to ascertain the correctness of the item.

The department identifies with reasonable specificity the portion, item or component of the source code needed to verify the correctness of the return item.
The department determines that the need for the portion, item or component of the source code with respect to the return item outweighs the risk of unauthorized disclosure of trade secrets.

B. The department is considered to have met the requirements of subsection A, paragraphs 1 and 2 of this section if:

The department determines that it is not feasible to determine the correctness of a return item without access to the computer software executable code and associated data described in subsection A, paragraph 1, subdivision (b) of this section.
The department makes a formal request to the taxpayer for the code and data and to the owner of the computer software source code for the executable code.
The code and data are not provided to the department within one hundred eighty days after the request.

§ 42-2254 Safeguards and protections

A. Any software or related materials that are provided to the department under this article are subject to the safeguards provided in this section.

B. In any court proceeding to enforce a subpoena duces tecum for any portion of software, the court may receive evidence and issue any order necessary to prevent the disclosure of trade secrets or other confidential information with respect to the software, including requiring that any information be placed under seal to be opened only as directed by the court.

C. Notwithstanding any other provision of this article, in the case of software that comes into the possession or control of the department in the course of any examination with respect to any taxpayer, the department shall:

Use and analyze the software and related materials only in connection with the examination of the taxpayer's return with which it was received, in any subsequent administrative or judicial proceeding and in any inquiry into any offense connected with the administration or enforcement of this title or title 43.
Provide the taxpayer and the software owner with a written list of the names of all persons who will analyze or otherwise have access to the software.
Maintain the software in a secure area or place.
Obtain either the owner's written consent or a court order authorizing removal before removing the computer source code from the owner's place of business.
Refrain from decompiling or disassembling the software.
Copy the software only as necessary to perform the specific examination, number all copies and provide written certification that no other copies have been or will be made.
Account for and return to the owner all copies of the software at the conclusion of the examination and related administrative or judicial proceedings.
Permanently delete from the department's hard drives or at other mass storage devices all copies of the software at the conclusion of the examination and related administrative or judicial proceedings.
Obtain from any person who analyzed or otherwise had access to the software a written certification under penalty of perjury that all copies and related materials have been returned and that no copies still exist.
Provide to both the taxpayer and the owner of any interest in the software a written agreement between the department and any individual who is not an employee of the department but who will analyze or otherwise have access to the software that the individual will not:

(a) Disclose the software to anyone other than the department's authorized agents and employees.

(b) Participate, for two years, in the development of software that is intended for a similar purpose.

D. For the purposes of subsection C, the owner shall make available any necessary equipment or materials for analysis of a computer software source code required to be conducted on the owner's premises. The owner of any interest in the software is considered a party to any agreement described in subsection C, paragraph 10.

Article 7 Managed Audit Agreements

§ 42-2301 Definitions

In this article, unless the context otherwise requires:

"Limited managed audit agreement" means a managed audit agreement that is limited in scope to certain periods, activities, lines of business, geographic areas or transactions, including tax on the receipts of certain sales, the value of certain assets, the value of certain items or services and other categories specified in the agreement.
"Managed audit" means a review and analysis by a taxpayer or the taxpayer's authorized representative of the invoices, checks, accounting records or other documents and information to determine a taxpayer's liability under chapters 3, 5 or 6 of this title or title 43, chapter 11.
"Managed audit agreement" means a written agreement between the director and taxpayer that consists of an audit plan that requires the taxpayer to review selected revenue, expense and fact records to determine the proper filing method and to calculate the taxpayer's liability under chapter 3, 5 or 6 of this title or title 43, chapter 11. Managed audit agreement includes a limited managed audit agreement.
"Taxpayer's authorized representative" means a representative who is selected by the taxpayer to conduct the managed audit and who is approved by the director.

§ 42-2302 Managed audit agreements

A. On application by a taxpayer, the director, in the director's sole discretion, may agree to a managed audit with the taxpayer. The managed audit agreement shall:

Be signed by the taxpayer and the director.
Contain a declaration by the taxpayer that all statements of fact in the taxpayer's application and agreement are true and correct for every material matter.
Specify the types of taxes, the reporting periods, any limitations on the scope of the managed audit, the name of the taxpayer's authorized representative, if any, and the audit plan, including the procedures to perform the managed audit.

B. The managed audit agreement may be modified in writing if the agreement is signed by the taxpayer and director and the agreement complies with subsection A of this section.

C. The director may consider all relevant factors when determining whether to agree to a managed audit agreement, including:

The taxpayer's history of tax compliance.
The amount of the taxpayer's time and quality of resources that the taxpayer can dedicate to the audit.
The extent and availability of the taxpayer's records.
The nature and scope of any legal dispute with the department and its relevance to the managed audit proposal.

D. A managed audit agreement for taxes under chapter 5 of this title shall include county excise taxes. A taxpayer may request that the managed audit agreement include city and town excise taxes and the department shall notify the cities or towns in which the taxpayer conducts business. If a city or town does not agree to participate in the managed audit agreement, the city or town shall not conduct an audit of the taxpayer for forty-two months from the end of the last tax period that is covered by the managed audit agreement unless an exception applies pursuant to section 42-2059.

§ 42-2303 Managed audit operations; appeal

A. The taxpayer or the taxpayer's representative shall furnish written findings of the managed audit to the director.

B. The director shall review the written findings and may examine records and perform other reviews that the director deems necessary to verify that the managed audit substantially conformed to the terms of the managed audit agreement. After performing the review under this subsection, the director shall accept or reject the findings of the managed audit and issue a notice of determination.

C. If the director accepts the managed audit findings, the director shall assess any deficiency or issue any refund that results from the managed audit pursuant to section 42-2304 in the manner described by sections 42-1108 and 42-1118.

D. If the managed audit results in a notice of determination that the taxpayer disputes or if the director rejects the findings of the managed audit, the taxpayer may appeal the notice of determination. The taxpayer has the same appeal rights under this section as if the department conducted the audit.

E. The taxpayer and director may agree to a closing agreement under section 42-1113 to resolve any issues or amounts that are disputed.

§ 42-2304 Interest and penalties; refunds

A. Notwithstanding section 42-1125, the director shall not assess any penalties unless the managed audit discloses that the taxpayer committed fraud or wilful tax evasion or that the taxpayer collected monies that were represented as tax but were not remitted to the state.

B. Notwithstanding section 42-1123, the director shall not assess interest if the managed audit results in a deficiency, if the taxpayer pays the tax within forty-five days of receipt of the notice of determination and the taxpayer did not commit the activities described in subsection A of this section. If the entire assessment is paid after forty-five days of the taxpayer's date of receipt of the notice of determination, the taxpayer shall pay interest pursuant to section 42-1123.

C. If the findings of a managed audit determine that a refund is due to the taxpayer, the department shall not pay interest to the taxpayer if the refund is issued within forty-five days of the taxpayer’s date of receipt of the notice of determination. If the refund is paid after forty-five days of the taxpayer’s date of receipt of the notice of determination, the department shall pay interest pursuant to section 42-1123.

D. For the purposes of subsections B and C of this section, "notice of determination" means either:

The director’s notice of determination, if not appealed.
The final decision at the highest level of appeal to which the matter is taken, if a notice of determination or rejection is appealed.

Chapter 3 Luxury Privilege Tax

Article 1 General Administration

§ 42-3001 Definitions

In this chapter, unless the context otherwise requires:

"Affix" and "affixed" include imprinting tax meter stamps on packages and individual containers as authorized by the department.
"Brand family" has the same meaning prescribed in section 44-7111.
"Cavendish" means a tobacco product that is smoked from a pipe and that meets one of the following criteria:

(a) Is described as cavendish, as containing cavendish or as a cavendish blend on its packaging, labeling or promotional materials.

(b) Appears to have been processed or manufactured with an amount of flavorings and humectants that exceeds twenty percent of the weight of the tobacco contained in the product.

"Cider" means vinous liquor that is made from the normal alcoholic fermentation of the juice of sound, ripe apples, pears or other pome fruit, including flavored, sparkling and carbonated cider and cider made from condensed apple, pear or other pome fruit must, and that contains more than one-half of one percent of alcohol by volume but not more than seven percent of alcohol by volume.
"Cigar" means any roll of tobacco wrapped in leaf tobacco or in any substance containing tobacco other than any roll of tobacco that is a cigarette, as defined in paragraph 6, subdivision (b) of this section.
"Cigarette" means either of the following:

(a) Any roll of tobacco wrapped in paper or any substance not containing tobacco.

(b) Any roll of tobacco wrapped in any substance containing tobacco that, because of its appearance, the type of tobacco used in the filler or its packaging and labeling, is likely to be offered to or purchased by a consumer as a cigarette described in subdivision (a) of this paragraph. This subdivision shall be interpreted consistently with the classification guidelines established by the federal alcohol and tobacco tax and trade bureau.

"Consumer" means a person in this state that comes into possession of any luxury subject to the tax imposed by this chapter and that, on coming into possession of the luxury, is not a distributor intending to sell or distribute the luxury, a retailer or a wholesaler.
"Craft distiller" means a distiller in the United States or in a territory or possession of the United States that holds a license pursuant to section 4-205.10.
"Distributor" means any person that manufactures, produces, ships, transports or imports into this state or in any manner acquires or possesses for the purpose of making the first sale of the following:

(a) Cigarettes without Arizona tax stamps affixed as required by this article.

(b) Roll-your-own tobacco or other tobacco products on which the taxes have not been paid as required by this chapter.

"Farm winery" has the same meaning prescribed in section 4-101.
"First sale" means the initial sale or distribution in intrastate commerce or the initial use or consumption of cigarettes, roll-your-own tobacco or other tobacco products.
"Luxury" means any article, object or device on which a tax is imposed under this chapter.
"Malt liquor" means any liquid that contains more than one-half of one percent alcohol by volume and that is made by the process of fermentation and not distillation of hops or grains, but not including:

(a) Liquids made by the process of distillation of such substances.

(b) Medicines that are unsuitable for beverage purposes.

"Master settlement agreement" has the same meaning prescribed in section 44-7101.
"Microbrewery" has the same meaning prescribed in section 4-101.
"Nonparticipating manufacturer" has the same meaning prescribed in section 44-7111.
"Other tobacco products" means tobacco products other than cigarettes and roll-your-own tobacco.
"Participating manufacturer" has the same meaning prescribed in section 44-7111.
"Person" means any individual, firm, partnership, joint venture, association, corporation, municipal corporation, estate, trust, club, society or other group or combination acting as a unit, and the plural as well as the singular number.
"Place of business" means a building, facility site or location where an order is received or where tobacco products are sold, distributed or transferred. Place of business does not include a vehicle.
"Retailer" means any person that comes into possession of any luxury subject to the taxes imposed by this chapter for the purpose of selling it for consumption and not for resale.
"Roll-your-own tobacco" means any tobacco that, because of its appearance, type, packaging or labeling, is suitable for use and likely to be offered to or purchased by consumers as tobacco for making cigarettes. This paragraph shall be interpreted consistently with the term as used in section 44-7101. This paragraph shall be interpreted consistently with the classification guidelines established by the federal alcohol and tobacco tax and trade bureau.
"Smoking tobacco" means any tobacco that, because of its appearance, type, packaging, labeling or promotion, is suitable for use and likely to be offered to or purchased by consumers as tobacco for making cigarettes or otherwise consumed by burning. Smoking tobacco includes pipe tobacco and roll-your-own tobacco.
"Spirituous liquor" means any liquid that contains more than one-half of one percent alcohol by volume, that is produced by distillation of any fermented substance and that is used or prepared for use as a beverage. Spirituous liquor does not include medicines that are unsuitable for beverage purposes.
"Tobacco product manufacturer" has the same meaning prescribed in section 44-7101.
"Tobacco products" means all luxuries included in section 42-3052, paragraphs 5 through 9.
"Vehicle" means a device in, on or by which a person or property is or may be transported or drawn on the roads of this state regardless of the means by which it is propelled or whether it runs on a track.
"Vinous liquor" means any liquid that contains more than one-half of one percent alcohol by volume and that is made by the process of fermentation of grapes, berries, fruits, vegetables or other substances but does not include:

(a) Liquids in which hops or grains are used in the process of fermentation.

(b) Liquids made by the process of distillation of hops or grains.

"Wholesaler" means a person that sells any spirituous, vinous or malt liquor taxed under this chapter to retail dealers or for the purposes of resale only.

§ 42-3002 Preemption by state of luxury taxation

The area of luxury taxation is preempted by the state. A county, city, town or other political subdivision of this state shall not levy a luxury tax, as long as the urban revenue sharing fund is maintained as provided in section 43-206.

§ 42-3003 Powers of administration and regulation

A. This chapter shall be administered by the department of revenue according to chapter 1, articles 1 and 3 of this title and this chapter.

B. In the administration of this chapter the department, its agents and representatives shall possess:

The powers, duties and authority of police officers within this state.
The powers and authority of appraisement, valuation, assessment, correction, computation, estimation, supervision, direction, investigation, inspection, collection and enforcement that are vested in the department by any law of this state relating to public revenue and taxation and applicable to the administration of this chapter.

§ 42-3004 Rules

The department may:

Adopt rules, not in conflict with this chapter, necessary for the enforcement of this chapter, including rules relating to refunds of taxes paid under this chapter.
Adopt different detailed rules applicable to diverse methods and conditions of sale or use of the luxuries upon which a tax is imposed by this chapter.
Prescribe in each luxury classification:

(a) Upon whom, as between the distributor, the wholesaler and the retailer or between the owner, lessor or other person in possession of any luxury, except for cigarettes, the primary duty of affixing official stamps or official labels rests.

(b) The manner in which the stamps or labels shall be affixed.

§ 42-3005 Agents and other employees; bond; credentials; removal

A. The department shall appoint, as necessary, such agents, clerks and stenographers authorized by law who:

Shall perform duties as may be required not inconsistent with this chapter.
May act for the department as it prescribes and as provided by this chapter.

B. Each agent shall execute a bond in the amount of five thousand dollars conditioned upon the faithful discharge of the agent's duties, but the department, in its discretion, may bond all or any of its agents by a multiple or joint bond.

C. The agents, clerks and stenographers may be removed by the department for cause, and the department is the final judge of the sufficiency of the cause.

D. All agents or representatives of the department shall have credentials signed by the director for identification purposes.

§ 42-3006 Tax stamps; general requirements

A. The department shall prepare and have on hand official adhesive stamps according to the classifications in section 42-3052 of luxuries upon which a tax is imposed by this chapter and for which the department either collects payment or prepayment of the tax through the purchase of such stamps or requires the affixation of stamps to indicate the tax-exempt nature of the luxuries.

B. The stamps shall have both of the following characteristics:

Be of a character so that they cannot be removed when once attached to an article without destroying them.
Be printed in the form and manner prescribed by the director.

C. Any tax stamp required under this chapter must be securely affixed to some visible part of the package or container and must remain firmly adhered to the package or container during possession by the consumer, except as otherwise provided.

D. Cigarette stamps shall also meet the requirements of article 11 of this chapter.

§ 42-3008 Refunds; definitions

A. Except as provided in subsection C of this section, the tax imposed by this chapter on any luxury shall be refunded when the amount of the tax has been paid and when one of the following applies:

Proof is made to the department that the luxuries were exported from this state or that the stamps have been affixed to luxuries on which stamps are not required.
Proof is made to the department that the luxury becomes unfit for sale due to breakage or spoilage within either six months from the date that the distributor originally receives the luxury for sale or two months from the date that the luxury was returned to the distributor by a retailer, whichever occurs later.
Within six months after a distributor returns a luxury to the manufacturer or importer, proof of the return is made to the department.

B. The manner of making proof shall be in accordance with rules adopted by the department.

C. The department shall not refund the tax for stamps that are affixed to luxuries that are deemed contraband under this chapter.

D. Except as otherwise provided in section 42-1123, interest is calculated sixty days after receipt by the department of a claim for refund under this section.

E. For the purposes of this section:

"Breakage" means damage to the outer wrapping or container of a tobacco product.
"Importer" and "manufacturer" have the same meanings prescribed in section 42-3451.
"Spoilage" means mutilation, product expiration or unfit for intended consumption.

§ 42-3009 Exemption for articles and substances sold in interstate commerce

The tax imposed by this chapter shall not be imposed upon any article or substance sold in interstate commerce and that this state is prohibited from taxing under the Constitution of the United States.

§ 42-3010 Transaction invoices and other records; retention period

A. When any wholesaler or distributor in this state sells or delivers to any person any of the luxuries on which a tax is imposed by this chapter, the wholesaler or distributor shall make a duplicate invoice of the transaction, showing the date of delivery, the amount and value of each sale, shipment or consignment, and the name and location of the purchaser or person to whom delivery is made. Except as otherwise provided in section 42-3405, the wholesaler or distributor shall file and retain the invoice for a period of two years, subject to inspection and use by the department.

B. Every wholesaler, distributor or retailer shall procure and retain invoices showing the amount and value of each purchase or shipment of any luxuries received, the date of the shipment, the name and location of the shipper and the value of the purchase or shipment. Except as otherwise provided in section 42-3405, the wholesaler, distributor or retailer shall retain the invoices for a period of two years, subject to inspection and use by the department.

C. Transactions that involve tobacco products shall also meet the requirements of article 11 of this chapter.

Article 2 Levy and Payment

§ 42-3051 Levy of tax

In addition to all other taxes there is levied and imposed and there shall be collected and deposited, pursuant to sections 35-146 and 35-147, in the manner provided by this chapter, taxes on all spirituous, vinous and malt liquors and on all cigarettes, cigars, smoking tobacco, plug tobacco, snuff and other forms of tobacco, for use as may be prescribed by law.

§ 42-3052 Classifications of luxuries; rates of tax

The taxes under this chapter are imposed at the following rates:

On each sealed container of spirituous liquor at the rate of three dollars per gallon and at a proportionate rate for any lesser or greater quantity than one gallon.
On each container of vinous liquor, except cider, of which the alcoholic content is not greater than twenty-four per cent by volume at the rate of eighty-four cents per gallon and at a proportionate rate for any lesser or greater quantity than one gallon.
On each container of vinous liquor of which the alcoholic content is greater than twenty-four per cent by volume, containing eight ounces or less, twenty-five cents, and for each eight ounces for containers containing more than eight ounces, twenty-five cents.
On each gallon of malt liquor or cider, sixteen cents, and at a proportionate rate for any lesser or greater quantity than one gallon.
On each cigarette, nine-tenths cent.
On smoking tobacco, snuff, fine cut chewing tobacco, cut and granulated tobacco, shorts and refuse of fine cut chewing tobacco, and refuse, scraps, clippings, cuttings and sweepings of tobacco, excluding tobacco powder or tobacco products used exclusively for agricultural or horticultural purposes and unfit for human consumption, two cents per ounce or major fraction of an ounce.
On all cavendish, plug or twist tobacco, one-half cent per ounce or fractional part of an ounce.
On each twenty small cigars or fractional part weighing not more than three pounds per thousand, four cents.
On cigars of all descriptions except those included in paragraph 8 of this section, made of tobacco or any tobacco substitute:

(a) If manufactured to retail at not more than five cents each, two cents on each three cigars.

(b) If manufactured to retail at more than five cents each, two cents on each cigar.

§ 42-3053 Method of payment; receipts; electronic filings of returns, reports and other documents; license applications and requests for refund or rebate; definition

A. All orders for the purchase or receipt of tax stamps required under this chapter must be submitted pursuant to an electronic filing program established by the department. Except as provided in subsection B of this section, all remittances of taxes for the purchase of Arizona tax stamps imposed by this chapter shall be made by electronic funds transfer to the department in monies that are immediately available to this state on the date of transfer. A remittance other than cash does not constitute a final discharge of liability for the tax levied by this chapter until it has been paid in cash to the department.

B. Any distributor remitting any taxes levied under section 42-3302 or under this chapter on any tobacco product other than cigarettes that is subject to tax under this chapter is required to pay the tax liability on or before the payment date in monies that are immediately available to this state on the date of transfer. The payment in immediately available monies must be made by electronic funds transfer and with the state treasurer's approval. The distributor must furnish evidence as prescribed by the department that the payment was remitted on or before the payment due date.

C. A person is required to electronically file any report, return or other document required under this chapter pursuant to an electronic filing program established by the department. The report, return or other document is deemed filed and received by the department on the date of the electronic postmark pursuant to section 42-1105.02.

D. An application for a license issued pursuant to section 42-3401 and any request for a refund or rebate of taxes paid on tobacco products made pursuant to section 42-3406 must be submitted pursuant to an electronic filing program established by the department. The application or request is considered to be filed and received by the department on the date of the electronic postmark pursuant to section 42-1105.02. The department may not consider applications or requests that fail to comply with this subsection. An applicant shall pay the application fee required under section 42-3401 to the department by electronic funds transfer.

E. A distributor who is required to make payment by electronic funds transfer under this chapter and who fails to do so is subject to the civil penalties prescribed by section 42-1125, subsection O. A distributor who fails to make a timely payment in immediately available monies as prescribed by this section is subject to civil penalties prescribed by section 42-1125, subsection D. A person who is required to electronically file any report, return or document under this chapter but fails to do so is subject to the civil penalty prescribed by section 42-1125, subsection K.

F. For the purposes of this section, "electronic filing program" has the same meaning prescribed in section 42-1105.02.

Article 3 Disposition of Revenue

§ 42-3101 Deposit

The department shall deposit, pursuant to sections 35-146, 35-147 and 42-1116, all monies received under this chapter accompanied by a monthly statement showing the amount received from each class of luxury prescribed by section 42-3052.

§ 42-3102 Distribution to state general fund

Unless otherwise provided by this article or article 6 or 7 of this chapter, the department shall deposit, pursuant to sections 35-146 and 35-147, all monies collected pursuant to this chapter in the state general fund.

§ 42-3103 Monies allocated for state school aid

The department shall allocate the following monies for the purpose of state school aid:

1.17 per cent of the monies collected pursuant to section 42-3052, paragraph 1.
14 per cent of the monies collected pursuant to section 42-3052, paragraph 3.
19.44 per cent of the monies collected pursuant to section 42-3052, paragraph 5.

§ 42-3104 Monies allocated to the corrections fund

The department shall deposit, pursuant to sections 35-146, 35-147 and 42-1116, the following monies in the corrections fund established by section 41-1641:

20 percent of the monies collected pursuant to section 42-3052, paragraph 1.
50 percent of the monies collected pursuant to section 42-3052, paragraph 2.
50 percent of the monies collected pursuant to section 42-3052, paragraph 3.
50 percent of the monies collected pursuant to section 42-3052, paragraph 4.
11.11 percent of the monies collected pursuant to section 42-3052, paragraph 5.
50 percent of the monies collected pursuant to section 42-3052, paragraph 6.
50 percent of the monies collected pursuant to section 42-3052, paragraph 7.
50 percent of the monies collected pursuant to section 42-3052, paragraph 8.
50 percent of the monies collected pursuant to section 42-3052, paragraph 9.

§ 42-3106 Monies allocated to the drug treatment and education fund; state department of corrections revolving fund

A. Notwithstanding any law to the contrary, seven percent of the monies collected pursuant to section 42-3052, paragraph 1 and eighteen percent of the monies collected pursuant to section 42-3052, paragraphs 2, 3 and 4 shall be deposited in the drug treatment and education fund established by section 13-901.02.

B. Notwithstanding any law to the contrary, three percent of the monies collected pursuant to section 42-3052, paragraph 1 and seven percent of the monies collected pursuant to section 42-3052, paragraphs 2, 3 and 4 shall be deposited in a separate revolving fund of the state department of corrections.

C. Monies in the separate revolving fund of the state department of corrections shall be used for the following purposes:

Implementing section 31-411.01.
Offender participation in appropriate drug treatment programs that are administered by the state department of corrections or by a qualified agency, organization or individual that is approved or licensed by the department of health services or the board of behavioral health examiners.
Reentry, education or mental health assistance programs that are administered by the state department of corrections or by a qualified agency, organization or individual.

D. Monies that are deposited in the state department of corrections revolving fund pursuant to subsection B of this section shall not revert to the state general fund if unexpended at the close of the fiscal year.

E. If the state department of corrections receives a federal grant, any portion of the monies that are deposited pursuant to subsection B of this section may be used as a cash match.

Article 4 Enforcement

§ 42-3151 Inspection of records and stocks of luxuries

A. All books, papers, invoices and records of any wholesaler, distributor or retailer whether or not required under this chapter to be kept, showing sales, receipts and purchases of luxuries, shall be open for inspection by the department as follows:

Except as provided in paragraph 2 of this subsection, any inspection must begin during the normal business hours of the building, facility, site or place being inspected.
Any inspection that does not begin during normal business hours requires a judicial warrant or the prior written consent of the wholesaler, distributor or retailer.

B. Any stock of luxuries in and upon any building, facility, site or place where placed, produced, stored or sold may be inspected by the department to determine compliance with this chapter. Except as provided in subsections A and C of this section, a business may not maintain any books, papers, invoices, records and luxuries subject to the department's inspection in a place and manner that requires a judicial warrant or prior written consent of the wholesaler, distributor or retailer.

C. A business that maintains any books, papers, invoices or records electronically shall provide access to the data for the department's inspection at its business location, regardless of the storage location of the data. The business shall provide the access at the business location in a place and manner that is accessible to the department during normal business hours without a judicial warrant or prior written consent of the wholesaler, distributor or retailer.

§ 42-3152 Personal liability for tax, increases, interest, penalties and collection charges

A. Every tax and all increases, interest and penalties imposed by this article, from the time they are due and payable, become a personal debt of the taxpayer to this state.

B. A person who fails to remit any additional charge made to cover the tax or truthfully account for and pay over any such amount is, in addition to other penalties provided by law, personally liable for the total amount of the additional charge so made and not accounted for or paid over.

§ 42-3153 Remedies for collection

A. Every tax and all increases, interest and penalties imposed by this article may be collected by action in tax court instituted in the name of this state by the attorney general upon request of the department. This remedy is in addition to existing remedies or those provided by law.

B. At the request of the department, the attorney general or the county attorney shall bring an action in the name of this state to enjoin any person against whom a tax is levied under this chapter from engaging or continuing in any business for which a tax is imposed by this chapter until the taxes have been paid, and until the person has complied with this chapter.

§ 42-3154 Failure or refusal to permit examination of records; classification; additional civil and criminal penalties

A. It is unlawful for any person to knowingly fail or refuse to permit any lawful examination of any book, paper, account, record or other memoranda by the department or any of its authorized agents or employees. A person violating this section is guilty of a class 2 misdemeanor.

B. In addition to the penalties prescribed by this section the civil and criminal penalties prescribed by sections 42-1125 and 42-1127 apply to violations of this chapter.

Article 6 Tobacco Tax for Health Care

§ 42-3251 Levy and collection of tobacco tax

(Caution: 1998 Prop. 105 applies)

A. In addition to all other taxes, and in addition to the tax levied and imposed by article 2 of this chapter, there is levied and shall be collected by the department and paid to the state treasurer in the manner provided by this chapter on all cigarettes, cigars, smoking tobacco, plug tobacco, snuff and other forms of tobacco the following tax:

On each cigarette, 2 cents.
On smoking tobacco, snuff, fine cut chewing tobacco, cut and granulated tobacco, shorts and refuse of fine cut chewing tobacco, and refuse, scraps, clippings, cuttings and sweepings of tobacco, excluding tobacco powder or tobacco products used exclusively for agricultural or horticultural purposes and unfit for human consumption, 4.5 cents per ounce or major fraction of an ounce.
On all cavendish, plug or twist tobacco, 1.1 cents per ounce or fractional part of an ounce.
On each twenty small cigars or fractional part weighing not more than three pounds per thousand, 8.9 cents.
On cigars of all descriptions, except those included in paragraph 4, made of tobacco or any tobacco substitute:

(a) If manufactured to retail at not more than 5 cents each at 4.4 cents on each three cigars.

(b) If manufactured to retail at more than 5 cents each, 4.4 cents on each cigar.

§ 42-3251.01 Levy and collection of tobacco tax

(Caution: 1998 Prop. 105 applies)

A. In addition to the taxes imposed by section 42-3251, paragraphs 1 through 5, there is levied and shall be collected an additional tax of one and one-half times the tax prescribed in that section on January 1, 2002.

B. Monies collected pursuant to this section shall be deposited, pursuant to sections 35-146 and 35-147, in the tobacco products tax fund established by section 36-770.

§ 42-3251.02 Levy and collection of tobacco tax for smoke-free Arizona fund

(Caution: 1998 Prop. 105 applies)

A. In addition to the taxes imposed by 42-3251(1), there is levied and shall be collected an additional tax of one tenth of one cent on each cigarette.

B. Monies collected pursuant to this section shall be deposited, pursuant to §§ 35-146 and 35-147, in the smoke-free Arizona fund established by §36-601.01.

§ 42-3252 Disposition of monies

The department shall deposit, pursuant to sections 35-146 and 35-147, monies levied and collected pursuant to this article in the tobacco tax and health care fund established by section 36-771 for use as prescribed by title 36, chapter 6, article 8.

§ 42-3253 Administration

Unless otherwise provided, the administration of this article is vested in and shall be exercised by the department according to chapters 1 and 2 of this title and articles 1, 2, 3 and 4 of this chapter, this article and articles 10, 11 and 12 of this chapter.

Article 7 Indian Reservation Tobacco Tax

§ 42-3301 Definitions

In this article, unless the context otherwise requires:

"Indian" means any person who is duly registered on the tribal rolls of an Indian tribe that occupies an Indian reservation.
"Indian reservation" means all lands that are held in trust by the United States within the limits of an area that is set aside by the United States for the exclusive use and occupancy of Indian tribes by treaty, statute or executive order and that is recognized as an Indian reservation by the United States department of the interior.
"Indian tribe" means any organized Indian nation, tribe, band or community that is recognized as an Indian tribe by the United States department of the interior.
"Luxury, sales, transaction privilege or similar tax" means an excise tax levied exclusively on tobacco products.

§ 42-3302 Levy; rates; disposition of revenues

(Caution: 1998 Prop. 105 applies)

A. In addition to all other taxes, there is levied and shall be collected by the department a tax on the purchase on an Indian reservation of cigarettes, cigars, smoking tobacco, plug tobacco, snuff and other forms of tobacco at the rates prescribed by sections 42-3251 and 42-3251.01.

B. The department shall deposit, pursuant to sections 35-146 and 35-147, monies levied and collected pursuant to subsection A of this section in the tobacco tax and health care fund established by section 36-771 and the tobacco products tax fund established by section 36-770 for use as prescribed by title 36, chapter 6, article 8.

C. If an Indian tribe imposes a luxury, sales, transaction privilege or similar tax on cigarettes, cigars, smoking tobacco, plug tobacco, snuff and other forms of tobacco but at a rate that is:

Less than that prescribed by subsection A of this section, the tax imposed by this article shall be levied at a rate equal to the difference between the rate prescribed by subsection A of this section and the tax imposed by the Indian tribe.
Equal to or greater than the tax prescribed by subsection A of this section, then the rate of tax under this article is zero.

§ 42-3303 Tax on the consumer; precollection and remission by distributor

A. The taxes levied pursuant to this article are conclusively presumed to be direct taxes on the consumer but shall be precollected and remitted to the department by the distributor for purposes of convenience and facility only. The taxes that the distributor precollects and pays to the department:

Are considered to be an advance payment.
Shall be added to the price of the cigarettes, cigars, smoking tobacco, plug tobacco, snuff and other forms of tobacco.
Shall be recovered from the consumer.

B. For the purpose of the precollection and remittance of the tax imposed by this article, the distributor shall obtain and affix revenue stamps pursuant to article 11 of this chapter.

§ 42-3303.01 Stamps required for cigarettes sold on Indian reservations to enrolled tribal members; definition

A. From and after December 31, 2014, for cigarettes purchased on an Indian reservation by an enrolled member of the governing tribe:

Where that tribe does not levy an excise tax on tobacco products or exempts its enrolled members from the tax, a distributor shall affix tax-exempt stamps that are distinguishable from any other tax stamp required by this chapter.
Where that tribe levies an excise tax on tobacco products and does not exempt its members from the tax, a distributor shall purchase and affix tax stamps pursuant to article 11 of this chapter that are distinguishable from any other tax or tax-exempt stamp required by this chapter.

B. For the purposes of this section, "excise tax on tobacco products" has the same meaning prescribed for "luxury, sales, transaction privilege or similar tax" under section 42-3301.

§ 42-3304 Exemptions; rules

A. The tax levied by this article does not apply to cigarettes, cigars, smoking tobacco, plug tobacco, snuff and other forms of tobacco:

For which the taxes imposed by article 6 of this chapter have been paid.
That are sold by an Indian tribe, or by a federally licensed Indian trader, on an Indian reservation to Indians who are enrolled members of the Indian tribe for whose benefit the Indian reservation was established.
That are exempt from tax under 26 United States Code section 5704 and that are distributed according to federal regulations.

B. The department shall adopt rules prescribing the procedures for claiming and verifying sales that are exempt under this section.

§ 42-3305 Enforcement; penalty for failure to precollect and remit tax; violation; classification

A. If the distributor fails to precollect or remit the tax imposed by this article when due, the distributor is subject to a civil penalty equal to the amount of taxes that should have been precollected or remitted but was not.

B. A distributor or any person who ships, transports, sells or distributes cigarettes, cigars, smoking tobacco, plug tobacco, snuff and other forms of tobacco on which the tax required by this article has not been paid when due is guilty of a class 3 misdemeanor.

§ 42-3306 Administration

§ 42-3307 Preemption by state

This state preempts the area of Indian reservation tobacco taxation. A county, city, town or any other political subdivision of this state shall not levy such a tax. Nothing in this article precludes an Indian tribe from imposing its own tobacco tax or a similar levy.

§ 42-3308 Agreements between the department and tribal tax authorities; definition

A. The department may collect and administer any tribal excise tax on tobacco products imposed by an Indian tribe, as described in section 42-3302, subsection C on entering into an intergovernmental agreement or contract with the tribe to provide a uniform or coordinated method of administration of Indian reservation tobacco tax imposed by this state under this article and tribal excise tax imposed by the tribe.

B. Any intergovernmental agreement or contract pursuant to subsection A of this section must contain provisions for a uniform or coordinated audit procedure for the Indian reservation tobacco tax imposed by this state under this article and tribal excise tax on tobacco products imposed by the tribe.

C. For the purposes of this section, "excise tax on tobacco products" has the same meaning prescribed for "luxury, sales, transaction privilege or similar tax" under section 42-3301.

Article 8 Liquors

§ 42-3351 Bonds required of liquor wholesalers; exemption

A. Every wholesaler of spirituous, vinous and malt liquors shall file with the department, in such form as the department prescribes, a bond or bonds, duly executed by the wholesaler as principal, and with a corporation duly authorized to execute and write bonds within the state as surety, payable to the state, and conditioned upon the payment of all taxes, penalties and other obligations of the wholesaler arising under this chapter.

B. The department shall fix the total amount of the bond or bonds required of the wholesaler and may increase or reduce the amount at any time. In fixing the total amount, the department shall require a bond or bonds equivalent in total amount to twice the wholesaler's estimated monthly tax, ascertained in such manner as the department deems proper. The total amount of the bond or bonds required of any wholesaler shall not be less than two thousand dollars.

C. A wholesaler is exempt from the requirements of this section if the wholesaler has made timely payment of the taxes imposed by this chapter for the twenty-four consecutive months immediately preceding the current month.

§ 42-3352 Reports of distillers and manufacturers

A. Every distiller or manufacturer of distilled spirits and vinous and malt liquors that sells any of those products to wholesalers within this state shall maintain in its records a copy of the invoice of the sale, showing in detail:

The kind of liquor or beverage sold.
The quantities of each.
The size of the container and the weight of the contents.
The alcoholic content if required by section 42-3052.
The name of the person, firm or corporation to whom sold.

B. A distiller or manufacturer shall make the invoices required to be kept pursuant to subsection A of this section available to the department on request.

§ 42-3353 Return and payment by cider or malt liquor wholesalers

A. Every wholesaler of cider or malt liquors purchasing cider or malt liquors for resale within the state shall pay the tax under this chapter on all such liquors so purchased and add the amount of the tax to the sales price.

B. The wholesaler shall pay the tax to the department monthly on or before the twentieth day of the month next succeeding the month in which the tax accrues.

C. On or before the date prescribed by subsection B of this section, the wholesaler shall prepare a sworn return for the month in which the tax accrues in the form prescribed by the department, showing:

The amount of cider or malt liquors purchased during the month in which the tax accrues.
The amount of tax for the period covered by the return.
Any other information that the department deems necessary for the proper administration of this chapter.

D. The taxpayer shall deliver the return, together with a remittance of the amount of the tax due, to the department.

E. Any taxpayer that fails to pay the tax within ten days from the date on which the payment becomes due is subject to and shall pay a penalty determined under section 42-1125, plus interest at the rate determined pursuant to section 42-1123 from the time the tax was due and payable until paid.

F. For reporting periods beginning from and after December 31, 2019, or when the department has established an electronic filing program, whichever is later, a taxpayer shall file electronically any report or return required under this chapter. The report or return is considered to be filed and received by the department on the date of the electronic postmark pursuant to section 42-1105.02.

§ 42-3354 Return and payment by spirituous or vinous liquor wholesalers

A. Every wholesaler of spirituous liquors selling spirituous liquors within the state shall pay the tax under this chapter on all such liquor sold within the state and add the amount of the tax to the sales price.

B. Every wholesaler of vinous liquors selling vinous liquors other than ciders as defined in section 42-3001 within this state shall pay the tax under this chapter on all such liquors sold within this state and add the amount of tax to the sales price.

C. The wholesaler shall pay the tax to the department monthly on or before the twentieth day of the month next succeeding the month in which the tax accrues.

D. On or before the date prescribed by subsection C of this section, the wholesaler shall prepare a sworn return for the month in which the tax accrues in the form prescribed by the department, showing:

The amount of spirituous liquors sold in this state during the month in which the tax accrues.
The amount of vinous liquors other than ciders as defined in section 42-3001 sold in the state during the month in which the tax accrues.
The amount of tax for the period covered by the return.
Any other information that the department deems necessary for the proper administration of this chapter.

E. The wholesaler shall deliver the return, together with a remittance of the amount of the tax due, to the department.

F. Any taxpayer that fails to pay the tax within ten days from the date on which the payment becomes due is subject to and shall pay a penalty determined under section 42-1125, plus interest at the rate determined pursuant to section 42-1123 from the time the tax was due and payable until paid.

G. For reporting periods beginning from and after December 31, 2019, or when the department has established an electronic filing program, whichever is later, each taxpayer shall file electronically any report or return required under this chapter. The report or return is considered to be filed and received by the department on the date of the electronic postmark pursuant to section 42-1105.02.

§ 42-3355 Return and payment by farm wineries, manufacturers, direct shipment licensees, microbreweries and craft distillers

A. A farm winery selling vinous liquor at retail or to a retail licensee pursuant to title 4, chapter 2 that is manufactured or produced on the premises, a producer of vinous liquor that sells at retail pursuant to section 4-243.02 or a direct shipment licensee that sells pursuant to section 4-203.04 shall pay the tax under this chapter on all such liquor sold at retail or to a retail licensee within this state and add the amount of the tax to the sales price.

B. A microbrewery selling malt liquor at retail or to a retail licensee pursuant to title 4, chapter 2 that is manufactured or produced on the premises or a manufacturer of beer that sells at retail pursuant to section 4-243.02 shall pay the tax under this chapter on all malt liquor sold at retail or to a retail licensee within this state and add the amount of the tax to the sales price.

C. A craft distiller selling spirituous liquor at retail or to a retail licensee pursuant to title 4, chapter 2 that is manufactured or produced on the premises or a distiller of spirituous liquor that sells at retail pursuant to section 4-243.02 shall pay the tax under this chapter on all spirituous liquor sold at retail or to a retail licensee within this state and add the amount of the tax to the sales price.

D. The farm winery, manufacturer, microbrewery, craft distiller or direct shipment licensee shall pay the tax to the department annually on or before the twentieth day of the first month of the year succeeding the year in which the tax accrues.

E. On or before that date, the farm winery, manufacturer, microbrewery, craft distiller or direct shipment licensee shall prepare a sworn return for the year in which the tax accrues in the form prescribed by the department, showing:

The amount of liquors or beer sold in this state during the year in which the tax accrues.
The amount of tax for the period covered by the return.
Any other information that the department deems necessary for the proper administration of this chapter.

F. The farm winery, manufacturer, microbrewery, craft distiller or direct shipment licensee shall deliver the return, together with a remittance of the amount of the tax due, to the department.

G. Any taxpayer that fails to pay the tax within ten days after the date on which the payment becomes due is subject to and shall pay a penalty determined under section 42-1125, plus interest at the rate determined pursuant to section 42-1123 from the time the tax was due and payable until paid.

H. For reporting periods beginning from and after December 31, 2019, or when the department has established an electronic filing program, whichever is later, each taxpayer shall file electronically any report or return required under this chapter. The report or return is considered to be filed and received by the department on the date of the electronic postmark pursuant to section 42-1105.02.

§ 42-3356 Bonds required of farm wineries and direct shipment licensees; exemption

A. Every farm winery that makes deliveries pursuant to section 4-205.04, subsection C, paragraph 7 or 9 or direct shipment licensee that makes deliveries pursuant to section 4-203.04 shall file with the department, in a form prescribed by the department, a bond or bonds, duly executed by the farm winery or direct shipment licensee as principal, and with a corporation duly authorized to execute and write bonds within this state as surety, payable to this state and conditioned on the payment of all taxes, penalties and other obligations of the farm winery or direct shipment licensee arising under this chapter and chapter 5 of this title.

B. The department shall fix the total amount of the bond or bonds required of the farm winery or direct shipment licensee and may increase or reduce the total amount at any time. In fixing the total amount, the department shall require a bond or bonds equivalent in total amount to twice the farm winery's or direct shipment licensee's estimated monthly tax, ascertained in a manner deemed proper by the department. The total amount of the bond or bonds required of any farm winery or direct shipment licensee shall not be less than five hundred dollars.

C. A farm winery or direct shipment licensee is exempt from the requirements of this section if the farm winery or direct shipment licensee has made timely payment of any taxes imposed by this chapter for the twelve consecutive months immediately preceding the current month.

Article 9 Tobacco Tax for Early Childhood Development and Health

§ 42-3371 Levy and collection of tax on cigarettes, cigars and other forms of tobacco

(Caution: 1998 Prop. 105 applies)

In addition to all other taxes, there is levied and shall be collected by the department in the manner provided by this chapter, on all cigarettes, cigars, smoking tobacco, plug tobacco, snuff and other forms of tobacco the following tax:

On each cigarette, four cents.
On smoking tobacco, snuff, fine cut chewing tobacco, cut and granulated tobacco, shorts and refuse of fine cut chewing tobacco, and refuse, scrubs, clippings, cuttings and sweepings of tobacco, excluding tobacco powder or tobacco products used exclusively for agricultural or horticultural purposes and unfit for human consumption, 9 cents per ounce or major fraction of an ounce.
On all cavendish, plug or twist tobacco, 2.2 cents per ounce or fractional part of an ounce.
On each twenty small cigars or fractional part weighing not more than three pounds per thousand, 17.8 cents.
On cigars of all descriptions except those included in paragraph 4, made of tobacco or any tobacco substitute:

(a) If manufactured to retail at not more than five cents each, 8.8 cents on each three cigars.

(b) If manufactured to retail at more than five cents each, 8.8 cents on each cigar.

§ 42-3372 Disposition of monies

(Caution: 1998 Prop. 105 applies)

Notwithstanding section 42-3102, the department shall deposit, pursuant to sections 35-146 and 35-147, monies levied and collected pursuant to this article in the early childhood development and education fund established by section 8-1181 for use as prescribed by title 8, chapter 13.

Article 10 Distributors and Retailers of Tobacco Products

§ 42-3401 Tobacco distributor licenses; application; conditions; revocations and cancellations

A. Every person acquiring or possessing for the purpose of making the initial sale or distribution in this state of any tobacco products on which a tax is imposed by this chapter shall obtain from the department a license to sell tobacco products. The application for the license shall be in the form provided by the department and shall be accompanied by a fee of $25 for each place of business listed in the application. The form shall state that the identity of the applicant will be posted to the department's website for public inspection. The application for a license shall include the applicant's name and address, the applicant's principal place of business, all other places of business where the applicant's business is conducted for the purpose of making the initial sale or distribution of tobacco products in this state, including any location that maintains an inventory of tobacco products, and any other information required by the department. The applicant's principal place of business and other business locations may not include a residential location or post office box address, except as allowed under subsection D, paragraph 2, subdivision (c) of this section. If the applicant is a firm, partnership, limited liability company, limited liability partnership or association, the applicant shall list the name and address of each of the applicant's members. If the applicant is a corporation, the application shall list the name and address of the applicant's officers and any person who directly or indirectly owns an aggregate amount of ten percent or more of the ownership interest in the corporation. If a licensee is a corporation, firm, partnership, limited liability company, limited liability partnership or association, the licensee under this subsection shall notify the department in writing within thirty days after any change in membership, legal entity status or ownership of more than fifty percent of the total ownership interest in a single transaction. If a licensee changes its business location, the licensee under this subsection shall notify the department within thirty days after a change in location. If the licensee is making a change in its business location by adding or replacing one or more additional places of business that are not currently listed on its application, the licensee must remit a fee of $25 for each additional place of business.

B. For the purposes of subsection A of this section, an applicant with a controlling interest in more than one business engaged in activities as a distributor shall apply for a single license encompassing all such businesses and list each place of business in its application. For the purposes of this subsection, "controlling interest" means direct or indirect ownership of at least eighty percent of the voting shares of a corporation or of the interests in a company, business or person other than a corporation.

C. The department shall issue a license authorizing the applicant to acquire or possess tobacco products in this state on the condition that the applicant complies with this chapter and the rules of the department. The license:

Shall be nontransferable. A licensee may not transfer its license to a new owner when selling its business, and any court-appointed trustee, receiver or other person shall obtain a license in its own name in cases of liquidation, insolvency or bankruptcy or pursuant to a court order if the business remains in operation as a distributor of tobacco products. In cases of liquidation, insolvency or bankruptcy or pursuant to a court order, the department will not consider a business as remaining in operation under this paragraph if the court-appointed trustee, receiver or other person winds up the business within sixty days after the order is issued. A licensee shall apply for a new license if it changes its legal entity status or otherwise changes the legal structure of its business.
Shall be valid for one year unless earlier canceled or revoked by the department.
Shall be displayed in a conspicuous place at the licensee's place of business. If the licensee operates from more than one place of business, the licensee must display a copy of its license in a conspicuous place at each location.

D. As a condition of licensure under this section, an applicant agrees to the following conditions:

A person may not hold or store any tobacco products, whether within or outside of this state, for sale or distribution in this state by or on behalf of a distributor at any place other than a location that has been disclosed to the department pursuant to subsection A of this section. This paragraph does not include a person holding or storing tobacco products by or on behalf of the distributor when the tobacco products are in transit to a distributor or retailer as part of a lawful sale.
All tobacco products held or stored, whether within or outside of this state, for sale or distribution in this state by or on behalf of a distributor:

(a) Shall be accessible to the department during normal business hours without a judicial warrant or prior written consent of the distributor.

(b) May not be held or stored in a vehicle, except as allowed under section 42-3403, subsection B.

(c) May not be held or stored at a residential location, unless the sole luxury for sale or distribution by or on behalf of the distributor is taxed as a cigar under section 42-3052, paragraph 8 or 9 and the product weight of the cigars is not more than five hundred pounds. If the product is held or stored at a residential location, as a condition of licensure, the distributor shall provide written consent and allow access to the department to inspect the stock of luxuries and all books, papers, invoices, records and electronically stored data showing sales, receipts and purchases of luxuries. The distributor shall submit the written consent to the department with the license application or on demand of the department.

Tobacco products may be sold, transferred or distributed to a retailer located on an Indian reservation in this state only if the retailer is registered with, and has a registration identification number issued by, the department.

E. A person who is convicted of an offense described in section 42-1127, subsection E is permanently ineligible to hold a license issued under this section.

F. The department may not issue or renew a license to an applicant and may revoke a license issued under subsection C of this section if any of the following applies:

The applicant or licensee owes $1,000 or more in delinquent taxes imposed on tobacco products under this chapter that are not under protest or subject to a payment agreement.
The department has revoked any license held by the applicant or licensee within the previous two years.
The applicant or licensee has been convicted of a crime that relates to stolen or counterfeit cigarettes.
The applicant or licensee has imported cigarettes into the United States for sale or distribution in violation of 19 United States Code section 1681a.
The applicant or licensee has imported cigarettes into the United States for sale or distribution without fully complying with the federal cigarette labeling and advertising act (P.L. 89-92; 79 Stat. 282; 15 United States Code section 1331).
The applicant or licensee is in violation of section 13-3711 or section 36-798.06, subsection A.
Pursuant to section 44-7111, section 6(a), the applicant or licensee is in violation of section 44-7111, section 3(c).
The civil rights of the applicant or licensee have been suspended under section 13-904. An applicant or licensee whose civil rights have been suspended is ineligible to hold a license for a period of five years following the restoration of the applicant's or licensee's civil rights.

G. In addition to any other civil or criminal penalty and except as otherwise provided in this section, the department may deny the issuance or renewal of or revoke a license issued under subsection C of this section if the person violates any requirement under this title more than two times within a three-year period or fails to otherwise maintain the conditions of licensure in this section.

H. The department shall publish on its website the names of each person who is issued a license under subsection C of this section, including any trade names or business names used by the licensee. The department shall update the published names at least once each month.

I. A person may not apply for or hold a distributor's license if that person does not engage in the activities described in subsection A of this section. In addition to any other applicable penalty, the department may cancel the license of any licensee that fails to incur any tax liability under this chapter for twelve consecutive months.

J. Any revocation, cancellation or denial of a license issued under this section by the department must comply with section 41-1092.11, subsection B.

K. Notwithstanding any other law, for the purposes of subsection F, paragraphs 1 and 2 of this section, section 42-1127, subsection C and section 42-3461, subsection B, if a distributor has listed in its application more than one place of business, any revocation, cancellation, denial or nonrenewal of the distributor's license shall apply only with effect to remove the place of business or business location at which the activity occurred from the distributor's license. If such a removal occurs, the distributor shall be subject to restrictions that the department prescribes by rule.

§ 42-3402 Contraband tobacco products

Notwithstanding any other law to the contrary, tobacco products that are ordered, purchased or transported in violation of section 13-3711, 36-798.06 or 42-3461 or section 44-7111, section 3(c) or any other statute under which the tobacco products are subject to seizure and destruction are considered to be contraband for which taxes that are imposed under this chapter may not be reported and remitted by a distributor pursuant to sections 42-3462 and 42-3501 or reported by a person pursuant to section 42-3457, subsection B.

§ 42-3403 Tobacco product retailers; vehicle as place of business prohibited; exceptions

A. A retailer may sell any tobacco product that is not otherwise prohibited by federal or state law from sale for resale, but a retailer may not acquire or possess unstamped cigarettes, or other tobacco products or cigarettes on which taxes levied under this chapter have not been paid, unless the retailer holds a valid license issued under section 42-3401.

B. A person may not use a vehicle as a place of business for selling, transferring or otherwise distributing tobacco products. This subsection does not prohibit the lawful delivery of other tobacco products by a person who holds a valid license issued under section 42-3401, or by that person's representative, using a vehicle that is owned, operated or contracted by that person or that person's representative. That person or that person's representative is expressly allowed to use such a vehicle to carry and store tax-paid other tobacco products in the normal course of performing the person's or the person's representative's duties, including for the purpose of selling other tobacco products to, and performing similar lawful transactions with, retailers and distributors. If a vehicle is used by a licensed distributor to carry and store tax-paid other tobacco products, as a condition of licensure, the distributor shall provide written consent and allow access to the department to inspect the stock of luxuries and all books, papers, invoices, records and electronically stored data showing sales, receipts and purchases of luxuries. The distributor shall submit the written consent to the department with the license application or on demand of the department.

C. This section does not prohibit business activities that are allowed under sections 42-3454 and 42-3502 for both taxed and untaxed tobacco products.

§ 42-3404 Exemptions and exclusions of certain tobacco products from tobacco taxes

A. The taxes imposed by this chapter do not apply to:

Tobacco products that are sold to the United States army, air force, navy, marine corps or coast guard exchanges and commissaries and navy or coast guard ships' stores.
Tobacco products that are sold to the United States department of veterans affairs.
Tobacco products that are non-tax-paid under subtitle E, chapter 52 of the internal revenue code and that are under internal revenue bond or customs control.
Tobacco products that are sold or transferred to a law enforcement agency for use in a criminal investigation if the sale or transfer is authorized by the department. A law enforcement agency authorized by the department to receive or purchase tobacco products is not required to:

(a) Be licensed as a distributor.

(b) Collect or remit the tax imposed by this chapter with respect to authorized distributions.

Tobacco products that are sold by a distributor licensed under section 42-3401 to a common carrier engaged in foreign passenger service or to a retailer that sells tobacco products on the facilities of the carrier that are dedicated to foreign passenger service.
Federally tax free tobacco products that are sold or given for delivery directly from the manufacturer under internal revenue bond to a veterans' home of this state or a hospital or domiciliary facility of the United States department of veterans affairs for gratuitous issue to veterans receiving hospitalization or domiciliary care. The taxes are not imposed with respect to the use or consumption of the tobacco products by the institution, veteran patients or domiciliaries.
Tobacco products that are sold by a manufacturer to a distributor licensed under section 42-3401.
Tobacco products that are manufactured outside the United States and that are sold by an importer to a distributor licensed under section 42-3401.

B. Subsection A, paragraphs 1 and 2 of this section do not apply after the first day of the first calendar month beginning more than sixty days after existing federal law is amended to permit state taxation of cigarettes sold by or through federal military installations.

C. Sales of tobacco products by a licensed distributor to an instrumentality of the United States government must be supported by a separate sales invoice and a properly completed federal exemption certificate. Each sales invoice must be numbered, be dated and show the name of the seller, the name of the purchaser and the destination.

D. This section does not affect the imposition of transaction privilege and use taxes pursuant to chapter 5 of this title to any transactions described in subsection A of this section if the transaction is otherwise subject to transaction privilege tax or use tax.

E. The exemptions and exclusions provided in subsection A of this section do not affect the taxability under this chapter of tobacco products that are sold, given or transferred to a person in this state subsequent to the transactions described in subsection A of this section.

§ 42-3405 Tobacco manufacturers, importers, distributors and retailers; recordkeeping and invoicing requirements; retention period

A. Except for retail transactions with consumers, each manufacturer, importer and distributor of tobacco products shall maintain copies of invoices or equivalent documentation for each facility and for each transaction that involves the sale, purchase, transfer, consignment or receipt of tobacco products within this state. The invoices or equivalent documentation for each transaction shall be in the form and manner prescribed by the department and shall indicate the name and address of the other party and the quantity by brand style of the tobacco products involved in the transaction.

B. A distributor of tobacco products shall issue an invoice or equivalent documentation for each transaction that involves the sale, purchase or consignment of tobacco products to a retailer. The invoice or equivalent documentation must include the license number of the distributor, which the retailer may use to ascertain whether the license is current and valid.

C. Any retailer of tobacco products shall retain all invoices or equivalent documentation received under subsection B of this section.

D. Records required under this section shall be preserved on the premises described in the relevant license in a manner as to ensure accessibility for inspection at reasonable hours by authorized personnel of the department. With the department's permission, persons with multiple places of business may retain centralized records, but shall transmit duplicates of the invoices or the equivalent documentation to each place of business within three business days after a request by the department.

E. The records required by this section shall be retained for a period of four years after the date of the transaction.

F. On request, the department and the United States secretary of the treasury or secretary's designee shall have access to records required under this section and reports required under section 42-3462. The department at its sole discretion may share the records and reports required by this chapter with other law enforcement officials of federal and state governments under conditions that assume the confidentiality of taxpayer information contained in the records and reports.

§ 42-3406 Refunds and rebates of tobacco taxes; supporting documentation; distributor's burden of proof

A. Except as otherwise provided under subsection B of this section or by the department for a refund or redemption under section 42-3008 or 42-3460, a distributor requesting any refund or rebate of taxes paid on tobacco products pursuant to article 2, 6, 7 or 9 of this chapter shall establish entitlement to the refund or rebate by obtaining a report executed by the retailer that purchased the tobacco products on which the distributor paid taxes, indicating the name and address of the retailer and the quantities of tobacco products sold, separately identified by the tax category of tobacco product and the necessary facts to establish the appropriate amount of refund or rebate. The report is subject to the following conditions:

The report shall be provided in the form and manner prescribed by the department. Under such rules as it may prescribe, the department may identify transactions for which a distributor may not rely solely on the information in the retailer's report but must instead obtain additional information as required by the rules in order to be entitled to the refund or rebate.
The burden of proof for the refund or rebate is on the distributor, but if the distributor complies in all other respects with this section, the department may require the retailer that caused the execution of the report to establish the accuracy and completeness of the information required to be contained in the report that would entitle the distributor to the refund or rebate. If the retailer cannot establish the accuracy and completeness of the information, the retailer is liable in an amount equal to any tax, penalty and interest that the distributor would have been liable for under this chapter if the distributor had not otherwise complied with this section. Payment of the amount under this section by the retailer exempts the distributor from liability for the underlying tax, penalty and interest. All amounts paid by a retailer under this paragraph shall be treated as tax revenues collected from the distributor in order to designate the distribution base for the purposes of this chapter.

B. In its discretion and in circumstances in which a retailer is uncooperative, nonresponsive or no longer in business, the department may accept proof other than a report described in subsection A of this section if the distributor shows, to the satisfaction of the department, that it exercised ordinary business care and prudence but was unable to furnish a report executed by the retailer. Acceptable forms of proof presented by the distributor pursuant to this subsection must consist of books, records or papers maintained by the distributor or retailer in the regular course of business.

Article 11 Cigarettes and Roll-Your-Own Tobacco

§ 42-3451 Acquisition and possession of cigarettes and roll-your-own tobacco; definitions

A. A manufacturer or importer may sell or distribute cigarettes or roll-your-own tobacco to a person who is located or doing business in this state, including Indian reservations located in this state, only if the person is an importer or licensed distributor or the manufacturer sells or distributes cigarettes or roll-your-own tobacco on which a tax has been paid pursuant to section 42-3452.

B. An importer may obtain cigarettes only from a manufacturer or importer.

C. A distributor may sell or distribute cigarettes to a person located or doing business in this state, including an Indian reservation in this state, only if the distributor is a licensed distributor.

D. A distributor shall obtain cigarettes only from a manufacturer, importer or licensed distributor.

E. For the purposes of this section:

"Importer" means a person who has received approval from the federal alcohol and tobacco tax and trade bureau to directly or indirectly import finished tobacco products into the United States for sale or distribution, pursuant to 26 United States Code section 5712 and 27 Code of Federal Regulations part 41.
"Manufacturer" means a person who has received approval from the federal alcohol and tobacco tax and trade bureau to manufacture, fabricate, assemble, process or label finished tobacco products, pursuant to 26 United States Code section 5712 and 27 Code of Federal Regulations part 40.

§ 42-3452 Payment of tax required to sell, distribute or transfer tobacco products

A. Except as provided in subsection B of this section, a person may not:

Sell, offer for sale, distribute or transfer any tobacco products on which a tax is imposed by this chapter to any person within this state unless at the time of the sale, distribution or transfer the tax has been paid. The department shall consider tobacco taxes paid at the time of the sale, distribution or transfer of cigarettes if evidenced by an Arizona tax stamp or any other official indicia affixed to the package by a licensed distributor. The department shall consider tobacco taxes paid at the time of the sale, distribution or transfer of tobacco products other than cigarettes if a licensed distributor reports and remits the taxes on the products in accordance with the manner, method and time prescribed by section 42-3501. Sworn returns that are prepared and remitted by a licensed distributor under section 42-3501 constitute official indicia that tobacco taxes have been paid on the tobacco products.
Sell cigarettes that have Arizona tax stamps affixed unless the tax evidenced by the stamps is actually paid. The department shall not refund any amount of that tax on the grounds that the stamps are not required to be affixed to the cigarettes.

B. A distributor licensed pursuant to section 42-3401 may not sell, distribute or transfer tobacco products for which the distributor is licensed to another such licensed distributor without paying the tax at the time of the sale, distribution or transfer.

§ 42-3453 Presumption of tax on unstamped cigarettes

Except as otherwise provided in section 42-1127, subsection F and section 42-3452, subsection B, for the purpose of proper administration and to prevent evasion of the taxes imposed by this chapter, until the contrary is established, it is presumed that cigarettes that are sold, distributed, used or consumed by a person in this state, but not placed in packages or containers on which official tax stamps are affixed, are intended for first sale by the person and are subject to the taxes imposed by this chapter.

§ 42-3454 Transport of unstamped cigarettes and untaxed roll-your-own tobacco prohibited; exceptions

A. A person may not hold, store or transport unstamped cigarettes or untaxed roll-your-own tobacco for sale or distribution in this state in any vehicle pursuant to section 36-798.06.

B. This section does not apply to either of the following:

A vehicle that is owned, operated or contracted by a person who holds a valid license issued under section 42-3401 and is transporting unstamped cigarettes or untaxed roll-your-own tobacco from one to another of the licensee's places of business listed on its application.
A vehicle that is transporting unstamped cigarettes or untaxed roll-your-own tobacco to a licensed distributor as part of a lawful sale or in interstate commerce to a person lawfully operating as a manufacturer, distributor or retailer of cigarettes or roll-your-own tobacco.

§ 42-3455 Cigarette tax stamps; description and characteristics; use by licensed distributors; affixation standards; metering

A. The department shall prescribe by rule or procedure the method and manner in which tax stamps are to be affixed to cigarettes and may provide for the cancellation of stamps. In addition to any specifications provided under this article, the stamps shall also meet the requirements provided in section 42-3006.

B. Each roll or sheet of stamps for cigarettes that are required under this chapter shall have a separate serial number that is legible at the point of sale to the distributor. The department shall use the serial number to keep records of each distributor who purchases each roll or sheet of stamps. The department shall not sell stamps that have the same serial number to more than one distributor. The department may sell a partial roll or sheet of stamps to a distributor and shall retain the remainder of the roll or sheet to subsequently sell to the same distributor or shall destroy the remainder of the roll or sheet.

C. Only licensed distributors may purchase, obtain or affix cigarette stamps. Distributors shall not sell or provide stamps to any other distributor or person. When affixing cigarette stamps to cigarettes, distributors shall ensure that the affixation method that is used maintains the legibility of the serial numbers on the stamps.

D. If, during compliance inspections of a distributor or retailer, the department discovers cigarette packages that appear not to be stamped in accordance with subsection C of this section and if the distributor or retailer has substantially complied with the other provisions of this chapter, the following shall be considered a properly stamped cigarette package:

A questioned individual cigarette package that does not have an affixed cigarette stamp containing a fully legible serial number but the legible digits of the serial number of the cigarette stamp on the questioned individual cigarette package match the corresponding digits of the serial numbers from other properly stamped cigarette packages that are packaged or shelved together with the questioned individual cigarette package.
A questioned individual cigarette package that is part of an originally unopened pallet, master carton or carton that contains other properly stamped cigarettes when the pallet, master carton or carton is subsequently opened during a compliance inspection by the department.
A questioned individual cigarette package if the distributor or retailer can demonstrate through books, records or other indicia to the satisfaction of the department that the questioned individual cigarette package was purchased as part of the same pallet, master carton or carton that contained properly stamped cigarette packages.

E. The department may authorize the use of a metering machine. If the department authorizes the use of a metering machine, the department shall assign a unique meter impression number to each distributor and ensure that the impression is legible at the point of sale. The department shall keep records that indicate the assigned meter impression number for each distributor.

§ 42-3456 Tax stamps as indicia of taxes paid; exception; definitions

A. Except as otherwise provided in this chapter, all cigarettes on which a tax is imposed by this chapter shall be placed in packages or containers, and on each package or container shall be affixed an official stamp described in section 42-3455. An affixed stamp shall be evidence that the taxes levied by sections 42-3052, 42-3251 and 42-3251.01 are paid.

B. Distributors are liable for affixing official stamps or otherwise applying tax indicia to cigarettes that are subject to a tax imposed by this chapter. A licensed distributor shall apply a stamp to each package of cigarettes that is sold or distributed in this state and that is subject to tax under this chapter, including cigarettes that are subject to tax under section 42-3302. A licensed distributor shall apply a tax exempt stamp to cigarette packages that are not subject to tax under section 42-3304, subsection A, paragraph 2.

C. Cigarettes that are sold, distributed or transferred by a distributor licensed pursuant to section 42-3401 to sell cigarettes are required to have affixed the luxury stamps described in section 42-3455 at the time the cigarettes are sold, distributed or transferred to another licensed distributor.

D. Notwithstanding subsection C of this section, a licensed distributor can submit a written request in the form and manner prescribed by the department in rule or procedure to sell, distribute or transfer unstamped cigarettes to another licensed distributor. Once an accurate and complete request is submitted to the department, the department will approve or deny the request as prescribed in rule or procedure within ten days of receipt of the request.

E. Cigarettes that are exempt from tax under 26 United States Code section 5704 and that are distributed according to federal regulations are not subject to tax and do not require a stamp under this chapter.

F. A retailer shall not offer for sale cigarettes in quantities that are not packaged as such for sale by the manufacturer.

G. Distributors may apply stamps only to cigarette packages that the distributors have directly received from a licensed distributor, manufacturer or importer.

H. For the purposes of this section:

"Importer" means a person who has received approval from the federal alcohol and tobacco tax and trade bureau to directly or indirectly import finished tobacco products into the United States for sale or distribution, pursuant to 26 United States Code section 5712 and 27 Code of Federal Regulations part 41.
"Manufacturer" means a person who has received approval from the federal alcohol and tobacco tax and trade bureau to manufacture, fabricate, assemble, process or label finished tobacco products, pursuant to 26 United States Code section 5712 and 27 Code of Federal Regulations part 40.

§ 42-3457 Unstamped cigarettes

A. A person shall not possess an unstamped cigarette package unless the person is shipping or transporting unstamped cigarettes pursuant to subsection B of this section, is a licensed manufacturer or importer or is a licensed distributor who receives unstamped cigarette packages directly from a licensed manufacturer or importer.

B. Except for a licensed manufacturer, importer or distributor and if lawful under section 36-798.06, a person who ships unstamped cigarette packages in or into this state shall first file with the department a notice of shipment. This subsection does not apply to any common or contract carrier that is transporting cigarettes through this state to another location under a proper bill of lading or freight bill that states the quantity, source and destination of the cigarettes.

C. If lawful under section 36-798.06, a person who transports unstamped cigarette packages in or into this state shall carry in the vehicle used to convey the shipment invoices or equivalent documentation of the shipment for all cigarettes in the shipment. The invoices or documentation shall indicate the name and address of the consignor or seller, the name and address of the consignee or purchaser and the quantity of each brand of cigarettes that is transported.

§ 42-3458 Discount purchases of tax stamps; refund, redemption and rebate amounts

A. The official stamps to be affixed to packages of cigarettes shall be obtainable from the department by each licensed distributor by purchase or as may be acquired pursuant to department procedures:

On or before September 30, 2014, at the following discount rates:

(a) Ninety-six percent of the face value for the first thirty-six thousand dollars worth of stamps purchased by the distributor in any month.

(b) Ninety-seven percent of the face value for the second thirty-six thousand dollars worth of stamps purchased by the distributor in any month.

(c) Ninety-eight percent of the face value on all stamps in excess of seventy-two thousand dollars purchased by the distributor in any month, except that if a distributor purchases more than one hundred sixty-five thousand dollars worth of stamps in one month, the department shall offset against the discount under this subdivision, or the distributor shall refund to the department, the difference between the face value and the discounted value of the first seventy-two thousand dollars worth of stamps under subdivisions (a) and (b) of this paragraph.

After September 30, 2014 through September 30, 2016, at the rate of ninety-six percent of the face value of the stamps.
After September 30, 2016, at the discount rate of 96.48 percent of the face value of all categories of stamps, except that:

(a) For those categories of stamps with a face value of zero, 3.52 cents per stamp shall be remitted to the acquiring distributor as an administrative allowance subject to the reporting of the affixation of such stamps pursuant to section 42-3462.

(b) For those categories of stamps for which the tax is not precollected pursuant to article 7 of this chapter, 3.52 cents per stamp shall be remitted to the acquiring distributor as an administrative allowance subject to the reporting of the affixation of such stamps pursuant to section 42-3462.

B. Any refund of tax stamps requested by a licensed distributor pursuant to section 42-3008 or redemption of unused or spoiled tax stamps pursuant to section 42-3460 shall be issued in an amount of:

The total face value of the stamps minus four percent if subsection A, paragraph 2 of this section applies to the stamps.
The total face value of the stamps minus 3.52 percent if subsection A, paragraph 3 of this section applies to the stamps.

C. Any rebate of tax stamps requested by a licensed distributor for which the tax is precollected pursuant to article 7 of this chapter shall be at the full face value of the stamps.

§ 42-3459 Secured cigarette stamp purchases on credit; cancellation of credit privileges; collection action; bonding requirement; waiver

A. Subject to subsections B and C of this section, and except as provided in subsection D of this section, a licensed distributor who furnishes a bond of a surety company qualified to do business in this state, in an amount equal to two times the amount of the distributor's current monthly stamp purchases and conditioned upon the payment within the time prescribed, may make payment for the official stamp on or before the twentieth day of the month next following the purchase of an official stamp. All other distributors shall pay for each stamp at the time of purchase.

B. Upon a finding that the amount of stamp purchases, or meter machine usage, exceeds seventy-five percent of the amount of the bond, the department may cancel the credit privileges provided to qualified distributors pursuant to subsection A of this section.

C. If the indebtedness of a distributor whose credit privileges have been canceled pursuant to this section remains unpaid for thirty days after cancellation, the director shall request the attorney general to take suitable action on behalf of the department to collect either on the indebtedness or the surety bond.

D. The distributor may request that the department waive the bonding requirement in subsection A of this section if the distributor maintains a timely, accurate and complete filing and payment record for a period of two years and otherwise complies with all requirements of a licensed distributor pursuant to this chapter and title 44, chapter 27. The waiver of the bonding requirement applies only to the distributor's purchases of tax stamps with which the distributor prepays the Indian reservation tobacco tax, pursuant to section 42-3303.

§ 42-3460 Redemption of unused or spoiled tax stamps and meter registration; definitions

A. The department shall redeem unused or spoiled Arizona tax stamps that a distributor presents for redemption if those stamps are unaffixed and purchased within two years of the date of the request for redemption and shall pay for them from monies collected under this chapter.

B. Under rules adopted by the department, the department shall redeem the unused amount of tax for which any meter is registered and shall pay for it from monies collected under this chapter.

C. Nothing in this section shall be construed to provide for redemption in the case of loss or theft of tax stamps.

D. For the purposes of this section:

"Redeem" means repurchase or replace Arizona tax stamps.
"Spoiled" means mutilated or illegible.

§ 42-3461 Unlawful use of stamps; classification; definition

A. A person may not affix a tax stamp to a package of cigarettes if the package:

Differs from the requirements of the federal cigarette labeling and advertising act (P.L. 89-92; 79 Stat. 282; 15 United States Code section 1331) relating to label warnings or other information on packages of cigarettes for sale in the United States.
Is labeled "for export only", "U.S. tax exempt", "for use outside U.S." or with similar words that indicate the manufacturer did not intend for the product to be sold in the United States.
Has been altered by adding or deleting the wording, labels or warnings described in paragraph 1 or 2 of this subsection.
Is placed in a carton, or any other package containing several individually stamped packages, that has been altered by adding or deleting the wording, labels or warnings described in paragraph 1 or 2 of this subsection.
Has been imported into the United States on or after January 1, 2000 in violation of 26 United States Code section 5754 or is the subject of a violation of 19 United States Code sections 1681 through 1681b or 15 United States Code section 1335a.
Violates federal trademark or copyright laws.

B. The director:

May revoke any license issued to a distributor who sells or offers for sale cigarette packages that are stamped in violation of subsection A of this section.
Shall seize and destroy packages of cigarettes that are stamped in violation of subsection A of this section.

C. A person who sells or offers for sale cigarette packages that are stamped in violation of subsection A of this section is guilty of a class 2 misdemeanor.

D. Any person who sells, distributes or manufactures cigarettes and sustains direct economic or commercial injury as a result of a violation of this section may bring an action in good faith for appropriate injunctive relief.

E. This section does not apply to cigarettes allowed to be imported or brought into the United States for personal use, or to cigarettes sold or intended to be sold as duty free merchandise by a duty free sales enterprise pursuant to 19 United States Code section 1555(b). This subsection does not apply to cigarettes that are brought back into the customs territory for resale within the customs territory.

F. A violation of this section is also a violation of title 44, chapter 10, article 7.

G. For the purposes of this section, "package" means any kind of pack, carton or container in which cigarettes are sold, offered for sale or otherwise distributed or intended for distribution to consumers.

§ 42-3462 Cigarette and roll-your-own tobacco; filing requirements; definition

A. Each distributor shall file a return in a form prescribed by the department for each place of business on or before the twentieth day of the month next succeeding the month for which the return is filed. The return shall contain all of the following:

The brand names and quantities of each brand of cigarettes and roll-your-own tobacco in possession at the beginning and end of the reporting period.
The brand names and quantities of each brand of cigarettes and roll-your-own tobacco received during the reporting period and the name and address of each person from whom each product was received.
The brand names and quantities of each brand of cigarettes and roll-your-own tobacco distributed or shipped into this state or between locations in this state during the reporting period, except for sales directly to consumers, and the name and address of each person to whom each product was distributed or shipped, with reference to the dates of distribution or shipment and corresponding invoice numbers from the invoices documenting the distribution or shipments.
The brand names and quantities of each brand of cigarettes and roll-your-own tobacco distributed or shipped to any destination wherever located, including the quantities reported under paragraph 3 of this subsection during the reporting period, except for sales directly to consumers, and the name and address of each person to whom each product was distributed or shipped, with reference to the dates of distribution or shipment and corresponding invoice numbers from the invoices documenting the distribution or shipments.
The brand names and quantities of each brand of cigarettes and roll-your-own tobacco sold to consumers that are itemized to show sales to consumers in this state and sale to consumers outside of this state.
Copies of the customs certificates with respect to such cigarettes and roll-your-own tobacco required to be submitted by 19 United States Code section 1681a(c).
The name and address of each nonparticipating manufacturer of each brand of cigarettes and roll-your-own tobacco identified by the distributor in the return.
The number of individual cigarettes and ounces of roll-your-own tobacco of each brand of each nonparticipating manufacturer sold in this state by the distributor during the preceding month, separately stating each of the following:

(a) The number of cigarette packages sold and the number of individual cigarettes in each package.

(b) The number of roll-your-own tobacco containers sold and the number of ounces of roll-your-own tobacco in each container.

The amount of luxury taxes paid or to be paid on the cigarettes and roll-your-own tobacco prescribed in paragraph 8 of this subsection, separately stating each of the following:

(a) The amount of luxury taxes paid by purchasing and affixing tax stamps to cigarette packages.

(b) The amount of luxury taxes to be paid for roll-your-own tobacco containers.

The number of individual cigarettes and ounces of roll-your-own tobacco of each brand of each nonparticipating manufacturer received by the distributor, separately stating each of the following:

(a) The number of cigarette packages received and the number of individual cigarettes in each package.

(b) The number of roll-your-own tobacco containers received and the number of ounces of roll-your-own tobacco in each container.

The number of individual cigarettes and ounces of roll-your-own tobacco of each brand of each nonparticipating manufacturer that the distributor exported from this state without payment of Arizona luxury taxes, separately stating each of the following:

(a) The number of cigarette packages exported and the number of individual cigarettes in each package.

(b) The number of roll-your-own tobacco containers exported and the number of ounces of roll-your-own tobacco in each container.

The number of individual cigarettes and ounces of roll-your-own tobacco of each brand of each nonparticipating manufacturer for which the distributor obtained a refund under section 42-3008, separately stating each of the following:

(a) The number of cigarette packages for which the distributor obtained a refund and the number of individual cigarettes in each package.

(b) The number of roll-your-own tobacco containers for which the distributor obtained a refund and the number of ounces of roll-your-own tobacco in each container.

The invoice, in the form and manner prescribed by the department, for the following transactions:

(a) The distributor's purchase or acquisition of any nonparticipating manufacturer's cigarettes received or sold by the tobacco distributor in this state.

(b) The distributor's export, if any, of any nonparticipating manufacturer's cigarettes from this state.

B. Any person who sells, ships or transfers cigarettes and roll-your-own tobacco into or within this state shall file a monthly report with the department on the tenth day of each month after the sale, shipment or transfer in the form and manner prescribed by section 42-3053, subsection C. The report shall contain information regarding each shipment of cigarettes and roll-your-own tobacco into or within this state during the previous calendar month, including the date of shipment, the name and address of the person to whom the shipment was made and the name, address and telephone number of the person or service delivering the shipment to the recipient on behalf of the seller. The report shall also include the brand names and quantities of cigarettes and roll-your-own tobacco contained in each shipment, with invoices or references to invoice number documenting each shipment.

C. Distributor reports that are submitted under subsection A of this section shall be itemized to disclose the quantity of reported cigarettes bearing tax stamps of this state, tax exempt stamps of this state, stamps of another state and unstamped cigarettes. The distributor reports shall also include, if applicable, the following:

The quantity of Arizona tax and tax exempt stamps that were not affixed to cigarettes.
The quantity of Arizona tax and tax exempt stamps that the distributor possessed at the beginning and end of the reporting period.
The quantity of each type of Arizona stamp received during the reporting period.
The quantity of each type of Arizona stamp applied during the reporting period.

D. The department may adopt rules requiring additional information in the monthly reports as necessary for the purposes of enforcing this article.

E. For the purposes of this section, "manufacturer" has the same meaning prescribed in section 42-3451.

Article 12 Tobacco Products Other Than Cigarettes

§ 42-3501 Return and payment by distributors of tobacco products other than cigarettes

A. Except for tobacco products described in section 42-3402, every distributor of tobacco products other than cigarettes shall pay the tax imposed by this chapter on all those products received within the state and shall add the amount of the tax to the sales price.

B. The distributor shall pay the tax to the department monthly on or before the twentieth day of the month next succeeding the month in which the tax accrues.

C. On or before that date the distributor shall prepare a sworn return for the month in which the tax accrues in the form prescribed by the department, showing:

The amount of tobacco products other than cigarettes received in this state during the month in which the tax accrues.
The amount of tax for the period covered by the return.
Any other information the department deems necessary for the proper administration of this chapter, including information required for roll-your-own tobacco provided under section 42-3462.

D. The distributor shall deliver the return, together with a remittance of the amount of the tax due, to the department.

E. A taxpayer who fails to pay the tax within ten days of the date on which the payment becomes due is subject to and shall pay a penalty determined under section 42-1125 plus interest at the rate determined pursuant to section 42-1123 from the time the tax was due and payable until paid.

§ 42-3502 Transport of untaxed other tobacco products prohibited; exceptions; definition

A. Except as allowed in section 42-3403, a person may not hold, store or transport untaxed other tobacco products for sale or distribution in this state in any vehicle.

B. This section does not apply to either of the following:

A vehicle that is owned, operated or contracted by a person who holds a valid license issued under section 42-3401 and is transporting untaxed other tobacco products from one to another of the licensee's places of business listed on its application.
A vehicle that is transporting untaxed other tobacco products to a licensed distributor as part of a lawful sale or in interstate commerce to a person lawfully operating as a manufacturer, distributor or retailer of other tobacco products.

C. For the purposes of this section, "untaxed other tobacco products" means other tobacco products on which applicable taxes have not been remitted pursuant to this chapter.

§ 42-3503 Acquisition and possession of untaxed other tobacco products; definitions

A. A person, other than a manufacturer or an importer shipping into the state, shall be licensed as a distributor if the person acquires or possesses untaxed other tobacco products for sale, barter or exchange or for any other purpose besides or in addition to personal use or consumption in this state, including Indian reservations located in this state.

B. A distributor shall obtain other tobacco products only from a manufacturer or an importer, or a distributor with a current license issued under section 42-3401.

C. For the purposes of this section:

"Importer" means a person who has received approval from the federal alcohol and tobacco tax and trade bureau to directly or indirectly import finished tobacco products into the United States for sale or distribution, pursuant to 26 United States Code section 5712 and 27 Code of Federal Regulations part 41.
"Manufacturer" means a person who has received approval from the federal alcohol and tobacco tax and trade bureau to manufacture, fabricate, assemble, process or label finished tobacco products, pursuant to 26 United States Code section 5712 and 27 Code of Federal Regulations part 40.

Chapter 5 Transaction Privilege and Affiliated Excise Taxes

Article 1 General Administrative Provisions

§ 42-5001 Definitions

In this article and article 2 of this chapter, unless the context otherwise requires:

"Business" includes all activities or acts, personal or corporate, that are engaged in or caused to be engaged in with the object of gain, benefit or advantage, either directly or indirectly, but does not include either:

(a) Casual activities or sales.

(b) The transfer of electricity from a solar photovoltaic generation system to an electric utility distribution system.

"Distribution base" means the portion of the revenues derived from the tax levied by this article and articles 5 and 8 of this chapter designated for distribution to counties, municipalities and other purposes according to section 42-5029, subsection D.
"Engaging", when used with reference to engaging or continuing in business, includes the exercise of corporate or franchise powers.
"Gross income" means the gross receipts of a taxpayer derived from trade, business, commerce or sales and the value proceeding or accruing from the sale of tangible personal property or service, or both, and without any deduction on account of losses.
"Gross proceeds of sales" means the value proceeding or accruing from the sale of tangible personal property without any deduction on account of the cost of property sold, expense of any kind or losses, but cash discounts allowed and taken on sales are not included as gross income.
Gross income and gross proceeds of sales do not include goods, wares or merchandise, or the value thereof, returned by customers if the sale price is refunded either in cash or by credit, or the value of merchandise traded in on the purchase of new merchandise when the trade-in allowance is deducted from the sales price of the new merchandise before completion of the sale.
"Gross receipts" means the total amount of the sale, lease or rental price, as the case may be, of the retail sales of retailers, including any services that are a part of the sales, valued in money, whether received in money or otherwise, including all receipts, cash, credits and property of every kind or nature, and any amount for which credit is allowed by the seller to the purchaser without any deduction from the amount on account of the cost of the property sold, materials used, labor or service performed, interest paid, losses or any other expense. Gross receipts do not include cash discounts allowed and taken or the sale price of property returned by customers if the full sale price is refunded either in cash or by credit.
"Marketplace" means a physical or electronic place, platform or forum, including a store, booth, internet website, catalog or dedicated sales software application, where products, including tangible personal property, are offered for sale.
"Marketplace facilitator":

(a) Means a person that facilitates a retail sale by a marketplace seller by listing or advertising for sale by the marketplace seller in a marketplace tangible personal property and, either directly or indirectly, through agreements or arrangements with third parties collecting payment from the purchaser and transmitting that payment to the marketplace seller, regardless of whether the marketplace facilitator receives compensation for the marketplace facilitator's services.

(b) Does not include a payment processor business that is appointed to handle payment transactions from various channels, such as charge cards, credit cards and debit cards, and whose sole activity with respect to marketplace sales is to handle transactions between two parties.

"Marketplace seller" means a person that makes retail sales through any physical or electronic marketplace that is operated by a marketplace facilitator.
"Person" or "company" includes an individual, firm, partnership, joint venture, association, corporation, estate, trust, marketplace facilitator or remote seller, this state, any county, city, town, district, other than a school district, or other political subdivision and any other group or combination acting as a unit, and the plural as well as the singular number.
"Qualifying community health center":

(a) Means an entity that is recognized as nonprofit under section 501(c)(3) of the United States internal revenue code, that is a community-based, primary care clinic that has a community-based board of directors and that is either:

(i) The sole provider of primary care in the community.

(ii) A nonhospital affiliated clinic that is located in a federally designated medically underserved area in this state.

(b) Includes clinics that are being constructed as qualifying community health centers.

"Qualifying health care organization" means an entity that is recognized as nonprofit under section 501(c) of the United States internal revenue code and that uses, saves or invests at least eighty percent of all monies that it receives from all sources each year only for health and medical related educational and charitable services, as documented by annual financial audits prepared by an independent certified public accountant, performed according to generally accepted auditing standards. Monies that are used, saved or invested to lease, purchase or construct a facility for health and medical related education and charitable services are included in the eighty percent requirement.
"Qualifying health sciences educational institution" means an entity that is recognized as nonprofit under section 501(c) of the United States internal revenue code and that solely provides graduate and postgraduate education in the health sciences. For the purposes of this paragraph, "health sciences" includes medicine, nursing, physician's assistant studies, pharmacy, physical therapy, occupational therapy, biomedical sciences, podiatry, clinical psychology, cardiovascular science, nurse anesthesia, dentistry, optometry and veterinary medicine.
"Qualifying hospital" means any of the following:

(a) A licensed hospital that is 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 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 that provides medical services, nursing services or health related services and that is not used or held for profit.

(c) A hospital, nursing care institution or residential care institution that is operated by the federal government, this state or a political subdivision of this state.

(d) A facility that is under construction and that on completion will be a facility under subdivision (a), (b) or (c) of this paragraph.

"Remote seller" means a person that sells products for delivery into this state and that does not have a physical presence or other legal requirement to obtain a transaction privilege tax license in this state other than because the person's business exceeds the threshold provided in section 42-5044.
"Retailer" includes every person engaged in the business classified under the retail classification pursuant to section 42-5061 and, when in the opinion of the department it is necessary for the efficient administration of this article, includes dealers, distributors, supervisors, employers and salesmen, representatives, peddlers or canvassers as the agents of the dealers, distributors, supervisors or employers under whom they operate or from whom they obtain the tangible personal property sold by them, whether in making sales on their own behalf or on behalf of the dealers, distributors, supervisors or employers.
"Sale" means any transfer of title or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means whatever, including consignment transactions and auctions and transactions facilitated by a marketplace facilitator on behalf of a marketplace seller, of tangible personal property or other activities taxable under this chapter, for a consideration, and includes:

(a) Any transaction by which the possession of property is transferred but the seller retains the title as security for the payment of the price.

(b) Fabricating tangible personal property for consumers who furnish either directly or indirectly the materials used in the fabrication work.

(c) Furnishing, preparing or serving for a consideration any tangible personal property consumed on the premises of the person furnishing, preparing or serving the tangible personal property.

"Solar daylighting" means a device that is specifically designed to capture and redirect the visible portion of the solar beam, while controlling the infrared portion, for use in illuminating interior building spaces in lieu of artificial lighting.
"Solar energy device" means a system or series of mechanisms that are designed primarily to provide heating, to provide cooling, to produce electrical power, to produce mechanical power, to provide solar daylighting or to provide any combination of the foregoing by means of collecting and transferring solar generated energy into such uses either by active or passive means, including wind generator systems that produce electricity. Solar energy systems may also have the capability of storing solar energy for future use. Passive systems shall clearly be designed as a solar energy device, such as a trombe wall, and not merely as a part of a normal structure, such as a window.
"Tangible personal property" means personal property that may be seen, weighed, measured, felt or touched or that is in any other manner perceptible to the senses.
"Taxpayer" means any person who is liable for any tax imposed by this article.
"Tax year" or "taxable year" means either the calendar year or the taxpayer's fiscal year, if permission is obtained from the department to use a fiscal year as the tax period instead of the calendar year.
"Wholesaler" or "jobber" means any person who sells tangible personal property for resale and not for consumption by the purchaser.

§ 42-5002 Exclusions from gross income, receipts or proceeds

A. For the purpose of this article the total amount of gross income, gross receipts or gross proceeds of sales shall be deemed to be the amount received, exclusive of:

The taxes imposed by this chapter and chapter 6, article 3 of this title, sales or transaction privilege taxes imposed by municipalities in this state and sales or transaction privilege taxes imposed in this state by Indian tribes, if the Indian tribal tax is imposed with respect to sales by non-Indian or nonaffiliated Indian vendors to nonmembers of the tribe. A person who imposes an added charge to cover the tax levied by this article or which is identified as being imposed to cover transaction privilege tax shall not remit less than the amount so collected to the department.
Freight costs billed to and collected from a purchaser by a retailer for tangible personal property which, upon the order of the retailer, is shipped directly from a manufacturer or wholesaler to the purchaser.

B. For the purposes of this article the total amount of gross income, gross receipts or gross proceeds of sales for nuclear fuel shall be deemed to be the value of the purchase price of uranium oxide used in producing the fuel. The tax imposed by this article may be imposed only once for any one quantity or batch of nuclear fuel regardless of the number of transactions or financing arrangements which may occur with respect to that nuclear fuel.

§ 42-5003 Administration and enforcement of article; employees; bonds

A. The administration of this article is vested in and shall be exercised by the department of revenue according to chapter 1, articles 1 and 3 of this title and this article, and all payments required by this article shall be made to the department.

B. The enforcement of this article in any court of the state shall be under the exclusive jurisdiction of the department and the attorney general.

C. The department shall appoint, as necessary, such agents, clerks and stenographers as authorized by law, who shall perform such duties as may be required not inconsistent with this article, and who shall be authorized to act for the department as it prescribes and as provided by this article. Each agent shall execute a bond in the amount of five thousand dollars conditioned upon the faithful discharge of the agent's duties, but the department may, in its discretion, bond all or any of its agents by a multiple or joint bond. The agents, clerks and stenographers may be removed by the department for cause, and the department shall be the final judge of the sufficiency of the cause.

§ 42-5004 Department records

A. The department shall keep records and accounts showing separately the taxes collected under each of the classifications and amounts collected from businesses engaged in within each county as prescribed in this article and article 2 of this chapter. Each month the department of revenue shall deliver a statement to the state treasurer and a duplicate statement to the director of the department of administration showing all collections made during the preceding month and setting forth the classifications and amounts collected from businesses engaged in within this state.

B. The department shall keep full and accurate records of all monies it receives, shall show how such monies were disbursed and shall preserve all returns filed with it as prescribed by section 42-1105.

§ 42-5005 Transaction privilege tax and municipal privilege tax licenses; fees; renewal; revocation; violation; classification

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

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

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

D. A municipal privilege tax license is valid only for the calendar year in which it is issued, but it may be renewed for the following calendar year by the payment of a license renewal fee of up to $50. The renewal fee is due and payable on January 1 and is considered delinquent if not received on or before the last business day of January. The department must collect, hold, pay and manage the fees in trust for the city or town and may not use the monies for any other purposes. The renewal fee imposed by this subsection does not apply to a marketplace facilitator or remote seller that is only required to obtain a transaction privilege tax license pursuant to section 42-5043.

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

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

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

"Location" means the business address appearing in the application for the license and on the transaction privilege tax or municipal privilege tax license.
"Ownership" means any right, title or interest in the business.
"Transferable" means the ability to convey or change the right or privilege to engage or continue in business by virtue of the issuance of the transaction privilege tax or municipal privilege tax license.

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

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

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

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

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

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

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

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

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

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

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

§ 42-5006 Taxpayer bonds; out of state licensed contractors and manufactured building dealers

A. Notwithstanding section 42-1102, the department shall require a surety bond for each taxpayer who is required to be licensed under title 32, chapter 10 or who is regulated under title 41, chapter 37, article 3, if the taxpayer's principal place of business is outside this state or if the taxpayer has conducted business in this state for less than one year. The department shall prescribe the form of the bond. The bond shall be maintained for a period of at least two years.

B. The bond, duly executed by the applicant as principal and with a corporation duly authorized to execute and write bonds in this state as surety, shall be payable to this state and conditioned on the payment of all transaction privilege taxes incurred and imposed on the taxpayer by this state and its political subdivisions. The bond shall be in such amount, but not less than two thousand dollars, as will assure the payment of the transaction privilege taxes which may reasonably be expected to be incurred by the licensed establishment for a period of one hundred fifty days.

C. The director, by rule, may establish classes of expected tax liability in five thousand dollar increments, beginning with the minimum bond amount prescribed in subsection B of this section. The bond shall provide that after notice and a hearing the director may order forfeited to this state and any affected political subdivision part or all of the bond for nonpayment of taxes, interest and penalties.

D. A licensee on application for a new license covered by subsection A of this section, renewal of a license covered by subsection A of this section or transfer of a license covered by subsection A of this section is exempt from posting a bond if the licensee has for at least two years immediately preceding the application made timely payment of all transaction privilege taxes incurred.

E. If a licensee is not exempt from this section, the director may exempt the licensee if the director finds that the surety bond is not necessary to insure payment of such taxes to the state and any affected political subdivision or the licensee had good cause for the late or insufficient payment of the transaction privilege tax and affiliated excise taxes incurred.

§ 42-5007 Taxpayer security; out-of-state prime contractors; definition

A. In lieu of the bond required under section 42-1102 or 42-5006, a person who is in the construction business, who does not have a principal place of business in this state and who enters into a prime construction contract to be performed in this state, at the time the contract is entered into, shall furnish to the director or the director's agent a surety bond or other acceptable security in an amount equal to the gross receipts to be paid under the contract multiplied by the aggregate rates of the applicable taxes imposed by this chapter to secure payment of the tax imposed by this chapter on the gross receipts from the contract and shall obtain a certificate from the director or the director's agent that the requirements of this section have been met.

B. If the total amount to be paid under the contract is changed by ten per cent or more after the date the bond or other security is furnished, the person shall increase or decrease, as the case may be, the amount of the bond or security within fourteen days after the change.

C. If a person fails to comply with subsection A or B of this section, the director or the director's agent may:

Demand by certified mail or in person that the person comply. On the person's failure to comply within ten days after the date of the mailing of such demand, the director may institute a proceeding to enjoin the person's business as provided in section 42-1103.
When a serious and immediate risk exists that an amount of tax due or reasonably expected to become due from the person on gross receipts from a prime construction contract will not be paid, request the person to comply, and, on failure to comply immediately, the director may without further notice apply to tax court for an injunction under section 42-1103.

D. This section does not apply if the total gross receipts under the construction contract, including any change in such amount, are to be less than fifty thousand dollars.

E. A city, town or county or an agency of this state shall not issue a building or other construction permit to any person who is subject to the requirements of this section without having first been furnished by the construction contractor with the certificate from the director or the director's agent provided under subsection A of this section.

F. In this section "principal place of business" means a location where a person has continuously operated a facility with at least one full-time employee for the preceding twelve consecutive months.

§ 42-5008 Levy of tax; purposes; distribution

A. There is levied and there shall be collected by the department, for the purpose of raising public money, privilege taxes measured by the amount or volume of business transacted by persons on account of their business activities, and in the amounts to be determined by the application of rates against values, gross proceeds of sales or gross income, as the case may be, as prescribed by this article and article 2 of this chapter.

B. If any monies remain after the payments are made for state purposes, as provided for by subsection A, the remainder of the monies shall be paid into the state school fund for educational purposes.

C. The tax levied by and collected pursuant to this article and article 2 of this chapter is designated the "transaction privilege tax".

§ 42-5008.01 Liability for amounts equal to retail transaction privilege tax due

A. A person that is either a prime contractor subject to tax under section 42-5075 or a subcontractor working under the control of such a prime contractor, that purchases tangible personal property, the purchase price of which was excluded from the tax base under the retail classification under section 42-5061, subsection A, paragraph 27 or was excluded from the use tax under section 42-5159, subsection A, paragraph 13, subdivision (g) at the time of purchase, and that incorporates or fabricates the tangible personal property into a project described in section 42-5075, subsection P is liable for an amount equal to any tax that a seller would have been required to pay under section 42-5061 and this article as follows:

The amount of liability shall be calculated and reported based on the location of the project and the taxes imposed under this chapter and chapter 6 of this title.
All deductions, exemptions and exclusions for the cost of tangible personal property provided in section 42-5075 apply to the tangible personal property incorporated or fabricated into the project.
This subsection does not apply to tangible personal property that is incorporated or fabricated into any project under a contract that would otherwise be excluded from the tax base under section 42-5075, without regard to section 42-5075, subsection P.
The amount of liability shall be reported within the reporting period that includes the month in which the person incorporates or fabricates the tangible personal property into the project.
The person is not liable for the amount if the contractor who hired the person executes and provides to the person a certificate stating that the contractor providing the certificate is liable for any amount due under this subsection. The department shall prescribe the form of the certificate. If the person has reason to believe that the information contained on the certificate is erroneous or incomplete, the department may disregard the certificate. The contractor providing the certificate is liable for the amount that otherwise would be due from the person under this subsection.

B. A person that purchased tangible personal property, the purchase price of which was excluded from the tax base under section 42-5061, subsection A, paragraph 27 or was excluded from the use tax under section 42-5159, subsection A, paragraph 13, subdivision (g) at the time of purchase, that subsequently cancels its transaction privilege tax license and that uses, consumes, sells or discards the tangible personal property is liable for an amount of tax determined under this subsection. For the purposes of this subsection:

If the tangible personal property is incorporated or fabricated into a project described in section 42-5075, subsection P, or otherwise used or consumed by the person, the amount of liability shall be calculated and reported based on the person's purchase price of the tangible personal property, the location of the project, use or consumption and the taxes imposed under this chapter and chapter 6 of this title.
If the tangible personal property is sold in a manner that is not subject to tax under this chapter or is discarded, the amount shall be calculated and reported based on the payment received by the person, the location of the person's principal place of business in this state and the taxes imposed under this chapter and chapter 6 of this title.
The person is not liable under this subsection for any amount if the person discards the tangible personal property and does not receive payment of any kind.
The amount of liability shall be reported on or before the business day preceding the last business day of the month following the month in which the person uses the tangible personal property in a manner described in paragraph 1 or 2 of this subsection. No amount is due under this subsection at any time that the person stores the tangible personal property without using it in a manner described in paragraph 1 or 2 of this subsection.
All deductions, exemptions and exclusions for the cost of tangible personal property provided in section 42-5075 apply to the tangible personal property incorporated or fabricated into a project described in section 42-5075, subsection P.
This subsection does not apply to tangible personal property that is incorporated or fabricated into any project under a contract that would otherwise be excluded from the tax base under section 42-5075, without regard to section 42-5075, subsection P.
The person is not liable for the amount if the contractor who hired the person executes and provides to the person a certificate stating that the contractor providing the certificate is liable for any amount due under this subsection for tangible personal property incorporated or fabricated into a project described in section 42-5075, subsection P. The department shall prescribe the form of the certificate. If the person has reason to believe that the information contained on the certificate is erroneous or incomplete, the department may disregard the certificate. The contractor providing the certificate is liable for the amount that otherwise would be due from the person under this subsection.

C. A person that fails to report or pay any amount due under subsection A or B of this section is liable for interest in a manner consistent with section 42-1123 and penalties in a manner consistent with section 42-1125.

D. If a person has paid an amount described in this section on tangible personal property that the person reasonably believed to be described in section 42-5075, subsection P and a final determination is made that section 42-5075, subsection P does not apply, the person is entitled to an offset for the amount paid under this section against the amount of tax liability assessed under this chapter and chapter 6 of this title.

§ 42-5009 Certificates establishing deductions; liability for making false certificate; tax exclusion; definitions

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

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

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

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

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

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

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

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

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

A valid certificate as prescribed by this subsection completed by the purchaser and obtained before the issuance of the nonresident registration permit authorized by section 28-2154.
For the purposes of the deductions provided by section 42-5061, subsection A, paragraph 14, subdivision (b) and section 42-5061, subsection V, a copy of the nonresident registration permit authorized by section 28-2154.
A legible copy of a current valid driver license issued to the purchaser by another state or foreign country that indicates an address outside of this state. For the sale of a motor vehicle to a nonresident entity, the entity's representative must have a current valid driver license issued by the same jurisdiction as that in which the entity is located.
For the purposes of the deduction provided by section 42-5061, subsection A, paragraph 14, subdivision (a), a certificate documenting the delivery of the motor vehicle to an out-of-state location.

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

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

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

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

The person that is not subject to tax under section 42-5075 may use the certificate issued pursuant to this subsection only with respect to tangible personal property that will be incorporated into a project for which the gross receipts are subject to tax under section 42-5075.
The department shall issue the certificate to the prime contractor on receiving sufficient documentation to establish that the prime contractor meets the requirements of this subsection.
If any person uses the certificate provided under this subsection to purchase tangible personal property to be used in a project that is not subject to tax under section 42-5075, the person is liable in an amount equal to any tax, penalty and interest that the seller would have been required to pay under this article if the seller had not complied with subsection A of this section. Payment of the amount under this section exempts the person from liability for any tax imposed under article 4 of this chapter. The amount shall be sourced under section 42-5040, subsection A, paragraph 2.

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

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

Persons who feed their own livestock or poultry.
Persons who are engaged in the business of producing livestock or poultry commercially.
Persons who are engaged in the business of feeding livestock or poultry commercially or who board livestock noncommercially.

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

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

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

If it is determined that operational control has been transferred for less than fifty percent but more than forty percent of the aircraft's flight hours, the owner of the aircraft is liable for an amount equal to any tax that the seller or purchaser would have been required to pay under this chapter at the time of the sale, plus interest.
If the aircraft is sold during the recapture period, the seller is not liable for the amount determined pursuant to this subsection unless the operational control of the aircraft had not been transferred for at least fifty percent of the aircraft's flight hours at the time of the sale.

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

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

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

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

§ 42-5010 Rates; distribution base

(Caution: 1998 Prop. 105 applies)

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

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

(a) Transporting classification.

(b) Utilities classification.

(d) Pipeline classification.

(e) Private car line classification.

(f) Publication classification.

(g) Job printing classification.

(h) Prime contracting classification.

(i) Amusement classification.

(j) Restaurant classification.

(k) Personal property rental classification.

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

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

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

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

Three and one-eighth percent of the tax base as computed for the business of every person engaging or continuing in this state in the mining classification described in section 42-5072.
Zero percent of the tax base as computed for the business of every person engaging or continuing in this state in the commercial lease classification described in section 42-5069.

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

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

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

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

F. Fifty percent of the tax revenues collected from persons on account of engaging in business under the business classification listed in subsection A, paragraph 2 of this section is designated as distribution base for the purposes of section 42-5029.

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

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

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

Any increase in the rate of tax that is levied by this article or article 2 of this chapter enacted by the legislature or by a vote of the people does not apply for a period of one hundred twenty days after the date of the tax rate increase to the gross proceeds of sales or gross income from the business of the taxpayer with respect to written contracts entered into before the effective date of the tax rate increase unless the taxpayer has entered into a contract that contains a provision that entitles the taxpayer to recover from the purchaser the amount of the additional tax levied.
The provisions of this subsection apply without regard to the accounting method used by the taxpayer to report the taxes imposed under article 2 of this chapter.
The provisions of this subsection shall not be considered in determining the rate of tax imposed under chapter 6, article 3 of this title.

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

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

§ 42-5010.01 Transaction privilege tax; additional rate increment

A. From and after June 30, 2021 through June 30, 2041, in addition to the rates prescribed by section 42-5010, subsection A, an additional rate increment is imposed and shall be collected. The additional tax rate increment is levied at the rate of six-tenths of one percent of the tax base of every person engaging or continuing in this state in a business classification listed in section 42-5010, subsection A, paragraph 1.

B. The taxpayer shall pay taxes pursuant to this section at the same time and in the same manner as under section 42-5010, subsection A. The department shall separately account for the revenues collected with respect to the rates imposed by this section, and the state treasurer shall distribute all of those revenues in the manner prescribed by section 42-5029.02. The rates imposed by this section are not considered local revenues for purposes of article IX, section 21, Constitution of Arizona.

§ 42-5011 Conditional sales

For the purpose of computing the tax levied by this article, conditional sales shall be treated as credit sales and the tax shall be paid only upon the amounts received under such conditional sales contracts, but if the seller transfers his interest in such contract to a third person, he shall pay upon the full sale price of the commodity unless a record is kept of payments thereafter made on the contract in such manner that the department may at all times ascertain from the records of the seller the amount paid thereon by the purchaser. If at any time the department cannot so ascertain the amount paid thereon, the tax shall become due and payable as to any amounts not shown to be paid by the records of the seller or to the satisfaction of the department.

§ 42-5012 Sales between affiliated persons

In determining value as applied to sales from one to another of affiliated corporations or persons, or other circumstances where the relation between the buyer and seller is such that the gross proceeds from the sale are not indicative of the true value of the subject matter of the sale, the department shall prescribe uniform and equitable rules for determining the value upon which the tax shall be levied, corresponding as nearly as possible to the gross proceeds from the sale of similar products of like quality or character by other taxpayers where no common interest exists between the buyer and seller, but otherwise under similar circumstances and conditions.

§ 42-5013 Partnerships

A. All taxes levied under this article upon the business activities of a partnership shall be a liability and charge against each and all of the partners, but when the tax is paid by the partnership the liability against each and all of the partners shall terminate.

B. Licenses issued to persons engaged in business as partners shall be in the name of the partnership.

§ 42-5014 Return and payment of tax; estimated tax; extensions; abatements; definitions

A. Except as provided in subsection B, C, D, E or F of this section, the taxes levied under this article:

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

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

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

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

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

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

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

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

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

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

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

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

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

Shall remit to the department the applicable taxes payable pursuant to section 42-5076 and chapter 6 of this title with respect to each online lodging transaction, as defined in section 42-5076, facilitated by the online lodging marketplace.
Shall report the taxes monthly and remit the aggregate total amounts for each of the respective taxing jurisdictions.
Shall not be required to list or otherwise identify any individual online lodging operator, as defined in section 42-5076, on any return or any attachment to a return.

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

File a consolidated return monthly with respect to all managed properties for which the licensee files an electronic consolidated tax return pursuant to section 42-6013.
Remit to the department the aggregate total amount of the applicable taxes payable pursuant to this chapter and chapter 6 of this title for all of the respective taxing jurisdictions with respect to the managed properties.

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

Shall electronically remit to the department the applicable taxes pursuant to section 42-5071 and chapter 6 of this title and any additional taxes, fees or charges on the gross proceeds or gross income of a shared vehicle transaction, subject to the limitations in section 28-9616, and, if the peer-to-peer car sharing program allows owners of vehicles that are not individual-owned shared vehicles to use the peer-to-peer car sharing program, applicable surcharges pursuant to sections 5-839 and 48-4234.
Shall electronically report the taxes monthly and remit the aggregate total amounts for each respective taxing jurisdiction.
Is not required to list or otherwise identify an individual-owned shared vehicle on any return or any attachment to a return. The peer-to-peer car sharing program shall retain surcharge and tax information for each peer-to-peer car sharing program transaction and shall provide the information to the department at the department's request.

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

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

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

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

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

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

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

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

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

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

The taxpayer has no computer.
The taxpayer has no internet access.
Any other circumstance considered to be worthy by the director exists.

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

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

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

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

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

§ 42-5015 Filing by electronic means

A taxpayer who is required to pay any transaction privilege and affiliated excise taxes to this state or a county or municipality may report and pay the required tax through electronic means. The electronic system shall be administered by the department of revenue. The department may enter into an agreement with the cities and towns that did not have an intergovernmental contract or agreement in effect as of January 1, 2013 with the department to provide for unified or coordinated licensing, collection and auditing programs for the cities and towns to contribute to the payment of the electronic system through money or resources. The electronic system shall:

Include a single point for licensing, filing a single return and paying transaction privilege and affiliated excise taxes for all state, county and municipal taxing jurisdictions.
Consolidate data in a manner compatible with the data systems of the department of revenue.
Capture data with sufficient specificity to meet the needs of the taxing jurisdictions.
Allow for identification of the correct taxing jurisdictions and tax rates based on the place where the transaction is sourced.

§ 42-5016 Credit for telecommunications service revenue reductions

A. A credit is allowed against the taxes imposed by this article and other affiliated excise taxes for taxpayers in the business of selling and delivering telecommunications services to residential customers in an amount equal to the dollar amount of payments for telecommunications services not received by the taxpayer that are directly attributable to the rate of assistance provided under title 46, chapter 6, article 1.

B. The taxpayer shall claim the credit for each tax period in such manner as prescribed by the department, that may be incorporated in the return form prescribed by section 42-5014. A claim for credit is not allowed if the taxpayer fails to pay the tax due before the payment becomes delinquent. If the taxpayer subsequently disallows or recovers any amount claimed as rate assistance under title 46, chapter 6, article 1 and received as a credit under this section in a previous tax period, that amount shall be subtracted from the credit allowed under this section for the next tax period following the disallowance or recovery.

C. The amount under this section is presumed to be revenues for the purpose of determining the total amount to be applied against the appropriation limitation prescribed under article IX, section 17, Constitution of Arizona.

§ 42-5017 Credit for accounting and reporting expenses; definition

A. A credit is allowed against the taxes imposed by this article and article 5 of this chapter for expenses incurred by the taxpayer in accounting and reporting those taxes. The credit is:

For a taxpayer who files a paper return, one percent of the amount of tax due but not to exceed a total of ten thousand dollars in any calendar year for the combined total of all business premises of the taxpayer.
For a taxpayer who files using an electronic filing program established by the department, one and two-tenths percent of the amount of tax due but not to exceed a total of twelve thousand dollars in any calendar year for the combined total of all business premises of the taxpayer.

B. Estimated taxes under section 42-5014, subsection D are not considered a separate reporting period.

C. A taxpayer shall claim the credit for each tax period on forms prescribed and furnished by the department, which may be incorporated in the return form prescribed pursuant to section 42-5014. A claim for credit is not allowed if the taxpayer fails to pay the tax due, plus any estimated tax liability, before the payment becomes delinquent. A claim for the increased credit amount under subsection A, paragraph 2 of this section is not allowed if the taxpayer fails to file using the department's electronic filing program for any taxable period during the calendar year. The department shall recapture any credit amounts claimed by the taxpayer but disallowed.

D. For the purposes of this section, "taxpayer" means the business entity under which the business reports for state income tax purposes or an entity that is exempt from state income tax.

§ 42-5018 Method of payment

All remittances of taxes imposed by this article shall be made by bank draft, check, cashier's check, money order, cash or electronic funds transfer to the department, which shall issue receipts therefor to the taxpayers, but no remittance other than cash shall be final discharge of liability for the tax levied by this article until it has been paid in cash to the department.

§ 42-5019 Reporting sales made in more than one class

A person engaged in any business in which sales are made on which the same rate does not apply, or in two or more businesses with respect to which the rate to be applied is not the same, shall make separate returns of the gross proceeds of sales or the gross income of each business separately classified.

§ 42-5020 Persons engaged in more than one business

Any person engaging in two or more forms of business of like classification taxable under this article may file a consolidated return covering all business activities of like classification engaged in within this state.

§ 42-5021 Payment of additional taxes after audit

Any additional tax due as disclosed by an audit made under section 42-1108 shall be paid within thirty days after receipt of such assessment, or if an appeal is taken to the department, within ten days after the order or decision of the department has become final.

§ 42-5022 Burden of proving sale not at retail

The burden of proving that a sale of tangible personal property was not a sale at retail shall be on the person who made the sale, unless either:

The person has taken from the purchaser a certificate signed by and bearing the name and address of the purchaser that the property was purchased for resale in the ordinary course of business and that he has a valid license, with the number thereof, to sell the kind of property purchased.
The person is exempt from the requirement of a certificate pursuant to section 42-5009, subsection N.

§ 42-5023 Presumption as to tax base

For the purpose of proper administration of this article and to prevent evasion of the tax imposed by this article it is presumed that all gross proceeds of sales and gross income derived by a person from business activity classified under a taxable business classification comprise the tax base for the business until the contrary is established.

§ 42-5024 Personal liability for tax; remedies for collection

Every tax imposed by this article and all increases, interest and penalties thereon shall become, from the time they are due and payable, a personal debt of the taxpayer to the state and may be collected by legal action under section 42-1114. Such remedy shall be in addition to existing remedies or those provided in this article.

§ 42-5025 Failure or refusal to permit examination of records; classification

B. In addition to the penalties prescribed by this section the civil and criminal penalties prescribed by sections 42-1125 and 42-1127 apply to violations of this chapter.

§ 42-5026 Failure to file return; notice; hearing; levy of tax

A. If any person required to file a return fails or refuses to do so, the department shall proceed to obtain facts and information on which to base the tax prescribed by this article, and for such purpose the department or its agent may examine the books, records and papers of such person, and may take evidence on oath of any person who it believes is in possession of facts or information pertinent to the inquiry. The director or his agent may administer the oath. As soon as the department procures such information it shall hold a public hearing for the purpose of ascertaining the amount of tax payable by such person.

B. The department shall give not less than ten days' notice in writing of the time and place of holding the hearing, which shall be mailed to the person at his last known address, or served upon him personally. To represent the taxpayer at the hearing or to appear on the taxpayer's behalf is deemed not to be the practice of law.

C. The levy of the tax after such hearing shall be final as to any person who fails or refuses to file a return.

§ 42-5027 Enjoining defaulting taxpayer from continuing in business

Any person against whom a tax is levied under this article may be enjoined by an action commenced by the attorney general or a county attorney in the name of the state, at the request of the department, from engaging or continuing in any business for which a tax is imposed by this article until the taxes have been paid, and until such person has complied with this article.

§ 42-5028 Failure to pay; personal liability

A person who fails to remit any additional charge made to cover the tax or truthfully account for and pay over any such amount is, in addition to other penalties provided by law, personally liable for the total amount of the additional charge so made and not accounted for or paid over.

§ 42-5029 Remission and distribution of monies; withholding; definition

(Caution: 1998 Prop. 105 applies)

A. The department shall deposit, pursuant to sections 35-146 and 35-147, all revenues collected under this article and articles 4, 5 and 8 of this chapter pursuant to section 42-1116, separately accounting for:

Payments of estimated tax under section 42-5014, subsection D.
Revenues collected pursuant to section 42-5070.
Revenues collected under this article and article 5 of this chapter from and after June 30, 2000 from sources located on Indian reservations in this state.
Revenues collected pursuant to section 42-5010, subsection G and section 42-5155, subsection D.
Revenues collected pursuant to section 42-5010.01 and section 42-5155, subsection E.
Revenues collected pursuant to section 42-5061 from a remote seller.

B. The department shall credit payments of estimated tax to an estimated tax clearing account and each month shall transfer all monies in the estimated tax clearing account to a fund designated as the transaction privilege and severance tax clearing account. The department shall credit all other payments to the transaction privilege and severance tax clearing account, separately accounting for the monies designated as distribution base under sections 42-5010, 42-5164 and 42-5205. Each month the department shall report to the state treasurer the amount of monies collected pursuant to this article and articles 4, 5 and 8 of this chapter.

C. On notification by the department, the state treasurer shall distribute the monies deposited in the transaction privilege and severance tax clearing account in the manner prescribed by this section and by sections 42-5164 and 42-5205, after deducting warrants drawn against the account pursuant to sections 42-1118 and 42-1254.

D. Of the monies designated as distribution base, the department shall:

Pay twenty-five percent to the various incorporated municipalities in this state in proportion to their population to be used by the municipalities for any municipal purpose, except a municipality shall use monies paid from revenues separately accounted for pursuant to subsection A, paragraph 6 of this section and paid pursuant to this paragraph for public safety before any other municipal purpose.
Pay 38.08 percent to the counties in this state by averaging the following proportions:

(a) The proportion that the population of each county bears to the total state population.

(b) The proportion that the distribution base monies collected during the calendar month in each county under this article, section 42-5164, subsection B and section 42-5205, subsection B bear to the total distribution base monies collected under this article, section 42-5164, subsection B and section 42-5205, subsection B throughout the state for the calendar month.

Pay an additional 2.43 percent to the counties in this state as follows:

(a) Average the following proportions:

(i) The proportion that the assessed valuation used to determine secondary property taxes of each county, after deducting that part of the assessed valuation that is exempt from taxation at the beginning of the month for which the amount is to be paid, bears to the total assessed valuations used to determine secondary property taxes of all the counties after deducting that portion of the assessed valuations that is exempt from taxation at the beginning of the month for which the amount is to be paid. Property of a city or town that is not within or contiguous to the municipal corporate boundaries and from which water is or may be withdrawn or diverted and transported for use on other property is considered to be taxable property in the county for purposes of determining assessed valuation in the county under this item.

(ii) The proportion that the distribution base monies collected during the calendar month in each county under this article, section 42-5164, subsection B and section 42-5205, subsection B bear to the total distribution base monies collected under this article, section 42-5164, subsection B and section 42-5205, subsection B throughout this state for the calendar month.

(b) If the proportion computed under subdivision (a) of this paragraph for any county is greater than the proportion computed under paragraph 2 of this subsection, the department shall compute the difference between the amount distributed to that county under paragraph 2 of this subsection and the amount that would have been distributed under paragraph 2 of this subsection using the proportion computed under subdivision (a) of this paragraph and shall pay that difference to the county from the amount available for distribution under this paragraph. Any monies remaining after all payments under this subdivision shall be distributed among the counties according to the proportions computed under paragraph 2 of this subsection.

After any distributions required by sections 42-5030, 42-5030.01, 42-5031, 42-5032, 42-5032.01, 42-5032.02 and 42-5032.03 and after making any transfer to the water quality assurance revolving fund as required by section 49-282, subsection B, credit the remainder of the monies designated as distribution base to the state general fund. From this amount the legislature shall annually appropriate to:

(a) The department of revenue, sufficient monies to administer and enforce this article and articles 5 and 8 of this chapter.

(b) The department of economic security, monies to be used for the purposes stated in title 46, chapter 1.

(c) The firearms safety and ranges fund established by section 17-273, $50,000 derived from the taxes collected from the retail classification pursuant to section 42-5061 for the current fiscal year.

E. If approved by the qualified electors voting at a statewide general election, all monies collected pursuant to section 42-5010, subsection G and section 42-5155, subsection D shall be distributed each fiscal year pursuant to this subsection. The monies distributed pursuant to this subsection are in addition to any other appropriation, transfer or other allocation of public or private monies from any other source and shall not supplant, replace or cause a reduction in other school district, charter school, university or community college funding sources. The monies shall be distributed as follows:

If there are outstanding state school facilities revenue bonds pursuant to title 15, chapter 16, article 7, each month one-twelfth of the amount that is necessary to pay the fiscal year's debt service on outstanding state school improvement revenue bonds for the current fiscal year shall be transferred each month to the school improvement revenue bond debt service fund established by section 15-2084. The total amount of bonds for which these monies may be allocated for the payment of debt service shall not exceed a principal amount of eight hundred million dollars exclusive of refunding bonds and other refinancing obligations.
After any transfer of monies pursuant to paragraph 1 of this subsection, twelve per cent of the remaining monies collected during the preceding month shall be transferred to the technology and research initiative fund established by section 15-1648 to be distributed among the universities for the purpose of investment in technology and research-based initiatives.
After the transfer of monies pursuant to paragraph 1 of this subsection, three per cent of the remaining monies collected during the preceding month shall be transferred to the workforce development account established in each community college district pursuant to section 15-1472 for the purpose of investment in workforce development programs.
After transferring monies pursuant to paragraphs 1, 2 and 3 of this subsection, one-twelfth of the amount a community college that is owned, operated or chartered by a qualifying Indian tribe on its own Indian reservation would receive pursuant to section 15-1472, subsection D, paragraph 2 if it were a community college district shall be distributed each month to the treasurer or other designated depository of a qualifying Indian tribe. Monies distributed pursuant to this paragraph are for the exclusive purpose of providing support to one or more community colleges owned, operated or chartered by a qualifying Indian tribe and shall be used in a manner consistent with section 15-1472, subsection B. For the purposes of this paragraph, "qualifying Indian tribe" has the same meaning as defined in section 42-5031.01, subsection D.
After transferring monies pursuant to paragraphs 1, 2 and 3 of this subsection, one-twelfth of the following amounts shall be transferred each month to the department of education for the increased cost of basic state aid under section 15-971 due to added school days and associated teacher salary increases enacted in 2000:

(a) In fiscal year 2001-2002, $15,305,900.

(b) In fiscal year 2002-2003, $31,530,100.

(d) In fiscal year 2004-2005, $66,957,200.

(e) In fiscal year 2005-2006 and each fiscal year thereafter, $86,280,500.

After transferring monies pursuant to paragraphs 1, 2 and 3 of this subsection, seven million eight hundred thousand dollars is appropriated each fiscal year, to be paid in monthly installments, to the department of education to be used for school safety as provided in section 15-154 and two hundred thousand dollars is appropriated each fiscal year, to be paid in monthly installments to the department of education to be used for the character education matching grant program as provided in section 15-154.01.
After transferring monies pursuant to paragraphs 1, 2 and 3 of this subsection, no more than seven million dollars may be appropriated by the legislature each fiscal year to the department of education to be used for accountability purposes as described in section 15-241 and title 15, chapter 9, article 8.
After transferring monies pursuant to paragraphs 1, 2 and 3 of this subsection, one million five hundred thousand dollars is appropriated each fiscal year, to be paid in monthly installments, to the failing schools tutoring fund established by section 15-241.
After transferring monies pursuant to paragraphs 1, 2 and 3 of this subsection, twenty-five million dollars shall be transferred each fiscal year to the state general fund to reimburse the general fund for the cost of the income tax credit allowed by section 43-1072.01.
After the payment of monies pursuant to paragraphs 1 through 9 of this subsection, the remaining monies collected during the preceding month shall be transferred to the classroom site fund established by section 15-977. The monies shall be allocated as follows in the manner prescribed by section 15-977:

(a) Forty per cent shall be allocated for teacher compensation based on performance.

(b) Twenty per cent shall be allocated for increases in teacher base compensation and employee related expenses.

F. The department shall credit the remainder of the monies in the transaction privilege and severance tax clearing account to the state general fund, subject to any distribution required by section 42-5030.01.

G. Notwithstanding subsection D of this section, if a court of competent jurisdiction finally determines that tax monies distributed under this section were illegally collected under this article or articles 5 and 8 of this chapter and orders the monies to be refunded to the taxpayer, the department shall compute the amount of such monies that was distributed to each city, town and county under this section. Each city's, town's and county's proportionate share of the costs shall be based on the amount of the original tax payment each municipality and county received. Each month the state treasurer shall reduce the amount otherwise distributable to the city, town and county under this section by 1/36 of the total amount to be recovered from the city, town or county until the total amount has been recovered, but the monthly reduction for any city, town or county shall not exceed ten percent of the full monthly distribution to that entity. The reduction shall begin for the first calendar month after the final disposition of the case and shall continue until the total amount, including interest and costs, has been recovered.

H. On receiving a certificate of default from the greater Arizona development authority pursuant to section 41-2257 or 41-2258 and to the extent not otherwise expressly prohibited by law, the state treasurer shall withhold from the next succeeding distribution of monies pursuant to this section due to the defaulting political subdivision the amount specified in the certificate of default and immediately deposit the amount withheld in the greater Arizona development authority revolving fund. The state treasurer shall continue to withhold and deposit the monies until the greater Arizona development authority certifies to the state treasurer that the default has been cured. In no event may the state treasurer withhold any amount that the defaulting political subdivision certifies to the state treasurer and the authority as being necessary to make any required deposits then due for the payment of principal and interest on bonds of the political subdivision that were issued before the date of the loan repayment agreement or bonds and that have been secured by a pledge of distributions made pursuant to this section.

I. Except as provided by sections 42-5033 and 42-5033.01, the population of a county, city or town as determined by the most recent United States decennial census plus any revisions to the decennial census certified by the United States bureau of the census shall be used as the basis for apportioning monies pursuant to subsection D of this section.

J. Except as otherwise provided by this subsection, on notice from the department of revenue pursuant to section 42-6010, subsection B, the state treasurer shall withhold from the distribution of monies pursuant to this section to the affected city or town the amount of the penalty for business location municipal tax incentives provided by the city or town to a business entity that locates a retail business facility in the city or town. The state treasurer shall continue to withhold monies pursuant to this subsection until the entire amount of the penalty has been withheld. The state treasurer shall credit any monies withheld pursuant to this subsection to the state general fund as provided by subsection D, paragraph 4 of this section. The state treasurer shall not withhold any amount that the city or town certifies to the department of revenue and the state treasurer as being necessary to make any required deposits or payments for debt service on bonds or other long-term obligations of the city or town that were issued or incurred before the location incentives provided by the city or town.

K. On notice from the auditor general pursuant to section 9-626, subsection D, the state treasurer shall withhold from the distribution of monies pursuant to this section to the affected city the amount computed pursuant to section 9-626, subsection D. The state treasurer shall continue to withhold monies pursuant to this subsection until the entire amount specified in the notice has been withheld. The state treasurer shall credit any monies withheld pursuant to this subsection to the state general fund as provided by subsection D, paragraph 4 of this section.

L. Except as otherwise provided by this subsection, on notice from the attorney general pursuant to section 41-194.01, subsection B, paragraph 1 that an ordinance, regulation, order or other official action adopted or taken by the governing body of a county, city or town violates state law or the Constitution of Arizona, the state treasurer shall withhold the distribution of monies pursuant to this section to the affected county, city or town and shall continue to withhold monies pursuant to this subsection until the attorney general certifies to the state treasurer that the violation has been resolved. The state treasurer shall redistribute the monies withheld pursuant to this subsection among all other counties, cities and towns in proportion to their population as provided by subsection D of this section. The state treasurer shall not withhold any amount that the county, city or town certifies to the attorney general and the state treasurer as being necessary to make any required deposits or payments for debt service on bonds or other long-term obligations of the county, city or town that were issued or incurred before committing the violation.

M. For the purposes of this section, "community college district" means a community college district that is established pursuant to sections 15-1402 and 15-1403 and that is a political subdivision of this state and, unless otherwise specified, includes a community college tuition financing district established pursuant to section 15-1409.

§ 42-5029.01 Qualifying Indian tribe; report; accounting procedures; definitions

A. To qualify for funding pursuant to section 42-5029, subsection E, paragraph 4 or section 42-5029.02, subsection A, paragraph 4, a qualifying Indian tribe shall report its full-time equivalent student enrollment, as calculated under section 15-1466.01, in the preceding fiscal year to the auditor general by June 30 each year and shall comply with the same accounting procedures and practices prescribed by the auditor general for calculating full-time equivalent student enrollment for community college districts. A qualifying Indian tribe may report to the state board of education the number of students simultaneously enrolled in a course for both high school and community college credit.

B. For the purposes of this section:

"Community college" includes any college that is owned, operated or chartered by a qualifying Indian tribe.
"Qualifying Indian tribe" has the same meaning prescribed in section 42-5031.01, subsection D.

§ 42-5029.02 Distribution of revenues for education; definitions

A. All monies collected pursuant to section 42-5010.01 and section 42-5155, subsection E shall be distributed each fiscal year pursuant to this subsection. The monies distributed pursuant to this subsection are in addition to any other appropriation, transfer or other allocation of public or private monies from any other source and may not supplant, replace or cause a reduction in other school district, charter school, university or community college funding sources. The monies shall be distributed as follows:

$64,100,000 is appropriated each fiscal year, to be paid in monthly installments, to the superintendent of public instruction for basic state aid.
After any transfer of monies pursuant to paragraph 1 of this subsection, twelve percent of the remaining monies collected during the preceding month shall be transferred to the technology and research initiative fund established by section 15-1648 to be distributed among the universities under the jurisdiction of the Arizona board of regents for the purpose of investment in technology and research-based initiatives.
After the transfer of monies pursuant to paragraph 1 of this subsection, three percent of the remaining monies collected during the preceding month shall be transferred to the workforce development account established in each community college district pursuant to section 15-1472 for the purpose of investment in workforce development programs.
After the transfer of monies pursuant to paragraphs 1, 2 and 3 of this subsection, one-twelfth of the amount a community college that is owned, operated or chartered by a qualifying Indian tribe on its own Indian reservation would receive pursuant to section 15-1472, subsection D, paragraph 2 if it were a community college district shall be distributed each month to the treasurer or other designated depository of the qualifying Indian tribe. Monies distributed pursuant to this paragraph are for the exclusive purpose of providing support to one or more community colleges that are owned, operated or chartered by a qualifying Indian tribe and shall be used in a manner consistent with section 15-1472, subsection B.
After the transfer of monies pursuant to paragraphs 1, 2 and 3 of this subsection, one-twelfth of $86,280,500 shall be transferred each month to the department of education for the increased cost of basic state aid under section 15-971 due to added school days and associated teacher salary increases that were enacted in 2000.
After the transfer of monies pursuant to paragraphs 1, 2 and 3 of this subsection, $7,800,000 is appropriated each fiscal year, to be paid in monthly installments, to the department of education to be used for school safety as provided in section 15-154 and $200,000 is appropriated each fiscal year, to be paid in monthly installments, to the department of education to be used for the character education matching grant program as provided in section 15-154.01.
After the transfer of monies pursuant to paragraphs 1, 2 and 3 of this subsection, the legislature may not appropriate more than $7,000,000 each fiscal year to the department of education to be used for accountability purposes as described in section 15-241.02 and title 15, chapter 9, article 8.
After the transfer of monies pursuant to paragraphs 1, 2 and 3 of this subsection, $1,500,000 is appropriated each fiscal year, to be paid in monthly installments, to the failing schools tutoring fund established by section 15-241.
After the transfer of monies pursuant to paragraphs 1, 2 and 3 of this subsection, $25,000,000 shall be transferred each fiscal year to the state general fund to reimburse the state general fund for the cost of the income tax credit allowed by section 43-1072.02.
From and after June 30, 2022 through June 30, 2028, after the transfer of monies pursuant to paragraphs 1 through 9 of this subsection, an amount determined by the director pursuant to section 42-5041 to the department of revenue integrated tax system project fund established by section 42-5041.
After the transfer of monies pursuant to paragraphs 1 through 10 of this subsection, the remaining monies collected during the preceding month shall be transferred to the classroom site fund established by section 15-977. The monies shall be allocated in the manner prescribed by section 15-977.

B. For the purposes of this section:

"Community college district" means a community college district that is established pursuant to sections 15-1402 and 15-1403 and that is a political subdivision of this state and, unless otherwise specified, includes a community college tuition financing district established pursuant to section 15-1409.
"Qualifying Indian tribe" has the same meaning as defined in section 42-5031.01.

§ 42-5030 Transfers to the Arizona convention center development fund; distributions

A. At the same time as the first distributions each fiscal year pursuant to section 42-5029, the department shall credit to the Arizona convention center development fund established by title 9, chapter 6, article 1 the amounts determined pursuant to this section.

B. The department shall credit twenty million dollars in each fiscal year until a certification of completion of construction is filed with the state treasurer pursuant to section 9-622. In each fiscal year thereafter, the department shall credit the amounts computed pursuant to subsection C of this section to the Arizona convention center development fund for each eligible project as described in section 9-605.

C. The amount distributed pursuant to subsection B of this section shall be computed by dividing the total cost of the eligible project not funded from municipal sources as identified in the certificate of completion of construction filed pursuant to section 9-622 by three hundred million and multiplying the quotient by the amount prescribed in section 9-602, subsection D.

D. If the chief financial officer of the eligible city certifies to the state treasurer pursuant to section 9-602 that no additional distributions are required from the Arizona convention center development fund for an eligible project, the department shall make no further transfers to the fund for that project.

§ 42-5030.01 Distribution of revenues for school facilities

From and after June 30, 1999, if there are outstanding state school facilities revenue bonds pursuant to title 41, chapter 56, article 6, and if the amount of monies available under section 37-521, subsection B, paragraph 1 is insufficient to pay the debt service due on the outstanding bonds in that fiscal year, the state treasurer shall transfer to the state school facilities revenue bond debt service fund established pursuant to section 41-5754 the amount that is necessary to pay the debt service due in that fiscal year on the outstanding bonds from state general fund revenues that were collected pursuant to this chapter.

§ 42-5031 Distribution of multipurpose facility revenues to district

A. Subject to the requirements of subsection D of this section, if a county stadium district is authorized by an election pursuant to section 48-4237, subsection E, paragraph 5 to use the amounts paid to the district pursuant to subsection B of this section as permitted by law, then after delivery of a resolution of the district board of directors requesting payment, which resolution shall contain notice of the exercise of the option to begin payments provided for in this subsection, the state treasurer shall pay each month, beginning with the second calendar month after the optional payment commencement event contained in the resolution, from the amount designated as distribution base pursuant to section 42-5029, subsection D, the amount determined under subsection B of this section to the district. Payments under this section shall continue until July 1, 2035 or until the date all authorized debt service payments are completed as provided by section 48-4203, subsection B, paragraph 3, whichever date is later.

B. The amount to be paid each month under subsection A of this section is one-half of the amount of state transaction privilege tax revenues received in the second preceding calendar month from all persons conducting business under any business classification under this article at a multipurpose facility site, or in the construction of a multipurpose facility, the public or district owned components of which cost at least two hundred million dollars to construct. In no event shall the amount to be paid each month under this section exceed the net new state transaction privilege tax revenues received from the multipurpose facility site as compared to the revenues received in the same month during the twelve months before the month in which the public vote pursuant to section 48-4237 is held. The amount paid to the district shall not exceed the amount required to service the debts and obligations of the district and to meet the purposes set forth in section 48-4204, subsection B.

C. The primary component, as described in section 48-4201, shall be constructed during the first phase of the project.

D. To qualify for payments under this section, the municipality in which the multipurpose facility site is located must either obtain voter approval for a local transaction privilege tax to pay costs associated with a multipurpose facility, or make a financial commitment by intergovernmental agreement between the municipality and the district to make direct payments to the district from any lawful source, including municipal transaction privilege taxes or to expend monies for land, infrastructure or other improvements directly related to the multipurpose facility or the multipurpose facility site, by the end of the date referred to in subsection A of this section in an aggregate amount equal to the amount received by the district pursuant to this section.

E. If the municipality in which the multipurpose facility site is located fails to satisfy the obligations of the municipality pursuant to subsection D of this section, then beginning six months after the date referred to in subsection A of this section, distributions otherwise payable to the municipality pursuant to section 42-5029, subsection C shall be reduced by an amount equal to the excess of the amount received by the district pursuant to this section over the amount paid or expended by the municipality. The amount of the reduction shall be distributed to the district to satisfy the financial commitment of the municipality pursuant to subsection D of this section.

F. To comply with the requirements of this section, the county stadium district board of directors or any city or town that is part of the county stadium district shall supply the department with all requested information necessary to administer this section.

§ 42-5031.01 Distribution of revenues for Indian tribal postsecondary educational institutions; definition

A. Subject to subsection C of this section, each month the state treasurer shall transmit to the treasurer or other designated depository of each qualifying Indian tribe the amount of transaction privilege tax revenues received pursuant to this article in the preceding month from all sources located on the Indian reservation established for the qualifying Indian tribe as determined pursuant to section 42-5029, subsection A, paragraph 3.

B. The monies distributed pursuant to this section are for the exclusive purpose of supporting the maintenance, renewal and capital expenses of one or more community college campuses in this state that are owned, operated or chartered by each qualifying Indian tribe on its own Indian reservation. Before receiving any monies under this section, a qualifying Indian tribe shall enter into an initial compact with this state on or before September 1, 2017, signed by the governor, to account for the use of monies distributed pursuant to this section. The compact shall:

Be for a term of at least twenty years. After a hearing and review of the compact by the joint legislative budget committee held during the fourth year prior to the expiration of the compact's term, a compact may be amended and renewed for an additional term of at least twenty years with the consent of this state, signed by the governor, and the qualifying Indian tribe, signed by the chairman, president or governor of the qualifying Indian tribe.
Require the monies to be used primarily for capital needs, including maintenance and renewal of existing facilities at designated community college campuses on the qualifying Indian tribe's own reservation in this state.
Provide for audits by the auditor general of the use of the monies. The auditor general shall submit copies of each audit to the joint legislative budget committee.
If necessary, provide for reimbursement to the department of revenue of costs associated with implementing this section, not to exceed one hundred fifty thousand dollars, from revenues that would otherwise be paid to the qualifying Indian tribe pursuant to this section.

C. Notwithstanding subsection A of this section, the state treasurer shall not transmit in any fiscal year more than the sum of the following amounts:

With respect to a single community college, one million seven hundred fifty thousand dollars or more than ten percent of transaction privilege tax revenues received pursuant to this article from all sources located on the reservation, whichever is less.
With respect to an additional technical college located on the same Indian reservation, eight hundred seventy-five thousand dollars or more than five percent of transaction privilege tax revenues received pursuant to this article from all sources located on the reservation, whichever is less.

D. For the purposes of this section, "qualifying Indian tribe" means an Indian tribe that owns, operates and charters any community college or postsecondary educational institution located on its own reservation in this state.

§ 42-5032 Distribution of bridge construction and highway improvement revenues to county; definitions

A. If, by June 30, 1998, the department of transportation enters into an intergovernmental agreement pursuant to section 28-401, subsection C or section 28-7652, subsection A for the construction of a bridge, the state treasurer shall pay each month, beginning from and after June 30, 1998 through June 30, 2010, pursuant to section 42-5029, subsection D, paragraph 4, one-twelfth of the amount determined under this subsection to a county that issues bonds pursuant to title 28, chapter 21, article 4 or enters into an intergovernmental agreement pursuant to section 28-401, subsection C. The amount to be paid under this subsection is the amount of state transaction privilege tax revenues received each calendar year, up to four hundred sixteen thousand six hundred sixty-seven dollars, from taxpayers described in subsection C of this section.

B. If, by December 30, 2004, the department of transportation enters into an intergovernmental agreement pursuant to section 28-401, subsection D or section 28-7652, subsection B for the design, reconstruction and improvement of a county highway approaching and traversing a bridge financed pursuant to subsection A of this section, the state treasurer shall pay each month, beginning from and after June 30, 2007 through June 30, 2019, pursuant to section 42-5029, subsection D, paragraph 4, one-twelfth of the amount determined under this subsection to a county that issues bonds pursuant to title 28, chapter 21, article 4 or enters into an intergovernmental agreement pursuant to section 28-401, subsection D. The amount to be paid under this subsection is the amount of state transaction privilege tax revenues received each calendar year, up to four hundred sixteen thousand six hundred sixty-seven dollars, from taxpayers described in subsection C of this section. If an owner of a sports entertainment facility described in this section voluntarily conveys a majority ownership interest in the facility to another entity or owner on or before June 30, 2014, the county must reimburse the state general fund the amount paid to the county pursuant to this subsection through the date of the conveyance, either by withholding transaction privilege tax revenues otherwise payable to the county under section 42-5029, subsection D or as otherwise provided by the intergovernmental agreement entered into pursuant to section 28-401, subsection D. The reimbursement of monies to the state general fund pursuant to this subsection does not affect the continuing payment of highway improvement revenues to the highway improvement interest fund or the redemption fund under section 28-7656, subsection B. For the purposes of this subsection, a conveyance occurs on the date a transfer of ownership or an option to acquire ownership becomes irrevocable.

C. This section applies with respect to transaction privilege tax revenues collected from all persons conducting business under any business classification under this article at a sports entertainment facility, destination resort or retail center that complies with all of the following:

Produces a total of at least six hundred thousand dollars each year in transaction privilege tax revenues to this state pursuant to this article.
Will acquire direct county highway access either:

(a) Across a river by the bridge constructed.

(b) By way of the county highway being widened and improved.

Produces at least nine hundred thousand dollars in each of the years 2007 through 2011 in transaction privilege tax revenues to this state.

D. The department shall report the amount under subsections A and B of this section to the state treasurer on or before March 31 of each year for payment for the following fiscal year.

E. For purposes of this section:

"Destination resort" means a person engaged in businesses classified under both the transient lodging classification and the amusement classification that provides on-site recreational facilities such as a golf course, tennis courts or a riding stable.
"Retail center" means a complex consisting of at least two businesses classified under the retail classification.
"Sports entertainment facility" means a complex located on at least three hundred acres that requires a ticket for admission for viewing a sporting event.

§ 42-5032.01 Distribution of revenues for tourism and sports authority

A. Each month the state treasurer shall pay, from the amount designated as distribution base pursuant to section 42-5029, subsection D, the amount determined under subsection B of this section to the tourism and sports authority for deposit in the authority's facility revenue clearing account established by section 5-834.

B. The amount to be paid under subsection A of this section is the total amount of state transaction privilege tax revenues received from persons conducting business under:

The retail, amusement and restaurant classifications at, or with respect to events held at, a multipurpose facility that is owned or operated by the authority pursuant to title 5, chapter 8.
The retail, amusement and restaurant classifications at, or with respect to, professional football contests that are held beginning July 2001 in a stadium located on the campus of an institution under the jurisdiction of the Arizona board of regents.

C. Each month the state treasurer shall pay, from the amount designated as distribution base pursuant to section 42-5029, subsection D, the total amount of state transaction privilege tax revenues received from persons conducting business under the prime contracting classification at a multipurpose facility that is owned or operated by the tourism and sports authority pursuant to title 5, chapter 8 for deposit in the authority's construction account established by section 5-833.

§ 42-5032.02 Distribution of revenues for city, town or county infrastructure improvements related to manufacturing facilities; definitions

A. Subject to subsection B of this section, from and after September 30, 2013 through September 30, 2033, the state treasurer shall pay in monthly increments a city, town or county up to the amount determined under subsection C of this section for public infrastructure improvements for the benefit of a manufacturing facility.

B. The state treasurer shall not make any payments under subsection C of this section until both of the following apply:

Ten percent of the qualifying capital investment that is certified under subsection D of this section and that constitutes construction phase services, as defined in section 42-5075, has been made by the manufacturing facility.
From and after June 30, 2014.

C. The total amount paid to a city, town or county under subsection A of this section shall not exceed the total amount of state transaction privilege tax revenues collected under section 42-5010, subsection A from persons conducting business under section 42-5075 derived from contracts to construct buildings and associated improvements for the benefit of a manufacturing facility or eighty percent of the total cost of the public infrastructure improvements, whichever is less. The total amount paid to all cities, towns and counties under this subsection shall not exceed a maximum of $200,000,000.

D. Within one hundred eighty days after the commencement of the construction of buildings and associated improvements for the benefit of a manufacturing facility that will require a city, town or county to make infrastructure improvements, the manufacturing facility shall file a sworn certification with the Arizona commerce authority and submit a copy of this sworn certification to the applicable city, town or county that the manufacturing facility agrees to either:

Make at least $500,000,000 in capital investment if the manufacturing facility is located in a county that has a population of eight hundred thousand persons or more.
Make at least $50,000,000 in capital investment if the manufacturing facility is located in a county that has a population of less than eight hundred thousand persons.

E. The certification under subsection D of this section shall contain a sworn statement or certification, signed by an officer of the manufacturing facility under penalty of perjury, that the information contained is true and correct according to the best belief and knowledge of the person submitting the information after a reasonable investigation of the facts.

F. Before submitting the certification to the Arizona commerce authority, the manufacturing facility and the city, town or county must enter into a written agreement that:

Identifies and states the cost of the public infrastructure improvements that will be constructed.
Identifies the sources of monies, including monies received pursuant to this section, that will be used to pay for the public infrastructure improvements.

G. On receipt of the sworn certification from a manufacturing facility pursuant to subsection D of this section, the city, town or county shall enter into a written agreement with the department. This agreement and any amendments or changes to the agreement shall:

State the cost of the public infrastructure improvements and separately identify the particular improvements that will be made.
State that the monies received under this section will be used exclusively to pay for public infrastructure improvements that are necessary to support the activities of the manufacturing facility.
State that the city, town or county will commit all of its portion of the revenue received pursuant to section 42-5029, subsection D derived from contracts subject to section 42-5075 to construct buildings and associated improvements for the benefit of the manufacturing facility for public infrastructure improvements that benefit the manufacturing facility.
State that the city, town or county will immediately notify the department when monies received under this section exceed eighty percent of the cost of the infrastructure improvements and will return the amount of the excess to the state treasurer for deposit in the state general fund.
Stipulate the actual amount of the construction funding that will be derived from sources other than this state.
Identify the persons who will be prime contractors on the construction of buildings and associated improvements for the benefit of a manufacturing facility and state that each prime contractor has been notified as to which portion of the contractor's income shall be separately identified to the department pursuant to section 42-5075, subsection H.
State that the city, town or county agrees that any amounts paid by the department to a prime contractor as identified under paragraph 6 of this subsection resulting from an audit adjustment or claim for credit or refund of taxes described in subsection C of this section shall be recovered by the department from the city, town or county by reducing the amount paid to the city, town or county under section 42-5029 from monies designated as distribution base in the month next succeeding the month in which the adjustment or claim is paid.
State that the city, town or county agrees that the department will use the amounts subject to any distribution required under subsection A of this section in calculating the maximum amount set by subsection C of this section.
State that the city, town or county agrees that if, on notification by the department, the state treasurer ceases payments because of the condition described in subsection H of this section, the city, town or county has no claim to additional payments if the department subsequently pays amounts to a prime contractor identified in an agreement with any city, town or county, as described in paragraph 6 of this subsection, due to an audit adjustment or claim for credit or refund of taxes described in subsection C of this section.
Provide any other information deemed necessary by the department.

H. On notification by the department, the state treasurer shall cease payments under subsection A of this section if either of the following occurs:

The city, town or county has received monies that meet or exceed eighty percent of the cost of the public infrastructure improvements that are necessary to support the activities related to the manufacturing facility as described in the written agreement pursuant to subsection G of this section.
The total amount subject to any distribution required under subsection A of this section has met the maximum amount set by subsection C of this section.

I. For the purposes of this section:

"Associated improvement" includes any public infrastructure improvement that is made for the benefit of the manufacturing facility outside of the parcel or parcels of real property where the manufacturing facility is located.
"Capital investment" means an expenditure to acquire, lease or improve property that is used for the benefit of a manufacturing facility, including land, buildings, machinery and fixtures.
"Manufacturing facility":

(a) Means an establishment that is engaged in the mechanical, physical or chemical transformation or fabrication of materials, substances or components into new products in this state, that is classified within sections 31 through 33 inclusive of the 2007 edition of the North American industry classification system as published by the national technical information service of the United States department of commerce and that agrees to either:

(i) Make at least $500,000,000 in capital investment if the manufacturing facility is located in a county that has a population of eight hundred thousand persons or more.

(ii) Make at least $50,000,000 in capital investment if the manufacturing facility is located in a county that has a population of less than eight hundred thousand persons.

(b) Does not include mining, milling or smelting mineral ore or generating electricity.

"Population" means the population determined in the most recent United States decennial census or the most recent special census as provided in section 28-6532.
"Public infrastructure" means water production, delivery and disposal facilities, wastewater production, delivery and disposal facilities and roads that are necessary to support the activities of the manufacturing facility.

§ 42-5032.03 Distribution of revenues for county stadium district; definitions

(Rpld. 4/1/56)

A. Subject to section 48-4238, beginning the first month following September 26, 2025 and each month thereafter through March 31, 2056, the state treasurer, on instruction from the department, shall transmit the amount determined under subsection B of this section to the county stadium district established pursuant to title 48, chapter 26 for deposit in the county stadium district fund established pursuant to section 48-4231.

B. The amount to be transmitted under subsection A of this section is the total amount of state transaction privilege tax revenues received for taxable periods beginning October 1, 2025 through December 31, 2055 from persons conducting business under the retail, amusement, restaurant and prime contracting classifications at, or with respect to events held at, a major league baseball facility or an adjacent building that is owned by a county stadium district pursuant to title 48, chapter 26 and operated by the county stadium district or the professional baseball franchise organization that occupies the major league baseball facility or adjacent building.

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

§ 42-5033 Special census

A. During the fifth year following the decennial census, a county, city or town may cause to be taken by the United States bureau of the census a special census of the population of the county, city or town. The results of the special census may be certified by the director. Beginning July 1 in the sixth year following the decennial census, the special census plus any revisions to the special census certified by the United States bureau of the census shall be used as the basis of apportionment of the taxes under section 42-5029, subsection D until the next federal decennial census, except that a city or town may elect to use either the results of the special census or the most recent population estimates from the United States bureau of the census as provided under section 42-5033.01. A city or town may use the results of the special census for only one year, and beginning on July 1 in the second year after the special census, the city or town shall use the most recent population estimates from the United States bureau of the census as provided under section 42-5033.01 as the basis for the apportionment of monies pursuant to this article.

B. Notwithstanding any of the provisions of section 42-5029, any municipality that is initially incorporated subsequent to the decennial census or July 1 of the fifth year thereafter and that has caused a special census of the population within the municipal limits to be taken by the United States census bureau may cause the result of such special census to be certified to the director. Commencing on July 1 following the completion of such a special census, the city or town may use the results of the special census or the most recent population estimates from the United States bureau of the census as the basis of apportionment of the taxes collected under this article in determining the amount payable to that municipality as provided under section 28-6532. The city or town may use the results of the special census for only one year, and beginning on July 1 in the second year after the special census, the city or town shall use the most recent population estimates from the United States bureau of the census as provided under section 42-5033.01 as the basis for the apportionment of monies pursuant to this article.

§ 42-5033.01 Use of population estimates for state shared revenues

In lieu of conducting a special census as provided by sections 28-6532 and 42-5033:

Before May 1 of the sixth year following a federal decennial census, a county may submit to the director of the department of revenue, the director of the department of transportation and the state treasurer the county's population estimate as of the fifth year following the last decennial census as approved by the office of employment and population statistics. On submittal, that population, plus any revisions due to annexations certified by the United States bureau of the census, shall be used for distribution of state shared tax revenues pursuant to sections 28-5808, 28-6540, 42-5029 and 43-206 to the county beginning July 1 of the sixth year following the last decennial census through June 30 of the year following the next decennial census.
Before May 1 of the sixth year following a federal decennial census, a county may contract with the United States bureau of the census to conduct a sample survey that results in a mid-decade resident population and submit the results of that survey to the director of the department of revenue, the director of the department of transportation and the state treasurer. The survey shall also report total resident population in housing units, total resident population in group quarters, total housing units and total occupied housing units for the county. On submittal, that mid-decade resident population, plus any revisions due to annexations certified by the United States bureau of the census, shall be used as the base for the calculation of population estimates for the sixth year following the decennial census until the next decennial census by the office of employment and population statistics and for distribution of state shared tax revenues pursuant to sections 28-5808, 28-6540, 42-5029 and 43-206 to the county beginning July 1 in the sixth year following the decennial census through June 30 of the year following the next decennial census. A county contracting for the survey may not exercise the option provided in paragraph 1 of this subsection.
Before May 1 of the sixth year following a federal decennial census, a county may request the director of the department of revenue, the director of the department of transportation and the state treasurer to continue to use the most recent United States decennial census through June 30 of the year following the next decennial census for distribution of state shared tax revenues pursuant to sections 28-5808, 28-6540, 42-5029 and 43-206.
The most recent population estimates of the United States bureau of the census shall be used annually for distribution of state shared tax revenues pursuant to sections 28-5808, 28-6540, 42-5029 and 43-206 to cities and towns beginning on July 1 in the second year following the decennial census through June 30 of the year following the next decennial census.

§ 42-5034 Determination of place of business for distribution of tax monies

A. For the purpose of determining the location of a business for purposes of this chapter, a taxpayer shall be deemed to be engaged in business as classified under:

Section 42-5062, at the location where the transportation begins.
Section 42-5072, at the location where the oil, natural gas, limestone, sand, gravel or nonmetalliferous mineral product is extracted, mined, quarried or pumped.
Section 42-5063, at the location where the electricity, gas or water is delivered to the consumer.
Section 42-5064, at the location from which the messages or conversations by telephone or messages by telegraph are transmitted.
Section 42-5067, at the location where the oil or artificial or natural gas is delivered to the consumer.
Section 42-5074, in the case of dining cars, and section 42-5068, in each county or Indian reservation in which such cars are operated in the same proportion that the mileage of railroads in each county over which the cars are operated bears to the total mileage of railroads in the state over which the cars are operated.
Section 42-5065, at the location where the newspaper, magazine or other periodical or publication is published.
Section 42-5066, at the location where the job printing, engraving, embossing or copying is done.
Section 42-5061 and section 42-5352, subsection A, at the location where the sale is made.
Section 42-5074, except in the case of dining cars, in the county or Indian reservation where the restaurants, dining rooms, lunchrooms, lunchstands, soda fountains or similar establishments where articles of food or drink are sold for consumption on the premises are located.
Sections 42-5069, 42-5070, 42-5071 and 42-5073, at the location where the businesses therein enumerated are located or conducted.

B. For the purpose of determining a county’s proportion of use tax on the use or consumption of tangible personal property purchased from a utility business, the taxpayer is considered to be located in the county where the tangible personal property is used or consumed.

C. Except as provided in this section, if a taxpayer is engaged in business in locations in more than one county or in locations both in and outside Indian reservations, the business in which the taxpayer is engaged in each location shall be determined by the department, and each respective county and reservation shall be entitled to distribution of their share of taxes on the basis of the business engaged in by such taxpayer in that county.

§ 42-5034.01 Mobile telecommunications services; definitions

A. For purposes of any tax that is levied and collected under this chapter relating to mobile telecommunications services, the department shall levy and collect the tax pursuant to the requirements of the mobile telecommunications sourcing act (P.L. 106-252; 114 Stat. 626; 4 United States Code sections 116 through 126).

B. If a home service provider charges a customer an amount of tax for mobile telecommunications services and the customer believes that the charge is incorrect, the customer shall notify the home service provider in writing of the contested charge. The written notification shall include the customer's account name and number, the street address for the customer's primary place of use, a description of the contested charge and other information that the home service provider reasonably requires to process the notification.

C. The home service provider has sixty days from the date of the postmark on the notification prescribed in subsection A to review the customer's account records and any electronic database or enhanced zip code that is used pursuant to the mobile telecommunications sourcing act (P.L. 106-252; 114 Stat. 626; 4 United States Code sections 116 through 126). After the review, the home service provider shall determine the correct amount to charge the customer and shall issue a refund or credit to the customer if any incorrect charges were collected during the previous two years.

D. The procedures in this section are the first course of remedy available to any consumer seeking correction of assignment of place of primary use or taxing jurisdiction or a refund of or other compensation for taxes assessed or other charges erroneously collected by the home service provider under this section. No cause of action based on a dispute arising from the collection of taxes by the home service provider under this section shall accrue until that consumer has reasonably exercised the rights and procedures prescribed in this section.

E. For purposes of this section:

"Customer" means a person or entity that contracts with a home service provider for mobile telecommunications services. Customer does not include a reseller of mobile telecommunications services or a serving carrier that is under an arrangement to serve the customer outside the home service provider's licensed service area.
"Home service provider" means a facilities based carrier or reseller that provides mobile telecommunications services to a customer.
"Mobile telecommunications services" means commercial mobile radio service as defined in 47 Code of Federal Regulations section 20.3 in effect on June 1, 1999.
"Place of primary use" means an address that is within the licensed service area of the home service provider and that is the customer's residential or primary business street address where the customer's use of mobile telecommunications service primarily occurs.

§ 42-5035 Use of share of tax monies by counties; inclusion of estimate of anticipated tax collections in county budget

A. The tax monies accruing to the counties under this article shall be credited to the general fund of each respective county.

B. The department, on or before the first Monday of July each year, shall estimate the anticipated tax monies to be collected under this article payable to each county of the state under this article during the ensuing fiscal year, and shall forthwith transmit the estimate to each county treasurer. The board of supervisors may include the estimate in the county's budget in its estimate of receipts from sources other than property taxes.

C. No debt, obligation or liability shall be paid or liquidated from any portion of the tax collected under this article which is credited to the county general fund unless it is for an item or purpose specific in amount included in the budget.

§ 42-5036 Procedure upon variance between county share of tax monies received and budget estimate

All monies paid to a county in a fiscal year under this article which are in excess of the amount of such monies estimated in the budget for that year shall be placed and kept in a special fund by the county until the next succeeding fiscal year, and the amount in the special fund shall be included in the budget of the county for that year and shall be expended only for the purposes included in the budget.

§ 42-5037 Notices

A. Notices required or authorized by this article to be given by mail to a taxpayer shall be addressed to him at his last known address, or to such address as may appear in the records of the department, and shall be sent by registered first class mail with return receipt requested.

B. For the purposes of this article notice shall be presumed received upon the date shown by an executed return receipt, or, if such receipt is not executed, then upon the date such notice was attempted to be delivered.

§ 42-5038 Transaction and privilege taxes independent of other taxes

Taxes imposed by this article shall be in addition to all other licenses and taxes levied by law, whether as a condition precedent to engaging in any business taxable under this article or for any other purpose.

§ 42-5039 Qualified destination management companies; definitions

A. A qualified destination management company is not subject to transaction privilege tax under this chapter on the gross proceeds of sales or gross income derived from a qualified contract for destination management services. The gross proceeds of sales or gross income derived by a qualified destination management company from transactions that are not part of a qualified contract for destination management services are subject to tax if otherwise taxable under this chapter.

B. A qualified destination management company is a final consumer and user of any tangible personal property, activity or service subject to transaction privilege tax under article 2 of this chapter that the qualified destination management company arranges pursuant to a qualified contract for destination management services.

C. For the purposes of this section:

"Destination management services" means the business of coordinating, designing and implementing the delivery by a third party of four or more of the following:

(a) Transportation.

(b) Entertainment.

(d) Recreational or amusement activity.

(e) Tours.

(f) Event venue.

(g) Theme decor.

"Qualified contract" means a contract for the provision of destination management services by a qualified destination management company where both of the following apply:

(a) The qualified destination management company receives payment from or on behalf of the qualified destination management company's client for the cost of the destination management services arranged by the qualified destination management company.

(b) The qualified destination management company pays the vendor supplying the destination management services arranged by the qualified destination management company including any applicable transaction privilege tax or collection of use tax charged by the vendor to the qualified destination management company.

"Qualified destination management company" means a person that receives on an annual basis at least eighty per cent of its gross proceeds of sales or gross income derived from destination management services.

§ 42-5040 Sourcing of certain transactions involving tangible personal property; definitions

A. Except as provided in section 42-5075, retail sales of tangible personal property shall be sourced as follows:

To the seller's business location if the seller receives the order at a business location in this state.
Except as provided in section 42-5008.01, to the purchaser's location in this state if the seller receives the order at a business location outside this state or, if there is no delivery address, to the purchaser's billing address.

B. A shared vehicle transaction shall be sourced as follows:

To the permanent street address of the registered shared vehicle owner if the shared vehicle is registered in this state.
To the street address in this state where the shared vehicle owner resides while in this state if the shared vehicle is registered in another state or country.
To the location of the shared vehicle at the car sharing start time if the shared vehicle owner does not reside in this state and the shared vehicle is registered in another state or country.

C. For the purposes of subsection A of this section, an order is received when all of the information necessary to accept the order has been received by or on behalf of the seller, regardless of where the order is accepted or approved. The place of business or residence of the purchaser does not determine where the order is received.

D. The gross receipts from leasing or renting tangible personal property shall be sourced as follows:

To the lessor's business location if the lessor has a business location in this state.
To the lessee's address if the lessor does not have a business location in this state or, if there is no lessee's address, to the lessee's billing address. The gross receipts are taxable when the property is shipped, delivered or otherwise brought into this state for use in this state.

E. For the purposes of this section:

"Car sharing start time" has the same meaning prescribed in section 28-9601.
"Lessee's address" means the residential address of an individual lessee and the primary business address of any other lessee.
"Lessor's business location" means the business address that appears on the lessor's transaction privilege tax license.
"Shared vehicle" has the same meaning prescribed in section 28-9601.
"Shared vehicle owner" has the same meaning prescribed in section 28-9601.
"Shared vehicle transaction" has the same meaning prescribed in section 28-9601.

§ 42-5040.01 Sourcing of tangible personal property; third-party service providers; certification

A. Beginning on or before January 1, 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:

Supervise and regulate all persons required by this section to obtain certification.
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.
Post a list of certified third-party service providers on the department's website.
Adopt rules to administer and enforce this section.

C. The director may:

Investigate and audit third-party service providers as necessary to ensure compliance with this section.
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:

The name, telephone number and address of the applicant and primary contact person.
Verification that the applicant meets the requirements prescribed by the director.
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.

§ 42-5041 Assessment of fees; integrated tax system modernization project; fund

A. From and after June 30, 2022 through June 30, 2028, the department shall assess and collect fees from counties, cities, towns, councils of governments and regional transportation authorities as determined by the director and as provided by this section to implement an integrated tax system modernization project at the department.

B. From and after June 30, 2022 through June 30, 2028, a fee is assessed to each county, city and town that receives state shared revenues pursuant to section 42-5029 or 43-206, to each council of governments that receives revenues pursuant to section 42-6105 and to each regional transportation authority located in a county with a population of more than eight hundred thousand persons that receives revenues pursuant to section 42-6106.

C. The department shall assess the fees under subsection A and B of this section not later than October 31 each year, and the fees are payable immediately on assessment. If a county, city, town, council of governments or regional transportation authority fails to pay the fees in full on or before December 31, the department shall notify the state treasurer who shall withhold the delinquent amount from the distribution of monies to the affected county, city or town pursuant to sections 42-5029 and 43-206, from the distribution of monies to the affected council of governments pursuant to section 42-6105 and from the distribution of monies to the affected regional transportation authority pursuant to section 42-6106, and who shall continue to withhold monies until the entire amount of the assessment has been satisfied.

D. Counties, cities and towns may meet their cost sharing obligation from any source of county, city or town revenue designated by the appropriate county, city or town. The county sources may include monies of any countywide special taxing jurisdiction in which the board of supervisors serves as the board of directors.

E. From and after June 30, 2022 through June 30, 2028, pursuant to section 42-5029.02, the department shall transfer an amount from monies collected pursuant to section 42-5010.01 and section 42-5155, subsection E as determined by the director to implement the integrated tax system modernization project at the department. The amount transferred pursuant to this subsection shall be the actual reasonable costs incurred by the department for integrated tax system modernization upgrades related to the taxes authorized and levied pursuant to section 42-5010.01 and section 42-5155, subsection E.

F. From and after June 30, 2022 through June 30, 2028, pursuant to section 36-2856, subsection B, paragraph 2, the state treasurer shall transfer an amount from monies collected pursuant to section 42-5452 as determined by the director to implement the integrated tax system modernization project at the department. The amount transferred pursuant to this subsection shall be the actual reasonable costs incurred by the department for integrated tax system modernization upgrades related to the tax authorized and levied by section 42-5452.

G. All monies paid to the department or withheld by the state treasurer for the fees assessed pursuant to subsection B of this section or transferred pursuant to subsections E and F of this section shall be credited to the department of revenue integrated tax system project fund established by subsection H of this section.

H. The department of revenue integrated tax system project fund is established consisting of monies deposited or transferred to the fund pursuant to this section. The director shall administer the fund. Monies in the fund are subject to legislative appropriation. The director shall use monies in the fund solely for the administrative, development and other operating costs incurred in implementing the integrated tax system modernization project at the department.

§ 42-5042 Online lodging operators; requirements; civil penalty; definitions

A. An online lodging operator may not offer for rent or rent a lodging accommodation without a current transaction privilege tax license. The online lodging operator shall list the transaction privilege tax license number on each advertisement for each lodging accommodation the online lodging operator maintains, including online lodging marketplace postings. An online lodging operator that fails to comply with this subsection shall pay a civil penalty of $250 for a first offense and $1,000 for a second or any subsequent offense.

B. For the purposes of this section:

"Lodging accommodation" has the same meaning prescribed in section 42-5076.
"Online lodging marketplace" has the same meaning prescribed in section 42-5076.
"Online lodging operator" has the same meaning prescribed in section 42-5076 and includes an owner of a vacation rental or short-term rental that is not offered through an online lodging marketplace.
"Vacation rental" and "short-term rental" have the same meanings prescribed in section 9-500.39 or 11-269.17.
"Verified violation" has the same meaning prescribed in section 9-500.39 or 11-269.17.

§ 42-5043 Liability; marketplace facilitators; remote sellers; refund claims; audits; definition

A. A marketplace facilitator is not liable for failing to pay the correct amount of transaction privilege tax for a marketplace seller's sales through the marketplace facilitator's marketplace to the extent that the marketplace facilitator demonstrates any of the following to the satisfaction of the department:

The failure to pay the correct amount of tax was due to incorrect information given to the marketplace facilitator by the marketplace seller, and the marketplace facilitator and the marketplace seller are not affiliated persons.
The marketplace facilitator and the marketplace seller are not affiliated persons, and the failure to pay the correct amount of tax was due to an error other than an error in sourcing the sale under section 42-5040.

B. The liability relief provided in subsection A, paragraph 2 of this section may not exceed the following:

For calendar year 2019, five percent of the total tax due under this chapter on taxable sales facilitated by the marketplace facilitator on behalf of a marketplace seller and sourced to this state under section 42-5040 during the same calendar year.
For calendar year 2020, three percent of the total tax due under this chapter on taxable sales facilitated by the marketplace facilitator on behalf of a marketplace seller and sourced to this state under section 42-5040 during the same calendar year.
For calendar year 2021 and each calendar year thereafter, zero percent of the total tax due under this chapter on taxable sales facilitated by the marketplace facilitator on behalf of a marketplace seller and sourced to this state under section 42-5040 during the same calendar year.

C. A remote seller is not liable for failing to pay the correct amount of transaction privilege tax if failure to pay the correct amount of tax was due to an error other than an error in sourcing the sale under section 42-5040. The liability relief provided in this subsection may not exceed the following:

For calendar year 2019, five percent of the total tax due under this chapter on taxable sales sourced to this state under section 42-5040 during the same calendar year.
For calendar year 2020, three percent of the total tax due under this chapter on taxable sales sourced to this state under section 42-5040 during the same calendar year.
For calendar year 2021 and each calendar year thereafter, zero percent of the total tax due under this chapter on taxable sales sourced to this state under section 42-5040 during the same calendar year.

D. The department may waive penalties and interest if the marketplace facilitator or remote seller seeks liability relief, the department rules that reasonable cause exists and the marketplace facilitator paid tax on sales facilitated for a marketplace seller during the period for which relief is sought or the remote seller paid tax on sales during the period for which relief is sought.

E. The department may determine the manner in which a marketplace facilitator or remote seller may claim the liability relief provided for in this section.

F. Refund claims related to an overpayment of transaction privilege tax collected by a marketplace facilitator shall be filed as prescribed by section 42-1118. If a refund claim is denied, the claimant may appeal the denial pursuant to chapter 1, article 6 of this title.

G. An audit of a marketplace facilitator may not automatically cause an audit of a marketplace seller.

H. For the purposes of this section, "affiliated person" means a person that, with respect to another person, either:

Has an ownership interest of more than five percent, whether direct or indirect, in that other person.
Is related to the other person because a third person, or a group of third persons that are affiliated persons with respect to each other, holds an ownership interest of more than five percent, whether direct or indirect, in the related persons.

§ 42-5044 Nexus; out-of-state businesses; threshold; applicability; rulemaking; reporting; definition

A. Notwithstanding any other law, any person that conducts business in an activity classified under section 42-5061 with purchasers in this state is engaging or continuing in business in this state, is subject to this article and shall pay the taxes levied under this article, section 42-5061 and chapter 6 of this title and any duly enacted special district transaction privilege taxes imposed under title 48 on retail sales of tangible personal property if the person meets either of the following criteria in the previous or current calendar year:

If the person is a remote seller, the gross proceeds of sales or gross income derived from the remote seller's business with customers in this state pursuant to section 42-5061 that is not facilitated by a marketplace facilitator is more than the following:

(a) For calendar year 2019, $200,000.

(b) For calendar year 2020, $150,000.

If the person is a marketplace facilitator, the gross proceeds of sales or gross income derived from the marketplace facilitator's business on its own behalf or on behalf of at least one marketplace seller with customers in this state pursuant to section 42-5061 is more than $100,000.

B. For the purpose of determining whether a person meets any of the criteria prescribed in subsection A of this section, all affiliated persons shall be aggregated.

C. If the threshold provided in subsection A of this section was not met in the previous calendar year and is met partway through the current calendar year, the person shall obtain a transaction privilege tax license from the department once the threshold is met and begin remitting the tax on the first day of the month that starts at least thirty days after the threshold is met for the remaining of the current year and the next calendar year. If the person does not meet the threshold in the next calendar year, the person is not required to remit the transaction privilege tax for the calendar year following that calendar year and may cancel the person's transaction privilege tax license. If the threshold is met in a subsequent calendar year, the person shall remit the transaction privilege tax pursuant to this section.

D. The department may adopt rules pursuant to title 41, chapter 6 to carry out this section.

E. A marketplace facilitator shall report the tax due under this section from transactions facilitated on behalf of marketplace sellers. A marketplace facilitator may report the tax due under this section with the tax collected from transactions made directly by the marketplace facilitator on a combined tax return or on a separate return.

F. For the purposes of this section, "affiliated person" means a person that, with respect to another person, either:

Has an ownership interest of more than five percent, whether direct or indirect, in that other person.
Is related to the other person because a third person, or a group of third persons that are affiliated persons with respect to each other, holds an ownership interest of more than five percent, whether direct or indirect, in the related persons.

§ 42-5045 Youth business; exemption from tax

Notwithstanding any other law, a person who is under nineteen years of age and who is engaging or continuing in business in this state is not required to obtain a transaction privilege tax license or to remit the tax levied by this chapter or chapter 6 of this title or any duly enacted special district transaction privilege tax imposed under title 48 if the gross proceeds of sales or gross income derived from the person's business is not more than $10,000 for the calendar year.

Article 2 Transaction Privilege Classifications

§ 42-5061 Retail classification; definitions

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

Professional or personal service occupations or businesses that involve sales or transfers of tangible personal property only as inconsequential elements.
Services rendered in addition to selling tangible personal property at retail.
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.
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.
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.
Business activity that is properly included in any other business classification that is taxable under this article.
The sale of stocks and bonds.
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.
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.
Insulin, insulin syringes and glucose test strips.
Prescription eyeglasses or contact lenses.
Hearing aids as defined in section 36-1901.
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.
Sales of motor vehicles to nonresidents of this state for use outside this state if either of the following applies:

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

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

Food, as provided in and subject to the conditions of article 3 of this chapter and sections 42-5074 and 42-6017.
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).
Textbooks by any bookstore that are required by any state university or community college.
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.
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.
Lottery tickets or shares pursuant to title 5, chapter 5.1, article 2.
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.

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.
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.
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.
Tangible personal property sold to:

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

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

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

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

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

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

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

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

Magazines or other periodicals or other publications by this state to encourage tourist travel.
Tangible personal property sold to:

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

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

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

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

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

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.
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.
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.
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.
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.
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.

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.
Sales of natural gas or liquefied petroleum gas used to propel a motor vehicle.
Paper machine clothing, such as forming fabrics and dryer felts, sold to a paper manufacturer and directly used or consumed in paper manufacturing.
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.
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.
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.

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.
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.
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.

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.
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.
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.
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.
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.

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.
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.
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.
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.
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.
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.

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

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

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

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

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.
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:

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

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

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.
Railroad rolling stock, rails, ties and signal control equipment used directly to transport persons or property.
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.
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.
Groundwater measuring devices required under section 45-604.
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.

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.
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.

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.

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

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

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.
Janitorial equipment and hand tools.
Office equipment, furniture and supplies.
Tangible personal property used in selling or distributing activities, other than the telecommunications transmissions described in subsection B, paragraph 16 of this section.
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.
Shops, buildings, docks, depots and all other materials of whatever kind or character not specifically included as exempt.
Motors and pumps used in drip irrigation systems.
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:

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.
Businesses classified under the:

(a) Transporting classification.

(b) Utilities 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:

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

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.
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:

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.
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:

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

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

U. For the purposes of section 42-5032.03 and subject to section 48-4238, beginning October 1, 2025 and each month thereafter through December 31, 2055, the department shall separately account for revenues collected under the retail classification from each business selling tangible personal property at retail on the premises of a major league baseball facility or an adjacent building that is owned by a county stadium district pursuant to title 48, chapter 26 and operated by the county stadium district or the professional baseball franchise organization that occupies the major league baseball facility or adjacent building. For the purposes of this subsection, "adjacent building" and "major league baseball facility" have the same meanings prescribed in section 48-4201.

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

W. For the purposes of this section:

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

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

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

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

§ 42-5062 Transporting classification

A. The transporting classification is comprised of the business of transporting for hire persons, freight or property by motor vehicle, railroads or aircraft from one point to another point in this state. The transporting classification does not include:

Transporting for hire persons, freight or property by:

(a) Motor carriers subject to a fee prescribed in title 28, chapter 16, article 4.

(b) Light motor vehicles subject to a fee under title 28, chapter 15, article 4.

(d) Transportation network company drivers on transactions involving transportation network services as defined in section 28-9551.

(e) Vehicle for hire companies that are issued permits pursuant to section 28-9503.

(f) Vehicle for hire drivers operating under a company permit issued pursuant to section 28-9503 on transactions involving vehicle for hire services.

The business of transporting for hire persons traveling in air commerce by aircraft if taxation of the business is preempted by federal law.
Ambulances or ambulance services provided under title 48 or certified pursuant to title 36, chapter 21.1 or provided by a city or town in a county with a population of less than one hundred fifty thousand persons as determined in the most recent United States decennial census.
Public transportation program services for the dial-a-ride programs and special needs transportation services.
Transporting freight or property for hire by a railroad operating exclusively in this state if the transportation comprises a portion of a single shipment of freight or property, involving more than one railroad, either from a point in this state to a point outside this state or from a point outside this state to a point in this state. For the purposes of this paragraph, "a single shipment" means the transportation that begins at the point at which one of the railroads first takes possession of the freight or property and continues until the point at which one of the railroads relinquishes possession of the freight or property to a party other than one of the railroads.
Arranging transportation as a convenience or service to a person's customers if that person is not otherwise engaged in the business of transporting persons, freight or property for hire. This exception does not apply to businesses that dispatch vehicles pursuant to customer orders and send the billings and receive the payments associated with that activity, including when the transportation is performed by third-party independent contractors. For the purposes of this paragraph, "arranging" includes billing for or collecting transportation charges from a person's customers on behalf of the persons providing the transportation.

B. The tax base for the transporting classification is the gross proceeds of sales or gross income derived from the business, except that the following shall be deducted from the tax base:

The gross proceeds of sales or gross income derived from transporting for hire persons, freight or property by a railroad pursuant to a contract with another railroad that is also considered to be engaged in the businesses of transporting persons, freight or property for hire if the other railroad is liable for the tax on gross proceeds of sales or gross income attributable to the transportation.
The gross proceeds of sales or gross income derived from business activity that is properly included in any other business classification under this article and that is taxable to the person engaged in that classification, but the gross proceeds of sales or gross income to be deducted shall not exceed the consideration paid to the person conducting the activity.
The gross proceeds of sales or gross income derived from a business activity that is arranged by the person who is subject to tax under this section and that is not taxable to the person conducting the activity due to an exclusion, exemption or deduction under this section or section 42-5073, but the gross proceeds of sales or gross income to be deducted shall not exceed the consideration paid to the person conducting the activity.
The gross proceeds of sales or gross income derived from business activity that is arranged by a person who is subject to tax under this section and that is taxable to another person under this section who conducts the activity, but the gross proceeds of sales or gross income to be deducted shall not exceed the consideration paid to the person conducting the activity.
The gross proceeds of sales or gross income derived from transporting fertilizer by a railroad from a point in this state to another point in this state.

§ 42-5063 Utilities classification; definitions

A. The utilities classification is comprised of the business of:

Producing and furnishing or furnishing to consumers natural or artificial gas and water.
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:

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

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.
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.
Gross proceeds of sales or gross income derived from sales to:

(a) Qualifying hospitals as defined in section 42-5001.

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.
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.
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.

(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.

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. For the purposes of this section:

"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.
"Cable operator" has the same meaning prescribed in section 9-505 and includes a video service provider.
"Electric distribution service" means distributing electricity to retail electric customers through the use of electric distribution facilities.
"Electric generation service" means providing electricity for sale to retail electric customers but excluding electric distribution or transmission services.
"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.
"Other services" includes metering, meter reading services, billing and collecting services.
"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.
"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.

§ 42-5064 Telecommunications classification; definitions

A. The telecommunications classification is comprised of the business of providing intrastate telecommunications services. The telecommunications classification does not include:

Sales of intrastate telecommunications services by a cable operator or by a microwave television transmission system that transmits television programming to multiple subscribers and that is operated pursuant to 47 Code of Federal Regulations parts 21 and 74.
Sales of internet access or application services to the person's subscribers and customers. For the purposes of this paragraph:

(a) "Application services" means software applications provided remotely using hypertext transfer protocol or another network protocol and purchased by or for any school district, charter school, community college or state university to assess or test student learning or to promote curriculum design or enhancement.

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

Leasing or renting 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 section 42-5063 or this section or that is a cable operator.

Over-the-top services. For the purposes of this paragraph, "over-the-top services" means audio or video programming services that are received by the purchaser by means of an internet connection, regardless of the technology used, that include linear or live programming and that are generally considered comparable to programming provided by a radio or television broadcast station and includes related on-demand programming that is provided at no additional charge, regardless of whether the services are provided independently or packaged with other audio or video programming.

B. The tax base for the telecommunications classification is the gross proceeds of sales or gross income derived from the business, including the gross income derived from tolls, subscriptions and services on behalf of subscribers or from the publication of a directory of the names of subscribers. However, the gross proceeds of sales or gross income derived from the following shall be deducted from the tax base:

Sales of intrastate telecommunications services to:

(a) Other persons engaged in businesses classified under the telecommunications classification for use in such business.

(b) A direct broadcast satellite television or data transmission service that operates pursuant to 47 Code of Federal Regulations part 25 for use in its direct broadcast satellite television or data transmission operation by a facility described in section 42-5061, subsection B, paragraph 16, subdivision (b).

End user common line charges established by federal communications commission regulations (47 Code of Federal Regulations section 69.104(a)).
Carrier access charges established by federal communications commission regulations (47 Code of Federal Regulations sections 69.105(a) through 69.118).
Sales of direct broadcast satellite television services pursuant to 47 Code of Federal Regulations part 25 by a direct broadcast satellite television service that operates pursuant to 47 Code of Federal Regulations part 25.
Telecommunications services purchased with a prepaid calling card, or a prepaid authorization number for telecommunications services, that is taxable under section 42-5061.

C. A person that is engaged in a transient lodging business subject to taxation under section 42-5070 and that provides telephone, fax or internet access services to its customers at an additional charge, which is separately stated on the customer invoice, is considered to be engaged in business subject to taxation under this section for the purposes of taxing the gross proceeds of sales or gross income derived from providing those services.

D. The gross proceeds of sales or gross income derived from a bundled transaction of services that are taxable pursuant to section 42-5023 are subject to the following:

A telecommunications service provider who can reasonably identify the portion of the sales price of the bundled transaction derived from charges for nontaxable services is subject to tax only on the gross proceeds of sales or gross income derived from the taxable services. For the purposes of this section, the telecommunications service provider may elect to reasonably identify the portion of the sales price of the bundled transaction derived from charges for nontaxable services by using allocation percentages derived from the telecommunications service provider's entire service area, including territories outside of this state. On request, the department may require the telecommunications service provider to provide this allocation information. The reasonableness of the allocation is subject to audit by the department.
Notwithstanding sections 42-1118, 42-1120 and 42-1121, the telecommunications service provider shall waive the right to file a claim for a refund of taxes paid on the bundled transaction if the taxes paid are based on the allocation percentage the telecommunications service provider had determined to be reasonable at the beginning of the tax period at issue.
The burden of proof is on the telecommunications service provider to establish that the gross proceeds of sales or gross income is derived from charges for nontaxable services.

E. For the purposes of this section:

"Bundled transaction" means a sale of multiple services in which both of the following apply:

(a) The sale consists of both taxable and nontaxable services.

(b) The telecommunications service provider charges a customer one sales price for all services that are sold instead of separately charging for each individual service.

"Cable operator" has the same meaning prescribed in section 9-505 and includes a video service provider.
"Internet" means the computer and telecommunications facilities that comprise the interconnected worldwide network of networks that employ the transmission control protocol or internet protocol, or any predecessor or successor protocol, to communicate information of all kinds by wire or radio.
"Internet access" means a service that enables users to access content, information, email or other services over the internet. Internet access does not include telecommunications services provided by a common carrier.
"Intrastate telecommunications services" means transmitting signs, signals, writings, images, sounds, messages, data or other information of any nature by wire, radio waves, light waves or other electromagnetic means if the information transmitted originates and terminates in this state.
"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.

§ 42-5065 Publication classification; definition

A. The publication classification is comprised of the business of publishing newspapers, magazines or other periodicals and publications if published in this state. The publication classification does not include:

Manufacturing or publishing books.
Sales of magazines or other periodicals or other publications by this state to encourage tourist travel.

B. The tax base for the publication classification is the gross proceeds of sales or gross income derived from the business, including the gross income derived from notices and subscription income, but the following shall be deducted from the tax base:

Gross income derived from advertising.
Gross proceeds of sales or gross income derived from sales of personal property to:

(a) Qualifying hospitals as defined in section 42-5001.

C. For purposes of this section "subscription income" includes all circulation revenue, except amounts actually retained by or credited to carriers and other vendors as compensation for sale or delivery of publications and revenue from publications sold, directly or through wholesalers or jobbers, to retailers for resale.

§ 42-5066 Job printing classification

A. The job printing classification is comprised of the business of job printing, engraving, embossing and copying.

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

Sales to a person in this state who has a transaction privilege tax license issued in this state, and who does either of the following:

(a) Resells the job printing, engraving, embossing or copying.

(b) Distributes such printing, engraving, embossing or copying without consideration in connection with the publication of a newspaper or magazine.

Sales of job printing, engraving, embossing and copying for use outside this state if the materials are shipped or delivered out of this state regardless of where title to the materials passes or their free on board point.
Sales of personal property to:

(a) Qualifying hospitals as defined in section 42-5001.

Sales of postage and freight except that the amount deducted shall not exceed the actual postage and freight expense that is paid to the United States postal service or a commercial delivery service and that is separately itemized by the taxpayer on the customer's invoice and in the taxpayer's records.

§ 42-5067 Pipeline classification

A. The pipeline classification is comprised of the business of operating pipelines for transporting oil or natural or artificial gas through pipes or conduits from one point to another point in this state. The pipeline classification does not include sales of natural gas or liquefied petroleum gas used to propel a motor vehicle.

B. The tax base for the pipeline classification is the gross proceeds of sales or gross income derived from the business, but the taxpayer shall deduct from the tax base the gross proceeds of sales or gross income derived from pipeline services to:

Qualifying hospitals as defined in section 42-5001.
A qualifying health care organization as defined in section 42-5001 if the oil or gas is used by the organization solely to provide health and medical related educational and charitable services.

§ 42-5068 Private car line classification

A. The private car line classification is comprised of the business of operating a private car company, as defined in section 42-14301, from one point to another point in this state.

B. The tax base for the private car line classification is the gross proceeds of sales or gross income derived from the business.

§ 42-5069 Commercial lease classification; definitions

A. The commercial lease classification is comprised of the business of leasing for a consideration the use or occupancy of real property.

B. A person who, as a lessor, leases or rents for a consideration under one or more leases or rental agreements the use or occupancy of real property that is used by the lessee for commercial purposes is deemed to be engaged in business and subject to the tax imposed by article 1 of this chapter, but this subsection does not include leases or rentals of real property used for residential or agricultural purposes.

C. The commercial lease classification does not include:

Any business activities that are classified under the transient lodging classification.
Activities engaged in by the Arizona exposition and state fair board or county fair commissions in connection with events sponsored by those entities.
Leasing real property to a lessee who subleases the property if the lessee is engaged in business classified under the commercial lease classification or the transient lodging classification.
Leasing real property pursuant to a written lease agreement entered into before December 1, 1967. This exclusion does not apply to the businesses of hotels, guest houses, dude ranches and resorts, rooming houses, apartment houses, office buildings, automobile storage garages, parking lots or tourist camps, or to the extension or renewal of any such written lease agreement.
Leasing real property between affiliated companies, businesses, persons or reciprocal insurers. For the purposes of this paragraph:

(a) "Affiliated companies, businesses, persons or reciprocal insurers" means the lessor holds a controlling interest in the lessee, the lessee holds a controlling interest in the lessor, affiliated persons hold a controlling interest in both the lessor and the lessee, or an unrelated person holds a controlling interest in both the lessor and lessee.

(b) "Affiliated persons" means members of an individual's family or persons who have ownership or control of a business entity.

(c) "Controlling interest" means direct or indirect ownership of at least eighty percent of the voting shares of a corporation or of the interests in a company, business or person other than a corporation.

(d) "Members of an individual's family" means the individual's spouse and brothers and sisters, whether by whole or half blood, including adopted persons, ancestors and lineal descendants.

(e) "Reciprocal insurers" has the same meaning prescribed in section 20-762.

Leasing real property for boarding horses.
Leasing or renting real property or the right to use real property at exhibition events in this state sponsored, operated or conducted 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 major league baseball teams 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.
Leasing or renting real property or the right to use real property for use as a rodeo featuring primarily farm and ranch animals in this state sponsored, operated or conducted 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 and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.
Leasing or renting dwelling units, lodging facilities or trailer or mobile home spaces if the units, facilities or spaces are intended to serve as the principal or permanent place of residence for the lessee or renter or if the unit, facility or space is leased or rented to a single tenant thirty or more consecutive days.
Leasing or renting real property and improvements for use primarily for religious worship by a nonprofit organization that is exempt from taxation under section 501(c)(3) of the internal revenue code and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.
Leasing, renting or granting the right to use real property to vendors or exhibitors by a trade or industry association that is a qualifying organization pursuant to section 513(d)(3)(C) of the internal revenue code for a period not to exceed twenty-one days in connection with an event that meets all of the following conditions:

(a) The majority of such vending or exhibition activities relate to the nature of the trade or business sponsoring the event.

(b) The event is held in conjunction with a formal business meeting of the trade or industry association.

Leasing, renting or granting the right to use real property for a period not to exceed twenty-one days by a coliseum, civic center, civic plaza, convention center, auditorium or arena owned by this state or any of its political subdivisions.
Leasing or subleasing real property used by a nursing care institution as defined in section 36-401 that is licensed pursuant to title 36, chapter 4.
Leasing or renting an eligible facility as defined in section 28-7701.
Granting or providing rights to real property that constitute a profit à prendre for the severance of minerals, including all rights to use the surface or subsurface of the property as is necessary or convenient to the right to sever the minerals. This paragraph does not exclude from the commercial lease classification leasehold rights to the real property that are granted in addition to and not included within the right of profit à prendre, but the tax base for the grant of such a leasehold right, if the gross income derived from the grant is not separately stated from the gross income derived from the grant of the profit à prendre, shall not exceed the fair market value of the leasehold rights computed after excluding the value of all rights under the profit à prendre. For the purposes of this paragraph, "profit à prendre" means a right to use the land of another to mine minerals, and carries with it the right of entry and the right to remove and take the minerals from the land and also includes the right to use the surface of the land as is necessary and convenient for exercise of the profit.
The leasing or renting of space to make attachments to utility poles as follows:

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

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

D. The tax base for the commercial lease classification is the gross proceeds of sales or gross income derived from the business, but reimbursements to the lessor for utility service shall be deducted from the tax base.

E. Notwithstanding section 42-1104, subsection B, paragraph 1, subdivision (b) and paragraph 2, the failure to file tax returns for the commercial lease classification that report gross income derived from any agreement that constitutes, in whole or in part, a grant of a right of profit à prendre for the severance of minerals does not constitute an exception to the general rule for the statute of limitations.

F. For the purposes of this section:

"Cable operator" has the same meaning prescribed in section 9-505 and includes a video service provider.
"Leasing" includes renting.
"Real property" includes any improvements, rights or interest in such property.
"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.

§ 42-5070 Transient lodging classification; definition

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

B. The transient lodging classification does not include:

Operating a convalescent home or facility, home for the aged, hospital, jail, military installation or fraternity or sorority house or operating any structure exclusively by an association, institution, governmental agency or corporation for religious, charitable or educational purposes, if no part of the net earnings of the association, corporation or other entity inures to the benefit of any private shareholder or individual.
A lease or rental of a mobile home or house trailer at a fixed location or any other similar structure, and also including a space, lot or slab that is occupied or intended or designed for occupancy by transients in a mobile home or house trailer furnished by them for such occupancy for thirty or more consecutive days.
Leasing or renting four or fewer rooms of an owner-occupied residential home, together with furnishing no more than a breakfast meal, to transient lodgers at no more than a fifty percent average annual occupancy rate.
The activities of any online lodging marketplace, as defined in section 42-5076.

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

The gross proceeds of sales or gross income derived from business activity that is properly included in another business classification under this article and that is taxable to the person engaged in that business classification, but the gross proceeds of sales or gross income to be deducted shall not exceed the consideration paid to the person conducting the activity.
The gross proceeds or gross income received by an online lodging operator, as defined in section 42-5076, from any online lodging transactions, as defined in section 42-5076, for which the online lodging operator has received documentation from a registered online lodging marketplace, as defined in section 42-5076, pursuant to section 42-5009, subsection P that the online lodging marketplace has remitted or will remit the applicable tax to the department pursuant to section 42-5014, subsection E.

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

Transactions or activities that are not limited to transients and that would not be taxable if engaged in by a person not subject to tax under this article.
Transactions or activities that are not limited to transients and that would not be taxable if engaged in by a person subject to taxation under section 42-5062 or 42-5073 due to an exclusion, exemption or deduction.
Commissions paid to a person that is engaged in transient lodging business subject to taxation under this section by a person providing services or property to the customers of the person engaging in the transient lodging business.

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

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

§ 42-5071 Personal property rental classification; definitions

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

Leasing or renting films, tapes or slides used by theaters or movies, which are engaged in business under the amusement classification, or used by television stations or radio stations.
Activities engaged in by the Arizona exposition and state fair board or county fair commissions in connection with events sponsored by such entities.
Leasing or renting tangible personal property by a parent business entity to a subsidiary business entity or by a subsidiary business entity to another subsidiary of the same parent business entity if taxes were paid under this chapter on the gross proceeds or gross income accruing from the initial sale of the tangible personal property. For the purposes of this paragraph, "subsidiary" means a business entity of which at least eighty percent of the voting shares are owned by the parent business entity.
Operating coin-operated washing, drying and dry cleaning machines or coin-operated car washing machines at establishments for the use of such machines.
Leasing or renting tangible personal property for incorporation into or comprising any part of a qualified environmental technology facility as described in section 41-1514.02. This paragraph shall apply for ten full consecutive calendar or fiscal years following the initial lease or rental by each qualified environmental technology manufacturer, producer or processor.
Leasing or renting aircraft, flight simulators or similar training equipment to students or staff by nonprofit, accredited educational institutions that offer associate or baccalaureate degrees in aviation or aerospace related fields.
Leasing or renting photographs, transparencies or other creative works used by this state on internet websites, in magazines or in other publications that encourage tourism.
Leasing or renting certified ignition interlock devices installed pursuant to the requirements prescribed by section 28-1461. For the purposes of this paragraph, "certified ignition interlock device" has the same meaning prescribed in section 28-1301.
The leasing or renting of space to make attachments to utility poles, as follows:

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

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

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

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

Reimbursements by the lessee to the lessor of a motor vehicle for payments by the lessor of the applicable fees and taxes imposed by sections 28-2003, 28-2352, 28-2402, 28-2481 and 28-5801, title 28, chapter 15, article 2 and article IX, section 11, Constitution of Arizona, to the extent such amounts are separately identified as such fees and taxes and are billed to the lessee.
Leases or rentals of tangible personal property that, if it had been purchased instead of leased or rented by the lessee, would have been exempt under:

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

(b) Section 42-5061, subsection B.

(d) Section 42-5061, subsection M.

Motor vehicle fuel and use fuel that are subject to a tax imposed under title 28, chapter 16, article 1, sales of use fuel to a holder of a valid single trip use fuel tax permit issued under section 28-5739 and sales of aviation fuel that are subject to the tax imposed under section 28-8344.
Leasing or renting a motor vehicle subject to and on which the fee has been paid under title 28, chapter 16, article 4.
Amounts received by a motor vehicle dealer for the first month of a lease payment if the lease and the lease payment for the first month of the lease are transferred to a third-party leasing company.

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

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

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

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

G. For the purposes of this section:

"Cable operator" has the same meaning prescribed in section 9-505 and includes a video service provider.
"Peer-to-peer car sharing" has the same meaning prescribed in section 28-9601.
"Peer-to-peer car sharing program" has the same meaning prescribed in section 28-9601.
"Shared vehicle owner" has the same meaning prescribed in section 28-9601.
"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.

§ 42-5072 Mining classification; definition

A. The mining classification is comprised of the business of mining, quarrying or producing for sale, profit or commercial use any nonmetalliferous mineral product that has been mined, quarried or otherwise extracted within the boundaries of this state described in article I, section 1, Constitution of Arizona.

B. The tax base for the mining classification is the gross proceeds of sales or gross income derived from the business. The gross proceeds of sales or gross income derived from sales described under section 42-5061, subsection A, paragraph 27 and subsection I, paragraph 2 shall be deducted from the tax base.

C. The tax base includes the value of the entire product mined, quarried or produced for sale, profit or commercial use in this state, regardless of the place of sale of the product or of the fact that deliveries may be made to points without this state. If, however, the sale price of the product includes freight, the sale price shall be reduced by the actual freight paid by any person from the place of production to the place of delivery.

D. In the case of a person engaged in business classified under the mining classification all or part of whose income is derived from service or manufacturing charges instead of from sales of the products manufactured or handled, the tax base includes the gross income of the person derived from the service or manufacturing charge.

E. If a person engaging in business classified under the mining classification ships or transports all or part of a product out of this state without making sale of the product or ships his product outside of this state in an unfinished condition, the value of the product or article in the condition or form in which it existed when transported out of this state and before it enters interstate commerce is included in the tax base, and the department shall prescribe equitable and uniform rules for ascertaining that value. In determining the tax base, if the product or any part of the product has been processed in this state and the proceeds of such processing have been included in the tax base of the processor under this chapter, the person may deduct from the value of the product when transported out of this state the cost of such processing.

F. A person who conducts a business classified under the mining classification may be deemed also to be engaged in business classified under the retail classification to the extent the person's activities comprise business under the retail classification if the tax is paid at the rate imposed on the retail classification by section 42-5010. If the transaction is not subject to taxation under the retail classification, the transaction shall be included in the tax base under this section, except for the transfer of title or possession of coal back and forth between an owner or operator of a power plant and a person who is responsible for refining coal if both of the following apply:

The transfer of title or possession of the coal is for the purpose of refining the coal.
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 the reduction of power plant emissions during the combustion of coal and the treatment of flue gas.

G. For the purposes of this section, "nonmetalliferous mineral product" means oil, natural gas, limestone, sand, gravel or any other nonmetalliferous mineral product, compound or combination of nonmetalliferous mineral products.

§ 42-5073 Amusement classification

A. The amusement classification is comprised of the business of operating or conducting theaters, movies, operas, shows of any type or nature, exhibitions, concerts, carnivals, circuses, amusement parks, menageries, fairs, races, contests, games, billiard or pool parlors, bowling alleys, public dances, dance halls, boxing and wrestling matches, skating rinks, tennis courts, except as provided in subsection B of this section, video games, pinball machines or sports events or any other business charging admission or user fees for exhibition, amusement or entertainment, including the operation or sponsorship of events by a tourism and sports authority under title 5, chapter 8. For the purposes of this section, admission or user fees include, but are not limited to, any revenues derived from any form of contractual agreement for rights to or use of premium or special seating facilities or arrangements. The amusement classification does not include:

Activities or projects of bona fide religious or educational institutions.
Private or group instructional activities. For the purposes of this paragraph, "private or group instructional activities" includes, but is not limited to, performing arts, martial arts, gymnastics and aerobic instruction.
The operation or sponsorship of events by the Arizona exposition and state fair board or county fair commissions.
A musical, dramatic or dance group or a botanical garden, museum or zoo that is qualified as a nonprofit charitable organization under section 501(c)(3) of the United States internal revenue code if no part of its net income inures to the benefit of any private shareholder or individual.
Exhibition events in this state sponsored, conducted or operated by a nonprofit organization that is exempt from taxation under section 501(c)(3), 501(c)(4) or 501(c)(6) of the internal revenue code if the organization is associated with major league baseball teams 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 this section.
Operating or sponsoring rodeos that feature primarily farm and ranch animals in this state and that are sponsored, conducted or operated 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 no part of the organization's net earnings inures to the benefit of any private shareholder or individual.
Sales of admissions to intercollegiate football contests if the contests are both:

(a) Operated by a nonprofit organization that is exempt from taxation under section 501(c)(3) of the internal revenue code and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.

(b) Not held in a multipurpose facility that is owned or operated by the tourism and sports authority pursuant to title 5, chapter 8.

Activities and events of, or fees and assessments received by, a homeowners organization from persons who are members of the organization or accompanied guests of members. For the purposes of this paragraph, "homeowners organization" means a mandatory membership organization comprised of owners of residential property within a specified residential real estate subdivision development or similar area and established to own property for the benefit of its members where both of the following apply:

(a) No part of the organization's net earnings inures to the benefit of any private shareholder or individual.

(b) The primary purpose of the organization is to provide for the acquisition, construction, management, maintenance or care of organization property.

Activities and events of, or fees received 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.
Arranging an amusement activity as a service to a person's customers if that person is not otherwise engaged in the business of operating or conducting an amusement personally or through others. This exception does not apply to businesses that operate or conduct amusements pursuant to customer orders and send the billings and receive the payments associated with that activity, including when the amusement is performed by third-party independent contractors. For the purposes of this paragraph, "arranging" includes billing for or collecting amusement charges from a person's customers on behalf of the persons providing the amusement.

B. The tax base for the amusement classification is the gross proceeds of sales or gross income derived from the business, except that the following shall be deducted from the tax base:

The gross proceeds of sales or gross income derived from memberships, including initiation fees, that provide for the right to use a health or fitness establishment or a private recreational establishment, or any portion of an establishment, including tennis and other racquet courts at that establishment, for participatory purposes for twenty-eight days or more and fees charged for use of the health or fitness establishment or private recreational establishment by bona fide accompanied guests of members, except that this paragraph does not include additional fees, other than initiation fees, charged by a health or fitness establishment or a private recreational establishment for purposes other than memberships that provide for the right to use a health or fitness establishment or private recreational establishment, or any portion of an establishment, for participatory purposes for twenty-eight days or more and accompanied guest use fees.
Amounts that are exempt under section 5-111, subsection G.
The gross proceeds of sales or gross income derived from membership fees, including initiation fees, that provide for the right to use a transient lodging recreational establishment, including golf courses and tennis and other racquet courts at that establishment, for participatory purposes for twenty-eight days or more, except that this paragraph does not include additional fees, other than initiation fees, that are charged by a transient lodging recreational establishment for purposes other than memberships and that provide for the right to use a transient lodging recreational establishment or any portion of the establishment for participatory purposes for twenty-eight days or more.
The gross proceeds of sales or gross income derived from sales to persons engaged in the business of transient lodging classified under section 42-5070, if all of the following apply:

(a) The persons who are engaged in the transient lodging business sell the amusement to another person for consideration.

(b) The consideration received by the transient lodging business is equal to or greater than the amount to be deducted under this subsection.

(c) The transient lodging business has provided an exemption certificate to the person engaging in business under this section.

The gross proceeds of sales or gross income derived from:

(a) Business activity that is properly included in any other business classification under this article and that is taxable to the person engaged in that classification, but the gross proceeds of sales or gross income to be deducted shall not exceed the consideration paid to the person conducting the activity.

(b) Business activity that is arranged by the person who is subject to tax under this section and that is not taxable to the person conducting the activity due to an exclusion, exemption or deduction under this section or section 42-5062, but the gross proceeds of sales or gross income to be deducted shall not exceed the consideration paid to the person conducting the activity.

(c) Business activity that is arranged by a person who is subject to tax under this section and that is taxable to another person under this section who conducts the activity, but the gross proceeds of sales or gross income to be deducted shall not exceed the consideration paid to the person conducting the activity.

The gross proceeds of sales or gross income derived from entry fees paid by participants for events that either:

(a) Until March 1, 2017, consist of a run, walk, swim or bicycle ride or a similar event, or any combination of these events.

(b) Are operated or conducted by nonprofit organizations that are exempt from taxation under section 501(c)(3) of the internal revenue code and of which no part of the organization's net earnings inures to the benefit of any private shareholder or individual, if the event consists of a run, walk, swim or bicycle ride or a similar event, or any combination of these events.

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

"Health or fitness establishment" means a facility whose primary purpose is to provide facilities, equipment, instruction or education to promote the health and fitness of its members and at least eighty percent of the monthly gross revenue of the facility is received through accounts of memberships and accompanied guest use fees that provide for the right to use the facility, or any portion of the facility, under the terms of the membership agreement for participatory purposes for twenty-eight days or more.
"Private recreational establishment" means a facility whose primary purpose is to provide recreational facilities, such as tennis, golf and swimming, for its members and where at least eighty percent of the monthly gross revenue of the facility is received through accounts of memberships and accompanied guest use fees that provide for the right to use the facility, or any portion of the facility, for participatory purposes for twenty-eight days or more.
"Transient lodging recreational establishment" means a facility whose primary purpose is to provide facilities for transient lodging, that is subject to taxation under this chapter and that also provides recreational facilities, such as tennis, golf and swimming, for members for a period of twenty-eight days or more.

D. Until December 31, 1988, the revenues from hayrides and other animal-drawn amusement rides, from horseback riding and riding instruction and from recreational tours using motor vehicles designed to operate on and off public highways are exempt from the tax imposed by this section. Beginning January 1, 1989, the gross proceeds or gross income from hayrides and other animal-drawn amusement rides, from horseback riding and from recreational tours using motor vehicles designed to operate on and off public highways are subject to taxation under this section. Tax liabilities, penalties and interest paid for taxable periods before January 1, 1989 shall not be refunded unless the taxpayer requesting the refund provides proof satisfactory to the department that the taxes will be returned to the customer.

E. If a person is engaged in the business of offering both exhibition, amusement or entertainment and private or group instructional activities, the person's books shall be kept to show separately the gross income from exhibition, amusement or entertainment and the gross income from instructional activities. If the books do not provide this separate accounting, the tax is imposed on the person's total gross income from the business.

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

G. For the purposes of section 42-5032.01, the department shall separately account for revenues collected under the amusement classification from sales of admissions to:

Events that are held in a multipurpose facility that is owned or operated by the tourism and sports authority pursuant to title 5, chapter 8, including intercollegiate football contests that are operated by a nonprofit organization that is exempt from taxation under section 501(c)(3) of the internal revenue code.
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.

H. For the purposes of section 42-5032.03 and subject to section 48-4238, beginning October 1, 2025 and each month thereafter through December 31, 2055, the department shall separately account for revenues collected under the amusement classification from the sales of admissions to a major league baseball facility that is owned by a county stadium district pursuant to title 48, chapter 26 and operated by the county stadium district or the professional baseball franchise organization that occupies the major league baseball facility. For the purposes of this subsection, "major league baseball facility" has the same meaning prescribed in section 48-4201.

§ 42-5074 Restaurant classification

A. The restaurant classification is comprised of the business of operating restaurants, dining cars, dining rooms, lunchrooms, mobile food units, lunch stands, soda fountains, catering services or similar establishments where articles of food or drink are sold for consumption on or off the premises.

B. The tax base for the restaurant classification is the gross proceeds of sales or gross income derived from the business. The gross proceeds of sales or gross income derived from the following shall be deducted from the tax base:

Sales to a person engaged in business classified under the restaurant classification if the items sold are to be resold in the regular course of the business.
Sales by a congressionally chartered veterans organization of food or drink prepared for consumption on the premises leased, owned or maintained by the organization.
Sales by churches, fraternal benefit societies and other nonprofit organizations, as these organizations are defined in the federal internal revenue code (26 United States Code section 501), that do not regularly engage or continue in the restaurant business for the purpose of fund-raising.
Sales 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.
Sales at a rodeo featuring primarily farm and ranch animals in this state 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 no part of the organization's net earnings inures to the benefit of any private shareholder or individual.
Sales 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.
Sales to qualifying hospitals as defined in section 42-5001.
Sales to 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.
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.
Sales of articles of prepared or unprepared food, drink or condiment and accessory tangible personal property to a school district or charter school if the articles and accessory tangible personal property are served to persons for consumption on the premises of a public school in the school district or charter school during school hours.
Prepared food, drink or condiment donated by a restaurant 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.
Sales of articles of food and drink at low or reduced prices to eligible elderly or homeless persons or persons with a disability by a restaurant that contracts with the department of economic security and that is approved by the food and nutrition services of the United States department of agriculture pursuant to the supplemental nutrition assistance program established by the food and nutrition act of 2008 (P.L. 110-246; 122 Stat. 1651; 7 United States Code sections 2011 through 2036a), if the purchases of the articles of food and drink are made with the benefits issued pursuant to the supplemental nutrition assistance program.

C. The tax imposed on the restaurant classification pursuant to this section does not apply to the gross proceeds of sales or gross income from tangible personal property sold to a commercial airline 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 subsection, "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.

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

E. For the purposes of section 42-5032.01, the department shall separately account for revenues collected under the restaurant classification from businesses operating restaurants, dining rooms, lunchrooms, lunch stands, soda fountains, catering services or similar establishments:

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

F. For the purposes of section 42-5032.03 and subject to section 48-4238, beginning October 1, 2025 and each month thereafter through December 31, 2055, the department shall separately account for revenues collected under the restaurant classification from businesses operating restaurants, dining rooms, lunchrooms, lunch stands, soda fountains, catering services or similar establishments on the premises of a major league baseball facility or an adjacent building that is owned by a county stadium district pursuant to title 48, chapter 26 and operated by the county stadium district or the professional baseball franchise organization that occupies the major league baseball facility or adjacent building. For the purposes of this subsection, "adjacent building" and "major league baseball facility" have the same meanings prescribed in section 48-4201.

§ 42-5075 Prime contracting classification; exemptions; definitions

A. The prime contracting classification is comprised of the business of prime contracting and the business of manufactured building dealer. Sales for resale to another manufactured building dealer are not subject to tax. Sales for resale do not include sales to a lessor of manufactured buildings. The sale of a used manufactured building is not taxable under this chapter. The prime contracting classification does not include any work or operation performed by a person that is not required to be licensed by the registrar of contractors pursuant to section 32-1121.

B. The tax base for the prime contracting classification is sixty-five percent of the gross proceeds of sales or gross income derived from the business. The following amounts shall be deducted from the gross proceeds of sales or gross income before computing the tax base:

The sales price of land, which shall not exceed the fair market value.
Sales and installation of groundwater measuring devices required under section 45-604 and groundwater monitoring wells required by law, including monitoring wells installed for acquiring information for a permit required by law.
The sales price of furniture, furnishings, fixtures, appliances and attachments that are not incorporated as component parts of or attached to a manufactured building or the setup site. The sale of such items may be subject to the taxes imposed by article 1 of this chapter separately and distinctly from the sale of the manufactured building.
The gross proceeds of sales or gross income received from a contract entered into for the modification of any building, highway, road, railroad, excavation, manufactured building or other structure, project, development or improvement located in a military reuse zone for providing aviation or aerospace services or for a manufacturer, assembler or fabricator of aviation or aerospace products within an active military reuse zone after the zone is initially established or renewed under section 42-1301. To be eligible to qualify for this deduction, before beginning work under the contract, the prime contractor must have applied for a letter of qualification from the department of revenue.
The gross proceeds of sales or gross income derived from a contract to construct a qualified environmental technology manufacturing, producing or processing facility, as described in section 41-1514.02, and from subsequent construction and installation contracts that begin within ten years after the start of initial construction. To qualify for this deduction, before beginning work under the contract, the prime contractor must obtain a letter of qualification from the department of revenue. This paragraph shall apply for ten full consecutive calendar or fiscal years after the start of initial construction.
The gross proceeds of sales or gross income from a contract to provide for one or more of the following actions, or a contract for site preparation, constructing, furnishing or installing machinery, equipment or other tangible personal property, including structures necessary to protect exempt incorporated materials or installed machinery or equipment, and tangible personal property incorporated into the project, to perform one or more of the following actions in response to a release or suspected release of a hazardous substance, pollutant or contaminant from a facility to the environment, unless the release was authorized by a permit issued by a governmental authority:

(a) Actions to monitor, assess and evaluate such a release or a suspected release.

(b) Excavation, removal and transportation of contaminated soil and its treatment or disposal.

(c) Treatment of contaminated soil by vapor extraction, chemical or physical stabilization, soil washing or biological treatment to reduce the concentration, toxicity or mobility of a contaminant.

(d) Pumping and treatment or in situ treatment of contaminated groundwater or surface water to reduce the concentration or toxicity of a contaminant.

(e) The installation of structures, such as cutoff walls or caps, to contain contaminants present in groundwater or soil and prevent them from reaching a location where they could threaten human health or welfare or the environment.

This paragraph does not include asbestos removal or the construction or use of ancillary structures such as maintenance sheds, offices or storage facilities for unattached equipment, pollution control equipment, facilities or other control items required or to be used by a person to prevent or control contamination before it reaches the environment.

The gross proceeds of sales or gross income that is derived from a contract for the installation, assembly, repair or maintenance of machinery, equipment or other tangible personal property that is either deducted from the tax base of the retail classification under section 42-5061, subsection B or that is exempt from use tax under section 42-5159, subsection B and that has independent functional utility, pursuant to the following provisions:

(a) The deduction provided in this paragraph includes the gross proceeds of sales or gross income derived from all of the following:

(i) Any activity performed on machinery, equipment or other tangible personal property with independent functional utility.

(ii) Any activity performed on any tangible personal property relating to machinery, equipment or other tangible personal property with independent functional utility in furtherance of any of the purposes provided for under subdivision (d) of this paragraph.

(iii) Any activity that is related to the activities described in items (i) and (ii) of this subdivision, including inspecting the installation of or testing the machinery, equipment or other tangible personal property.

(b) The deduction provided in this paragraph does not include gross proceeds of sales or gross income from the portion of any contracting activity that consists of the development of, or modification to, real property in order to facilitate the installation, assembly, repair, maintenance or removal of machinery, equipment or other tangible personal property that is either deducted from the tax base of the retail classification under section 42-5061, subsection B or exempt from use tax under section 42-5159, subsection B.

(c) The deduction provided in this paragraph shall be determined without regard to the size or useful life of the machinery, equipment or other tangible personal property.

(d) For the purposes of this paragraph, "independent functional utility" means that the machinery, equipment or other tangible personal property can independently perform its function without attachment to real property, other than attachment for any of the following purposes:

(i) Assembling the machinery, equipment or other tangible personal property.

(ii) Connecting items of machinery, equipment or other tangible personal property to each other.

(iii) Connecting the machinery, equipment or other tangible personal property, whether as an individual item or as a system of items, to water, power, gas, communication or other services.

(iv) Stabilizing or protecting the machinery, equipment or other tangible personal property during operation by bolting, burying or performing other similar nonpermanent connections to either real property or real property improvements.

The gross proceeds of sales or gross income attributable to the purchase of machinery, equipment or other tangible personal property that is exempt from or deductible from transaction privilege and use tax under:

(a) Section 42-5061, subsection A, paragraph 25, 29 or 58.

(b) Section 42-5061, subsection B.

(c) Section 42-5159, subsection A, paragraph 13, subdivision (a), (b), (c), (d), (e), (f), (j), (k), (m) or (n) or paragraph 55.

(d) Section 42-5159, subsection B.

The gross proceeds of sales or gross income received from a contract for the construction of an environmentally controlled facility for the raising of poultry for the production of eggs and the sorting, cooling and packaging of eggs.
The gross proceeds of sales or gross income that is derived from a contract entered into with a person who is engaged in the commercial production of livestock, livestock products or agricultural, horticultural, viticultural or floricultural crops or products in this state for the modification of any building, highway, road, excavation, manufactured building or other structure, project, development or improvement used directly and primarily to prevent, monitor, control or reduce air, water or land pollution.
The gross proceeds of sales or gross income that is derived from the installation, assembly, repair or maintenance of clean rooms that are deducted from the tax base of the retail classification pursuant to section 42-5061, subsection B, paragraph 17.
For taxable periods beginning from and after June 30, 2001, the gross proceeds of sales or gross income derived from a contract entered into for the construction of a residential apartment housing facility that qualifies for a federal housing subsidy for low-income persons over sixty-two years of age and that is owned by a nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code.
For taxable periods beginning from and after December 31, 1996 and ending before January 1, 2017, the gross proceeds of sales or gross income derived from a contract to provide and install a solar energy device. The contractor shall register with the department as a solar energy contractor. By registering, the contractor acknowledges that it will make its books and records relating to sales of solar energy devices available to the department for examination.
The gross proceeds of sales or gross income derived from a contract entered into for the construction of a launch site, as defined in 14 Code of Federal Regulations section 401.5.
The gross proceeds of sales or gross income derived from a contract entered into for the construction of a domestic violence shelter that is owned and operated by a nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code.
The gross proceeds of sales or gross income derived from contracts to perform postconstruction treatment of real property for termite and general pest control, including wood-destroying organisms.
The gross proceeds of sales or gross income received from contracts entered into before July 1, 2006 for constructing a state university research infrastructure project if the project has been reviewed by the joint committee on capital review before the university enters into the construction contract for the project. For the purposes of this paragraph, "research infrastructure" has the same meaning prescribed in section 15-1670.
The gross proceeds of sales or gross income received from a contract for the construction of any building, or other structure, project, development or improvement owned 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 if actual construction begins before January 1, 2024. To qualify for this deduction, the prime contractor must obtain a letter of qualification from the Arizona commerce authority before beginning work under the contract.
Any amount of the gross proceeds of sales or gross income attributable to development fees that are incurred in relation to a contract for construction, development or improvement of real property and that are paid by a prime contractor or subcontractor. For the purposes of this paragraph:

(a) The attributable amount shall not exceed the value of the development fees actually imposed.

(b) The attributable amount is equal to the total amount of development fees paid by the prime contractor or subcontractor, and the total development fees credited in exchange for the construction of, contribution to or dedication of real property for providing public infrastructure, public safety or other public services necessary to the development. The real property must be the subject of the development fees.

(c) "Development fees" means fees imposed to offset capital costs of providing public infrastructure, public safety or other public services to a development and authorized pursuant to section 9-463.05, section 11-1102 or title 48 regardless of the jurisdiction to which the fees are paid.

The gross proceeds of sales or gross income derived from a contract entered into for the construction of a mixed waste processing facility that is located on a municipal solid waste landfill and that is constructed for the purpose of recycling solid waste or producing renewable energy from landfill waste. For the purposes of this paragraph:

(a) "Mixed waste processing facility" means a solid waste facility that is owned, operated or used for the treatment, processing or disposal of solid waste, recyclable solid waste, very small quantity generator waste or household hazardous waste. For the purposes of this subdivision, "very small quantity generator waste", "household hazardous waste" and "solid waste facility" have the same meanings prescribed in section 49-701, except that solid waste facility does include a site that stores, treats or processes paper, glass, wood, cardboard, household textiles, scrap metal, plastic, vegetative waste, aluminum, steel or other recyclable material.

(b) "Municipal solid waste landfill" has the same meaning prescribed in section 49-701.

(c) "Recycling" means collecting, separating, cleansing, treating and reconstituting recyclable solid waste that would otherwise become solid waste, but does not include incineration or other similar processes.

(d) "Renewable energy" means usable energy, including electricity, fuels, gas and heat, produced through the conversion of energy provided by sunlight, water, wind, geothermal, heat, biomass, biogas, landfill gas or another nonfossil renewable resource.

The gross proceeds of sales or gross income derived from a contract to install containment structures. For the purposes of this paragraph, "containment structure" means a structure that prevents, monitors, controls or reduces noxious or harmful discharge into the environment.

C. Entitlement to the deduction pursuant to subsection B, paragraph 7 of this section is subject to the following provisions:

A prime contractor may establish entitlement to the deduction by both:

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

(b) Obtaining a certificate executed by the purchaser indicating the name and address of the purchaser, the precise nature of the business of the purchaser, the purpose for which the purchase was made, the necessary facts to establish the deductibility of the property under section 42-5061, subsection B, and a certification that the person executing the certificate is authorized to do so on behalf of the purchaser. The certificate may be disregarded if the prime contractor has reason to believe that the information contained in the certificate is not accurate or complete.

A person who does not comply with paragraph 1 of this subsection may establish entitlement to the deduction by presenting facts necessary to support the entitlement, but the burden of proof is on that person.
The department may prescribe a form for the certificate described in paragraph 1, subdivision (b) of this subsection. The department may also adopt rules that describe the transactions with respect to which a person is not entitled to rely solely on the information contained in the certificate provided in paragraph 1, subdivision (b) of this subsection but must instead obtain such additional information as required in order to be entitled to the deduction.
If a prime contractor is entitled to a deduction by complying with paragraph 1 of this subsection, the department may require the purchaser who caused the execution of the certificate to establish the accuracy and completeness of the information required to be contained in the certificate that would entitle the prime contractor to the deduction. If the purchaser cannot establish the accuracy and completeness of the information, the purchaser is liable in an amount equal to any tax, penalty and interest that the prime contractor would have been required to pay under article 1 of this chapter if the prime contractor had not complied with paragraph 1 of this subsection. Payment of the amount under this paragraph exempts the purchaser from liability for any tax imposed under article 4 of this chapter. The amount shall be treated as a transaction privilege tax to the purchaser and as tax revenues collected from the prime contractor in order to designate the distribution base for purposes of section 42-5029.

D. Subcontractors or others who perform modification activities are not subject to tax if they can demonstrate that the job was within the control of a prime contractor or contractors or a dealership of manufactured buildings and that the prime contractor or dealership is liable for the tax on the gross income, gross proceeds of sales or gross receipts attributable to the job and from which the subcontractors or others were paid.

E. Amounts received by a contractor for a project are excluded from the contractor's gross proceeds of sales or gross income derived from the business if the person who hired the contractor executes and provides a certificate to the contractor stating that the person providing the certificate is a prime contractor and is liable for the tax under article 1 of this chapter. The department shall prescribe the form of the certificate. If the contractor has reason to believe that the information contained on the certificate is erroneous or incomplete, the department may disregard the certificate. If the person who provides the certificate is not liable for the tax as a prime contractor, that person is nevertheless deemed to be the prime contractor in lieu of the contractor and is subject to the tax under this section on the gross receipts or gross proceeds received by the contractor.

F. Every person engaging or continuing in this state in the business of prime contracting or dealership of manufactured buildings shall present to the purchaser of such prime contracting or manufactured building a written receipt of the gross income or gross proceeds of sales from such activity and shall separately state the taxes to be paid pursuant to this section.

G. For the purposes of section 42-5032.01, the department shall separately account for revenues collected under the prime contracting classification from any prime contractor engaged in the preparation or construction of a multipurpose facility, and related infrastructure, that is owned, operated or leased by the tourism and sports authority pursuant to title 5, chapter 8.

H. For the purposes of section 42-5032.02, from and after September 30, 2013, the department shall separately account for revenues reported and collected under the prime contracting classification from any prime contractor engaged in the construction of any buildings and associated improvements that are for the benefit of a manufacturing facility. For the purposes of this subsection, "associated improvements" and "manufacturing facility" have the same meanings prescribed in section 42-5032.02.

I. For the purposes of section 42-5032.03 and subject to section 48-4238, beginning October 1, 2025 and each month thereafter through December 31, 2055, the department shall separately account for revenues reported and collected under the prime contracting classification from any prime contractor engaged in the construction of any buildings and associated improvements that are for the benefit of a major league baseball facility or an adjacent building that is owned by a county stadium district pursuant to title 48, chapter 26 and operated by the county stadium district or the professional baseball franchise organization that occupies the major league baseball facility or adjacent building. For the purposes of this subsection, "adjacent building" and "major league baseball facility" have the same meanings prescribed in section 48-4201.

J. The gross proceeds of sales or gross income derived from a contract for lawn maintenance services is not subject to tax under this section if the contract does not include landscaping activities. Lawn maintenance service is a service pursuant to section 42-5061, subsection A, paragraph 1, and includes lawn mowing and edging, weeding, repairing sprinkler heads or drip irrigation heads, seasonal replacement of flowers, refreshing gravel, lawn dethatching, seeding winter lawns, leaf and debris collection and removal, tree or shrub pruning or clipping, garden and gravel raking and applying pesticides, as defined in section 3-361, and fertilizer materials, as defined in section 3-262.

K. Except as provided in subsection P of this section, the gross proceeds of sales or gross income derived from landscaping activities is subject to tax under this section. Landscaping includes installing lawns, grading or leveling ground, installing gravel or boulders, planting trees and other plants, felling trees, removing or mulching tree stumps, removing other imbedded plants, building irrigation berms, installing railroad ties and installing underground sprinkler or watering systems.

L. The portion of gross proceeds of sales or gross income attributable to the actual direct costs of providing architectural or engineering services that are incorporated in a contract is not subject to tax under this section. For the purposes of this subsection, "direct costs" means the portion of the actual costs that are directly expended in providing architectural or engineering services.

M. Operating a landfill or a solid waste disposal facility is not subject to taxation under this section, including filling, compacting and creating vehicle access to and from cell sites within the landfill. Constructing roads to a landfill or solid waste disposal facility and constructing cells within a landfill or solid waste disposal facility may be deemed prime contracting under this section.

N. The following apply in determining the taxable situs of sales of manufactured buildings:

For sales in this state where the manufactured building dealer contracts to deliver the building to a setup site or to perform the setup in this state, the taxable situs is the setup site.
For sales in this state where the manufactured building dealer does not contract to deliver the building to a setup site or does not perform the setup, the taxable situs is the location of the dealership where the building is delivered to the buyer.
For sales in this state where the manufactured building dealer contracts to deliver the building to a setup site that is outside this state, the situs is outside this state and the transaction is excluded from tax.

O. The gross proceeds of sales or gross income attributable to a written contract for design phase services or professional services, executed before modification begins and with terms, conditions and pricing of all of these services separately stated in the contract from those for construction phase services, is not subject to tax under this section, regardless of whether the services are provided sequential to or concurrent with prime contracting activities that are subject to tax under this section. This subsection does not include the gross proceeds of sales or gross income attributable to construction phase services. For the purposes of this subsection:

"Construction phase services" means services for the execution and completion of any modification, including the following:

(a) Administration or supervision of any modification performed on the project, including team management and coordination, scheduling, cost controls, submittal process management, field management, safety program, close-out process and warranty period services.

(b) Administration or supervision of any modification performed pursuant to a punch list. For the purposes of this subdivision, "punch list" means minor items of modification work performed after substantial completion and before final completion of the project.

(c) Administration or supervision of any modification performed pursuant to change orders. For the purposes of this subdivision, "change order" means a written instrument issued after execution of a contract for modification work, providing for all of the following:

(i) The scope of a change in the modification work, contract for modification work or other contract documents.

(ii) The amount of an adjustment, if any, to the guaranteed maximum price as set in the contract for modification work. For the purposes of this item, "guaranteed maximum price" means the amount guaranteed to be the maximum amount due to a prime contractor for the performance of all modification work for the project.

(iii) The extent of an adjustment, if any, to the contract time of performance set forth in the contract.

(d) Administration or supervision of any modification performed pursuant to change directives. For the purposes of this subdivision, "change directive" means a written order directing a change in modification work before agreement on an adjustment of the guaranteed maximum price or contract time.

(e) Inspection to determine the dates of substantial completion or final completion.

(f) Preparation of any manuals, warranties, as-built drawings, spares or other items the prime contractor must furnish pursuant to the contract for modification work. For the purposes of this subdivision, "as-built drawing" means a drawing that indicates field changes made to adapt to field conditions, field changes resulting from change orders or buried and concealed installation of piping, conduit and utility services.

(g) Preparation of status reports after modification work has begun detailing the progress of work performed, including preparation of any of the following:

(i) Master schedule updates.

(ii) Modification work cash flow projection updates.

(iii) Site reports made on a periodic basis.

(iv) Identification of discrepancies, conflicts or ambiguities in modification work documents that require resolution.

(v) Identification of any health and safety issues that have arisen in connection with the modification work.

(h) Preparation of daily logs of modification work, including documentation of personnel, weather conditions and on-site occurrences.

(i) Preparation of any submittals or shop drawings used by the prime contractor to illustrate details of the modification work performed.

(j) Administration or supervision of any other activities for which a prime contractor receives a certificate for payment or certificate for final payment based on the progress of modification work performed on the project.

"Design phase services" means services for developing and completing a design for a project that are not construction phase services, including the following:

(a) Evaluating surveys, reports, test results or any other information on-site conditions for the project, including physical characteristics, legal limitations and utility locations for the site.

(b) Evaluating any criteria or programming objectives for the project to ascertain requirements for the project, such as physical requirements affecting cost or projected utilization of the project.

(c) Preparing drawings and specifications for architectural program documents, schematic design documents, design development documents, modification work documents or documents that identify the scope of or materials for the project.

(d) Preparing an initial schedule for the project, excluding the preparation of updates to the master schedule after modification work has begun.

(e) Preparing preliminary estimates of costs of modification work before completion of the final design of the project, including an estimate or schedule of values for any of the following:

(i) Labor, materials, machinery and equipment, tools, water, heat, utilities, transportation and other facilities and services used in the execution and completion of modification work, regardless of whether they are temporary or permanent or whether they are incorporated in the modifications.

(ii) The cost of labor and materials to be furnished by the owner of the real property.

(iii) The cost of any equipment of the owner of the real property to be assigned by the owner to the prime contractor.

(iv) The cost of any labor for installation of equipment separately provided by the owner of the real property that has been designed, specified, selected or specifically provided for in any design document for the project.

(v) Any fee paid by the owner of the real property to the prime contractor pursuant to the contract for modification work.

(vi) Any bond and insurance premiums.

(vii) Any applicable taxes.

(viii) Any contingency fees for the prime contractor that may be used before final completion of the project.

(f) Reviewing and evaluating cost estimates and project documents to prepare recommendations on site use, site improvements, selection of materials, building systems and equipment, modification feasibility, availability of materials and labor, local modification activity as related to schedules and time requirements for modification work.

(g) Preparing the plan and procedures for selection of subcontractors, including any prequalification of subcontractor candidates.

"Professional services" means architect services, engineer services, geologist services, land surveying services or landscape architect services that are within the scope of those services as provided in title 32, chapter 1 and for which gross proceeds of sales or gross income has not otherwise been deducted under subsection L of this section.

P. The gross proceeds of sales or gross income derived from a contract with the owner of real property or improvements to real property for the maintenance, repair, replacement or alteration of existing property is not subject to tax under this section if the contract does not include modification activities, except as specified in this subsection. The gross proceeds of sales or gross income derived from a de minimis amount of modification activity does not subject the contract or any part of the contract to tax under this section. For the purposes of this subsection:

Tangible personal property that is incorporated or fabricated into a project described in this subsection may be subject to the amount prescribed in section 42-5008.01.
Each contract is independent of any other contract, except that any change order that directly relates to the scope of work of the original contract shall be treated the same as the original contract under this chapter, regardless of the amount of modification activities included in the change order. If a change order does not directly relate to the scope of work of the original contract, the change order shall be treated as a new contract, with the tax treatment of any subsequent change order to follow the tax treatment of the contract to which the scope of work of the subsequent change order directly relates.

Q. Notwithstanding subsection P of this section, a contract that primarily involves surface or subsurface improvements to land and that is subject to title 28, chapter 19, 20 or 22 or title 34, chapter 2 or 6 is taxable under this section, even if the contract also includes vertical improvements. Agencies that are subject to procurement processes under those provisions shall include in the request for proposals a notice to bidders when those projects are subject to this section. This subsection does not apply to contracts with:

Community facilities districts, fire districts, county television improvement districts, community park maintenance districts, cotton pest control districts, hospital districts, pest abatement districts, health service districts, agricultural improvement districts, county free library districts, county jail districts, county stadium districts, special health care districts, public health services districts, theme park districts or revitalization districts.
Any special taxing district not specified in paragraph 1 of this subsection if the district does not substantially engage in the modification, maintenance, repair, replacement or alteration of surface or subsurface improvements to land.

R. Notwithstanding subsection S, paragraph 10 of this section, a person owning real property who enters into a contract for sale of the real property, who is responsible to the new owner of the property for modifications made to the property in the period subsequent to the transfer of title and who receives a consideration for the modifications is considered a prime contractor solely for purposes of taxing the gross proceeds of sale or gross income received for the modifications made subsequent to the transfer of title. The original owner's gross proceeds of sale or gross income received for the modifications shall be determined according to the following methodology:

If any part of the contract for sale of the property specifies amounts to be paid to the original owner for the modifications to be made in the period subsequent to the transfer of title, the amounts are included in the original owner's gross proceeds of sale or gross income under this section. Proceeds from the sale of the property that are received after transfer of title and that are unrelated to the modifications made subsequent to the transfer of title are not considered gross proceeds of sale or gross income from the modifications.
If the original owner enters into an agreement separate from the contract for sale of the real property providing for amounts to be paid to the original owner for the modifications to be made in the period subsequent to the transfer of title to the property, the amounts are included in the original owner's gross proceeds of sale or gross income received for the modifications made subsequent to the transfer of title.
If the original owner is responsible to the new owner for modifications made to the property in the period subsequent to the transfer of title and derives any gross proceeds of sale or gross income from the project subsequent to the transfer of title other than a delayed disbursement from escrow unrelated to the modifications, it is presumed that the amounts are received for the modifications made subsequent to the transfer of title unless the contrary is established by the owner through its books, records and papers kept in the regular course of business.
The tax base of the original owner is computed in the same manner as a prime contractor under this section.

S. For the purposes of this section:

"Alteration" means an activity or action that causes a direct physical change to existing property. For the purposes of this paragraph:

(a) For existing property that is properly classified as class two property under section 42-12002, paragraph 1, subdivision (c) or paragraph 2, subdivision (c) and that is used for residential purposes, class three property under section 42-12003 or class four property under section 42-12004, this paragraph does not apply if the contract amount is more than twenty-five percent of the most recent full cash value established under chapter 13, article 2 of this title as of the date of any bid for the work or the date of the contract, whichever value is higher.

(b) For all existing property other than existing property described in subdivision (a) of this paragraph, this paragraph does not apply if the contract amount is more than $750,000.

(c) Project elements may not be artificially separated from a contract to cause a project to qualify as an alteration. The department has the burden of proof that project elements have been artificially separated from a contract.

(d) If a project for which the owner and the person performing the work reasonably believed, at the inception of the contract, would be treated as an alteration under this paragraph and, on completion of the project, the project exceeded the applicable threshold described in either subdivision (a) or (b) of this paragraph by not more than twenty-five percent of the applicable threshold for any reason, the work performed under the contract qualifies as an alteration.

(e) A change order that directly relates to the scope of work of the original contract shall be treated as part of the original contract, and the contract amount shall include any amount attributable to a change order that directly relates to the scope of work of the original contract.

(f) Alteration does not include maintenance, repair or replacement.

"Contracting" means engaging in business as a contractor.
"Contractor" is synonymous with the term "builder" and means any person or organization that undertakes to or offers to undertake to, or purports to have the capacity to undertake to, or submits a bid to, or does personally or by or through others, modify any building, highway, road, railroad, excavation, manufactured building or other structure, project, development or improvement, or to do any part of such a project, including the erection of scaffolding or other structure or works in connection with such a project, and includes subcontractors and specialty contractors. For all purposes of taxation or deduction, this definition shall govern without regard to whether or not such a contractor is acting in fulfillment of a contract.
"Manufactured building" means a manufactured home, mobile home or factory-built building, as defined in section 41-4001.
"Manufactured building dealer" means a dealer who either:

(a) Is licensed pursuant to title 41, chapter 37, article 4 and who sells manufactured buildings to the final consumer.

(b) Supervises, performs or coordinates the excavation and completion of site improvements or the setup of a manufactured building, including the contracting, if any, with any subcontractor or specialty contractor for the completion of the contract.

"Modification" means construction, grading and leveling ground, wreckage or demolition. Modification does not include:

(a) Any project described in subsection P of this section.

(b) Any wreckage or demolition of existing property, or any other activity that is a necessary component of a project described in subsection P of this section.

(c) Any mobilization or demobilization related to a project described in subsection P of this section, such as the erection or removal of temporary facilities to be used by those persons working on the project.

"Modify" means to make a modification or cause a modification to be made.
"Owner" means the person that holds title to the real property or improvements to real property that is the subject of the work, as well as an agent of the title holder and any person with the authority to perform or authorize work on the real property or improvements, including a tenant and a property manager. For the purposes of subsection P of this section, a person who is hired by a general contractor that is hired by an owner, or a subcontractor of a general contractor that is hired by an owner, is considered to be hired by the owner.
"Prime contracting" means engaging in business as a prime contractor.
"Prime contractor" means a contractor who supervises, performs or coordinates the modification of any building, highway, road, railroad, excavation, manufactured building or other structure, project, development or improvement, including the contracting, if any, with any subcontractors or specialty contractors and who is responsible for the completion of the contract. Except as provided in subsections E and R of this section, a person who owns real property, who engages one or more contractors to modify that real property and who does not itself modify that real property is not a prime contractor within the meaning of this paragraph regardless of the existence of a contract for sale or the subsequent sale of that real property.
"Replacement" means the removal from service of one component or system of existing property or tangible personal property installed in existing property, including machinery or equipment, and the installation of a new component or system or new tangible personal property, including machinery or equipment, that provides the same, a similar or an upgraded design or functionality, regardless of the contract amount and regardless of whether the existing component or system or existing tangible personal property is physically removed from the existing property.
"Sale of a used manufactured building" does not include a lease of a used manufactured building.

§ 42-5076 Online lodging marketplace classification; definitions

A. The online lodging marketplace classification is comprised of the business of operating an online lodging marketplace.

B. The tax base for the online lodging marketplace classification is the gross proceeds of sales or gross income derived from the business measured by the total amount charged for an online transient lodging transaction by the online lodging operator.

C. Through December 31, 2018, the online lodging marketplace classification does not include any online lodging marketplace that has not entered into an agreement with the department to register for, or has not otherwise obtained from the department, a license to collect tax pursuant to section 42-5005, subsection L.

D. The tax base for the online lodging marketplace classification does not include the gross proceeds of sales or gross income derived from charges to an occupant who is a transient as defined in section 42-5070 for the occupancy of any lodging accommodation in this state that is classified for property tax purposes under section 42-12001.

E. For the purposes of this section:

"Online lodging marketplace" means a person that provides a digital platform for compensation through which an unaffiliated third party offers to rent lodging accommodations in this state to an occupant, including a transient, as defined in section 42-5070, and the accommodations are not classified for property tax purposes under section 42-12001. For the purposes of this paragraph:

(a) "Lodging accommodations" means any space offered to the public for lodging, including any hotel, motel, inn, tourist home or house, dude ranch, resort, campground, studio or bachelor hotel, lodging house, rooming house, residential home, apartment house, dormitory, public or private club, mobile home or house trailer at a fixed location in this state or other similar structure or space.

(b) "Unaffiliated third party" means a person that is not owned or controlled, directly or indirectly, by the same interests.

"Online lodging operator" means a person that is engaged in the business of renting to an occupant, including a transient as defined in section 42-5070, any lodging accommodation in this state offered through an online lodging marketplace.
"Online lodging transaction" means a charge to an occupant, including a transient as defined in section 42-5070, by an online lodging operator for the occupancy of any lodging accommodation in this state and includes an online transient lodging transaction.
"Online transient lodging transaction" means a charge to an occupant who is a transient as defined in section 42-5070 by an online lodging operator for the occupancy of any lodging accommodation in this state.

Article 3 Tax Exemption for Sales of Food

§ 42-5101 Definitions

In this article, unless the context otherwise requires:

"Eligible grocery business" means an establishment that is deemed eligible to participate in the supplemental nutrition assistance program established by the food and nutrition act of 2008 (P.L. 110-246; 122 Stat. 1651; 7 United States Code sections 2011 through 2036a) by the United States department of agriculture food and nutrition service or an establishment that proves to the satisfaction of the department of revenue that, based on the nature of the establishment's food sales, could be eligible to participate in the supplemental nutrition assistance program established by the food and nutrition act of 2008.
"Facilities for the consumption of food" means tables, chairs, benches, booths, stools, counters and similar conveniences, trays, glasses, dishes or other tableware and parking areas for the convenience of in-car consumption of food in or on the premises on which the retailer conducts business.
"Food" means any food item intended for human consumption that is intended for home consumption as defined by rules adopted by the department pursuant to section 42-5106.
"Food for consumption on the premises" includes:

(a) Hot prepared food.

(b) Hot or cold sandwiches.

(c) Food served by an attendant to be eaten at tables, chairs, benches, booths, stools, counters and similar conveniences and within parking areas for the convenience of in-car consumption of food.

(d) Food served with trays, glasses, dishes or other tableware.

(e) Beverages sold in cups, glasses, or open containers.

(f) Food sold by caterers.

(g) Food sold within the premises of theaters, movies, operas, shows of any type or nature, exhibitions, concerts, carnivals, circuses, amusement parks, fairs, races, contests, games, athletic events, rodeos, billiard and pool parlors, bowling alleys, public dances, dance halls, boxing, wrestling and other matches and any business that charges admission, entrance or cover fees for exhibition, amusement or entertainment.

(h) Any items contained in subdivisions (a) through (g) of this paragraph even though they are sold on a take-out or to go basis, and whether or not the item is packaged, is wrapped or is actually taken from the premises.

"Hot prepared food" includes those products, items or ingredients of food that are prepared and intended for sale in a heated condition. Hot prepared food includes a combination of hot and cold food items or ingredients if a single price has been established.
"Premises" means the total space and facilities in or on which a retailer conducts business and that are owned or controlled, in whole or in part, by a retailer or are made available for the use of customers of the retailer or group of retailers, including any building or part of a building, parking lot or grounds.

§ 42-5102 Tax exemption for sales of food; nonexempt sales

A. Except for the gross proceeds of sales or gross income from the sale of food for consumption on the premises, the taxes imposed by this chapter do not apply to the gross proceeds of sales or gross income from sales of food by any of the following:

A retailer who conducts an eligible grocery business.
A retailer who conducts a business whose primary business is not the sale of food but who sells food which is displayed, packaged and sold in a similar manner as an eligible grocery business.
A retailer who sells food and does not provide or make available any facilities for the consumption of food on the premises.
A retailer who conducts a delicatessen business either from a counter which is separate from the place and cash register where taxable sales are made or from a counter which has two cash registers which are used to record taxable and tax exempt sales or a retailer who conducts a delicatessen business and who uses a cash register which has at least two tax computing keys which are used to record taxable and tax exempt sales.
A retailer who is a street or sidewalk vendor and who uses a pushcart.
Vending machines and other types of automatic retailers.

B. The taxes imposed by this chapter do not apply to the gross proceeds of sales or gross income from sales of food by a state university or community college or its designee on its campuses to students using a validated meal ticket or to patients purchasing or consuming food at the Arizona health sciences center.

C. The taxes imposed by this chapter do not apply to the gross proceeds of sales or gross income from sales of food by a retailer to:

A regularly organized private or parochial school that offers an educational program for grade twelve or under which may be attended in substitution for a public school pursuant to section 15-802.
A child care facility that is licensed under section 36-882 or a child care group home certified under section 36-897.01.
A facility which provides on a regular basis care and supervision of persons who, because of age or a mental or physical condition, are incapable of caring for themselves and where they are unaccompanied by their custodians or guardians for periods of less than twenty-four hours a day.
An organization which is tax exempt under section 501(c)(3) of the internal revenue code and which provides the articles to persons with a nominal charge or without a monetary charge.
A 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 for consumption on the premises.

D. Notwithstanding subsection A of this section, the taxes imposed by this chapter do not apply to the gross proceeds of sales or gross income from sales of low or reduced cost articles of food or drink to eligible elderly or homeless persons or persons with a disability by a business subject to tax under section 42-5074 that contracts with the department of economic security and that is approved by the food and nutrition service of the United States department of agriculture pursuant to the supplemental nutrition assistance program established by the food and nutrition act of 2008 (P.L. 110-246; 122 Stat. 1651; 7 United States Code sections 2011 through 2036a), if the purchases are made with the benefits issued pursuant to the supplemental nutrition assistance program.

§ 42-5104 Records of sales

A. Retailers shall maintain accurate, verifiable and complete records of all purchases and sales of tangible personal property in order to verify exemptions from taxes imposed by this chapter. A retailer may use any method of recording that properly reflects all purchases and sales of food items exempted from taxes imposed by this chapter, as well as all purchases and sales of items subject to taxes imposed by this chapter, provided such records are maintained in accordance with rules adopted by the department.

B. Any retailer who fails to maintain records as provided in this section shall pay the amount of taxes that would have been imposed on tangible personal property by this chapter if sales of food had not been exempted by article 2 of this chapter and this article.

C. If, upon request by the department, the retailer cannot demonstrate to the department that such records properly reflect all sales of food items exempted from taxes imposed by this chapter, the department may recompute the amount of tax to be paid pursuant to section 42-1108.

§ 42-5106 Rules

A. The department shall adopt rules defining food consistent with section 42-5101 and this section.

B. The department shall include as food:

Returnable containers for which a deposit is collected.
Ice and dry ice used in packing, shipping or transporting food.
Seeds and plants to grow food for personal consumption.

C. The department shall not include food for consumption on the premises, alcoholic beverages, tobacco, medicines or dietary supplements, such as vitamins and protein supplements, as food, unless the item is otherwise deemed to be food under this section.

D. Notwithstanding section 42-5101, any ready-to-drink, nonalcoholic beverage that is contained in a closed or sealed bottle, can or carton, that is intended for human consumption and that is intended for home consumption is deemed to be food.

E. The department shall adopt rules that, other than for those items specifically included or excluded by subsections B, C and D of this section, define food to be those items that are intended for human consumption and that are intended for home consumption. In adopting these rules, the department shall give strong consideration to those specific items that are then eligible for purchase with supplemental nutrition assistance program benefits so as to effectuate the intent of the legislature as specified in this article.

Article 3.1 Tax Exemption for Sales to Indian Tribes, Tribally Owned Businesses, Tribal Entities and Affiliated Indians

§ 42-5121 Definitions

In this article, unless the context otherwise requires:

"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.
"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.
"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.

§ 42-5122 Tax exemption; sales to Indian tribes, tribally owned businesses, tribal entities and affiliated Indians

The taxes imposed by this chapter do not apply to the gross proceeds of sales or gross income derived from any of the following:

Business activities performed by the Indian tribe, tribally owned business, tribal entity or affiliated Indian if the business activity takes place on the Indian reservation.
Business activities performed by a nonaffiliated Indian or non-Indian vendor on an Indian reservation for the Indian tribe, tribal entity or affiliated Indian.
Contracting activities performed on an Indian reservation by the Indian tribe, tribally owned business, tribal entity or affiliated Indian.
Contracting activities performed for the Indian tribe, tribally owned business, tribal entity or affiliated Indian on the Indian reservation by a nonaffiliated Indian or non-Indian contractor.
Retail sales of tangible personal property to the Indian tribe, tribally owned business, tribal entity or affiliated Indian if the sale of tangible personal property takes place on the Indian reservation. A sale is deemed to take place on the Indian reservation if the tangible personal property is ordered from and delivered on an Indian reservation.
The sale of a motor vehicle to an enrolled member of an Indian tribe who resides on the Indian reservation established for that Indian tribe.

§ 42-5123 Records of transaction

Nonaffiliated Indians and non-Indian vendors shall maintain sufficient documentation of their taxable and nontaxable gross proceeds and gross income, under any method of recording that properly reflects such taxable and nontaxable gross proceeds and gross income, to enable the department to determine which transactions are subject to transaction privilege tax. Any gross proceeds and gross income that cannot be identified as nontaxable is considered taxable.

Article 4 Use Tax

§ 42-5151 Definitions

In this article, unless the context otherwise requires:

"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.
"Electric distribution service" means distributing electricity to retail electric customers through the use of electric distribution facilities.
"Electric generation service" means providing electricity for sale to retail electric customers but excluding electric distribution or transmission services.
"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 corporation commission.
"Electric utility services" means the business of providing electric ancillary services, electric distribution services, electric generation services, electric transmission services and other services related to providing electricity.
"Electricity" means electric energy, electric capacity or electric capacity and energy.
"Electricity supplier" means a person, whether acting in a principal, agent or other capacity, that offers to sell electricity to a retail electric customer in this state.
"Motor vehicles that are removed from inventory" means a motor vehicle that has been removed from a motor vehicle dealer's, as defined in section 28-4301, inventory and that is not for sale.
"Natural gas" means natural or artificial gas and includes methane and propane gas, the natural gas commodity, natural gas pipeline capacity or natural gas commodity and pipeline capacity.
"Natural gas utility services" means the business of selling natural gas or providing natural gas transportation services or other services related to providing natural gas.
"Notice" means written notice served personally or by certified mail and addressed to the last known address of the person to whom such notice is given.
"Other services" includes metering, meter reading services, billing and collecting services.
"Person" means an individual, firm, partnership, joint venture, association, corporation, estate, trust, receiver or syndicate, this state or a county, city, municipality, district or other political subdivision or agency thereof.
"Purchase" means any transfer, exchange or barter, conditional or otherwise, in any manner or by any means, of tangible personal property for a consideration, including transactions by which the possession of property is transferred but the seller retains the title as security for payment.
"Purchase price" or "sales price" means the total amount for which tangible personal property is sold, including any services that are a part of the sale, valued in money, whether paid in money or otherwise, and any amount for which credit is given to the purchaser by the seller without any deduction on account of the cost of the property sold, materials used, labor or services performed, interest charged, losses or other expenses, but does not include:

(a) Discounts allowed and taken.

(b) Charges for labor or services in installing, remodeling or repairing.

(c) Freight costs billed to and collected from a purchaser by a retailer for tangible personal property which, on the order of the retailer, is shipped directly from a manufacturer or wholesaler to the purchaser.

(d) Amounts attributable to federal excise taxes imposed by 26 United States Code section 4001, 4051 or 4081 on sales of heavy trucks and trailers and automobiles or on sales of use fuel, as defined in section 28-5601.

(e) The value of merchandise that is traded in on the purchase of new or pre-owned merchandise when the trade-in allowance is deducted from the sales price of the new or pre-owned merchandise before the completion of the sale.

"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.
"Retail natural gas customer" means a person who purchases natural gas for that person's own use, including use in that person's trade or business, and not for resale, redistribution or retransmission.
"Retailer" includes:

(a) Every person engaged in the business of making sales of tangible personal property for storage, use or other consumption or in the business of making sales at auction of tangible personal property owned by that person or others for storage, use or other consumption. If in the opinion of the department it is necessary for the efficient administration of this article to regard any salesmen, representatives, peddlers or canvassers as the agents of the dealers, distributors, supervisors or employers under whom they operate or from whom they obtain the tangible personal property sold by them, regardless of whether they are making sales on their own behalf or on behalf of such dealers, distributors, supervisors or employers, the department may so regard them and may regard the dealers, distributors, supervisors or employers as retailers for purposes of this article.

(b) A person who solicits orders for tangible personal property by mail if the solicitations are substantial and recurring or if the retailer benefits from any banking, financing, debt collection, telecommunication, television shopping system, cable, optic, microwave or other communication system or marketing activities occurring in this state or benefits from the location in this state of authorized installation, servicing or repair facilities.

"Solar daylighting" means a device that is specifically designed to capture and redirect the visible portion of the solar beam, while controlling the infrared portion, for use in illuminating interior building spaces in lieu of artificial lighting.
"Solar energy device" means a system or series of mechanisms designed primarily to provide heating, to provide cooling, to produce electrical power, to produce mechanical power, to provide solar daylighting or to provide any combination of the foregoing by means of collecting and transferring solar generated energy into such uses by either active or passive means, including wind generator systems that produce electricity. Solar energy systems may also have the capability of storing solar energy for future use. Passive systems shall clearly be designed as a solar energy device, such as a trombe wall, and not merely as a part of a normal structure, such as a window.
"Storage" means keeping or retaining tangible personal property purchased from a retailer for any purpose except sale in the regular course of business or subsequent use solely outside this state. For the purposes of this paragraph, sale in the regular course of business does not include the transfer of title or possession of coal back and forth between an owner or operator of a power plant and a person who is responsible for refining coal if both of the following apply:

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

(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.

"Taxpayer" means any retailer or person storing, using or consuming tangible personal property, the storage, use or consumption of which is subject to the tax imposed by this article when such tax was not paid to a retailer.
"Use or consumption" means the exercise of any right or power over tangible personal property incidental to owning the property except holding for sale or selling the property in the regular course of business. For the purposes of this paragraph, selling the property in the regular course of business does not include the transfer of title or possession of coal back and forth between an owner or operator of a power plant and a person who is responsible for refining coal if both of the following apply:

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

"Utility business" means a person that is engaged in the business of providing electric utility services to retail electric customers or natural gas utility services to retail natural gas customers.

§ 42-5152 Presumption

It shall be presumed that tangible personal property purchased by any person and brought into this state is purchased for storage, use or consumption in this state.

§ 42-5153 Exclusions from sales price

For purposes of this article the total sales price for nuclear fuel purchased for storage, use or consumption in this state shall be deemed to be the value of the purchase price of uranium oxide used in producing the fuel. The tax imposed by this article will be imposed only once for any one quantity or batch of nuclear fuel regardless of the number of transactions or financing arrangements which may occur with respect to that nuclear fuel.

§ 42-5154 Registration of retailers

Every retailer shall, before selling any tangible personal property for storage, use or consumption within this state, register with the department upon forms prescribed by the department.

§ 42-5155 Levy of tax; tax rate; purchaser's liability

(Caution: 1998 Prop. 105 applies)

A. There is levied and imposed an excise tax on the storage, use or consumption in this state of tangible personal property purchased from a retailer or utility business, as a percentage of the sales price. A manufactured building purchased outside this state and set up in this state is subject to tax under this section and in this case the rate is a percentage of sixty-five percent of the sales price.

B. The tax imposed by this section applies to any purchaser that purchased tangible personal property for resale but subsequently uses or consumes the property.

C. The tax rate shall equal the rate of tax prescribed by section 42-5010, subsection A as applied to retailers and utility businesses according to the respective classification under articles 1 and 2 of this chapter for the same type of transaction or business activity.

D. In addition to the rate prescribed by subsection C of this section, if approved by the qualified electors voting at a statewide general election, an additional rate increment of six-tenths of one per cent is imposed and shall be collected through June 30, 2021. The taxpayer shall pay taxes pursuant to this subsection at the same time and in the same manner as under subsection C of this section. The department shall separately account for the revenues collected with respect to the rate imposed pursuant to this subsection, and the state treasurer shall pay all of those revenues in the manner prescribed by section 42-5029, subsection E.

E. From and after June 30, 2021 through June 30, 2041, in addition to the rate prescribed by subsection C of this section, an additional rate increment of six-tenths of one percent is imposed and shall be collected. The taxpayer shall pay taxes pursuant to this subsection at the same time and in the same manner as under subsection C of this section. The department shall separately account for the revenues collected with respect to the rate imposed pursuant to this subsection, and the state treasurer shall pay all of those revenues in the manner prescribed by section 42-5029.02, subsection A.

F. Every person storing, using or consuming in this state tangible personal property purchased from a retailer or utility business is liable for the tax. The person's liability is not extinguished until the tax has been paid to this state.

G. A receipt from a retailer or utility business that maintains a place of business in this state or from a retailer or utility business that is authorized by the department to collect the tax, under such rules as it may prescribe, and that is for the purposes of this article regarded as a retailer or utility business maintaining a place of business in this state, given to the purchaser as provided in section 42-5161 is sufficient to relieve the purchaser from further liability for the tax to which the receipt refers.

§ 42-5156 Tangible personal property provided under a service contract or warranty; definition

A. The tax imposed by section 42-5155 shall be levied and collected at an amount equal to five and six-tenths per cent of the cost of the tangible personal property provided under the conditions of a warranty or service contract.

B. Every person storing, using or otherwise consuming in this state tangible personal property provided under the conditions of a warranty or service contract is liable for the tax. Such person's liability is not extinguished until the tax has been paid to this state, except that a receipt from a retailer maintaining a place of business in this state or from a retailer who is authorized by the department to collect the tax, under such rules as it may prescribe, and who is for the purposes of this article regarded as a retailer maintaining a place of business in this state, given to the purchaser in accordance with the provisions of section 42-5161 is sufficient to relieve the purchaser from further liability for the tax imposed upon the tangible personal property to which the receipt refers.

C. For the purpose of this section, "cost" means the cost of the tangible personal property to the provider of the warranty or contract.

§ 42-5157 Motor vehicles removed from inventory; service vehicles

A. The tax imposed by this article on motor vehicles that are removed from inventory by a motor vehicle dealer as defined in section 28-4301, that are used directly in the conduct of the motor vehicle dealer's primary business and that are returned to the dealer's active sales inventory within one year after the date of the initial removal from inventory shall be levied and imposed on a monthly basis and shall be applied to 1/39 of the value of each new motor vehicle as determined by the manufacturer's suggested retail price and to 1/39 of the value of each used motor vehicle as determined by any industry-wide publication in common use and devoted to listing used car values.

B. A service vehicle is not considered to be removed from inventory if the service vehicle is continuously available for sale. The department shall consider any service vehicle that remains a new motor vehicle as defined in section 28-4301 or that is treated as a new motor vehicle under title 28, chapter 10 to be continuously available for sale.

§ 42-5158 Motor vehicles used by motor vehicle manufacturers

The tax imposed by this article on a motor vehicle manufacturer for the storage, use or consumption of its maintenance, support or service motor vehicles shall be levied and imposed on a monthly basis and is applied as a percentage of one thirty-ninth of the dealer net price of the motor vehicles. This tax shall not be imposed for more than thirty-nine months on any motor vehicle. Motor vehicles and component parts used in any manner for testing or development by motor vehicle manufacturers are not subject to the tax imposed pursuant to this article.

§ 42-5159 Exemptions

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

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.
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.
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.
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.
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.
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.
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.
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.

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

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.
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.
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.

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 P.

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

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

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

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

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

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

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

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

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

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.
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.

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.
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.
Prescription eyeglasses and contact lenses.
Insulin, insulin syringes and glucose test strips.
Hearing aids as defined in section 36-1901.
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.
Food, as provided in and subject to the conditions of article 3 of this chapter and sections 42-5074 and 42-6017.
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).
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.
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.
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.
Lottery tickets or shares purchased pursuant to title 5, chapter 5.1, article 1.
Textbooks, sold by a bookstore, that are required by any state university or community college.
Magazines, other periodicals or other publications produced by this state to encourage tourist travel.
Paper machine clothing, such as forming fabrics and dryer felts, purchased by a paper manufacturer and directly used or consumed in paper manufacturing.
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.
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.

Natural gas or liquefied petroleum gas used to propel a motor vehicle.
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.
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.
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.
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.
Tangible personal property that is or directly enters into and becomes an ingredient or component part of cards used as prescription plan identification cards.
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.

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.
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.
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.
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.
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.
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.

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

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.
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.
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.
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.

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

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

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

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

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

(a) A person:

(b) Any foreign government.

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.
Rolling stock, rails, ties and signal control equipment used directly to transport persons or property.
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.
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.
Groundwater measuring devices required under section 45-604.
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:

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

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.
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:

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.

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:

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

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

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

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.
Janitorial equipment and hand tools.
Office equipment, furniture and supplies.
Tangible personal property used in selling or distributing activities, other than the telecommunications transmissions described in subsection B, paragraph 16 of this section.
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.
Shops, buildings, docks, depots and all other materials of whatever kind or character not specifically included as exempt.
Motors and pumps used in drip irrigation systems.
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:

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.
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:

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.
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:

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:

(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.

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

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:

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

"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.

§ 42-5160 Liability for tax

Any person who uses, stores or consumes any tangible personal property upon which a tax is imposed by this article and upon which the tax has not been collected by a registered retailer or utility business shall pay the tax as provided by this article, but every retailer and utility business maintaining a place of business in this state and making sales of tangible personal property for storage, use or other consumption in this state shall collect the tax from the purchaser or user unless the property is exempt under this article or the purchaser or user pays the tax directly to the department as provided by section 42-5167. In the case of a manufactured building that is purchased from a dealer outside this state and brought into this state, any person who is hired to set up the manufactured building and who is licensed pursuant to title 41, chapter 37, article 4 shall collect the tax from the owner and remit the tax with any tax that is due under the prime contracting classification.

§ 42-5161 Collection from purchaser; receipt; tax as debt to state

Except as provided by section 42-5167, every retailer and utility business shall collect from the purchaser the tax imposed by this article and give to such purchaser a receipt for the tax in the manner and form prescribed by the department. The tax required to be collected shall be shown separately on the invoice or other proof of sale. The tax required to be collected shall constitute a debt owed by the retailer or utility business to this state.

§ 42-5162 Monthly return; time for payment; extension of time; quarterly payment

A. Every retailer engaged in the business of making sales of tangible personal property the use, storage or consumption of which is subject to the tax imposed by this article, and every person who purchases for use, storage or consumption any such property for which the tax is not paid to the retailer, shall file a return with the department on or before the twentieth day of the month next succeeding the month in which the tangible personal property is brought into this state for use, storage or consumption. The return shall be on a form prescribed by the department and shall show the tangible personal property sold for use, storage or consumption or purchased for use, storage or consumption within the state during the preceding calendar month. Such return shall be verified by oath or affirmation of the retailer or person making the report, or his agent, and shall be accompanied by payment of the tax shown to be due. The return and tax are delinquent if not received by the department on or before the business day preceding the last business day of the month when due.

B. Notwithstanding subsection A of this section, a person who is required to file a return under chapter 5, article 1 of this title may report and pay the tax liability under this article on the same return and filing basis as the taxes reported under chapter 5, article 1 of this title.

C. For good cause shown the department may extend the time for making a return and paying the tax, but the time for filing the return shall not be extended beyond the first day of the third month next succeeding the regular due date of the return.

§ 42-5163 Personal liability for tax; remedies for collection

Every tax imposed by this article and all increases, interest and penalties thereon shall become, from the time they are due and payable, a personal debt of the taxpayer to the state, and may be collected by action in tax court instituted in the name of the state by the attorney general upon request of the director. Such remedy shall be in addition to other existing remedies or those provided in this article.

§ 42-5164 Disposition of revenue

A. The department shall deposit, pursuant to sections 35-146 and 35-147, all monies received under the provisions of this article.

B. Twenty per cent of the revenues collected from the tax on electricity purchased from electricity suppliers is designated as distribution base for purposes of section 42-5029.

C. The remainder of the monies collected pursuant to this article shall be deposited in the state general fund pursuant to section 42-1116.

§ 42-5165 Retailer; advertising absorption of tax prohibited; penalty

It is unlawful for any retailer to advertise or hold out or state to the public or to any customer or purchaser, directly or indirectly, that the tax or any part of the tax imposed by this article will be assumed or absorbed by the retailer or that it will not be added to the selling price of the property sold or that if added any part thereof will be refunded.

§ 42-5166 Diesel fuel imported and used by locomotives; exemption

A. The tax imposed by this article does not apply to diesel fuel imported in the fuel tank or tanks of a locomotive and consumed in this state.

B. Diesel fuel imported and consumed in a quantity exceeding the capacity of the fuel tank or tanks of a locomotive according to the manufacturer's specifications is subject to the use tax imposed by this article. The use and consumption of the fuel shall be reported and the tax shall be paid in the manner prescribed in section 42-5162.

§ 42-5167 Use tax direct payment

A. A person may elect to pay use taxes directly to the department under this article if the person:

Applies to the department for a use tax direct payment permit. The application must be on a form prescribed by the department setting forth the name under which the applicant transacts or intends to transact business, the location of the place or places of business where the applicant intends to make direct payment of use taxes and any other information that the department may require. The application must be signed, in the case of:

(a) A natural person, by the owner.

(b) An association or partnership, by a member or partner.

(c) A corporation, by an executive officer or another person specifically authorized by the corporation to sign the application.

Agrees to self-assess and pay directly to the department any use tax liability incurred under this article.
Certifies to the department that the person purchased for the person's own use tangible personal property at a cost of five hundred thousand dollars or more, in the aggregate, during the immediately preceding calendar year.

B. The department shall issue a use tax direct payment permit to any applicant that meets the requirements of subsection A of this section.

C. If the department deems it necessary to protect the revenues to be collected under this section, it may require a person to file a bond to secure the payment of such amounts pursuant to section 42-1102.

D. A person who holds a valid use tax direct payment permit shall:

Self-assess and pay directly to the department use taxes due under this article for all tangible personal property subject to use tax.
Report the tax on a tax return prescribed by the department.

E. A holder of a use tax direct payment certificate may issue a use tax direct payment certificate to any retailer or seller, subject to all of the following:

The certificate shall be in a form prescribed by the department and must be signed by and bear the name, address and permit number of the holder of the use tax direct payment permit.
The certificate is effective until the permit holder revises or withdraws the certificate or until the retailer or seller receives actual notice that the department has revoked the permit.
The certificate relieves the retailer or seller of the duty to collect use tax only if taken in good faith from a person who holds a use tax direct payment permit. The department may periodically publish on its web site a list of taxpayers by name with tax identification numbers who have been issued direct payment permits. A purchaser holding a direct payment permit who issues a use tax direct payment certificate that is accepted in good faith by a retailer or seller of tangible personal property shall be liable for use tax and related interest and penalties with respect to any transaction that the department subsequently determines properly subjects the vendor to the transaction privilege tax and not use tax. The vendor shall be relieved of the duty to pay transaction privilege tax on such transactions.
In addition to any use tax liabilities, a holder of a use tax direct payment permit that gives a use tax direct payment certificate to a retailer or seller is subject to the same penalty provisions that apply to a retailer or seller.

§ 42-5168 Use tax percentage based reporting; definitions

A. The director may permit a taxpayer to use a percentage based reporting method for determining the amount of use tax that is due under this article by issuing a letter of authorization to the taxpayer.

B. When issuing a letter of authorization and determining the standards that a taxpayer shall use to calculate use tax under this article, the director may categorize transactions by the dollar amount, the types of taxable items that are purchased or the purposes for which the taxable items are used or by other standards that are appropriate to the taxpayer's operations. The director shall consider the taxpayer's type, nature and amount of records and transactions when determining the standards.

C. A letter of authorization that is signed by the director and countersigned by the taxpayer shall be valid for no longer than four years.

D. The director may revoke a letter of authorization that is issued under this section if either of the following applies:

The taxpayer has committed any fraud, malfeasance or misrepresentation of a material fact. A revocation under this paragraph is effective on the date the fraud, malfeasance or misrepresentation occurred or on any later date that is determined by the director.
The director determines that the percentage stated in the letter of authorization is no longer valid because of a change in the law, a change in the interpretation of a law or an administrative rule or a change in the taxpayer's business operations. A revocation under this paragraph is effective on the first day of the month that is at least ninety days after the taxpayer receives the notice of revocation.

E. The director's decision to revoke a letter of authorization under subsection D is final and may not be appealed.

F. The department may audit a taxpayer who has been issued a letter of authorization for the transactions that are listed in the letter, but the audit shall be limited to whether the taxpayer properly calculated the amount of use tax according to the terms of the letter. A taxpayer may protest the determination of the audit, but the protest shall be limited to whether the department's proposed changes are correct according to the terms of the letter of authorization.

G. For the purposes of this section:

"Letter of authorization" means a letter that is signed by the director, that authorizes a taxpayer to use a percentage based reporting method and that specifies the standards for the taxpayer to follow.
"Percentage based reporting method" means a method by which a taxpayer categorizes purchase transactions according to the standards that are specified in a letter of authorization, reviews approved sample invoices for each category of transactions when determining the percentage of taxable transactions and uses that percentage to calculate the amount of use tax that is due under this article.

Article 5 Severance Tax

§ 42-5201 Definitions

In this article, unless the context otherwise requires:

"Gross value of production" means the sum of the value of production determined for each metalliferous mineral mined by the severer.
"Metallic product" means any metalliferous mineral or metalliferous mineral product.
"Metalliferous mineral" means copper, gold, silver, molybdenum or other metal or any ore or substance containing such metals including turquoise that is severed within this state.
"Metalliferous mineral product" means the material resulting from the processing of a metalliferous mineral including any concentrate of an ore, any precipitate of a metalliferous mineral or any metal bullion.
"Mining" means the activity of extracting from the earth substances that become metalliferous minerals and:

(a) In the case of ore that is customarily milled, concentrated, agitation leached, or vat leached, mining includes all activity from the breaking of ground to the delivery of ore to the primary crusher, including blasting, loading, hauling, including hauling of waste, and dumping. The quantity mined shall be measured after final crushing.

(b) In the case of ore that is not customarily milled, concentrated, agitation leached, or vat leached, mining includes all activity from the breaking of ground to the delivery of the ore to the reduction works, or if the reduction works are located away from the situs of the mining activity, to the point at which the ore is loaded on a means of transport to the reduction works. The quantity mined shall be measured upon delivery to the reduction works, or if the reduction works are located away from the situs of mining activity, upon loading on a means of transport to the reduction works.

(c) In the case of dump or in situ leaching where the leach liquor is precipitated, mining includes all activity from the breaking of ground, if any, to the delivery of the leach liquor to the facility at which precipitation takes place. The quantity mined shall be measured upon precipitation.

(d) In the case of dump or in situ leaching where the leach liquor is converted through a chemical, electrolytic or other means directly from a liquor to a solid metallic mass, mining includes all activity from the breaking of ground, if any, to the delivery of the leach liquor to the solvent extraction or similar facility. The quantity mined shall be measured upon delivery to the solvent extraction facility.

"Mining costs" means production costs incurred in mining.
"Out-of-state processing costs" means processing costs incurred by the severer out of this state including freight charges incurred for shipping metallic products out of this state.
"Price" means the per unit consideration a severer receives from the sale during the reporting period of a metallic product whether sold within or without this state. If a severer engages in manufacturing, fabricating or other transforming activities of a refined metalliferous mineral product before making a sale, the charges made by the severer for such activities shall not be a part of the consideration in establishing the price. If no sales occurred during the reporting period, price shall be derived from the last reporting period in which sales occurred.
"Processing" means any non-mining activity that transforms metalliferous minerals into metalliferous mineral products including precipitating, crushing, concentrating, smelting and refining. "Processing" does not include manufacturing or fabrication or other transformation activities beyond refining.
"Processing costs" means production costs other than mining costs.
"Production costs" means the costs incurred by the severer in mining and processing until the point of sale including but not limited to energy, fuel, labor, supplies, depreciation, transportation and other expenses reasonably allocable to mining or processing including but not limited to labor benefits, property taxes, lease payments for equipment used in mining or processing and support services such as maintenance, security and administration if such services are site specific. Production costs also include selling expenses but do not include severance taxes or depletion expenses. Production costs also do not include corporate salary and office expenses, income taxes, interest expense on debt or corporate capital charges.
"Recoverable units" means metalliferous mineral units based on processing or contractual recoveries during the period of production.
"Sale" shall have the meaning ascribed to it in section 42-5001.
"Severer" means a person engaging in the business of mining.
"Severing" means mining.
"Value of production" means the price multiplied by the recoverable units of a metallic product mined by the severer.

§ 42-5202 Levy of tax

A. There is levied on any severer, and the department shall collect, an excise tax, denominated as a severance tax.

B. Except as provided in section 42-5203, the severance tax is in lieu of any other tax imposed upon the activities of mining and processing by article 1 of this chapter.

C. The amount of the severance tax levied on a severer engaging in the business of mining shall be determined by multiplying the net severance base by two and one-half per cent.

§ 42-5203 Sales at retail; exemption

This article does not apply to the gross proceeds or gross income from sales at retail which shall be taxable under article 1 of this chapter.

§ 42-5204 Computation of the net severance base

The net severance base is fifty per cent of the difference between the gross value of production and the production costs.

§ 42-5205 Administration; allocation of revenues

A. Except as otherwise provided in this section, or unless the context otherwise requires, article 1 of this chapter governs the administration of the tax imposed by this article.

B. The revenue derived from eighty per cent of the tax rate imposed by this chapter is designated as distribution base and shall be distributed pursuant to section 42-5029, subsection D.

C. The revenue derived from twenty per cent of the tax rate imposed by this chapter shall be credited to the state general fund and appropriated each year for public educational purposes.

§ 42-5206 Sales between affiliated persons

For the purpose of this article, in determining price, the department shall recognize sales between affiliated corporations or persons or sales between units of the same corporation provided the terms of such sales are indicative of the fair market value of the subject matter of the sale.

Article 6 Telecommunication Service Excise Tax

§ 42-5251 Definitions

In this article, unless the context otherwise requires:

"Customer" means a person or entity in whose name telephone or telecommunication services are rendered, as evidenced by a signature on an application or contract for service or by receipt or payment of bills regularly issued in the person's or entity's name.
"Emergency telecommunication services" means telecommunication services or systems that use number 911 or a similarly designated telephone number for emergency calls.
"Exchange access services" means telephone or telecommunication exchange access lines or channels that provide local access from the premises of a customer to the local telecommunications network to effect the transfer of information.
"Prepaid wireless telecommunications service" means wireless services that allow a caller to dial 911 to access the 911 system under a service that is paid for in advance and that is sold in predetermined units or dollars of which the number declines with use in a known amount.
"Provider" means any of the following:

(a) A public service corporation that offers telephone or telecommunications services pursuant to title 40 and that provides exchange access services.

(b) A supplier of wireless services.

"Wireless services" means a commercial mobile service, as defined by 47 Code of Federal Regulations section 20.3, as amended.

§ 42-5252 Levy of tax; applicability

A. A tax is levied on every provider in an amount as follows:

For the fiscal years beginning from and after June 30, 2001 and ending before July 1, 2006, thirty-seven cents per month for each activated wire and wireless service account for the purpose of financing emergency telecommunication services.
For fiscal year 2006-2007, twenty-eight cents per month for each activated wire and wireless service account for the purpose of financing emergency telecommunication services.
For the fiscal years beginning from and after June 30, 2007, twenty cents per month for each activated wire and wireless service account for the purpose of financing emergency telecommunication services.

B. A tax is levied on every public service corporation at the rate of 1.1 per cent of the public service corporations' gross proceeds of sales or gross income derived from the business of providing exchange access services. Revenues from the tax shall be used for the purpose of financing telecommunication devices for the deaf and the severely hearing and speech impaired under the program established pursuant to section 36-1947. For the purposes of this subsection, "public service corporation" means a public service corporation that offers telephone or telecommunications services pursuant to title 40 and that provides exchange access services.

C. Each provider shall state on the invoice to customers a separate line item stating the amount of tax levied pursuant to subsections A and B of this section.

D. Unless the context otherwise requires, article 1 of this chapter governs the administration of the tax imposed under this section.

E. The tax levied under this section does not apply to prepaid wireless telecommunications service.

§ 42-5253 Remission and distribution of revenues

A. Each provider shall remit monthly to the department the amount of tax due pursuant to section 42-5252, accompanied by an information return as prescribed by the department.

B. The department shall deposit, pursuant to sections 35-146 and 35-147, all monies remitted pursuant to this article as follows:

Section 42-5252, subsection A in the emergency telecommunication services revolving fund.
Section 42-5252, subsection B in the telecommunication fund for the deaf.

Article 7 Tax on Water Use

§ 42-5301 Definition of municipal water delivery system

In this article, unless the context otherwise requires "municipal water delivery system" means an entity that distributes or sells potable water primarily through a pipeline delivery system which is owned by either:

A city or town incorporated or chartered under the constitution and laws of this state.
A private entity which is regulated as a public service corporation by the Arizona corporation commission under a certificate of public convenience and necessity.
A special taxing district established under title 48, chapter 6.
An entity which is regulated as a water supply system by the department of environmental quality.

§ 42-5302 Levy and payment of tax

A. There is levied and the department shall collect a tax on the business of operating a municipal water delivery system for the purposes prescribed in section 49-282. The tax is levied at the rate of .65 of one cent per one thousand gallons of water delivered to customers, except that water delivered to a customer for resale is exempt from the tax.

B. The owner or operator of a municipal water delivery system shall pay the tax to the department at the same time as paying the transaction privilege tax under section 42-5014. If the system for any reason does not pay transaction privilege tax, the tax imposed by this article is due and payable to the department, and is delinquent if not paid, as provided in section 42-5014, subsection A.

§ 42-5303 Administration

Unless the context otherwise requires, article 1 of this chapter governs the administration, collection and enforcement of the taxes imposed by this article, except that:

If a municipal water delivery system is subject to the transaction privilege tax:

(a) A separate license and bond are not required for the tax imposed by this article, but the tax due under this article shall be included, reported and paid with the transaction privilege tax, with a separate accounting for the tax imposed by this article.

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

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

§ 42-5304 Disposition of revenues

The department shall separately account for monies paid under this article and shall deposit, pursuant to sections 35-146 and 35-147, the first $1,800,000 of net revenues collected under this article in the safe drinking water program fund established by section 49-360 and the remaining net revenues in the water quality assurance revolving fund established by section 49-282.

Article 8 Jet Fuel Excise and Use Tax

§ 42-5351 Definitions

In this article, unless the context otherwise requires:

"Jet fuel":

(a) Means crude oil or any fraction of crude oil which is liquid at sixty degrees Fahrenheit and 14.7 pounds per square inch absolute, and petroleum-based substances comprised of a complex blend of hydrocarbons derived from crude oil through processes of separation, conversion, upgrading and finishing, such as motor fuels, residual fuel oils, lubricants, petroleum solvents and used oils when these products are expressly manufactured and blended for the purpose of effectively and efficiently operating jet or turbine powered aircraft.

(b) Includes:

(i) An aviation turbine fuel that consists of conventional and synthetic blending components that can be used without the need to modify aircraft engines and existing fuel distribution infrastructure.

(ii) jet fuels derived from coprocessed feedstocks at a conventional petroleum refinery.

"Person" includes an individual, firm, partnership, joint venture, association, corporation, estate, trust, receiver or syndicate, this state or a county, city, municipality, district or any other political subdivision or agency of this state.
"Retail sale" means a sale for any purpose other than a sale for resale in the regular course of business.
"Retailer" includes every person engaging or continuing in the business of selling jet fuel for storage, use or other consumption or in the business of selling jet fuel owned by that person or others for storage, use or other consumption. If in the opinion of the department it is necessary for the efficient administration of this article to regard any salesmen, representatives, peddlers or canvassers as the agents of the dealers, distributors, supervisors or employers under whom they operate or from whom they obtain the jet fuel sold by them, regardless of whether they are selling on their own behalf or on behalf of such dealers, distributors, supervisors or employers, the department may so regard them and may regard the dealers, distributors, supervisors or employers as retailers for purposes of this article.
"Storage" means keeping or retaining jet fuel purchased from a retailer for any purpose except sale in the regular course of business or subsequent use solely outside this state.
"Use or consumption" means the exercise of any right or power over jet fuel incidental to owning the fuel except holding for sale or selling the fuel in the regular course of business.

§ 42-5352 Levy of tax

A. A jet fuel excise tax is levied on every person engaging or continuing in the business of the retail sale of jet fuel. The jet fuel excise tax levied on the purchase of jet fuel by each purchaser of jet fuel in each calendar year shall be as follows:

The first ten million gallons of jet fuel shall be taxed at a rate of 3.05 cents per gallon.
From and after June 30, 1992, any amounts over ten million gallons of jet fuel shall be taxed at a rate of 2.05 cents per gallon.
From and after June 30, 1993, any amounts over ten million gallons of jet fuel shall be taxed at a rate of 1.05 cents per gallon.
From and after June 30, 1994, any amounts over ten million gallons of jet fuel shall not be subject to tax.

B. Except as provided in subsections C and D, a jet fuel use tax is levied and imposed on the storage, use or consumption in this state of jet fuel purchased from a retailer at the same tax rate imposed by subsection A in any case in which the tax imposed by subsection A has not been paid to the state. The tax imposed by this section applies to any purchaser which purchased jet fuel for resale but subsequently uses or consumes the jet fuel.

C. A receipt, invoice or other valid transaction document given to the purchaser by a retailer who maintains a place of business in this state or by a retailer who is licensed by the department to pay the tax imposed by subsection A and which either shows that the tax imposed by subsection A has been separately charged by the retailer or expressly states that the total charge is inclusive of the tax imposed by subsection A is sufficient to relieve the purchaser from further liability for the tax imposed by subsection B.

D. The tax levied by this article does not apply to the sale or use of jet fuel which has already been subjected to an excise tax under the laws of another state of the United States, whether imposed on a gallonage, percentage or other basis, which is equal to or exceeds the tax imposed by this article. If the excise tax imposed under the laws of another state of the United States is less than the tax imposed by this article, then a credit in the amount of the tax imposed by the other state shall be allowed against the tax imposed under this article.

§ 42-5353 Administration; disposition of revenues

Unless the context otherwise requires, article 1 of this chapter governs the administration of the tax imposed under this article. Monies received from the taxes collected pursuant to section 42-5352 shall be deposited in the state aviation fund established by section 28-8202.

§ 42-5354 Exemption

The tax levied by this article does not apply to jet fuel which is sold in this state to commercial airlines and used on flights which originate in this state and whose first outbound destination is outside of the United States.

Article 9 Prepaid Wireless Telecommunications E911 Excise Tax

§ 42-5401 Definitions

In this article, unless the context otherwise requires:

"Consumer" means a person who purchases prepaid wireless telecommunications service in a retail sale of prepaid wireless telecommunications service.
"Prepaid wireless telecommunications service" means a commercial mobile radio service, as defined by 47 Code of Federal Regulations section 20.3, as amended, that allows a caller to dial 911 to access the 911 system under a service that is paid for in advance and that is sold in predetermined units or dollars of which the number declines with use in a known amount.
"Prepaid wireless telecommunications service provider" means a person that provides prepaid wireless telecommunications service pursuant to a license that is issued by the federal communications commission.
"Retail sale of prepaid wireless telecommunications service" means a sale of prepaid wireless telecommunications service by a seller for any purpose other than resale.
"Seller" means a person who sells prepaid wireless telecommunications service to another person.
"Wireless services" means a commercial mobile service, as defined by 47 Code of Federal Regulations section 20.3, as amended.

§ 42-5402 Levy of tax

A. A prepaid wireless telecommunications E911 excise tax is levied on every seller in an amount of eight-tenths of one per cent of the gross proceeds of sales or gross income derived from the retail sale of prepaid wireless telecommunications service.

B. The seller is liable for the tax imposed under this section. The amount of tax may be separately stated on the invoice, receipt or other similar document that is provided to the consumer by the seller or otherwise disclosed to the consumer. The seller may retain three per cent of the amount of tax collected before remitting the tax to the department.

C. For the purpose of determining the location of a retail sale of prepaid wireless telecommunications service under this article, a retail sale of prepaid wireless telecommunications service occurs in this state if:

The retail sale of prepaid wireless telecommunications service is completed in person at a business location in this state.
If paragraph 1 of this subsection does not apply, the product is delivered to the consumer at an address in this state.
If paragraphs 1 and 2 of this subsection do not apply, the seller's records that are maintained in the ordinary course of business indicate that the consumer's address is located in this state and the seller's records are not made or kept in bad faith.
If paragraphs 1, 2 and 3 of this subsection do not apply, the consumer gives the seller an address in this state during the completion of the sale, including the consumer's payment instrument if no other address is available, and the address is not given in bad faith.
If paragraphs 1 through 4 of this subsection do not apply, the wireless telephone number is associated with a location in this state.

D. The amount of tax that is paid by a seller shall not be included in the tax base for computing any transaction privilege, sales, use, franchise or other similar tax or fee, however denominated, that is imposed by this state, any political subdivision of this state or any intergovernmental agency.

E. The tax levied under this section shall be the only E911 funding obligation for prepaid wireless telecommunications service in this state. This state, any political subdivision of this state or any intergovernmental agency shall not levy any other similar tax or fee, however denominated, on any seller or consumer for the sale, purchase, use or provision of prepaid wireless telecommunications service for the purpose of funding E911 service.

§ 42-5403 Administration of tax; distribution of revenues

A. Unless the context otherwise requires, article 1 of this chapter governs the administration of the tax imposed by this article.

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

C. The procedures for a seller of prepaid wireless telecommunications service to document a sale that is not a retail sale of prepaid wireless telecommunications service shall be substantially similar to the procedures for documenting sale for resale transactions under the retail classification pursuant to sections 42-5009 and 42-5061.

D. The department shall separately account for the monies paid under this article and shall deposit, pursuant to sections 35-146 and 35-147, the net revenues collected under this article in the emergency telecommunications services revolving fund established by section 41-704.

§ 42-5404 Liability

A. Nothing in this article creates a cause of action or right to bring an action against a seller of prepaid wireless telecommunications service for damages to any person resulting from or incurred in connection with the provision of, or failure to provide, 911 or E911 service, or for identifying, or failing to identify, the telephone number, address, location or name associated with any person or device that is accessing or attempting to access 911 or E911 service.

B. Nothing in this article creates a cause of action or right to bring an action against a seller of prepaid wireless telecommunications service for damages to any person resulting from, or incurred in connection with, any lawful investigation by a law enforcement officer of the United States, this state, any other state or any political subdivision of this state or any other state.

Article 10 Marijuana and Marijuana Products

§ 42-5451 Definitions

(Caution: 1998 Prop. 105 applies)

In this article, unless the context otherwise requires:

"Consumer," "dual licensee," "marijuana," "marijuana establishment" and "marijuana products" have the same meanings prescribed in section 36-2850.
"Designated caregiver," "nonprofit medical marijuana dispensary" and "qualifying patient" have the same meanings prescribed in section 36-2801.

§ 42-5452 Levy and rate of tax; effect of federal excise tax

(Caution: 1998 Prop. 105 applies)

A. There is levied and the department shall collect an excise tax on all marijuana and marijuana products sold to a consumer by a marijuana establishment at a rate of sixteen percent of the price of the marijuana or marijuana product sold. This subsection does not apply to marijuana dispensed to a registered qualifying patient or registered designated caregiver pursuant to title 36, chapter 28.1 by a dual licensee or nonprofit medical marijuana dispensary.

B. If the United States levies and collects an excise tax on marijuana and marijuana products, the aggregate of federal and state excise taxes may not exceed a rate of thirty percent of the price of the marijuana or marijuana product sold, and the tax levied pursuant to subsection A of this section shall be lowered accordingly and automatically on the effective date of the federal excise tax.

C. A product subject to the tax imposed by this section may not be bundled with a product or service that is not subject to the tax imposed by this section.

D. The tax levied and collected pursuant to this section shall not be included in computing the tax base, gross proceeds of sales or gross income of a marijuana establishment for purposes of title 42, chapters 5 and 6, and is not subject to any transaction privilege, sales, use or other similar tax levied by a county, city, town or special taxing district.

E. Notwithstanding section 42-3102, the department shall deposit all monies levied and collected pursuant to this section in the smart and safe Arizona fund established by section 36-2856.

§ 42-5453 Return statement and payment by marijuana establishment; penalty; interest; rules; confidential information

(Caution: 1998 Prop. 105 applies)

A. The tax imposed by this article is due and payable, together with a return statement prescribed by the department, for each month on or before the twentieth day of the succeeding month.

B. A marijuana establishment that fails to pay the tax imposed by this article within ten days after the date the payment is due is subject to and shall pay a penalty determined under section 42-1125, plus interest at the rate determined pursuant to section 42-1123, from the time the tax was due and payable until paid. The department may waive any penalty or interest if it determines that the marijuana establishment has made a good faith attempt to comply with the requirements of this article.

C. The monthly return statement prescribed by the department shall include an accounting of the quantity of marijuana that is sold by a marijuana establishment that is subject to the tax imposed by this article during the tax month.

D. All penalties and interest collected pursuant to this section shall be deposited in the smart and safe Arizona fund established by section 36-2856.

E. The department may adopt rules that are necessary or convenient to enforce this article, except that those rules may not conflict with title 36, chapter 28.2.

F. The department may share confidential information as defined in section 42-2001 with the department of health services for its use in determining whether a marijuana establishment, marijuana testing facility or dual licensee is in compliance with tax obligations under this title or title 43.

Chapter 6 Local Excise Taxes

Article 1 Administration of Local Excise Taxes

§ 42-6001 Collection and administration of transaction privilege tax and affiliated excise taxes; intergovernmental contract or agreement; method of payment

A. The department shall collect and administer any transaction privilege and affiliated excise taxes, including use tax, severance tax, jet fuel excise and use tax, and rental occupancy tax, imposed by any city or town. The department and each city or town shall enter into an intergovernmental contract or agreement to provide a uniform method of administration, collection, audit and licensing of transaction privilege and affiliated excise taxes imposed by the state or cities or towns pursuant to title 11, chapter 7, article 3. The department may deny a request by a city or town to audit a taxpayer that is engaged in business in more than one city or town. The contract or agreement shall include criteria for which the department can make the denial. If the department denies an audit request from a city or town, the city or town may not audit a taxpayer that is engaged in business in more than one city or town.

B. A taxpayer that does not report and pay the required tax to a city or town electronically shall file and pay the tax to the department of revenue if the department has developed the electronic and nonelectronic tools necessary to capture data with sufficient specificity to meet the needs of all taxing jurisdictions, including specific data regarding each tax classification and any corresponding deductions at each business location of the taxpayer.

§ 42-6002 Administration; procedures for levy, collection and enforcement applicable to cities and towns; definition

A. Unless the context otherwise requires, chapter 1 and chapter 5, article 1 of this title govern the administration of the municipal privilege taxes levied by a city or town.

B. The procedures for levy, collection and enforcement of payment of transaction privilege and affiliated excise taxes, including use tax, severance tax, jet fuel excise and use tax, and rental occupancy tax, levied by a city or town shall be in the same manner as authorized by chapter 5 of this title. Except for business activities classified under the retail classification pursuant to section 42-5061, this subsection does not preclude a city or town from levying a transaction privilege, sales, use or other similar tax as a result of a person's business activities as provided in this article and article 2 of this chapter.

C. An intergovernmental contract or agreement entered into pursuant to section 42-6001, subsection A shall include the following provisions:

All audits shall be conducted in accordance with standard audit procedures defined in the department of revenue audit manual.
All auditors shall be trained in accordance with the policies of the department.
An auditor that is trained and authorized to conduct an audit may not represent any taxpayer in any tax matter.
Except as provided in paragraph 5 of this subsection, the audit of a taxpayer that has locations in two or more cities or towns shall be conducted by the department.
All audits shall include all taxing jurisdictions in this state regardless of which jurisdiction conducts the audit. A city or town may conduct an audit of any taxpayer that is engaged in business in only one city or town and any other taxpayer authorized by the department.
The department shall issue all audit assessments on behalf of all taxing jurisdictions in a single notice to the taxpayer.
Appeals of audit assessments shall be directed to the department.
Appeals of audit assessments shall be administered pursuant to chapter 1, article 6 of this title.
The department shall notify all affected cities and towns before entering into any compromise, closing, settlement or other agreement with a person related to the tax levied and imposed by the cities and towns.

D. For the purposes of this section, "transaction privilege, sales, use or other similar tax" means any tax imposed under the model city tax code.

§ 42-6003 Multi-municipal taxes; determination of municipality entitled to levy and collect taxes; appeal; definitions

A. Except as otherwise provided in this section, a taxpayer who has paid transaction privilege taxes on a transaction to an appropriate city or town, or qualified for an exemption from transaction privilege taxes under the ordinance of an appropriate city or town, is not required to pay transaction privilege taxes on the same transaction to any other city or town.

B. If a city or town asserts, in whole or in part, the right to a tax which was paid to an appropriate city or town, the cities and towns claiming the tax shall attempt to resolve allocation of the tax among themselves. Except as otherwise provided in this section, the taxpayer shall not be a party to the dispute but may be compelled to give evidence or produce books and records.

C. If a city or town asserts the right to tax a transaction which is exempt from transaction privilege taxes under the ordinance of an appropriate city or town, the city or town asserting the right to tax and the city or town which the taxpayer asserts is an appropriate city or town shall attempt to resolve which city or town has the superior jurisdictional claim. Except as otherwise provided in this section, the taxpayer shall not be a party to the dispute but may be compelled to give evidence or produce books and records.

D. If the cities or towns involved cannot resolve the dispute arising under subsection B or C, any city or town which is a party to the dispute may submit the issue to the municipal tax code commission for resolution. The taxpayer may intervene in any proceeding before the commission to assist in resolving the dispute. The commission shall determine which city or town has the superior jurisdictional claim, based upon its respective ordinances and common law principles related to transaction privilege taxation, and, if the taxpayer paid tax on the transaction, shall award the entire tax to the prevailing city or town.

E. If it is determined that the taxpayer should have paid taxes to a city or town with a higher tax rate than the city or town to which the tax was actually paid, the taxpayer is liable for the tax at the higher rate only on transactions occurring after the taxable month of the written notification requirement provided in subsection H.

F. If a city or town with a higher tax rate asserts a claim to transaction privilege taxes paid to an appropriate city or town with a lower tax rate, the taxpayer may submit the issue to the municipal tax code commission for resolution and may intervene as a party in a proceeding before the commission to resolve the dispute.

G. Any party aggrieved by an order or decision of the municipal tax code commission may appeal to the state board of tax appeals within thirty days after notice of the order or decision of the commission has been received by the party. Any party aggrieved by an order or decision of the state board of tax appeals under this section may appeal the order or decision to tax court but must commence such action within thirty days after notice of the order or decision of the state board has been received by the party.

H. Following an agreement among the cities or towns involved as to which city or town has jurisdiction over transaction privilege taxation on a transaction or following a final determination by the municipal tax code commission, the state board of tax appeals or the tax court that a city or town is entitled to collect such taxes, and following written notification to the taxpayer, the taxpayer shall thereafter pay transaction privilege taxes on similar transactions to that city or town.

I. In this section:

"Appropriate city or town" means a city or town in this state either:

(a) In which the business sales office which generated the taxable transaction is located.

(b) In which the purchaser resides, is located or is situated at the time of the transaction.

(c) Which imposes or claims the right to impose a transaction privilege tax on the transaction in question under its ordinance.

"Transaction privilege tax" means a municipal transaction privilege license tax, use tax or similar tax and includes for purposes of this section any penalty assessed by a city or town for nonpayment, delinquent payment or failure to timely report or file a return, and any interest assessed because of late payment of taxes.

§ 42-6004 Exemption from municipal tax; definitions

A. A city, town or special taxing district shall not levy a transaction privilege, sales, use or other similar tax on:

Exhibition events in this state sponsored, conducted or operated by a nonprofit organization that is exempt from taxation under section 501(c)(3), 501(c)(4) or 501(c)(6) of the internal revenue code if the organization is associated with a major league baseball team or a national touring professional golfing association and no part of the organization's net earnings inures to the benefit of any private shareholder or individual. This paragraph does not apply to an organization that is owned, managed or controlled, in whole or in part, by a major league baseball team, or its owners, officers, employees or agents, or by a major league baseball association or professional golfing association, or its owners, officers, employees or agents, unless the organization conducted or operated exhibition events in this state before January 1, 2018 that were exempt from state transaction privilege tax under section 42-5073.
Interstate telecommunications services, which include that portion of telecommunications services, such as subscriber line service, allocable by federal law to interstate telecommunications service.
Sales of warranty or service contracts.
Sales of motor vehicles to nonresidents of this state for use outside this state if either of the following applies:

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

Interest on finance contracts.
Dealer documentation fees on the sales of motor vehicles.
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.
Sales of internet access services to the person's subscribers and customers. For the purposes of this paragraph:

(a) "Internet" means the computer and telecommunications facilities that comprise the interconnected worldwide network of networks that employ the transmission control protocol or internet protocol, or any predecessor or successor protocol, to communicate information of all kinds by wire or radio.

(b) "Internet access" means a service that enables users to access content, information, electronic mail or other services over the internet. Internet access does not include telecommunication services provided by a common carrier.

The gross proceeds of sales or gross income retained by the Arizona exposition and state fair board from ride ticket sales at the annual Arizona state fair.
Leasing real property between affiliated companies, businesses, persons or reciprocal insurers. For the purposes of this paragraph:

(b) "Affiliated persons" means members of the individual's family or persons who have ownership or control of a business entity.

(d) "Members of the individual's family" means the individual's spouse and brothers and sisters, whether by whole or half blood, including adopted persons, ancestors and lineal descendants.

(e) "Reciprocal insurer" has the same meaning prescribed in section 20-762.

The gross proceeds of sales or gross income derived from a contract for the installation, assembly, repair or maintenance of machinery, equipment or other tangible personal property that is described in section 42-5061, subsection B and that has independent functional utility, pursuant to the following provisions:

(a) The deduction provided in this paragraph includes the gross proceeds of sales or gross income derived from all of the following:

(i) Any activity performed on machinery, equipment or other tangible personal property with independent functional utility.

(c) The deduction provided in this paragraph shall be determined without regard to the size or useful life of the machinery, equipment or other tangible personal property.

(i) Assembling the machinery, equipment or other tangible personal property.

(ii) Connecting items of machinery, equipment or other tangible personal property to each other.

(iii) Connecting the machinery, equipment or other tangible personal property, whether as an individual item or as a system of items, to water, power, gas, communication or other services.

(iv) Stabilizing or protecting the machinery, equipment or other tangible personal property during operation by bolting, burying or performing other dissimilar nonpermanent connections to either real property or real property improvements.

The leasing or renting of certified ignition interlock devices installed pursuant to the requirements prescribed by section 28-1461. For the purposes of this paragraph, "certified ignition interlock device" has the same meaning prescribed in section 28-1301.
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.
The gross proceeds of sales or gross income derived from a contract with the owner of real property or improvements to real property for the maintenance, repair, replacement or alteration of existing property, except as specified in this paragraph. The gross proceeds of sales or gross income derived from a de minimis amount of modification activity does not subject the contract or any part of the contract to tax. For the purposes of this paragraph:

(a) Each contract is independent of another contract, except that any change order that directly relates to the scope of work of the original contract shall be treated the same as the original contract under this paragraph, regardless of the amount of modification activities included in the change order. If a change order does not directly relate to the scope of work of the original contract, the change order shall be treated as a new contract, with the tax treatment of any subsequent change order to follow the tax treatment of the contract to which the scope of work of the subsequent change order directly relates.

(b) Any term not defined in this paragraph that is defined in section 42-5075 has the same meaning prescribed in section 42-5075.

(c) This paragraph does not apply to a contract that primarily involves surface or subsurface improvements to land and that is subject to title 28, chapter 19, 20 or 22 or title 34, chapter 2 or 6 even if the contract also includes vertical improvements. If a city or town imposes a tax on contracts that are subject to procurement processes under those provisions, the city or town shall include in the request for proposals a notice to bidders when those projects are subject to the tax. This subdivision does not apply to contracts with:

(i) Community facilities districts, fire districts, county television improvement districts, community park maintenance districts, cotton pest control districts, hospital districts, pest abatement districts, health service districts, agricultural improvement districts, county free library districts, county jail districts, county stadium districts, special health care districts, public health services districts, theme park districts or revitalization districts.

(ii) Any special taxing district not specified in item (i) of this subdivision if the district does not substantially engage in the modification, maintenance, repair, replacement or alteration of surface or subsurface improvements to land.

Monitoring services relating to an alarm system as defined in section 32-101.
Tangible personal property, job printing or publications sold to or purchased by, or tangible personal property leased, rented or licensed for use to or by, a qualifying health sciences educational institution as defined in section 42-5001.
The transfer of title or possession of coal back and forth between an owner or operator of a power plant and a person who is responsible for refining coal if both of the following apply:

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

Tangible personal property incorporated or fabricated into a project described in paragraph 14 of this subsection, 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.

The charges for the leasing or renting of space to make attachments to utility poles as follows:

(a) By a person that is engaged in the business of providing or furnishing electrical services or telecommunication services or that is a cable operator.

(b) To a person that is engaged in the business of providing or furnishing electrical services or telecommunication services or that is a cable operator.

Until March 1, 2017, the gross proceeds of sales or gross income derived from entry fees paid by participants for events that consist of a run, walk, swim or bicycle ride or a similar event, or any combination of these events.
The gross proceeds of sales or gross income derived from entry fees paid by participants for events that are operated or conducted by nonprofit organizations that are exempt from taxation under section 501(c)(3) of the internal revenue code and of which no part of the organization's net earnings inures to the benefit of any private shareholder or individual, if the event consists of a run, walk, swim or bicycle ride or a similar event, or any combination of these events.
The gross proceeds of sales or gross income derived from sales of 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.

The gross proceeds of sales or gross income derived from a contract to install containment structures. For the purposes of this paragraph, "containment structure" means a structure that prevents, monitors, controls or reduces noxious or harmful discharge into the environment.

B. A city, town or other taxing jurisdiction shall not levy a transaction privilege, sales, use, franchise or other similar tax or fee, however denominated, on natural gas or liquefied petroleum gas used to propel a motor vehicle.

C. A city, town or other taxing jurisdiction shall not levy a transaction privilege, sales, gross receipts, use, franchise or other similar tax or fee, however denominated, on gross proceeds of sales or gross income derived from any of the following:

A motor carrier's use on the public highways in this state if the motor carrier is subject to a fee prescribed in title 28, chapter 16, article 4.
Leasing, renting or licensing a motor vehicle subject to and on which the fee has been paid under title 28, chapter 16, article 4.
The sale of a motor vehicle and any repair and replacement parts and tangible personal property becoming a part of such motor vehicle to a motor carrier who is subject to a fee prescribed in title 28, chapter 16, article 4 and who is engaged in the business of leasing, renting or licensing such property.
Incarcerating or detaining in a privately operated prison, jail or detention facility prisoners who are under the jurisdiction of the United States, this state or any other state or a political subdivision of this state or of any other state.
Transporting for hire persons, freight or property by light motor vehicles subject to a fee under title 28, chapter 15, article 4.
Any amount attributable to development fees that are incurred in relation to the construction, development or improvement of real property and paid by the taxpayer as defined in the model city tax code or by a contractor providing services to the taxpayer. For the purposes of this paragraph:

(a) The attributable amount shall not exceed the value of the development fees actually imposed.

(b) The attributable amount is equal to the total amount of development fees paid by the taxpayer or by a contractor providing services to the taxpayer and the total development fees credited in exchange for the construction of, contribution to or dedication of real property for providing public infrastructure, public safety or other public services necessary to the development. The real property must be the subject of the development fees.

Any amount attributable to fees collected by transportation network companies issued a permit pursuant to section 28-9552.
Transporting for hire persons by transportation network company drivers on transactions involving transportation network services as defined in section 28-9551.
Transporting for hire persons by vehicle for hire companies that are issued permits pursuant to section 28-9503.
Transporting for hire persons by vehicle for hire drivers on transactions involving vehicle for hire services as defined in section 28-9501.

D. A city, town or other taxing jurisdiction shall not levy a transaction privilege, sales, use, franchise or other similar tax or fee, however denominated, in excess of one-tenth of one percent of the value of the entire product mined, smelted, extracted, refined, produced or prepared for sale, profit or commercial use, on persons engaged in the business of mineral processing, except to the extent that the tax is computed on the gross proceeds or gross income from sales at retail.

E. In computing the tax base, any city, town or other taxing jurisdiction shall not include in the gross proceeds of sales or gross income:

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

F. A city or town shall not levy a use tax on the storage, use or consumption of tangible personal property in the city or town by a school district or charter school.

G. A city, town or taxing jurisdiction shall not levy a transaction privilege, sales, gross receipts, use, franchise or other similar tax or fee, however denominated, on gross proceeds of sales or gross income derived from over-the-top services. For the purposes of this subsection, "over-the-top services" means audio or video programming services that are received by the purchaser by means of an internet connection, regardless of the technology used, that include linear or live programming and that are generally considered comparable to programming provided by a radio or television broadcast station and includes related on-demand programming that is provided at no additional charge, regardless of whether the services are provided independently or packaged with other audio or video programming.

H. From and after December 31, 2024, a city, town or other taxing jurisdiction may not levy a transaction privilege, sales, gross receipts, use, franchise or other similar tax or fee, however denominated, on the business of renting or leasing real property for residential purposes. This subsection:

Does not apply to health care facilities, long-term care facilities or hotel, motel or other transient lodging businesses.
Applies regardless of whether the city or town has adopted the model city tax code pursuant to article 2 of this chapter.

I. For the purposes of this section:

"Cable operator" has the same meaning prescribed in section 9-505 and includes a video service provider.
"Electrical services" means transmitting or distributing electricity, electric lights, current or power over lines, wires or cables.
"Telecommunication services" means transmitting or relaying sound, visual image, data, information, images or material over lines, wires or cables by radio signal, light beam, telephone, telegraph or other electromagnetic means.
"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.

§ 42-6005 Unified audit committee; audits

A. The director shall establish a unified audit committee with cities and towns. The committee shall:

Establish and publish uniform audit guidelines.
Coordinate uniform audit functions.

B. If the state statutes and model city tax code are the same and the department has issued written guidance, the department's interpretation is binding on cities and towns.

§ 42-6006 Municipal elections on tax issues

A city or town may submit any issue relating to a transaction privilege tax, sales, use, franchise or other similar tax or fee, however denominated, to the qualified electors of the city or town at any regular or special municipal election, and may spend public monies of the city or town to cover the expenses of the election on that issue.

§ 42-6007 Mobile telecommunications services; definitions

A. Any city or town that levies and collects a tax with respect to mobile telecommunications services shall levy and collect the tax pursuant to the requirements of the mobile telecommunications sourcing act (P.L. 106-252; 114 Stat. 626; 4 United States Code sections 116 through 126).

C. The home service provider has sixty days from the date of the postmark on the notification prescribed in subsection B to review the customer's account records and any electronic database or enhanced zip code that is used pursuant to the mobile telecommunications sourcing act (P.L. 106-252; 114 Stat. 626; 4 United States Code sections 116 through 126). After the review, the home service provider shall determine the correct amount to charge the customer and shall issue a refund or credit to the customer if any incorrect charges were collected during the previous two years.

D. The procedures in this section are the first course of remedy available to any customer seeking correction of assignment of place of primary use or taxing jurisdiction or a refund of or other compensation for taxes assessed or other charges erroneously collected by the home service provider under this section. No cause of action based on a dispute arising from the collection of taxes by the home service provider under this section shall accrue until that customer has reasonably exercised the rights and procedures prescribed in this section.

E. For the purposes of this section:

"Customer" means a person or entity that contracts with a home service provider for mobile telecommunications services. Customer does not include a reseller of mobile telecommunications services or a serving carrier that is under an arrangement to serve the customer outside the home service provider's licensed service area.
"Home service provider" means a facilities based carrier or reseller that provides mobile telecommunications services to a customer.
"Mobile telecommunications services" means commercial mobile radio service as defined in 47 Code of Federal Regulations section 20.3 in effect on June 1, 1999.
"Place of primary use" means an address that is within the licensed service area of the home service provider and that is the customer's residential or primary business street address where the customer's use of mobile telecommunications service primarily occurs.

§ 42-6008 Municipal interest rates

A city or town that levies and collects a tax under the model city tax code shall compute interest on a deficiency assessment or a claim for refund or credit at the rate and in the manner prescribed by section 42-1123, subsection A.

§ 42-6009 Online lodging; definitions

A. Except as provided by this section, a city, town or other taxing jurisdiction may not levy a transaction privilege, sales, use, franchise or other similar tax or fee, however denominated, on the business of operating an online lodging marketplace or, in the case of an online lodging marketplace that is licensed pursuant to section 42-5005, subsection L, on any online lodging transaction facilitated by the online lodging marketplace or on any online lodging operator with respect to any online lodging transaction for which it has received documentation that the online lodging marketplace has remitted or will remit the applicable tax to the department pursuant to section 42-5014, subsection E.

B. In the case of an online lodging marketplace that is licensed pursuant to section 42-5005, subsection L, a city, town or other taxing jurisdiction may levy a transaction privilege, sales, use, franchise or other similar tax or fee on an online lodging marketplace from any activity subject to tax under the model city tax code, with the tax base for an online marketplace being limited pursuant to section 42-5076, subject to the following conditions:

The city, town or other taxing jurisdiction tax must be administered in a manner that is uniform with the treatment of online lodging marketplaces, online lodging operators and online lodging transactions provided by chapter 5 of this title, except that:

(a) The city, town or other taxing jurisdiction tax rate may be different from the state tax rate prescribed by section 42-5010.

(b) The city, town or other taxing jurisdiction tax may apply to online lodging transactions involving rentals of lodging accommodations in the city, town or other taxing jurisdiction for more than twenty-nine consecutive days. With respect to any tax on rentals of lodging accommodations for more than twenty-nine consecutive days, in the case of an online lodging marketplace that has registered pursuant to section 42-5005, subsection L, the city, town or other taxing jurisdiction tax must uniformly apply to all lodging accommodations in the city, town or other taxing jurisdiction for thirty consecutive days or more, and the tax base for the tax must be limited exclusively to online lodging transactions facilitated by an online lodging marketplace for rentals of lodging accommodations for thirty consecutive days or more and located in the applicable city, town or other taxing jurisdiction.

The city, town or other taxing jurisdiction tax shall be administered, collected and enforced by the department and distributed to the city, town or other taxing jurisdiction in a uniform manner.
The city, town or other taxing jurisdiction tax imposed on online lodging marketplaces and online lodging operators must be uniform with all other taxpayers engaging in the same activity within the jurisdictional boundaries of the city, town or other taxing jurisdiction.
Any city, town or other taxing jurisdiction tax is subject to:

(a) Section 42-6002, relating to audits.

(b) Section 42-2003, subsection X, relating to confidential information.

(d) Section 42-5005, subsection L, relating to registration of online lodging marketplaces.

(e) Section 42-5014, subsection E, relating to tax returns.

The city, town or other taxing jurisdiction tax may not be collected from an online lodging operator with respect to any online lodging transaction or transactions for which the online lodging operator has received written notice or documentation from a registered online lodging marketplace that it has remitted or will remit the applicable city, town or other taxing jurisdiction tax with respect to those transactions to the department pursuant to section 42-5014, subsection E.

C. For the purposes of this section, "lodging accommodations", "online lodging marketplace", "online lodging operator" and "online lodging transaction" have the same meanings prescribed in section 42-5076.

§ 42-6010 Retail business location municipal tax incentives; prohibition; penalty; exceptions; definitions

A. If at least sixty-five per cent of the land area within a city's or town's exterior boundaries is located within the exterior boundary of a metropolitan statistical area having a population of more than two million persons, the city or town shall not offer or provide a tax incentive to a business entity as an inducement or in exchange for locating or relocating a retail business facility in the city or town.

B. A city or town that violates this section is subject to a penalty equal to the amount of the incentive realized by the taxpayer, extended over a period of sixty months. The department of revenue shall notify the state treasurer to withhold the amount of the penalty from monies otherwise payable to the city or town as provided by section 42-5029, subsection J.

C. The city or town shall report to the department of revenue the value of any tax incentive used as an inducement or in exchange for locating or relocating a retail business facility in the city or town. For the purposes of this subsection, the value includes all negotiated amounts, in any form and whether actual, realized or contingent, over the term of the incentive agreement.

D. This section does not apply with respect to:

Municipal services and benefits generally afforded by ordinance to all new businesses in the city or town, having no direct affect on municipal tax levies.
Tax incentives that are afforded to all existing retail business facilities in the city or town.
Tax incentives for locating retail business facilities in an area designated as a redevelopment project pursuant to title 36, chapter 12, article 3 where the average household income is less than the average city household income as determined by the United States census bureau.
Incentives consisting of reimbursement for public infrastructure dedicated to and accepted and controlled upon completion of the project by the city or town, county, state or a private utility where no other political subdivision provides such utility for transportation, water, sewer, electrical, drainage, the fair market value of real property necessary for the public infrastructure and other necessary public infrastructure. This paragraph does not apply to parking lots, parking structures or parking facilities or other structures or amenities owned or controlled by a private entity.
Incentives that are offered for the purpose of preserving historical buildings and other structures.
Incentives that are offered for cleanup or other remediation activities at a brownfields site under title 49, chapter 2, article 1.1 or the comprehensive environmental response, compensation, and liability act of 1980 (P.L. 96-510, 94 Stat. 2767; 42 United States Code sections 9601 through 9657), commonly known as "superfund".

E. To qualify as exempt from the penalty, an incentive under subsection D of this section that is offered in exchange for expenses incurred by the business entity must be in the form of a reimbursement of the expenses and may not exceed or otherwise be disproportional to the actual cost incurred.

F. This section does not apply to tax incentives that were referred to a vote of the qualified electors of the city or town before July 1, 2007 and approved by the qualified electors of the city or town.

G. For the purposes of this section:

"Metropolitan statistical area" means a geographical area consisting of cities, towns and other populated areas defined for federal statistical and census purposes by the United States office of management and budget with technical assistance from the United States bureau of the census.
"Retail business facility" means a store, warehouse or other improvement to real estate where at least one-half of the business conducted on the premises consists of retail sales of tangible personal property to the ultimate consumer, measured by either the number of employees assigned to retail sales or the square footage of the facility used for retail sales. For the purposes of this paragraph, retail sales do not include:

(a) Sales of food and beverage for consumption on the premises of the facility.

(b) The distribution without charge of promotional products that display the company logo or trademark.

"Tax incentive" means any waiver, exemption, deduction, credit, rebate, discount, deferral or other abatement or reduction of the normal municipal tax liability of an individual taxpayer that otherwise applies to similar existing taxpayers and properties in the city or town, however denominated, computed or applied, and generally understood as an inducement for the taxpayer to locate a business facility or other operation in the city or town.

§ 42-6012 Municipal transaction privilege tax; sales of electricity, natural gas or liquefied petroleum gas

A city or town that levies a transaction privilege, sales, gross receipts, use, franchise or other similar fee or tax, however denominated, on the business of producing, providing or furnishing electricity, electric lights, current, power, natural gas or liquefied petroleum gas shall either tax or exempt in whole the gross proceeds of sales or gross income from sales by those businesses to either of the following businesses:

A qualified manufacturing or smelting business located in that city or town. 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:

(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 processing, fabricating, job printing, mining, generating electricity or operating a restaurant.

(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.

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

Businesses that operate an international operations center in this state and that are certified by the Arizona commerce authority pursuant to section 41-1520.

§ 42-6013 Electronic consolidated real property management tax returns; definition

A. For taxable periods beginning from and after December 31, 2017, a city or town that levies a transaction privilege tax under this section shall allow persons who are licensed pursuant to title 32, chapter 20 and who are licensed with the department pursuant to section 42-5005, subsection M to file electronic consolidated tax returns with the department with respect to gross proceeds or gross income derived from the individual properties under management on behalf of the property owners, subject to the following conditions and requirements:

The department shall administer, collect and enforce the tax that is reported and paid pursuant to an electronic consolidated return and remit the collected revenues to the appropriate city or town.
The tax may not be collected from any property owner whose licensee has provided written documentation to the property owner and to the city or town that the licensee has reported and remitted or will report and remit the applicable tax with respect to the property under management.
The department shall develop an electronic consolidated return form that separately identifies each owner's property locations and the gross income and deductions for each property location. The licensee shall file the return electronically using the consolidated return form developed by the department.
All participating property owners included in the same electronic consolidated return must be on the same tax payment schedule and use the same cash receipts or accrual basis of reporting.
A licensee filing an electronic consolidated return:

(a) Acts in a fiduciary capacity as the property owners' agent.

(b) Is responsible and accountable to the property owners and to the city or town for fully and accurately reporting and paying to the department the tax and any other amounts due.

(c) Is subject to audit, as provided by law, of the electronic consolidated returns, including data in the licensee's possession that is used in compiling and filing the electronic consolidated returns.

(d) Notwithstanding section 42-1129, subsection A, shall remit the applicable tax in monies that are immediately available to this state on the date of the transfer in accordance with section 42-1129, subsection B.

A property owner:

(a) Remains ultimately responsible, accountable and liable for both:

(i) The accuracy of information the property owner furnishes to the licensee.

(ii) The return and payment of the full tax liability, including any penalties prescribed by section 42-1125.

(b) Is subject to audit, as provided by law, of the records in the property owner's possession that are submitted to the licensee for the purposes of the electronic consolidated return.

(c) May withdraw any of the property owner's properties from the electronic consolidated return on thirty days' written notice to the licensee, the department and the tax collector of the city or town.

B. For the purposes of this section, "licensee" means a person who is licensed pursuant to title 32, chapter 20 and who is licensed with the department pursuant to section 42-5005, subsection M.

§ 42-6014 Municipal jet fuel excise tax

The area of taxation of jet fuel, as defined in section 42-5351, is a matter of statewide concern. Any municipal tax on jet fuel is subject to the following limits and requirements:

The application of the tax is limited to amounts of not more than ten million gallons of jet fuel purchased by each purchaser in each calendar year. The levy and measure of the tax must be structured to affirmatively exempt purchases in excess of ten million gallons per purchaser per year.
Beginning from and after November 30, 2017, the revenues generated by each public airport must be segregated in separate accounts for the exclusive expenditure for the capital or operating costs of the airport, the airport system or other local airport facilities owned or operated by the municipality and directly and substantially related to the air transportation of passengers or property.

§ 42-6015 Municipal transaction privilege tax; food; exemption

A. If a city, town or other taxing jurisdiction imposes a transaction privilege, sales, use, franchise or other similar tax or fee, however denominated, on:

The sale of food items intended for human consumption as defined by rule adopted pursuant to section 42-5106 or items prescribed by section 42-5106, subsection D for home consumption, the tax must be applied uniformly with respect to all food, and an additional tax or fee differential may not be assessed or applied with respect to any specific food item.
The sale of food items intended for human consumption as defined by rule adopted pursuant to section 42-5106 or items prescribed by section 42-5106, subsection D for consumption on the premises, the tax must be applied uniformly with respect to all food items, and an additional tax or fee differential may not be assessed or applied with respect to any specific food item.

B. A city, town or other taxing jurisdiction may not levy a transaction privilege, sales, use, franchise or other similar tax or fee, however denominated, with respect to:

The manufacture, wholesale or distribution to or among any wholesalers, distributors or retailers, of food items intended for human consumption as defined by rule adopted pursuant to section 42-5106 or items prescribed by section 42-5106, subsection D for home consumption or for consumption on the premises.
Any container or packaging used exclusively for transporting, protecting or consuming food items intended for human consumption as defined by rule adopted pursuant to section 42-5106 or items prescribed by section 42-5106, subsection D for home consumption or for consumption on the premises.
The sale of food or other items purchased with United States department of agriculture food stamp coupons issued under the food stamp act of 1977 (P.L. 95-113; 91 Stat. 958) 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; 42 United States Code section 1786) but may impose such a tax consistent with this section on other sales of food.
The sale of low or reduced-cost articles of food or drink to eligible elderly or homeless persons or persons with a disability by a business subject to tax under the restaurant classification pursuant to section 42-5074 that contracts with the department of economic security and that is approved by the food and nutrition service of the United States department of agriculture pursuant to the supplemental nutrition assistance program established by the food and nutrition act of 2008 (7 United States Code sections 2011 through 2036c), if the purchases are made with the benefits issued pursuant to the supplemental nutrition assistance program.

§ 42-6016 Mobile food vendors; definitions

A. A city, town or other taxing jurisdiction may levy a transaction privilege, sales, use, franchise or other similar tax or fee as provided by the model city tax code on a person engaging in business as a mobile food vendor subject to the restaurant classification pursuant to section 42-5074 for sales of food or beverages for immediate service and consumption and the retail classification pursuant to section 42-5061 for sales of incidental retail items if the adopted tax:

Applies only with respect to transactions that occur within the jurisdictional boundaries of the city, town or taxing jurisdiction.
Is administered in a manner that is consistent with the treatment of restaurants or similar establishments where food or beverages are prepared and served for consumption on or off the premises.
Is administered, collected and enforced by the department and remitted to the city, town or other taxing jurisdiction in a uniform manner.

B. The taxpayer shall maintain records that show separately the taxable receipts from transactions in the respective cities, towns or other taxing jurisdictions in which the taxpayer conducts business. If the taxpayer fails to comply with this subsection, the department shall collect the tax based on the taxpayer's total receipts, applying the highest tax rate levied by any city, town or other taxing jurisdiction.

C. For the purposes of this section:

"Mobile food unit" means a food establishment that is licensed by this state, that is readily movable and that dispenses food or beverages for immediate service and consumption and other incidental retail items from any vehicle as defined in section 28-101.
"Mobile food vendor" means any person who owns, controls, manages or leases a mobile food unit or contracts with a person to prepare foods and vend from, drive or operate a mobile food unit.

§ 42-6017 Municipal taxation of businesses selling tangible personal property at retail; state preemption; exceptions; definitions

A. Except as provided in this section, section 42-5061 supersedes all city or town ordinances or other local laws insofar as the ordinances or local laws now or hereafter relate to the taxation of business activities classified under section 42-5061.

B. The municipal tax rate for businesses selling tangible personal property at retail for marketplace facilitators is the municipal tax rate that is in effect in the city or town for businesses selling tangible personal property at retail on September 30, 2019, until the city or town changes the tax rate.

C. A city or town may:

Notwithstanding section 42-5061, subsection A, paragraph 15, levy a transaction privilege tax on the gross proceeds of sales or gross income derived from the business of selling food at retail by the persons described in section 42-5102, subsection A, subject to the conditions of sections 42-5074, 42-5101 and 42-6015.
Notwithstanding section 42-5061, subsection A, paragraph 17, levy a transaction privilege tax on the gross proceeds of sales or gross income derived from a bookstore selling textbooks that are required by any state university or community college.
Notwithstanding section 42-5061, subsection A, paragraph 33, paragraph 42, subdivision (b) and paragraph 43 and subsection B, paragraph 5, continue to levy an existing transaction privilege tax that was levied on or before May 1, 2019 on the gross proceeds of sales or gross income derived from the sales of:

(a) Propagative materials to persons who use those items to commercially produce agricultural, horticultural, viticultural or floricultural crops in this state. This subdivision does not apply and a city or town may not continue to levy a transaction privilege tax pursuant to this subdivision as follows:

(i) For a city or town with a population of fifty thousand persons or less, from and after June 30, 2021.

(ii) For a city or town with a population of more than fifty thousand persons, from and after December 31, 2019.

(c) Implants used as growth promotants and injectable medicines, not already exempt under section 42-5061, subsection A, paragraph 8, for livestock or 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. This subdivision does not apply and a city or town may not continue to levy a transaction privilege tax pursuant to this subdivision as follows:

(i) For a city or town with a population of fifty thousand persons or less, from and after June 30, 2021.

(ii) For a city or town with a population of more than fifty thousand persons, from and after December 31, 2019.

(d) 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. This subdivision does not apply and a city or town may not continue to levy a transaction privilege tax pursuant to this subdivision as follows:

(i) For a city or town with a population of fifty thousand persons or less, from and after June 30, 2021.

(ii) For a city or town with a population of more than fifty thousand persons, from and after December 31, 2019.

Levy a transaction privilege tax on the gross proceeds of sales or gross income derived from the sale of nonmetalliferous mined materials at retail.
Notwithstanding section 42-5061, subsection A, paragraph 59, levy a transaction privilege tax on the gross proceeds of sales or gross income derived from the sale 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.
Notwithstanding section 42-5061, subsection A, paragraph 28 or section 42-5122, levy a transaction privilege tax on the gross proceeds of sales or gross income derived from the sale of a motor vehicle to:

(a) 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 chapter 5, article 1 of this title 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. This subdivision does not apply if the purchaser takes possession of the vehicle outside of this state.

(b) An enrolled member of an Indian tribe who resides on the Indian reservation established for that tribe, except if possession of the vehicle is received on the enrolled member's Indian reservation.

Exempt from transaction privilege, sales, use or other similar tax the sale 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 paragraph, fine art does not include an art creation such as jewelry, macramé, 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.

D. For the purposes of this section:

"Food" has the same meaning prescribed by rule adopted by the department pursuant to section 42-5106.
"Marketplace facilitator" has the same meaning prescribed in section 42-5001.
"Poultry" includes ratites.
"Propagative materials":

"Remote seller" has the same meaning prescribed in section 42-5001.

§ 42-6018 Distribution of revenues for county stadium district from cities and towns; notice; limit; definitions

(Rpld. 4/1/55)

A. Subject to section 48-4238 and subsection D of this section, beginning the first month following September 26, 2025 and each month thereafter through March 31, 2056, each city and town shall transmit the amount determined under subsection B of this section to the county stadium district established pursuant to title 48, chapter 26 for deposit in the county stadium district fund established pursuant to section 48-4231. The department shall notify the city or town of the amount determined pursuant to subsection B of this section each month, and the city or town shall transmit the monies within thirty days after receiving the notice.

B. The amount to be transmitted under subsection A of this section is the amount determined by the department to be the first two percent of the rate of transaction privilege, sales, use, franchise or other similar tax or fees collected on behalf of the city or town for taxable periods beginning October 1, 2025 through December 31, 2055 from persons engaged in the following business activities at, or with respect to events held at, a major league baseball facility or an adjacent building that is owned by a county stadium district pursuant to title 48, chapter 26 and operated by the county stadium district or the professional baseball franchise organization that occupies the major league baseball facility or adjacent building:

Selling tangible personal property at retail.
Operating or conducting theaters, movies, operas, shows of any type or nature, exhibitions, concerts, carnivals, circuses, amusement parks, menageries, fairs, races, contests, games, billiard or pool parlors, bowling alleys, public dances, dance halls, boxing and wrestling matches, skating rinks, tennis courts, video games, pinball machines or sports events or any other business charging admission or user fees for exhibition, amusement or entertainment.
Operating a restaurant, dining car, dining room, lunchroom, mobile food unit, lunch stand, soda fountain, catering service or similar establishment where articles of food or drink are sold for consumption on or off the premises.
Prime contracting.

C. For the purposes of this section and subject to section 48-4238, beginning October 1, 2025 and each month thereafter through December 31, 2055, the department shall separately account for revenues collected from each business prescribed in subsection B of this section on the premises of a major league baseball facility or an adjacent building that is owned by a county stadium district pursuant to title 48, chapter 26 and operated by the county stadium district or the professional baseball franchise organization that occupies the major league baseball facility or adjacent building.

D. The total amount transmitted under this section may not exceed $3,500,000 each year as increased pursuant to subsection E of this section. If the limit prescribed by this subsection is met, the city or town shall stop transmitting monies pursuant to this section until the following year.

E. Beginning from and after December 31, 2026 through December 31, 2055, each city or town shall annually increase the limit prescribed by subsection D of this section by three percent.

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

Article 2 Model City Tax Code

§ 42-6051 Definitions

In this article, unless the context otherwise requires:

"Commission" means the municipal tax code commission.
"Model city tax code" or "code" means the document filed with the secretary of state on or before July 1, 1988 and that is maintained by the department of revenue beginning July 1, 2012.

§ 42-6052 Municipal tax code commission; members; meetings; model city tax code; official copy; review and comment on proposed amendments; annual report

A. The municipal tax code commission is established consisting of the director, or the director's representative, as an ex officio member without the power to vote and nine members who are mayors or members of the governing bodies of cities or towns that have adopted the model city tax code and who are appointed as follows:

Five members appointed by the governor.
Two members appointed by the president of the senate.
Two members appointed by the speaker of the house of representatives.

B. Not more than two members of the commission may be from the same city or town. The commission shall annually elect a chairperson from among its members. Appointive members shall serve terms of three years. Members of the commission are not eligible for compensation for their services.

C. The commission shall meet on the call of the chairperson, in response to any proposed amendment pursuant to subsection E of this section or at the request of four or more of its members.

D. The department shall:

Maintain the official copy of the model city tax code.
Incorporate changes to the model city tax code that are required to conform the model city tax code with a statutory change within thirty days of the effective date of the statutory change.
Post the official copy on the department's official website.
Maintain a mailing list for meeting notices, send required notices and provide staff support and meeting accommodations for the commission. All notices under this paragraph may be delivered by either physical mail or email and shall be delivered within the time frames prescribed in this section.

E. At least sixty days before the commission adopts any amendment to the model city tax code, a city or town, a taxpayer or the department shall submit the proposed amendment to the commission to review and consider for adoption. The department shall post the proposed amendment, meeting notice and meeting agenda on the department's official website at least thirty days before the informational public hearing required under subsection F of this section and at least sixty days before the public hearing for consideration to adopt the proposed amendment required under subsection G of this section.

F. At least thirty days after receiving a proposed amendment, and at the request of a city or town, a taxpayer or the department, the commission shall hold an informational public hearing to review and receive comments on the proposed amendment. The department shall provide a legal analysis of the proposed amendment to the commission at the hearing. The commission shall consider any information and testimony presented at the hearing, may require changes to the language presented at the hearing and may require changes to the language presented by the city or town, taxpayer or department. The department shall post the proposed amendment with any required changes on the department's official website not later than five days after the date of the informational public hearing.

G. At least sixty days after the commission receives a proposed amendment pursuant to subsection E of this section, the commission shall hold a public hearing to consider any information and testimony presented at the informational public hearing, if one was requested under subsection F of this section, and to consider adopting the proposed amendment. Beginning from and after October 30, 2023, a two-thirds vote of the commission is required to adopt a proposed amendment to the model city tax code that either repeals a model or local option that provides an exemption from taxation or which expands the types of business activities that are considered taxable. If the commission adopts the proposed amendment, the department shall update the official copy of the model city tax code to reflect the amendment adopted by the commission not later than ten days after the commission adopts the amendment. Any changes that are not reflected in the official copy posted on the department's official website are void and have no effect.

H. All cities and towns shall adopt the changes to the model city tax code adopted by the commission. This requirement does not prohibit the commission from recommending a model or local option or changes to a model or local option contained in the model city tax code to be adopted only by those cities and towns that choose the option or from approving a change submitted by a city or town that does not apply to any other city or town. The city or town may not adopt an amendment to any provision of the model city tax code unless the commission has adopted the amendment or the amendment is a result of a statutory change incorporated pursuant to subsection D, paragraph 2 of this section.

I. Changes in rates of tax are not subject to review or approval by the commission, but within ten days after passage of an ordinance imposing a rate change:

The city or town imposing a new or different tax rate shall notify the commission and the department. Failure of a city or town to notify the commission and the department renders the new or different tax rate void and has no effect. For the purposes of this paragraph, "new or different tax rate" means the adoption or repeal of a model or local option or any change that increases the amount of tax a taxpayer must pay to a city or town.
The official copy of the model city tax code must reflect the change. Any change not reflected in the official copy of the model city tax code is void and has no effect.

J. The commission shall prepare a report and deliver the report to the governor, the president of the senate and the speaker of the house of representatives before January 1 each year.

§ 42-6054 Modifications to model city tax code; notice and hearing

A. If a city or town adopts the model city tax code, the city or town shall not adopt any modification or amendment to the code unless the city or town holds a public hearing on the proposed action before the modification or amendment becomes effective.

B. If a city or town that has adopted the model city tax code issues a written notice with respect to an interpretation of any provision of the code or any procedures to be followed under the code, the city or town shall not adopt any modification or amendment to the written notice unless the city or town holds a public hearing on the proposed action before the modification or amendment becomes effective.

C. A city or town that has adopted the model city tax code shall not change the application of the code from audit to audit unless the city or town adopted an amendment or modification to the code.

D. The governing body of the city or town shall publish a notice of the hearing at least fifteen days before the date of the hearing in a newspaper of general circulation in the city or town. At the hearing, the governing body shall receive all written and oral comments relating to the proposed action. If, after receiving and considering all comments, the governing body proceeds with the proposed action, the modification or amendment shall not become effective for at least sixty days after the date of the hearing, unless otherwise provided by city charter.

E. A city or town that proposes an ordinance to adopt or repeal a model or local option in the model city tax code shall notify all taxpayers in the affected tax classification pursuant to section 9-499.15.

§ 42-6055 Authority of municipalities to provide retroactive relief from model city tax code

Any city or town which adopted the model city tax code may elect to amend the effective date of any provision of such code, or amend the effective date for application to any specified class of taxpayers of any provision of such code, to any date after the effective date of the original adoption of the code in any case where the city or town believes a substantial number of taxpayers may not have received a fair notice as to the applicability of such tax, or in any case where the city or town determines that a prospective application of a provision may further substantial justice. Nothing in this section is intended to require any city or town to take action.

§ 42-6056 Municipal tax hearing office

(Conditionally Rpld.)

A. A municipal tax hearing office is established. The hearing office shall hear all reviews of petitions for hearing or redetermination under the model city tax code for cities and towns not in the state collection system as of January 1, 2013 and for appeals from supplementary audits performed by cities and towns under the state collection system for all audits and assessments initiated by a city or town prior to January 1, 2015. All matters initiated by a city or town from and after January 1, 2015 shall be subject to review pursuant to section 42-6002.

B. The municipal tax code commission shall confirm within sixty days all hearing officers appointed to the municipal tax hearing office.

C. The municipal tax hearing office shall submit at least quarterly a report of the office’s activities to the municipal tax code commission.

D. The cost of the municipal tax hearing office shall be funded by the cities and towns in a manner determined pursuant to an intergovernmental agreement or contract as provided in section 11-952.

Article 3 County Excise Taxes

§ 42-6101 Definition of population

In this article, unless the context otherwise requires, "population" means the population determined in the most recent United States decennial census or the most recent special census as provided in section 28-6532.

§ 42-6102 Administration; exception

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

A separate license is not required for the taxes imposed by this article, and the taxes due under this article shall be included, reported and paid with the transaction privilege tax.
A separate bond is not required of employees of the department in administering this article.
The taxes imposed by this article may be included without segregation in any notice and lien filed for unpaid transaction privilege taxes.

B. The taxes imposed pursuant to this article do not apply to the gross proceeds of sales or gross income derived pursuant to contracts entered into before the date of the election to authorize the tax by prime contractors and owner builders who are classified under sections 42-5075 and 42-5076 unless the contract contains a provision which entitles the contractor to recover the amount of the tax from a purchaser. In order to qualify for this exemption the contractor shall provide sufficient documentation, in a manner and form prescribed by the department, to verify that a contract was entered into before the date of the election to authorize the tax.

§ 42-6103 County general excise tax; authority to levy; rate; distribution; use of proceeds

A. A county having a population of less than one million five hundred thousand persons, according to the most recent United States decennial census, on a unanimous vote of the board of supervisors, may levy and, if levied, the department shall collect a county general excise tax on each person engaging or continuing in the county in a business taxed under chapter 5, article 1 of this title and section 42-5352, subsection A.

B. The excise tax levied pursuant to subsection A of this section shall be at a rate applied as a percentage of the rates prescribed by section 42-5010, subsection A on each class of business subject to the tax imposed by chapter 5, article 1 of this title and section 42-5352, subsection A, not to exceed ten per cent.

C. At the end of each month the state treasurer shall transmit the net revenues collected pursuant to this section to the treasurer of the county levying the tax. The county shall use these revenues to support and enhance countywide services.

§ 42-6105 County transportation excise tax; counties with population of one million two hundred thousand or more persons

A. If approved by the qualified electors voting at a countywide election, a county with a population of one million two hundred thousand or more persons shall levy and the department shall collect a tax as provided by this section, in addition to all other taxes.

B. The tax shall be levied and collected:

At a rate of not more than ten per cent of the transaction privilege tax rate prescribed by section 42-5010, subsection A applying, as of January 1, 1990, to each person engaging or continuing in the county in a business taxed under chapter 5, article 1 of this title.
At a rate of not more than ten per cent of the rate prescribed by section 42-5352, subsection A.
On the use or consumption of electricity or natural gas by retail electric or natural gas customers in the county who are subject to use tax under section 42-5155, at a rate equal to the transaction privilege tax rate under paragraph 1 of this subsection applying to persons engaging or continuing in the county in the utilities transaction privilege tax classification.

C. The tax levied under this section shall be in effect for a term of twenty years.

D. The net revenues collected under this section shall be distributed and deposited as follows for use consistent with the regional transportation plan adopted under title 28, chapter 17, article 1:

56.2 per cent to the regional area road fund pursuant to section 28-6303 for freeways and other routes in the state highway system, including capital expense and maintenance.
10.5 per cent to the regional area road fund pursuant to section 28-6303 for major arterial streets and intersection improvements, including capital expense and implementation studies.
33.3 per cent to the public transportation fund pursuant to section 48-5103 for:

(a) Capital costs, maintenance and operation of public transportation classifications.

(b) Capital costs and utility relocation costs associated with a light rail public transit system.

§ 42-6105.01 County transportation excise tax; counties with population of three million or more persons

A. If approved by the qualified electors voting at a countywide election, from and after December 31, 2025, a county with a population of three million or more persons shall levy and the department shall collect a tax as provided by this section, in addition to all other taxes.

B. The tax shall be levied and collected:

At a rate of not more than ten percent of the transaction privilege tax rate prescribed by section 42-5010, subsection A that applies, as of January 1, 1990, to each person engaging or continuing in the county in a business taxed under chapter 5, article 1 of this title.
At a rate of not more than ten percent of the rate prescribed by section 42-5352, subsection A.
On the use or consumption of electricity or natural gas by retail electric or natural gas customers in the county who are subject to use tax under section 42-5155, at a rate equal to the transaction privilege tax rate under paragraph 1 of this subsection that applies to persons engaging or continuing in the county in the utilities transaction privilege tax classification.

C. The tax levied under this section shall be in effect for a term of twenty years.

D. The plan adopted under title 28, chapter 17, article 2 shall specify the distribution of monies collected under this section in the regional area road fund established pursuant to section 28-6302 or the public transportation fund established by section 48-5103. Except as provided in subsection E of this section, the plan shall distribute:

40.5 percent to the regional area road fund for freeways and other routes in the state highway system, including capital expense and maintenance.
22.5 percent to the regional area road fund for major arterial streets, intersection improvements and regional transportation infrastructure, including capital expense and implementation studies.
37 percent to the public transportation fund for both:

(a) Capital costs, maintenance and operation of public transportation mode classifications.

(b) Capital rehabilitation costs associated with the light rail system.

E. Tax revenues collected under this section may not:

Be used for any light rail, commuter rail, streetcar or trolley extension.
Be spent on any project that will result in a reduction in existing lane miles on a highway as defined in section 28-101 or a state highway as defined in section 28-101, unless all of the following apply:

(a) Reconfiguration for operational efficiency is necessary as determined by a department-approved third-party engineering study or road safety assessment.

(b) An opportunity for public input is provided.

(d) The reduction will not increase vehicle congestion or travel times.

Be spent on a project that results in a reduction in existing lane miles on a street or highway as defined in section 28-601 or a roadway as defined in section 28-601 unless all the following apply:

(a) A third-party engineering study demonstrates that the project will not materially increase vehicle congestion or travel times.

(b) An opportunity for public input is provided.

F. The distribution specified in subsection D, paragraphs 1 and 2 of this section may not be decreased.

G. Monies collected pursuant to this section may not be used to influence the outcome of an election.

H. Not more than 3.5 percent of the monies that are distributed pursuant to subsection D, paragraph 3 of this section may be used for light rail capital rehabilitation.

I. Not more than five percent of the revenues collected under this section may be used for regional transportation infrastructure.

§ 42-6106 County transportation excise tax

A. If approved by the qualified electors voting at a countywide election, the regional transportation authority in any county shall levy and the department shall collect a transportation excise tax up to the rate authorized by this section in addition to all other taxes.

B. The tax shall be levied and collected:

At a rate that, by itself or together with any tax imposed pursuant to section 42-6107, is not more than twenty percent of the transaction privilege tax rate prescribed by section 42-5010, subsection A in effect on January 1, 1990 to each person engaging or continuing in the county in a business taxed under chapter 5, article 1 of this title.
At a rate that, by itself or together with any tax imposed pursuant to section 42-6107, is not more than twenty percent of the rate prescribed by section 42-5352, subsection A.
On the use or consumption of electricity or natural gas by retail electric or natural gas customers in the county who are subject to use tax under section 42-5155, at a rate equal to the transaction privilege tax rate under paragraph 1 of this subsection applying to persons engaging or continuing in the county in the utilities transaction privilege tax classification.

C. Any subsequent reduction in the transaction privilege tax rate prescribed by chapter 5, article 1 of this title shall not reduce the tax that is approved and collected as prescribed in this section. The department shall collect the tax at a variable rate if the variable rate is specified in the ballot proposition. The department shall collect the tax at a modified rate if approved by a majority of the qualified electors voting.

D. The net revenues collected under this section:

In counties with a population exceeding four hundred thousand persons, shall be deposited in the regional transportation fund pursuant to section 48-5307.
In counties with a population of four hundred thousand or fewer persons, shall be deposited in the public transportation authority fund pursuant to section 28-9142 or the regional transportation fund pursuant to section 48-5307 or shall be allocated between both funds.

E. The tax shall be levied under this section beginning January 1 or July 1, whichever date occurs first after approval by the voters, and may be in effect for a period of not more than twenty years.

§ 42-6107 County transportation excise tax for roads

A. If a majority of the qualified electors voting at a countywide special election, or a majority of the qualified electors voting on the ballot proposition at a general election, approves the transportation excise tax, the county shall levy and the department shall collect a tax:

At a rate of not more than ten per cent of the transaction privilege tax rate as prescribed by section 42-5010, subsection A applying, as of January 1, 1990, to each person engaging or continuing in the county in a business taxed under chapter 5, article 1 of this title.
At a rate of not more than ten per cent of the rate prescribed by section 42-5352, subsection A.
On the use or consumption of electricity or natural gas by retail electric or natural gas customers in the county who are subject to use tax under section 42-5155, at a rate equal to the transaction privilege tax rate under paragraph 1 applying to persons engaging or continuing in the county in the utilities transaction privilege tax classification. If a majority of the qualified electors in the county approved the transportation excise tax under this section before 1998, a tax under this paragraph may be approved by resolution adopted by a majority of the board of supervisors.

B. The net revenues collected under this section within a county shall be deposited in the county's regional area road fund pursuant to title 28, chapter 17, article 3.

C. The tax shall be levied under this section beginning January 1 or July 1, whichever date occurs first after approval by the voters, and may be in effect for a period of not more than twenty years.

§ 42-6108 Tax on hotels

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

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

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

Not more than thirty-four percent of these revenues for the purposes set forth in section 48-4204, subsection A, as financial participation by the county as required by that subsection.
Not more than sixteen percent of these revenues for the purposes of economic development under section 11-254.04. Any increase in tax imposed under this section shall not constitute a new tax for the purposes of section 11-254.04, subsection B.
All remaining revenues to promote and enhance tourism through the recognized tourism promotion agency in the county.

§ 42-6108.01 Tax on hotels

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

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

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

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

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

§ 42-6109 Jail facilities excise tax; maintenance of effort; definition

A. If approved by the qualified electors voting at a countywide general election, a county with a population of at least one million five hundred thousand persons shall levy and the department shall collect a transaction privilege tax, in addition to all other taxes, at rates of not more than 4.0 per cent of the transaction privilege tax rate prescribed by section 42-5010, subsection A applying to each person engaging or continuing in the county in a business taxed under chapter 5, article 1 of this title.

B. If a tax is levied under subsection A of this section, the county board of supervisors, by resolution, may levy and, if levied, the department shall collect a use tax on the use or consumption of electricity or natural gas by retail electric or natural gas customers in the county and subject to use tax pursuant to section 42-5155. The use tax levied pursuant to this subsection shall be applied as a percentage of the use tax imposed by chapter 5, article 4 of this title equal to the percentage determined under subsection A of this section.

C. Taxes shall be levied under this section beginning January 1 or July 1, whichever date first occurs after approval by the voters, or county board of supervisors, as applicable, and may continue in effect until the amount of nine hundred million dollars of revenue is collected, as determined by the department of revenue, but in any event not more than nine years as adopted by resolution of the county board of supervisors before the election and as approved by the voters. The board of supervisors may, by resolution, decrease or increase the rates of taxes during the term of the taxes, subject to the maximum rates prescribed by this section.

D. At the end of each month the state treasurer shall transmit the net revenues collected pursuant to this section to the treasurer of the county levying the tax. If the county that initially imposes the tax under this section is divided into two or more new counties during the term of the tax, each new county shall continue to impose the tax, but the state treasurer shall transmit the net revenues collected within both counties equally to each of the new counties. The county treasurer shall segregate all the monies received under this section for use only for the purposes authorized by this section. The county treasurer may disburse monies from the fund only to:

Finance construction of new adult and juvenile jail facilities.
Maintain and operate adult and juvenile jail facilities.
Fund the following for the purpose of reducing the expense of adult and juvenile jail facilities:

(a) Implementing an integrated criminal justice information system.

(b) Developing regional centers for courts not of record.

(d) Consolidating criminal divisions of the superior court in the county to a common location.

(e) Expanding pretrial release supervision.

(f) Implementing electronic monitoring of preadjudicated defendants.

(g) Enhancing substance abuse evaluation and programming.

(h) Increasing drug court admissions to include preadjudicated defendants and expanding drug court jurisdiction.

(i) Using community based juvenile detention and postadjudication programs.

E. The county shall maintain its support of adult and juvenile jail facilities. The county shall determine the amount the county spent for maintenance and operation of adult and juvenile jail facilities in the fiscal year immediately preceding the first fiscal year in which the tax is levied under this section. The auditor general shall audit this amount and the audited amount is the base expenditure. Any outstanding debt due from a city, this state or the United States for the county housing prisoners pursuant to section 31-121 shall be excluded from the base expenditure. In the first year the tax is levied under this section the county shall pay an amount equal to the base expenditure adjusted by the percentage change in the assessed valuation of the taxable property in the county, determined for secondary property tax purposes, from the preceding year. In each year the tax is imposed, the county shall pay an amount equal to the amount paid under this subsection in the preceding fiscal year, adjusted by the percentage change in the assessed valuation of the taxable property in the county, determined for secondary property tax purposes, from the preceding year. The county treasurer shall transfer that amount, without further authorization, in twelve equal monthly installments from the county general fund for the uses prescribed in subsection D of this section. For purposes of this subsection, "maintenance and operation" includes detention personnel compensation, employee related expenses, utility expenses of the facility, costs of food and care of prisoners, administrative support costs and costs of maintaining and repairing the facility and grounds.

F. For the purposes of this section, "jail facility" means a jail or other place of detention of persons charged with or convicted of a crime or of persons who are subject to the jurisdiction of the juvenile court.

§ 42-6109.01 Jail facilities excise tax; maintenance of effort; definitions

A. The board of supervisors of any county that levies a jail facilities excise tax under section 42-6109, by resolution adopted before the expiration of that tax, may call for a countywide general election to authorize the levy of a transaction privilege tax under this section, in addition to all other taxes. If approved by the qualified electors voting at the countywide general election, the county shall levy and the department shall collect the tax at rates of not more than 4.0 per cent of the transaction privilege tax rate prescribed by section 42-5010, subsection A applying to each person engaging or continuing in the county in a business taxed under chapter 5, article 1 of this title. By resolution, the board of supervisors may decrease the rates of the tax during the term of the tax.

B. The resolution shall:

Include a statement of the taxes that have been collected pursuant to section 42-6109 and an accounting of how those revenues have been expended by project, program or category authorized by section 42-6109.
Include a projection of the amount of taxes anticipated to be collected annually if the tax levy under section 42-6109.01 is approved in the countywide general election.
Identify the projects, programs and categories for which expenditures are contemplated and the amount of taxes that are estimated to be expended for each.
Be printed in the ballot proposition publicity pamphlet which will be mailed to every household with a registered voter.

C. Taxes under this section shall be levied beginning in the month following the expiration of the tax under section 42-6109 and may continue for not more than twenty years after the date the tax collection begins.

D. At the end of each month the state treasurer shall transmit the net revenues collected pursuant to this section to the treasurer of the county levying the tax. If the county that initially imposes the tax under this section is divided into two or more new counties during the term of the tax, each new county shall continue to impose the tax, but the state treasurer shall transmit the net revenues collected within each county to that county as determined pursuant to section 42-5034. The county treasurer shall segregate all the monies received under this section for use only for the purposes authorized by this section. The county treasurer may disburse revenues from the tax only to:

Finance construction or renovation of adult and juvenile jail facilities.
Maintain and operate adult and juvenile jail facilities.
Fund the following for the purpose of reducing the expense of adult and juvenile jail facilities:

(a) Implementing an integrated criminal justice information system.

(b) Developing regional centers for courts not of record.

(d) Consolidating criminal divisions of the superior court in the county to a common location.

(e) Expanding pretrial release supervision.

(f) Implementing electronic monitoring of preadjudicated defendants.

(g) Enhancing substance abuse evaluation and programming.

(h) Increasing drug court admissions to include preadjudicated defendants and expanding drug court jurisdiction.

(i) Using community based juvenile detention and postadjudication programs.

(j) Implementing other programs designed to reduce the expense of adult and juvenile facilities.

E. The county shall maintain its support of adult and juvenile jail facilities. In the first fiscal year the tax is levied under this section the county shall pay an amount equal to the amount paid under section 42-6109 in the preceding fiscal year, adjusted by the percentage change in the GDP price deflator from the preceding fiscal year. In each fiscal year the tax is imposed, the county shall pay an amount equal to the amount paid under this subsection in the preceding fiscal year, adjusted by the percentage change in the GDP price deflator from the preceding fiscal year. The county treasurer shall transfer that amount, without further authorization, in twelve equal monthly installments from the county general fund for the uses prescribed in subsection D of this section.

F. For purposes of this section:

"GDP price deflator" has the same meaning prescribed by section 41-563.
"Jail facility" means a jail or other place of detention of persons charged with or convicted of a crime or of persons who are subject to the jurisdiction of the juvenile court, including related support facilities.

§ 42-6109.02 Jail facilities excise tax; maintenance of effort; definitions

(Conditionally Rpld.)

A. The board of supervisors of any county that levies a jail facilities excise tax under section 42-6109.01, by resolution adopted before the expiration of that tax, may call for a countywide general election to authorize the levy of a transaction privilege tax under this section in addition to all other taxes. If approved by the qualified electors voting at the countywide general election, the county shall levy and the department shall collect the tax at rates of not more than 4.0 percent of the transaction privilege tax rate prescribed by section 42-5010, subsection A applying to each person engaging or continuing in the county in a business taxed under chapter 5, article 1 of this title. By resolution, the board of supervisors may decrease the rates of the tax during the term of the tax.

B. The resolution shall:

Include a statement of the taxes collected pursuant to section 42-6109.01 and an accounting of the budgeting of those revenues by the county.
Include a projection of the amount of taxes anticipated to be collected annually if the tax levy under this section is approved in the countywide general election.
Identify the projects, programs and categories for which expenditures are contemplated and the estimated amount of taxes to be expended for each.
Be printed in the ballot proposition publicity pamphlet that will be mailed to every household with a registered voter.

C. Taxes under this section shall be levied beginning in the month following the expiration of the tax under section 42-6109.01 and may not continue for more than twenty years after the date the tax collection begins.

D. At the end of each month, the state treasurer shall transmit the net revenues collected pursuant to this section to the treasurer of the county levying the tax. The county treasurer may disburse revenues from the tax only to:

Finance construction or renovation of adult and juvenile jail facilities.
Maintain and operate adult and juvenile jail facilities.
Fund and implement other programs designed to reduce the expense of adult and juvenile facilities.

E. The county shall maintain its support of adult and juvenile jail facilities. In the first fiscal year the tax is levied under this section, the county shall pay an amount equal to the amount paid under section 42-6109.01 in the preceding fiscal year, adjusted by the percentage change in the GDP price deflator from the preceding fiscal year. In each fiscal year the tax is imposed, the county shall pay an amount equal to the amount paid under this subsection in the preceding fiscal year, adjusted by the percentage change in the GDP price deflator from the preceding fiscal year. The county treasurer shall transfer that amount, without further authorization, in twelve equal monthly installments from the county general fund for the uses prescribed in subsection D of this section.

F. For the purposes of this section:

"GDP price deflator" has the same meaning prescribed in section 41-563.
"Jail facility" means a jail or other place of detention of persons who are charged with or convicted of a crime or of persons who are subject to the jurisdiction of the juvenile court, including related support facilities.

§ 42-6110 County use tax on electricity

A. A county with a population of less than one million five hundred thousand persons according to the most recent United States decennial census, on a unanimous vote of the board of supervisors, may levy, and if levied, the department shall collect, a county use tax on electricity purchased by an electricity customer from an electricity supplier, as defined in section 42-5151, and used or consumed in the county.

B. The use tax levied pursuant to this section shall be at a rate applied as a percentage of the use tax rate imposed by chapter 5, article 4 of this title, not to exceed ten per cent.

C. Notwithstanding section 42-6102, the use tax levied pursuant to this section shall be administered subject to chapter 5, article 4 of this title.

D. At the end of each month the state treasurer shall transmit the net revenues collected pursuant to this section to the treasurer of the county levying the tax. The county shall use these revenues to support and enhance countywide services.

§ 42-6111 County capital projects tax

A. The board of supervisors of a county with a population of less than two million persons, on a unanimous vote, may submit a proposed county capital projects tax for approval at a countywide special election or at a general election. If a majority of the qualified electors voting on the proposition approves the tax, the board of supervisors may levy and the department shall collect a tax, in addition to all other taxes, at a rate that, by itself or together with any tax imposed pursuant to section 42-6106 or 42-6107, does not exceed ten per cent of the transaction privilege tax rate prescribed by section 42-5010, subsection A applying, as of the date of its initial levy, to each person engaging or continuing in the county in a business taxed under chapter 5, article 1 of this title.

B. If a tax is levied under subsection A of this section, a tax shall also be levied on the use or consumption of electricity or natural gas by retail electric or natural gas customers in the county who are subject to use tax under section 42-5155 at a rate equal to the transaction privilege tax rate under subsection A of this section applying to persons engaging or continuing in the county in the utilities transaction privilege tax classification.

C. The tax shall be levied under this section beginning on January 1 or July 1, whichever date first occurs at least forty-five days after the election. The tax may be in effect for a period of not more than twenty years.

D. The state treasurer shall deposit the net revenues collected pursuant to this section in a fund designated as that county's transportation and capital projects fund. The state treasurer shall hold the monies in the fund as trustee for the county. The county has the beneficial interest in the fund. The state treasurer shall invest the monies in the county transportation and capital projects fund and shall credit to the fund all interest and other income earned from investments.

E. Each month the state treasurer shall distribute the monies in the transportation and capital projects fund to the county in a manner prescribed by the board of supervisors. The county may only use the revenues for capital projects and to purchase, construct and lease buildings, structures, facilities, roads, highways and other real and personal property, including open space and development rights, for the use or benefit of the county.

F. The ballot in the election described in subsection A of this section shall list each project to be financed with the tax collected and the estimated costs of each project. The tax terminates if and when the total amount of estimated costs for all of the projects has been raised.

§ 42-6112 County excise tax for county judgment bonds

A. A county, by resolution that is dated on or before December 31, 2011 and that is approved by a unanimous vote of the board of supervisors, may levy and, if levied, the department shall collect a county excise tax on each person engaging or continuing in the county in a business taxed under chapter 5, article 1 of this title and under section 42-5352, subsection A. The tax authorized by this section is in addition to any tax authorized pursuant to section 42-6103.

B. The excise tax levied pursuant to this section shall be at a rate adopted by the board of supervisors in the resolution levying the tax, applied as a percentage of the tax rates prescribed on the date of the resolution by section 42-5010, subsection A on each class of business subject to the transaction privilege tax imposed by chapter 5, article 1 of this title and the jet fuel excise tax imposed by section 42-5352, subsection A, but not more than ten per cent through May 31, 2013 and thirty per cent thereafter.

C. Each month the state treasurer shall transmit the net revenues collected pursuant to this section to the treasurer of the county levying the tax for credit to the county's debt service fund established pursuant to section 11-681.03.

D. A tax levied pursuant to this section terminates when all debt service costs have been paid relating to county judgment bonds issued pursuant to title 11, chapter 4, article 5. Not more than thirty days before the final debt service payment is due, the board of supervisors shall notify the department by certified mail of the termination of the tax. Any surplus monies that are not encumbered for debt service purposes shall be used to reduce the county primary property tax levy in the following year.

§ 42-6113 Distribution of revenues for county stadium district from county transportation excise tax; definitions

(Rpld. 4/1/55)

A. Subject to section 48-4238, beginning the first month following September 26, 2025 and each month thereafter through March 31, 2056, the state treasurer, on instruction from the department, shall transmit from the amount collected pursuant to this article the amount determined under subsection B of this section to the county stadium district established pursuant to title 48, chapter 26 for deposit in the county stadium district fund established pursuant to section 48-4231.

B. The amount to be transmitted under subsection A of this section is the total amount of county excise taxes collected pursuant to sections 42-6105 and 42-6105.01 on behalf of the county for taxable periods beginning on October 1, 2025 through December 31, 2055 from persons engaged in the following business activities at, or with respect to events held at, a major league baseball facility or an adjacent building that is owned by a county stadium district pursuant to title 48, chapter 26 and operated by the county stadium district or the professional baseball franchise organization that occupies the major league baseball facility or adjacent building:

Selling tangible personal property at retail.
Operating or conducting theaters, movies, operas, shows of any type or nature, exhibitions, concerts, carnivals, circuses, amusement parks, menageries, fairs, races, contests, games, billiard or pool parlors, bowling alleys, public dances, dance halls, boxing and wrestling matches, skating rinks, tennis courts, video games, pinball machines or sports events or any other business charging admission or user fees for exhibition, amusement or entertainment.
Operating a restaurant, dining car, dining room, lunchroom, mobile food unit, lunch stand, soda fountain, catering service or similar establishment where articles of food or drink are sold for consumption on or off the premises.
Prime contracting.

C. For the purposes of this section and subject to section 48-4238, beginning October 1, 2025 and each month thereafter through December 31, 2055, the department shall separately account for revenues collected pursuant to sections 42-6105 and 42-6105.01 from each business prescribed in subsection B of this section on the premises of a major league baseball facility or an adjacent building that is owned by a county stadium district pursuant to title 48, chapter 26 and operated by the county stadium district or the professional baseball franchise organization that occupies the major league baseball facility or adjacent building.

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

Article 5 Government Property Lease Excise Tax

§ 42-6201 Definitions

In this article, unless the context otherwise requires:

"Government lessor" means a city, town, county or county stadium district.
"Government property improvement" means a building for which a certificate of occupancy has been issued, for which the title of record is held by a government lessor, that is situated on land for which the title of record is held by a government lessor or a political subdivision of this state and that is available for use for any commercial, residential rental or industrial purpose, including, but not limited to, office, retail, restaurant, service business, hotel, entertainment, recreational or parking uses.
"Gross building space" means the total floor area of a building measured from the exterior of the walls, but not including unenclosed areas.
"Prime lessee" means any person, partnership, corporation, company, limited liability company, joint venture or other organization or association that enters into a lease directly with a government lessor to develop or occupy for at least thirty consecutive days a government property improvement, regardless of whether the improvement is actually used by the prime lessee or by one or more sublessees.

§ 42-6202 Commercial government property lease excise tax; database

A. A government lessor shall levy and the county treasurer shall collect an annual excise tax on each prime lessee for the use or occupancy of each government lessor's government property improvement.

B. A government lessor may not own or operate a government property improvement unless one of the following applies:

The improvement is subject to the government property lease excise tax under this article with respect to the improvement.
The improvement is exempt from tax under section 42-6208.
Tax on the improvement has been abated under section 42-6209.

C. Within thirty days after entering into a lease for the occupancy of a government property improvement, the government lessor shall:

Record a memorandum of lease in the office of the county recorder in the county in which the government property improvement is located. The memorandum of lease must include the basic lease terms, including the names of the parties, the leased property, the lease term, including the beginning and ending dates, and any options to renew the lease or to purchase any of the government property improvement or government owned land.
Submit to the county treasurer copies of the lease or an abstract of the lease.

D. The government lessor shall maintain a public database by county, city and town as applicable, or post its lease agreements on a county, city or town website where the government property improvement is located, of all government property leases that are subject to the tax under this article.

E. The government lessor shall submit a current link to the public database as described in subsection D of this section to the department of revenue and notify the department when the database no longer contains any active leases.

F. The department of revenue shall place links to all of the government lessors' databases with active leases on their website.

G. If a county assessor becomes aware of a government property improvement that is or should be subject to the tax under this article, the assessor shall notify the county treasurer and the government lessor for confirmation that the improvement is included in their database.

§ 42-6203 Rates of tax

A. Except as otherwise provided in this section, if a lease of a government property improvement was entered into before June 1, 2010, or if a development agreement, ordinance or resolution was approved by the governing body of the government lessor before June 1, 2010 that authorized a lease on the occurrence of specified conditions and the lease was entered into within ten years after the date the development agreement was entered into or the ordinance or resolution was approved by the governing body and the lease was determined by the department of revenue to be in compliance with this subsection:

The tax authorized by this article shall be levied and collected at the following rates:

(a) One dollar per square foot of gross building space for office buildings with one floor above ground.

(b) One dollar twenty-five cents per square foot of gross building space for office buildings with more than one but fewer than eight floors above ground.

(c) One dollar seventy-five cents per square foot of gross building space for office buildings with eight floors or more above ground.

(d) One dollar fifty cents per square foot of retail building space, including space that is devoted to the sale of tangible personal property, restaurants, health clubs, hair salons, dry cleaners, travel agencies and other retail services.

(e) One dollar fifty cents per square foot of hotel or motel building space.

(f) Seventy-five cents per square foot of warehouse or industrial building space.

(g) Fifty cents per square foot of residential rental building space.

(h) One hundred dollars per parking space located in a parking garage or deck.

(i) One dollar per square foot of all other government property improvements not included in subdivisions (a) through (h) of this paragraph.

The tax rate for government property improvements for which the original certificate of occupancy was issued:

(a) At least ten years but less than twenty years before the date the tax is due is eighty percent of the rate provided in paragraph 1 of this subsection.

(b) At least twenty years but less than thirty years before the date the tax is due is sixty percent of the rate provided in paragraph 1 of this subsection.

(c) At least thirty but less than forty years before the date the tax is due is forty percent of the rate provided in paragraph 1 of this subsection.

(d) At least forty but less than fifty years before the date the tax is due is twenty percent of the rate provided in paragraph 1 of this subsection.

(e) Fifty or more years before the date the tax is due is zero.

If no certificate of occupancy can be located, dated aerial photographs or other evidence of substantial completion may be used to determine the age of the building for purposes of paragraph 2 of this subsection.
A lease or development agreement, originally subject to this subsection, that is subsequently amended remains subject to this subsection if the amended lease or development agreement meets all of the following requirements:

(a) The government lessor determines that the amendment furthers the original purpose of the lease or development agreement.

(b) Any land added under the amendment is contiguous to the land under the original lease or development agreement and does not increase the land area under the original lease or development agreement by more than fifty percent.

(c) Any government property improvement added under the amendment does not increase the area of gross building space of government property improvements under the original lease or development agreement by more than one hundred percent.

B. Except as otherwise provided in this section, if a lease of a government property improvement does not meet the conditions for applying subsection A of this section:

Subject to paragraphs 2 and 3 of this subsection, the tax authorized by this article shall be levied and collected at the following base rates, which apply through December 31, 2011:

(a) Two dollars per square foot of gross building space for office buildings with one floor above ground.

(b) Two dollars thirty cents per square foot of gross building space for office buildings with more than one but fewer than eight floors above ground.

(c) Three dollars ten cents per square foot of gross building space for office buildings with eight floors or more above ground.

(d) Two dollars fifty-one cents per square foot of retail building space, including space that is devoted to the sale of tangible personal property, restaurants, health clubs, hair salons, dry cleaners, travel agencies and other retail services.

(e) Two dollars per square foot of hotel or motel building space.

(f) One dollar thirty-five cents per square foot of warehouse or industrial building space.

(g) Seventy-six cents per square foot of residential rental building space.

(h) Two hundred dollars per parking space located in a parking garage or deck.

(i) Two dollars per square foot of all other government property improvements not included in subdivisions (a) through (h) of this paragraph.

If, in the tax year in which the lease of the government property improvement is entered into, the aggregate of all ad valorem property tax rates of all taxing jurisdictions in which the government property improvement is located is at least ninety percent of the countywide average combined property tax rates, the rate of tax prescribed by paragraph 1 of this subsection, as currently adjusted pursuant to paragraph 3 of this subsection, applies with respect to that government property improvement. If, in the tax year in which the lease of the government property improvement is entered into, the aggregate of all ad valorem property tax rates of all taxing jurisdictions in which the government property improvement is located is less than ninety percent of the countywide average combined property tax rates, the rate of tax prescribed by paragraph 1 of this subsection, as currently adjusted pursuant to paragraph 3 of this subsection, shall be reduced by ten percent.
On or before December 1, 2011 and December 1 of each year thereafter, for all government property leases that are subject to this subsection, the department of revenue shall adjust the tax rates that apply under paragraphs 1 and 2 of this subsection in the following calendar year for each property use according to the average annual positive or negative percentage change for the two most recent fiscal years in the producer price index for new construction or its successor index published by the United States bureau of labor statistics. On or before December 15 of each year, the department shall post the adjusted rates for the following calendar year on its official website and transmit the adjusted rates to each county treasurer.

C. The tax rate for a government property improvement that was constructed pursuant to a lease or development agreement entered into from and after June 30, 1996 and that is located outside a slum or blighted area established pursuant to title 36, chapter 12, article 3 is one and one-half times the rate established by subsections A and B of this section.

D. Within the first twenty years after the issuance of the original certificate of occupancy, the tax rate on the use or occupancy of a government property improvement is twenty percent of the rate established in subsections A and B of this section for any of the following:

Government property improvements that are subject to leases or agreements that were entered into before April 1, 1985, and options and rights contained in the leases or agreements.
Government property improvements that are subject to leases entered into based on a redevelopment contract, as defined in section 36-1471, entered into before April 1, 1985.
Government property improvements that are subject to leases entered into based on an agreement for a redevelopment project for which federal grant monies have been received and that was entered into before April 1, 1985.
Government property improvements that are located at an airport that was owned on or before January 1, 1988 by a county having a population of four hundred thousand persons or less or by a city or town that is located in a county having a population of four hundred thousand persons or less if the property is used primarily for manufacturing, retail, distribution, research or commercial purposes. For the purposes of this paragraph, "commercial" includes facilities for office, recreational, hotel, motel and service uses.

E. Within the first ten years after the issuance of the certificate of occupancy, the tax rate on the use or occupancy of a government property improvement that is located in a slum or blighted area established pursuant to title 36, chapter 12, article 3, that resulted or will result in an increase in property value of at least one hundred percent and that is not eligible for abatement pursuant to section 42-6209 is eighty percent of the rate established in subsections A and B of this section.

F. The tax rate to be applied under subsection A or B of this section shall be determined by the predominant use to which the government property improvement is devoted, except that in all cases the tax rate prescribed by subsection A, paragraph 1, subdivision (h) or subsection B, paragraph 1, subdivision (h) of this section shall be applied to any parking garage or deck. If there is no single predominant use, the tax shall be determined by applying the appropriate tax rate to the building space devoted to each use identified in that subsection. For the purposes of this subsection, in applying the tax rates under subsection A of this section the functional area of a government property improvement does not include subsidiary, auxiliary or servient areas such as lobbies, stairwells, mechanical rooms and meeting and banquet rooms. For the purposes of this subsection, "predominant use" means the use to which eighty-five percent or more of the functional area of a government property improvement is devoted.

G. Prime lessees of government property improvements who become taxable or whose taxable status terminates during the calendar year in which the taxes are due, including prime lessees subject to exemption or abatement under sections 42-6208 and 42-6209, shall pay tax for that calendar year on a pro rata basis.

§ 42-6204 Payment; return; interest; penalty; annual reports

A. The taxes that are levied pursuant to this article are:

Due and payable to the county treasurer annually on or before December 1.
Delinquent if not paid on or before that date.

B. The government lessor shall calculate the excise tax for each prime lessee, submit a return to the county treasurer on a return form prescribed by the department of revenue and submit a copy of the return to the prime lessee. If the prime lessee is exempt from the tax pursuant to section 42-6208, the government lessor shall keep and maintain the information required in this subsection. The return form shall be made available by the county treasurer at least sixty days before the taxes are due and payable and shall include:

The name and address of the prime lessee.
The location of the government property improvement.
The amount of gross building space or number of parking garage or deck spaces. The prime lessee may submit an initial statement of gross building space that is certified by a person who is professionally credentialed in this state as an architect, general contractor, surveyor or appraiser and thereafter shall file an annual statement with the return, under penalty of perjury, that the gross building space is unchanged from the amount previously certified.
The date of the original certificate of occupancy.
The use or uses of the property.
If an abatement under section 42-6209 applies, a certification under penalty of perjury that all elements necessary to qualify for the abatement are satisfied for the year covered by the return.
Any other pertinent information that is required by the return form.

C. If any part of the tax is not paid before it becomes delinquent, interest accrues on the unpaid amount at the rate and in the manner prescribed by section 42-18053 until it is paid. Interest on overpayments accrues at the rate and in the manner prescribed by section 42-18053 until the refund is paid by the county treasurer.

D. The county treasurer shall assess and collect a penalty of five percent of any part of the tax that is not paid before it becomes delinquent.

E. The county treasurer shall issue a receipt to the government lessor and prime lessee for payments under this article.

F. On or before February 15 of each year, the county treasurer shall submit a report to:

The department of revenue of all returns and payments received for the preceding calendar year under this section. The report shall be in a form and contain data prescribed by the department of revenue.
The joint legislative budget committee of all returns and payments received for the preceding calendar year with respect to leases of government property improvements owned by the government lessor. These reports shall contain the same data prescribed in paragraph 1 of this subsection.

G. The county treasurer is entitled to rely on any information contained in any abatement certification described in subsection B, paragraph 6 of this section unless the county treasurer has actual knowledge that the certification is inaccurate.

§ 42-6205 Disposition of revenue

A. The county treasurer shall separately account for payments received under this article with respect to each government property improvement.

B. Within thirty days after receiving tax revenues under this article, the county treasurer shall pay to the following taxing jurisdictions in which the government property improvement is located the monies received with respect to the improvement, allocating the revenue among the jurisdictions as follows:

The county, for deposit in its general fund, thirteen per cent.
The city or town, seven per cent. If the government property improvement is located in an unincorporated area, the revenue that would otherwise be allocated to a city or town shall be allocated to the other jurisdictions identified in this section in the same proportion that the remaining revenues are allocated to them.
The community college district, seven per cent. If the government property improvement is not located in a community college district, the revenue that would otherwise be allocated to the district shall be allocated to the other jurisdictions identified in this section in the same proportion that the remaining revenues are allocated to them.
The common school district, thirty-six and one-half per cent, the high school district, thirty-six and one-half per cent, the common school district not within a high school district, seventy-three per cent, or the unified school district, seventy-three per cent. If the government property improvement is not located in any school district, the revenue that would otherwise be allocated under this paragraph shall be allocated to the other jurisdictions identified in this section in the same proportion that the remaining revenues are allocated to them.

C. The county treasurer shall distribute all monies collected or received under this article as delinquent or back taxes in the same manner and proportions as required by subsection B, except that the county treasurer shall credit to the county general fund any interest and penalties collected under this article with respect to delinquent taxes.

§ 42-6206 Leases and development agreements; notice of tax liability; approval requirements; default

A. Each lease or development agreement between a prime lessee and a government lessor entered into after June 30, 1996 shall include:

A notice of the tax liability under this article.
A provision that failure by the prime lessee to pay the tax after notice and an opportunity to cure is an event of default that could result in divesting the prime lessee of any interest in or right of occupancy of the government property improvement.

B. Except as provided by subsection C of this section, each lease or development agreement between a prime lessee and a government lessor for a government property improvement located in a slum or blighted area that is established pursuant to title 36, chapter 12, article 3, that is entered into from and after May 31, 2010 and that does not meet the conditions provided in section 42-6203, subsection A:

Shall not be approved unless the government lessor:

(a) Notifies the governing bodies of the county and any city, town and school district in which the government property improvement is located at least sixty days before the approval. The notice must include the name and address of the intended prime lessee, the location and proposed use of the government property improvement and the proposed term of the lease or development agreement.

(b) Determines that, within the term of the lease or development agreement, the economic and fiscal benefit to this state and the county, city or town in which the government property improvement is located will exceed the benefits received by the prime lessee as a result of the development agreement or lease on the basis of an estimate of those benefits prepared by an independent third party in a manner and method acceptable to the governing body of the government lessor. The estimate must be provided to the government lessor and the governing bodies of the county and any city, town and school district in which the government property improvement is located at least thirty days before the vote of the governing body. A lease or development agreement between a prime lessee and a government lessor involving residential rental housing is exempt from the economic estimate analysis requirements of this subsection.

Must be approved by a simple majority vote of the governing body without the use of a consent calendar.

C. A lease or development agreement that is subject to subsection B of this section must provide that the lease begins within ten years after approval of the development agreement and the term of the lease does not exceed twenty-five years, including any abatement period authorized under section 42-6209, and regardless of whether the lease is transferred or conveyed to subsequent prime lessees during that period. As soon as reasonably practicable but within twelve months after the expiration date of the lease the government lessor must convey to the current prime lessee title to the government property improvement and underlying land unless the parcel is controlled by an airport subject to federal regulation or by the local federal transit authority. Property conveyed to the prime lessee under this subsection does not qualify for classification as class six property or for any other discounted assessment regardless of the location or condition of the property.

D. Subsections B and C of this section do not apply if the government lessor is acting as a commercial landlord without a development agreement in a lease for a use ancillary to a government property improvement used for a public purpose.

E. No later than June 30 of each year the government lessor shall provide the county assessor with a complete list of development agreements between the government lessor and the prime lessees, including the commencement and termination dates of the agreements, the names and addresses of the prime lessees and the locations of the properties that are subject to the agreements.

§ 42-6207 Enforcement

Unless the context otherwise requires, the enforcement of the tax imposed under this article shall be governed by sections 545 through 590 of the model city tax code, as adopted by the city or town in which the government property improvement is located or, if the government property improvement is not located in a city or town or is located in a city or town that has not adopted the model city tax code, by sections 545 through 590 of the model city tax code as defined in section 42-6051, except that a refund may be allowed within the time allowed by the model city tax code for any taxpayer error regardless of whether the error relates to an erroneous legal interpretation or any other matter.

§ 42-6208 Exempt government property improvements

The tax under this article, section 42-6206, subsection B and section 42-6209, subsection C do not apply with respect to:

Property that is used for a governmental activity.
Property that is used for public housing.
Easements and rights-of-way of railroads and gas, electric, water, pipeline and telephone utilities.
Interests in all or any part of a facility that is owned of record by a government lessor and used primarily for athletic, recreational, entertainment, artistic, cultural or convention activities if the interest is used for those activities or activities directly related and incidental to these uses including concession stands.
Property that is used for or in connection with aviation, including hangars, tie-downs, aircraft maintenance, sale of aviation related items, charter and rental activities, commercial aircraft terminal franchises, rental car operations, parking facilities and restaurants, stores and other services that are located in a terminal.
The use by a commercial airline of the runways and terminal facilities of state, city, town or county airports and public airports operating pursuant to sections 28-8423, 28-8424 and 28-8425.
Leases of property or interests in a transportation facility that is constructed or operated pursuant to title 28, chapter 22.
Interests in lands held in trust by this state pursuant to title 37, chapter 2, article 1.
Interests in property held in trust for an Indian or an Indian tribe by the United States government.
Interests in property that is defined as "contractor-acquired property" or "government-furnished property" in the federal acquisition regulations, 48 Code of Federal Regulations section 45.101, and that is owned by the government and used to perform a government contract.
Property of a corporation that is organized by or at the direction of a county, city or town to develop, construct, improve, repair, replace or own any property, improvement, building or other facility to be used for public purposes that the county, city or town pledges to lease or lease-purchase with county or municipal special or general revenues.
Interests in property used by a chamber of commerce recognized under section 501(c)(6) of the United States internal revenue code if the property is used predominately for those federal tax exempt purposes.
Interests in property used by organizations that are exempt from taxation under section 501(c)(3) of the internal revenue code.
Interests in parking garages or decks if the parking garages or decks are owned and operated by a government lessor or operated on behalf of a government lessor, by an entity other than the prime lessee, pursuant to a management agreement with the government lessor.
Residential rentals if the prime lessee is the occupant.

§ 42-6209 Abatement of tax for government property improvements in single central business district; definition

A. A city or town may abate the tax provided for under this article for a limited period beginning when the certificate of occupancy is issued and ending eight years after the certificate of occupancy is issued on a government property improvement that is constructed either before or after July 20, 1996 and that meets the following requirements:

The improvement is located in a single central business district in the city or town and is subject to a lease or development agreement entered into on or after April 1, 1985. For the purposes of this section:

(a) A city or town shall not designate more than one central business district within its corporate boundaries.

(b) A city or town shall not approve or enter into a development agreement or lease for a government property improvement within one year after the designation of the central business district in which the improvement is located.

(c) "Central business district" means a single and contiguous geographical area that is designated by resolution of the governing body of the city or town and that is geographically compact and not larger than the greatest of the existing total land area of the central business district of the city or town as of January 1, 2018, two and one-half percent of the total land area within the exterior boundaries of the city or town or nine hundred sixty acres. For the purposes of this subdivision, any central business district formed before January 1, 2018 is considered to be geographically compact. For the expanded areas of an existing central business district only and the new designation of a central business district formed on or after January 1, 2018 and for the purposes of this subdivision, "geographically compact" means a form or shape that has a length that is not more than twice its width as measured from at least four points on the exterior boundary of the expanded areas of an existing central business district or a central business district formed on or after January 1, 2018.

The improvement is located entirely within a slum or blighted area that is designated pursuant to title 36, chapter 12, article 3.
The government property improvement resulted or will result in an increase in property value of at least one hundred percent.

B. The prime lessee shall notify the county treasurer and the government lessor and apply for the abatement before the taxes under this article are due and payable in the first year after the certificate of occupancy is issued.

C. Except as provided by subsection D of this section, each lease between a prime lessee and a government lessor for which the tax is abated under this section that is entered into from and after May 31, 2010, and that does not meet the conditions provided in section 42-6203, subsection A must be approved by a simple majority vote of the governing body without using a consent calendar and shall not be approved unless:

The government lessor notifies the governing bodies of the county and any city, town and school district in which the government property improvement is located at least sixty days before the approval. The notice must include the name and address of the intended prime lessee, the location and proposed use of the government property improvement and the proposed term of the lease or development agreement.
The government lessor determines that, within the term of the lease or development agreement, the economic and fiscal benefit to this state and the county, city or town in which the government property improvement is located will exceed the benefits received by the prime lessee as a result of the development agreement or lease on the basis of an estimate of those benefits prepared by an independent third party in a manner and method acceptable to the governing body of the government lessor. The estimate must be provided to the government lessor and the governing bodies of the county and any city, town and school district in which the government property improvement is located at least thirty days before the vote of the governing body. A lease or development agreement between a prime lessee and a government lessor involving residential rental housing is exempt from the economic estimate analysis requirements of this paragraph.
The lease or development agreement provides that the government lessor may not approve an amendment to change the use of the government property improvement during the period of abatement unless:

(a) The government lessor notifies the governing bodies of the county and any city, town and school district in which the government property improvement is located at least sixty days before the approval. The notice must include the name and address of the prime lessee, the location and proposed use of the government property improvement and the remaining term of the lease or development agreement.

(b) The government lessor determines that, within the remaining term of the lease or development agreement, the economic and fiscal benefit to this state and the county, city or town in which the government property improvement is located will exceed the benefits received by the prime lessee as a result of the change in the lease or development agreement on the basis of an estimate of those benefits prepared by an independent third party in a manner and method acceptable to the governing body of the government lessor. The estimate must be provided to the government lessor and the governing bodies of the county and any city, town and school district in which the government property improvement is located at least thirty days before the vote of the governing body. A change in use under a lease or development agreement between a prime lessee and a government lessor to residential rental housing is exempt from the economic estimate analysis requirements of this subdivision.

D. Subsection C of this section does not apply if:

The tax is not abated under this section.
The government lessor is acting as a commercial landlord without a development agreement in a lease for a use ancillary to a government property improvement used for a public purpose.

E. The designation of a slum or blighted area that is originally designated from and after September 30, 2018 and in which a central business district is located automatically terminates on the tenth anniversary after the designation unless the city or town formally renews or modifies all or part of the slum or blighted area designation. The termination of a slum or blighted area designation under this subsection does not affect any existing project described in section 35-701, paragraph 7, subdivision (a), item (ix) that is within the designated area. Before the tenth anniversary of its designation, the city or town shall review the area and, pursuant to the review, shall either renew, modify or terminate the designation. If the city or town renews or modifies the original designation, the slum or blighted area designation is subject to subsequent reviews on a ten-year cycle. If the city or town fails to renew or modify the designation, the slum or blighted area designation automatically terminates five years after the review. This subsection does not apply to leases or development agreements to lease government property if either of the following conditions is met with respect to any such excluded area:

The lease of the government property improvement was entered into before the termination or modification of the slum or blighted area designation.
A development agreement, ordinance or resolution was approved by the governing body of the government lessor before the termination or modification of the slum or blighted area designation that authorized a lease on the occurrence of specified conditions and the lease was entered into within five years after the date the development agreement was entered into or the ordinance or resolution was approved by the governing body.

F. Before October 1, 2020, each city or town shall review the designation of each slum or blighted area that was originally designated before September 30, 2018 and in which a central business district is located. All such slum or blighted areas in which a central business district is located are considered to be valid. Pursuant to the review, the city or town shall either renew, modify or terminate the designation. If the city or town renews or modifies the original designation, the slum or blighted area designation is subject to subsequent reviews on a ten-year cycle. If the city or town fails to renew or modify the designation, the slum or blighted area designation automatically terminates from and after September 30, 2025, or five years after any subsequent review. The termination of a slum or blighted area designation under this subsection does not affect:

Any existing project described in section 35-701, paragraph 7, subdivision (a), item (ix) that is within the designated area.
Any lease or development agreement to lease government property if either of the following conditions is met with respect to the slum or blighted area:

(a) The lease of the government property improvement was entered into before the termination or modification of the slum or blighted area designation.

(b) A development agreement, ordinance or resolution was approved by the governing body of the government lessor before the termination or modification of the slum or blighted area designation that authorized a lease on the occurrence of specified conditions and the lease was entered into within five years after the date the development agreement was entered into or the ordinance or resolution was approved by the governing body.

G. Notwithstanding section 42-6206, subsection C, beginning with development agreements, ordinances or resolutions to lease government property improvements approved by the governing body of the government lessor from and after December 31, 2016, the lease period for a property for which the tax is abated under this section may not exceed eight years, including any abatement period, regardless of whether the lease is transferred or conveyed to subsequent prime lessees during that period. As soon as reasonably practicable but within twelve months after the expiration date of the lease, the government lessor must convey to the current prime lessee title to the government property improvement and the underlying land. Property conveyed to the prime lessee under this subsection does not qualify for classification as class six property or for any other discounted assessment regardless of the location or condition of the property. This subsection does not apply to leases or development agreements to lease government property if either of the following occurred before January 1, 2017:

A corresponding resolution or ordinance for the lease or intent to lease such property subject to this section was approved by the governing body of the government lessor.
A proposal was submitted to the government lessor in response to a request for proposals.

§ 42-6210 Park property lease excise tax

A. A county shall levy and collect an annual excise tax on each prime lessee of a lease with the national park service of the United States department of the interior of a property improvement located in the county.

B. The tax prescribed by this section shall be assessed, collected and distributed in the same manner as prescribed in this article for the government property lease excise tax, except that:

Section 42-6206 does not apply to a lease with the national park service.
The tax rate shall not be less than twenty per cent of the tax rate prescribed in section 42-6203, subsection A or B, as applicable.

Chapter 11 Property Tax

Article 1 General Provisions

§ 42-11001 Definitions

In chapters 11 through 19 of this title, unless the context otherwise requires:

"Assessed valuation" means the value derived by applying the applicable percentage prescribed by chapter 15, article 1 of this title to the full cash value or limited property value of the property, as applicable.
"Board" or "state board" means the state board of equalization.
"County board" means the county board of supervisors sitting as the county board of equalization.
"Current usage" means the use to which property is put at the time of valuation by the assessor or the department.
"Due date" means the next business day if a due date of any report, claim, return, statement, payment, deposit, petition, notice or other document or filing falls on Saturday, Sunday or a legal holiday.
"Full cash value", for property tax purposes, means the value determined as prescribed by statute. If a statutory method is not prescribed, full cash value is synonymous with market value, which means the estimate of value that is derived annually by using standard appraisal methods and techniques. Full cash value is the basis for assessing, fixing, determining and levying primary and secondary property taxes on property described in section 42-13304. Full cash value shall not be greater than market value regardless of the method prescribed to determine value for property tax purposes.
"Limited property value" means the value determined pursuant to section 42-13301. Limited property value is the basis for:

(a) Computing levy limitations for counties, cities, towns and community college districts.

(b) Assessing, fixing, determining and levying primary and secondary property taxes on all property except property described in section 42-13304.

"Net assessed value" means the assessed value minus any exempt property.
"Person" means a natural person, individual, proprietor, proprietorship, company, corporation, organization, association, joint venture, partner, partnership, trust, estate or limited liability company, the federal or state government, a political subdivision of a state or any other legal entity or combination of entities that owns, controls or has possession of real or personal property.
"Personal property" includes property of every kind, both tangible and intangible, that is not included as real estate.
"Primary property taxes" means all ad valorem taxes except for secondary property taxes.
"Producing mine" or "mining claim" means a mine or mining claim from which coal or any other mineral or mineral substance, except for clay, sand, gravel, building stone or a mineral or mineral substance that is normally processed into artificial stone, has been extracted for commercial purposes at any time during a period of one year before the first Monday in January of the valuation year.
"Real estate" includes the ownership of, claim to, possession of or right of possession to lands or patented mines.
"Residential treatment and education facility" means any residential facility that is subject to title 15, chapter 10, article 6.
"Roll" means the assessment and tax roll.
"Secondary property taxes" means:

(a) Ad valorem taxes or special property assessments that are used to pay the principal of and the interest and redemption charges on bonded indebtedness or other lawful long-term obligations that are issued or incurred for a specific capital purpose by a municipality, county or taxing district.

(b) Ad valorem taxes or assessments that are levied by or for special taxing districts and assessment districts other than school districts and community college districts.

"Tax year" for all property means the calendar year in which the taxes are levied.
"Valuation" means the full cash value or limited property value that is determined for real or personal property, as applicable.
"Valuation date", for the purposes of real property and property valued by the department, means January 1 of the year preceding the year in which taxes are levied.
"Valuation year" means:

(a) For real property and property valued by the department, the calendar year preceding the year in which the taxes are levied.

(b) For personal property, the calendar year in which the taxes are levied.

§ 42-11002 Property subject to taxation

All property in this state is subject to taxation except as provided in article IX, Constitution of Arizona, and article 3 of this chapter.

§ 42-11003 Double taxation prohibited

This title shall not be construed to require or permit double taxation.

§ 42-11004 Payment of tax as prerequisite to testing validity

A person on whom a tax has been imposed or levied under any law relating to taxation may not test the validity or amount of tax, either as plaintiff or defendant, if any of the taxes:

Levied and assessed in previous years against the person's property have not been paid.
That are the subject of the action are not paid before becoming delinquent.
Coming due on the property during the pendency of the action are not paid before becoming delinquent.

§ 42-11005 Suit to recover illegally levied, assessed or collected tax; refund

A. Except as provided in chapter 16, article 6 of this title, within one year after payment of the first installment of tax, an action may be maintained to recover any tax that was illegally collected.

B. If the court determines that the tax due is less than the amount paid, the excess shall be refunded in the manner provided by this title with interest at the legal rate computed from the date of overpayment. For the purpose of computing interest under the judgment, if the tax was paid in installments, a pro rata share of the total overpayment is considered to be attributable to each installment.

C. The department shall be a party to any action brought pursuant to this section.

D. Any taxpayer who is dissatisfied with the valuation or classification of the taxpayer's property may appeal to court only in the time and manner prescribed in chapter 16 of this title.

§ 42-11006 Injunctive relief prohibited

A court may not issue an injunction, writ of mandamus or any other extraordinary writ in any action or proceeding against the state, a county or municipality or a state, county or municipal officer to prevent or enjoin:

Extending an assessment on the tax roll.
Collecting an imposed or levied tax.

§ 42-11007 Evidentiary value of records

Each of the following documents and entries are prima facie evidence of the facts stated in them:

The entries made in the county treasurer's records.
The records of the county board of supervisors.
The valuations and roll and the accompanying resolutions.
The delinquent list or a certified copy of the delinquent list.

§ 42-11008 Validity of assessment despite irregularities in the roll

The lack of description, a misdescription or an irregularity in the description of property on the roll does not invalidate an assessment if it can be ascertained or proved what property is intended.

§ 42-11009 Public access to valuation and assessment information

A. The county assessor or the department shall:

Make public documents and public records that relate to locally assessed property valuation and assessment available to the public in the media and format in which they are maintained on or before the date prescribed by law on which the contents of the document become official and effective. The assessor or the department shall make information relating to notices of valuation prescribed in chapter 15, article 3 of this title available to the taxpayer or the taxpayer's representative in the media and format in which it is maintained, including microfiche and electronic media, on or before the date these notices are mailed.
Notwithstanding paragraph 1, on request, reproduce and deliver those public documents and records within ten days after the date of the request. If the assessor cannot reasonably provide the copies within ten days, the assessor shall provide a written estimate of the time that is reasonably necessary to provide the copies. If the assessor fails to provide the requested copies within ten days or fails to provide an estimate of the time that is reasonably necessary to provide the copies, the person making the request may bring an action to compel compliance with this section and may obtain an award of legal costs and reasonable attorney fees pursuant to section 39-121.02.
On written request, furnish the requested public information on electronic media if the requested information is maintained electronically. Information shall be furnished under this paragraph in the media and format in which the assessor maintains it.

B. Information obtained for the purpose of preparing and defending a property tax appeal is not considered to be obtained for a commercial purpose as defined in section 39-121.03. The assessor or department may charge the actual cost of reproducing information under this section. The assessor or department, on request, shall provide written documentation to support the reproduction costs charged. The assessor or department shall not assess a fee for granting a release of public information that is in the possession or custody of the assessor, the department or another official.

Article 2 Powers and Duties of Department of Revenue

§ 42-11051 General powers of department relating to property valuation

In performing its duties under this title the department may:

Study the property tax systems of other states.
Employ technical experts and assistants and contract for services as necessary to carry out its duties.
Appoint advisory committees that represent various classes of property.

§ 42-11052 Investigating and prosecuting violations

A. The department may:

Examine alleged violations of this title relating to valuing property and assessing and collecting taxes.
Request the attorney general or the county attorney in the respective county to commence and prosecute actions and proceedings or to represent the department in litigation to enforce the laws relating to property taxation and the department's orders or rules.

B. If, in the director's opinion and in the opinion of the attorney general or the county attorney of the county in which the public official serves, a public official who performs valuing, taxing or equalizing functions is guilty of official misconduct or neglect of duty the director shall take whatever steps are necessary to ensure that complaints are filed and prosecutions are commenced to remove the official from office. A complaint by the director charging official misconduct or neglect of duty of a public officer shall be delivered to the county attorney or to the attorney general who shall file the original with the superior court in the county in which the official serves and cause a copy to be served on the public official. Proceedings on such a complaint shall be pursuant to section 38-342, subsections B and C and sections 38-343 and 38-345.

C. The director may request the attorney general to initiate a mandamus action if a county assessor fails to follow any rule, order or direction of the director or the department or if the director determines that an assessor or county board of equalization has practiced discrimination in valuing property. For purposes of this subsection, county boards of equalization and county assessors are state officers within the meaning of article VI, section 5, Constitution of Arizona.

§ 42-11053 Investigating property valuations

A. The department shall investigate property valuations and any matters relating to property taxes and shall require the production of any private or public record relating to those valuations or property taxes.

B. The director or the director's agent may:

Enter on and examine any property in this state to determine its full cash value. If the owner or possessor of property refuses entrance to the director or the director's agent, the director may estimate the valuation of the property.
Require any officer whose duties relate to assessing or collecting taxes to report to the director at the time and in the manner that the director prescribes.

§ 42-11054 Standard appraisal methods and techniques

A. Subject to subsection B of this section, the department shall:

Prescribe guidelines for applying standard appraisal methods and techniques that shall be used by the department and county assessors in determining the valuation of property.
Prepare and maintain manuals and other necessary guidelines, consistent with this section, reflecting the standard methods and techniques to perpetuate a current inventory of taxable property and the valuation of that property.

B. Before they are adopted, the department shall submit each substantive proposed guideline, table and manual that is developed, amended or otherwise modified from and after December 31, 2006 to the joint legislative oversight committee on property tax assessment and appeals. The department shall not finally adopt, amend or otherwise modify a substantive guideline, table or manual for at least thirty days after submitting the measure to the committee. The committee may hold one or more informational hearings on the proposed measure within thirty days after submission. In adopting, amending or modifying the measure the department shall consider the committee's comments. If the committee fails to hold a hearing within thirty days after submission, the department may adopt, amend or modify the measure without further consideration.

C. In applying prescribed standard appraisal methods and techniques:

Current usage shall be included in the formula for reaching a determination of full cash value.
Solar energy devices, as defined in section 44-1761, grid-tied photovoltaic systems and any other device or system designed to produce solar energy primarily for on-site consumption are considered to add no value to the property on which such a device or system is installed.
If characterized as personal property, subject to any applicable constitutional exemption from taxation, solar energy devices, as defined in section 44-1761, grid-tied photovoltaic systems and any other device or system designed to produce solar energy primarily for on-site consumption shall be valued as provided in section 42-13056.
Energy efficient building components, renewable energy equipment and combined heat and power systems are considered to add no value to the property, if the property owner provides the county assessor with documentation of all elements that qualify pursuant to this paragraph, including documents showing actual acquisition and installation costs. The documentation must be submitted to the county assessor not later than six months before the notice of full cash value is issued for the initial evaluation year pursuant to section 42-15101 or, if the component is added after September 30 of the preceding year, not later than March 31 of the initial valuation year. For the purposes of this paragraph:

(a) "Combined heat and power system" means a system that generates electricity or mechanical power and useful thermal energy in a single, integrated system such that the useful power output of the facility plus one-half the useful thermal output during any twelve-month period is not less than 42.5 percent of the total energy input of fuel to the facility.

(b) "Energy efficient building components" means high performance sustainable building components installed so that the buildings or building components meet or exceed the energy efficiencies prescribed by the United States environmental protection agency energy star program or by a leadership in energy and environmental design green building rating standard developed by the United States green building council, or an equivalent green building standard, or that are at least fifteen percent more energy efficient than the international energy conservation code in effect at the time of building permit issuance.

(c) "Renewable energy equipment" means equipment that is used to produce energy primarily for on-site consumption from renewable resources, including wind, forest thinnings, agricultural waste, biogas, biomass, geothermal, low-impact hydropower and solar energy not included under paragraph 2 of this subsection.

D. If the methods and techniques prescribe using market data as an indication of market value, the price paid for future anticipated property value increments shall be excluded.

E. For the purposes of determining full cash value the department and county assessors shall use and apply the ratio standard guidelines issued by the department for tax year 1993 in the same manner as they were applied in tax year 1993. This subsection does not apply to property that is valued according to prescribed statutory methods or to property for which values are determined in the year after an appeal pursuant to section 42-16002.

§ 42-11056 Department records of valuations; notifying department of changes in valuations

A. The department may maintain a complete and current record of all property that is subject to property tax and of property tax assessments in this state.

B. The county assessors, county treasurers, county boards of equalization and state board of equalization shall notify the department of each change in valuation or assessment of any property listed on the rolls and the reasons for the change on such form as the department may prescribe. The county assessors and treasurers shall not make any change in the valuation or assessment of any property listed on the rolls unless the department is notified according to the form prescribed by the department.

C. The county assessors shall furnish the department with any other information that the department may require.

Article 3 Exemptions

§ 42-11101 Definitions

In this article, unless the context otherwise requires:

"Afflicted" means persons who, because of a mental or physical condition, illness or condition of distress, adversity or harassment, or imminent risk of such condition, are unable to reasonably take care of themselves or their families or to properly function in society without periodic or continuous assistance.
"Indigent" means a person who is without sufficient means or ability to provide themselves with adequate food, shelter or social necessaries.

§ 42-11102 Exemption for government property; application of procedural provisions

A. Federal, state, county and municipal property is exempt from taxation, including:

Property that is owned by a nonprofit organization but is used by this state or a political subdivision during the entire tax year exclusively for a governmental activity.
Property that is the subject of a lease-purchase agreement that is authorized by law and in which this state or a political subdivision is the lessee-purchaser and the property is used by this state or a political subdivision during the entire taxable year exclusively for a governmental activity.
Improvements that are placed on public lands held under grazing permits, the title to which passes to the federal government.

B. Article 4 of this chapter does not apply to the exemption from taxation for federal, state, county and municipal property.

C. Notwithstanding subsection A relating to state property, property that is owned by the Arizona state retirement system, the corrections officer retirement plan, the public safety personnel retirement system or the elected officials' retirement plan, that is not used during the entire taxable year exclusively for a governmental activity and that is acquired either by foreclosure of an authorized investment or for the purposes of producing income for the system or plan is subject to either a government property lease tax under chapter 6, article 5 of this title or, if a government property lease tax is not paid or is not economically feasible, to voluntary contributions of money to the county, municipality, school district and community college district and any other special taxing district in which the property is located in lieu of taxes otherwise levied by those entities. The system or plan may not continue to hold title to the property as an authorized investment under title 38 unless a tax or voluntary contribution is paid pursuant to this subsection. On or before April 1 of each year the plan or system shall notify the county assessor of the county in which the property is located whether a government property lease tax or voluntary contribution will be paid. If a tax is not economically feasible, the county assessor may require the plan or system to pay voluntary contributions. If the system or plan pays a voluntary contribution:

The assessor shall determine the full cash value of the property at market value and shall transmit that determination to the board of supervisors on or before the third Monday in June.
On or before the third Friday in September the assessor shall compute the contribution to be made based on the determined valuation using the method of assessment applied in assessing ad valorem taxes of properties of similar character and devoted to the same use in the county for the current tax year.
The assessor shall:

(a) Submit the computation of the contribution to the board of supervisors at the same time that the assessor submits the assessment roll.

(b) Notify the county school superintendent of the amount of the contribution.

The plan or system shall pay one-half of the amount determined not later than the first Monday in November and the other one-half not later than the first Monday in May of the next year.
The county treasurer shall distribute the monies received to the various taxing jurisdictions in the same manner as property taxes are distributed.
Any person, public official or taxing entity that is not satisfied by a determination under this subsection has the same remedies provided by this title or may file a civil action to determine the correct amount due. In any such action the only issue shall be the correctness of the computation of the amount due.

§ 42-11103 Exemption for government bonded indebtedness; application of procedural provisions

A. Public debts as evidenced by the bonds of this state, counties, municipalities and other political subdivisions are exempt from taxation.

B. Article 4 of this chapter does not apply to the exemption from taxation for public debts that are evidenced by bonds.

§ 42-11104 Exemption for educational and library property

A. Libraries, colleges, school buildings and other buildings that are used for education, with their furniture, libraries and equipment and the land that is appurtenant to and used with them, are exempt from taxation if they are used for education and not used or held for profit.

B. Property and buildings are exempt from taxation if leased from:

A school district pursuant to a lease or lease-purchase agreement under section 15-342, paragraph 9 or 10.
A community college district pursuant to a lease or lease-purchase agreement under section 15-1444.

C. Property and buildings, including land, improvements, furniture and equipment, that are owned by a nonprofit organization that is recognized under section 501(c)(3) of the internal revenue code and that operates as:

A charter school pursuant to section 15-183 are exempt from taxation beginning on the date the nonprofit organization acquires ownership of the property and buildings if the property and buildings are used for education and are not used or held for profit.
A trap and skeet shooting club that teaches, trains, sponsors, coaches or hosts or sponsors clinics, shooting leagues, competitive tournaments or other events, including hunter and firearm safety classes, are exempt from taxation if the property and buildings are used for education purposes and not used or held for profit.
A residential treatment and education facility are exempt from taxation beginning on the date the nonprofit organization acquires ownership of the property and buildings if the property and buildings are used for education and are not used or held for profit.

D. Within ten days after receiving an initial affidavit of eligibility submitted under section 42-11152 by a nonprofit organization described under subsection C of this section, the county assessor, on request, shall issue a receipt for the affidavit.

E. A nonprofit organization described under subsection C of this section shall file with the assessor the affidavit required by section 42-11152 and evidence of the organization's tax exempt status under section 501(c)(3) of the internal revenue code when initially claiming the exemption.

F. A nonprofit organization described under subsection C of this section that acquires ownership of property that was previously owned by another nonprofit organization and used primarily for education shall comply with the requirements of section 42-11152 to qualify and establish eligibility for exemption.

G. If a nonprofit organization described under subsection C of this section that holds title to property used primarily for education fails to file the affidavit required by section 42-11152 in a timely manner, but otherwise qualifies for exemption, the county board of supervisors, on petition by the organization, shall direct the county treasurer to:

Refund any property taxes paid by the organization for a tax year if the organization submits a claim for the refund to the county treasurer within one year after the date the taxes were paid. The county treasurer shall pay the claim within thirty days after it is submitted to the treasurer. The county treasurer is entitled to a credit for the refund in the next accounting period with each taxing jurisdiction to which the tax monies may have been transmitted.
Forgive and strike off from the tax roll any property taxes and accrued interest and penalties that are due but not paid.

§ 42-11105 Exemption for health care property

A. Hospitals for the relief of the indigent or afflicted, appurtenant land and their fixtures and equipment are exempt from taxation if they are not used or held for profit.

B. Property that is used to operate a health care institution that provides medical, nursing or health related services for persons with disabilities or who are sixty-two years of age or older is exempt from taxation if the property is not used or held for profit.

C. Qualifying community health centers as defined in section 36-2907.06 and appurtenant land and their fixtures and equipment are exempt from taxation if they are not used or held for profit.

D. Property that is owned by a health care provider recognized under section 501(c)(3) of the internal revenue code and organized as a nonprofit corporation is exempt from taxation if the property is used to provide health care services and the property is not used or held for profit. An exemption under this subsection includes all buildings, appurtenant land, fixtures, equipment and other reasonably required property, including property used for the administration of services. For the purposes of this subsection, "health care provider" means a health care institution as defined in title 36 or an entity that provides health care services directly to patients through health care providers who are licensed pursuant to title 32.

§ 42-11106 Exemption for apartments for elderly residents or residents with disabilities

Property that is used to operate a nonprofit residential apartment housing facility that is structured for persons with disabilities or persons who are sixty-two years of age or older is exempt from taxation if either of the following circumstances applies:

The property is located adjacent to property that is exempt from taxation under section 42-11105, subsection B and is owned and operated by the same person or association that owns that adjacent property.
The federal, state or local government or a nonprofit organization pays a subsidy and:

(a) The payment or subsidy is a substantial amount in relation either to the amount given or to the total annual operating expenses to pay for principal, interest and operating expenses.

(b) The nonprofit organization is not created or operated for the primary purpose of providing the subsidy or payment.

§ 42-11107 Exemption for institutions for relief of indigent or afflicted

Property of charitable institutions for the relief of the indigent or afflicted, appurtenant land and their fixtures, equipment and other reasonably required property including property used for the administration of such relief, are exempt from taxation if the institutions and property are not used or held for profit.

§ 42-11108 Exemption for grounds and buildings owned by agricultural societies

The grounds and buildings owned by agricultural societies are exempt from taxation if they are used only for those purposes and are not used or held for profit.

§ 42-11109 Exemption for religious property; affidavit

A. Property or buildings that are used or held primarily for religious worship, including land, improvements, furniture and equipment, are exempt from taxation if the property is not used or held for profit.

B. Within ten days after receiving an initial affidavit of eligibility submitted under section 42-11152 by a nonprofit organization that owns property used primarily for religious worship, the county assessor, on request, shall issue a receipt for the affidavit.

C. The organization shall file with the assessor the affidavit required by section 42-11152 and evidence of the organization's tax exempt status under section 501(c)(3) of the internal revenue code when initially claiming the exemption.

D. A nonprofit organization that obtains title to property that was previously owned by another nonprofit organization and used primarily for religious worship shall comply with the requirements of section 42-11152 to qualify and establish eligibility for exemption.

E. If a nonprofit organization that holds title to property used primarily for religious worship fails to file the affidavit required by section 42-11152 in a timely manner, but otherwise qualifies for exemption, the county board of supervisors, on petition by the organization, shall direct the county treasurer to:

Refund any property taxes paid by the organization for a tax year if the organization submits a claim for the refund to the county treasurer within one year after the date the taxes were paid. The county treasurer shall pay the claim within thirty days after it is submitted to the treasurer. The county treasurer is entitled to credit for the refund in the next accounting period with each taxing jurisdiction to which the tax monies may have been transmitted.
Forgive and strike off from the tax roll any property taxes and accrued interest and penalties that are due but not paid.

§ 42-11110 Exemption for cemeteries

A. Cemeteries as defined in section 32-2101 that are set apart and used to inter deceased human beings and historic private burial sites and historic private cemeteries as defined in section 41-511.04 are exempt from taxation.

B. The owner of a cemetery, historic private burial site or historic private cemetery shall initially establish qualification for exemption under this section by filing an affidavit with the county assessor under section 42-11152. Thereafter, the owner shall notify the county assessor pursuant to section 42-11152 if:

Any part of the property is no longer, or will not be, used as a cemetery or has been rezoned, and the assessor shall sever that part of the property from the exempt parcel.
Any interest in the title to any part of the property is conveyed to a new owner.

§ 42-11111 Exemption for property; widows and widowers; persons with a total and permanent disability; veterans with a disability; definitions

A. The property of widows and widowers, of persons with total and permanent disabilities and of veterans with service or nonservice connected disabilities who are residents of this state is exempt from taxation as provided by article IX, section 2, Constitution of Arizona, and subject to the conditions and limits prescribed by this section.

B. Pursuant to article IX, section 2, subsection F, Constitution of Arizona, the exemptions from taxation under this section are allowed as provided in subsections C, D and E of this section.

C. The property of a veteran with a service-connected disability whose disability rating by the United States department of veterans affairs is one hundred percent is fully exempt from taxation. The surviving spouse of a veteran whose property is eligible for the exemption under this subsection may continue to claim the full exemption as long as the surviving spouse uses the property as the surviving spouse's primary residence and the surviving spouse does not remarry.

D. The property of a veteran with a nonservice-connected disability whose disability rating by the United States department of veterans affairs is one hundred percent or less or with a service-connected disability whose disability rating by the United States department of veterans affairs is less than one hundred percent is exempt in the amount of $4,188. The limit under this subsection is further limited by multiplying the total exemption amount by the percentage of the veteran's disability, as rated by the United States department of veterans affairs.

E. The property of a widow or widower or a person with a total and permanent disability is exempt in the amount of:

$4,188 if the person's total assessment does not exceed the amount provided in paragraph 2 of this subsection.
No exemption if the person's total assessment exceeds $28,459.

F. On or before December 31 of each year, the department shall increase the following amounts:

The total allowable exemption amount under subsection D and subsection E, paragraph 1 of this section based on the average annual percentage increase, if any, in the GDP price deflator in the two most recent complete state fiscal years.
Beginning in tax year 2026, the total assessment limit amount under subsection E, paragraph 2 of this section based on the average annual percentage increase, if any, in the federal house price index for the two most recent complete state fiscal years.
The total income limit amounts under subsection H, paragraphs 1 and 2 of this section based on the average annual percentage increase, if any, in the GDP price deflator in the two most recent complete state fiscal years.

G. For the purpose of determining the amount of the allowable exemption pursuant to subsection E of this section, the person's total assessment shall not include the value of any vehicle that is taxed under title 28, chapter 16, article 3.

H. Pursuant to article IX, section 2, subsection F, Constitution of Arizona, to qualify for this exemption, the total income from all sources of the claimant and the claimant's spouse and the income from all sources of all of the claimant's children who resided with the claimant in the claimant's residence in the year immediately preceding the year for which the claimant applies for the exemption shall not exceed:

$34,901 if none of the claimant's children under eighteen years of age resided with the claimant in the claimant's residence.
$41,870 if one or more of the claimant's children residing with the claimant in the claimant's residence either:

(a) Were under eighteen years of age.

(b) Had a total and permanent physical or mental disability, as certified by competent medical authority as provided by law.

I. For the purposes of subsection H of this section, "income from all sources" means the sum of the following, excluding the items listed in subsection J of this section:

Adjusted gross income as defined by the department.
The amount of capital gains excluded from adjusted gross income.
Nontaxable strike benefits.
Nontaxable interest that is received from the federal government or any of its instrumentalities.
Payments that are received from a retirement program and paid by:

(a) This state or any of its political subdivisions.

(b) The United States through any of its agencies, instrumentalities or programs, except as provided in subsection J of this section.

The gross amount of any pension or annuity that is not otherwise exempted.

J. Notwithstanding subsection I of this section, income from all sources does not include monies received from:

Cash public assistance and relief.
Railroad retirement benefits.
Payments under the federal social security act (49 Stat. 620).
Payments under the unemployment insurance laws of this state.
Payments from any veterans pensions.
Workers' compensation payments.
Loss of time insurance.
Gifts from nongovernmental sources, surplus foods or other relief in kind supplied by a governmental agency.

K. A widow or widower, a person with a total and permanent disability or a veteran with a disability shall establish eligibility for exemption under this section by filing an affidavit with the county assessor under section 42-11152 when initially claiming the exemption. Each year thereafter, the person or the person's representative shall annually calculate income from the preceding year to ensure that the person still qualifies for the exemption and notify the county assessor in writing of any event that disqualifies the person from further exemption. Regardless of whether the person or representative notifies the assessor as required by this subsection, the property is subject to tax as provided by law from the date of disqualification, including interest, penalties and proceedings for tax delinquencies. Disqualifying events include:

Except as provided in subsection C of this section, the person's death.
The remarriage of a widow or widower.
The person's income from all sources exceeding the limits prescribed by subsection H of this section.
The conveyance of title to the property to another owner.

L. Any dollar amount of exemption that is unused in a tax year against the limited property value of property and improvements owned by the individual may be applied for the tax year against the value of personal property subject to special property taxes, including the taxes collected pursuant to title 5, chapter 3, article 3 and title 28, chapter 16, article 3.

M. An individual is not entitled to property tax exemptions under more than one category as a widow or widower, a person with a total and permanent disability or a veteran with a disability even if the individual is eligible for an exemption in more than one category.

N. For the purposes of this section:

"Competent medical authority" means any of the following:

(a) An individual licensed under title 32, chapter 8, 13, 14, 17, 19.1, 25 or 29 or a comparable law of another state.

(b) A registered nurse practitioner as defined in section 32-1601.

"Federal house price index" means the average measure of movement of single-family house prices in the United States published by the federal housing finance agency, or its successor, for this state.
"GDP price deflator" means the average of the four implicit price deflators for the gross domestic product reported by the United States department of commerce or its successor for the four quarters of the state fiscal year.
"Person with a total and permanent disability" means a person who is unable to engage in any substantial gainful activity, for pay or profit, by reason of any physical or mental impairment that is expected to last for a continuous period of at least twelve months or result in death within twelve months as certified by a competent medical authority.
"Veteran" means an individual who has served in, and been discharged, separated or released under honorable conditions from, active or inactive service in the uniformed services of the United States, including:

(a) All regular, reserve and national guard components of the United States army, navy, air force, marine corps and coast guard.

(b) The commissioned corps of the national oceanic and atmospheric administration.

(d) A nurse in the service of the American red cross or in the army and navy nurse corps.

(e) Any other civilian service that is authorized by federal law to be considered active military duty for the purpose of laws administered by the United States secretary of veterans affairs.

§ 42-11112 Exemption for observatories

Observatories that are maintained for astronomical research and education for the public welfare and property that is used in the work or maintenance of observatories, including property held in trust, are exempt from taxation if the observatories and other property are used only for those purposes and are not used or held for profit.

§ 42-11113 Exemption for land and buildings owned by animal control and humane societies

Land and buildings that are owned by societies to prevent cruelty to animals and to shelter, care for and control animals are exempt from taxation if the land and buildings are used only for those purposes and are not used or held for profit.

§ 42-11114 Exemption for property held for conveyance as parkland; recapture

A. Property that is held by a charitable organization, recognized under section 501(c)(3) of the internal revenue code, for transfer to this state or to a political subdivision of this state to be used as parkland is exempt from taxation if the charitable organization does not receive rent or valuable consideration.

B. If property that is exempt under this section is transferred to an entity other than this state or a political subdivision of this state or if the property is used or occupied by or for the benefit of any other person, the charitable organization is liable for all tax, interest and penalties that would be due if the property were not exempt from taxation.

§ 42-11115 Exemption for property held to preserve or protect scientific resources

Property that is held by a charitable organization, recognized under section 501(c)(3) of the internal revenue code, to preserve and protect scientific, biological, geological, paleontological, natural or archaeological resources is exempt from taxation.

§ 42-11116 Exemption for property of arts and science organizations

Property of musical, dramatic, dance and community arts groups, botanical gardens, museums and zoos that are qualified as nonprofit charitable organizations under section 501(c)(3) of the internal revenue code is exempt from taxation if the property is used for those purposes and not used or held for profit.

§ 42-11117 Exemption for property of volunteer fire departments

The property of a volunteer fire department that is recognized under section 501 of the internal revenue code is exempt from taxation if the property is used exclusively for fire suppression and prevention activities and is neither used nor occupied by or for the benefit of any person.

§ 42-11118 Exemption for social welfare and quasi-governmental service property; qualifying activities

A. Property that is owned by a volunteer nonprofit organization that is recognized under section 501(c)(4) of the internal revenue code and that is operated exclusively to promote social welfare and provide community quasi-governmental services in an unincorporated area of a county is exempt from taxation.

B. To qualify as providing quasi-governmental services under this section, the organization must provide at least six of the following services:

Public information and complaint office.
Voter registration.
Property tax assessment information.
Building permit distribution.
Resident assistance with deed restrictions and violations.
County planning and zoning review.
Water resources planning and management.
Public safety planning, oversight and maintenance.
Government liaison for regional planning activities.

§ 42-11119 Exemption for property of volunteer roadway cleanup and beautification organizations

Property that is owned by a volunteer nonprofit organization is exempt from taxation if it meets all of the following requirements:

The property is used exclusively for the purpose of performing roadway cleanup and beautification on a gratuitous basis.
The property is not used or held for profit.
The property is not used or occupied by or for the benefit of any person.

§ 42-11120 Exemption for property of veterans' organizations

Property that is owned by a United States veterans' organization that qualifies as a charitable organization and that is recognized under either section 501(c)(3) or 501(c)(19) of the internal revenue code is exempt from taxation if the property is used predominantly for those purposes and is not used or held for profit.

§ 42-11121 Exemption for property of charitable community service organizations

Property that is not used or held for profit and that is owned by a community service organization the mission of which is to serve a population that includes persons who are indigent or afflicted, as defined in section 42-11101, and that qualifies as a charitable organization and is recognized under section 501(c)(3) of the internal revenue code is exempt from taxation if the community service organization is primarily engaged in delivering services on that property consisting of fitness programs, camping programs, health and recreation services, youth programs, child care, senior citizen programs, individual and family counseling, employment and training programs, services for individuals with disabilities, meals, feeding programs or disaster relief.

§ 42-11122 Exemption for trading commodities

A commodity, as defined in 7 United States Code section 2, that is 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 is exempt from taxation.

§ 42-11123 Exemption for animal and poultry feed

Animal and poultry feed, including salts, vitamins and other additives, for animal or poultry consumption is exempt from taxation.

§ 42-11124 Exemption for possessory interests for educational or charitable activities

A possessory interest consisting of property or improvements pursuant to a lease from this state or a political subdivision of this state is exempt from taxation if it is used by an association or institution that meets all of the following requirements:

The purpose of the association or institution is educational or charitable activities.
Its annual gross revenues do not exceed fifty thousand dollars.
It is not operated for profit.
It is recognized under section 501(c)(3) of the internal revenue code.

§ 42-11125 Exemption for inventory, materials and products

Stocks of raw or unfinished materials, unassembled parts, work in progress or finished products that constitute the inventory of a retailer, wholesaler or manufacturer that is located in this state and that is principally engaged in reselling the materials, parts or products are exempt from taxation.

§ 42-11126 Exemption for production livestock and animals; definition

Livestock and poultry as defined in section 3-1201, aquatic animals as defined in section 3-2901 and colonies of bees are exempt from taxation as provided by article IX, section 13, Constitution of Arizona. For purposes of this section, "poultry" includes ratites.

§ 42-11127 Exempt personal property

A. Pursuant to article IX, section 2, subsection F, Constitution of Arizona, personal property that is class two property pursuant to section 42-12002, paragraph 2, subdivision (a) or (b) and that is used for agricultural purposes or personal property that is class one property pursuant to section 42-12001 and that is used in a trade or business as described in section 42-12001, paragraphs 8 through 11 or 13 is exempt from taxation up to a maximum amount of $500,000 of full cash value for each taxpayer.

B. On or before December 31 of each year, the department shall increase the maximum amount of the exemption for the following tax year based on the percentage increase, if any, in the employment cost index for total compensation for private industry workers in the two most recent complete state fiscal years. For the purposes of this subsection, "employment cost index" means the average of the employment cost indices reported by the United States department of labor, bureau of labor statistics or its successor for the eight quarters of the two most recent state fiscal years.

§ 42-11128 Exemption for personal property in transit; violation; classification

A. The following personal property has no situs in this state and is exempt from taxation:

Personal property moving through this state to a final destination outside this state.
Personal property consigned to a warehouse in this state from a point outside this state for storage or assembly in transit to a final destination outside this state.

B. Property that is claimed to have no situs in this state for the purposes of taxation shall be entered in the records of the warehouse in which it is located as property in transit or futures contract property. The record shall include:

The date of receipt.
The date of withdrawal.
The point of origin.
The point of ultimate destination, if known.

C. The record of property shall be open at all times to inspection by the department or the taxing authority of a political subdivision of this state.

D. A person who files a claim for exemption of property in transit shall do so on a form and in the manner the department prescribes and shall include a certificate of the operator of the warehouse in which the property is located stating that the property is entered in the warehouse records as property in transit.

E. The owner or operator of a warehouse in or from which commodities that are exempt under section 42-11122 are deliverable shall file an affidavit with the county assessor between the first Monday in January and March 1 of each year stating that the property in the warehouse is futures contract property. The assessor may require additional evidence of the facts stated by the affidavit, but when the assessor accepts the affidavit as complete and correct, the commodities that are stored or consigned in the warehouse are considered to be exempt from taxation for the tax year under section 42-11122.

F. A person who knowingly makes a false statement in any document submitted under this section to an officer who is charged with assessing property for tax purposes is guilty of a class 6 felony.

§ 42-11129 Exemption for property of fraternal societies

Property that is owned by a fraternal society or organization that is recognized under section 501(c)(8) of the internal revenue code, if the net earnings of the fraternal society or organization are devoted exclusively to religious, charitable, scientific, literary, educational or fraternal purposes, or section 501(c)(10) of the internal revenue code is exempt from taxation if the property is used predominantly for educational, charitable or religious purposes and for the purposes authorized under section 501(c)(8) or 501(c)(10) of the internal revenue code and no portion of the property is used for the sale of food or beverage to the general public or the consumption of alcoholic beverages by nonmembers of the fraternal society or organization or is used or held for profit.

§ 42-11130 Exemption for public library organizations

Property that is not used or held for profit, that is owned by an organization the mission of which is to provide supplemental financial support to public libraries and that qualifies as a charitable organization and is recognized under section 501(c)(3) of the internal revenue code is exempt from taxation if the property is used predominantly for those purposes.

§ 42-11131 Exemption for low-income Indian housing; definitions

A. Property owned and operated by a federally recognized Indian tribe or its tribally designated housing authority is exempt from taxation, subject to the following requirements:

The property must be used exclusively for the charitable purpose of providing low-income rental housing and related facilities for the use of Indians.
The property may not be used, held or operated for profit.
No part of the net earnings of the housing authority, if any, may inure to the benefit of any private shareholder or individual.
The housing was designed and constructed, in whole or in part, using federal financial assistance pursuant to the Native American Housing assistance and self-determination act of 1996 (P.L. 104-330; 25 United States Code chapter 43) or using tribal government monies.

B. To apply for an initial exemption under this section, an Indian tribe or tribal housing authority must submit the following documents to the county assessor:

Documents establishing the federal recognition of the Indian tribe.
Documents establishing that the housing authority, if any:

(a) Is formally designated by the tribe for the purposes of owning and operating rental housing facilities for Indians.

(b) Is recognized as a charitable institution pursuant to section 501(c)(3) of the internal revenue code.

Legally binding documents that establish a current agreement or other restriction that limits the property’s use to low-income rental housing and related facilities for Indians.

C. An Indian tribe or tribal housing authority shall notify the county assessor in writing pursuant to section 42-11152 if the property is conveyed to a new owner or is no longer used for the qualifying purposes under subsection A, paragraph 1 of this section or if any legal or equitable interest in any part of the property is conveyed to a new owner.

D. This section shall not be interpreted to prevent an Indian tribe or tribal housing authority from making voluntary payments in lieu of property taxes to a county, city, town, school district or other political subdivision for providing services, improvements or facilities for the benefit of a low-income housing project owned and operated by the tribe or housing authority. Any payments in lieu of tax may not exceed the maximum amount permitted under applicable federal law, if any, or the estimated cost to the county, city, town, school district or other political subdivision of the services, improvements or facilities to be provided, whichever is less.

E. For the purposes of this section:

"Indian" has the same meaning prescribed in 25 United States Code section 4103.
"Indian tribe" has the same meaning prescribed in 25 United States Code section 4103.
"Low-income rental housing" means housing for individuals or families having an income that does not exceed the income for a low-income family, as defined in 25 United States Code section 4103.
"Related facilities" means nonhousing facilities that are located on the low-income housing property and that are available for the use of Indian tenants in conjunction with their use of the housing facilities.

§ 42-11132 Property leased to educational institutions

A. Property, buildings and fixtures that are leased to a nonprofit charter school or a residential treatment and education facility and that are used for educational instruction in any grade or program through grade twelve shall be classified as class nine property pursuant to section 42-12009. If only part of a parcel of real property or improvements to real property is leased for operation of a charter school or a residential treatment and education facility, only the portion so leased qualifies as class nine property.

B. Property, buildings and fixtures that are owned by an educational, a religious or a charitable organization, institution or association and leased to a nonprofit educational organization, institution or association are exempt from taxation if the property is used for educational instruction in any grade or program through grade twelve.

C. If the educational, religious or charitable organization, institution or association that owns the property files with the assessor the affidavit required by section 42-11152, evidence of the organization's, institution's or association's tax exempt status under section 501(c)(3) of the internal revenue code and an affidavit by the educational organization, institution or association that it uses the property for educational instruction as described in subsection B of this section, the property qualifies for the tax exemption under this section. The educational, religious or charitable organization, institution or association shall notify the county assessor in writing pursuant to section 42-11152 if all or part of the property is conveyed to a new owner or is no longer used for educational purposes.

§ 42-11132.01 Property leased to a church, religious assembly or religious institution

A. Property, buildings and fixtures that are leased to a nonprofit church, religious assembly or religious institution and that are primarily used or held for religious worship shall be classified as class nine property pursuant to section 42-12009. If only part of the parcel or improvements is leased to a nonprofit church, religious assembly or religious institution and primarily used or held for religious worship, only the portion so leased qualifies as class nine property. To qualify under this subsection, the church, religious assembly or institution must annually file with the assessor an affidavit that it:

Continues to use or hold the property primarily for religious worship.
Is the sole economic beneficiary of the classification of the property as class nine pursuant to section 42-12009, subsection A, paragraph 5.

B. Property, buildings and fixtures that are owned by an educational, religious or charitable organization, institution or association, that are leased to a nonprofit church, religious assembly or religious institution and that are primarily used or held for religious worship are exempt from taxation.

C. If the educational, religious or charitable organization, institution or association that owns the property files with the assessor the affidavit required by section 42-11152, evidence of the organization's tax exempt status under section 501(c)(3) of the internal revenue code and an affidavit by the nonprofit church, religious assembly or religious institution that it uses or holds the property primarily for religious worship as described in subsection B of this section, the property qualifies for the tax exemption under this section. The educational, religious or charitable organization, institution or association shall notify the county assessor in writing pursuant to section 42-11152 if all or part of the property is conveyed to a new owner or is no longer primarily used or held by the church, assembly or institution.

§ 42-11132.02 Property leased to veterans' organization; definition

A. Property, buildings and fixtures that are leased to a veterans' organization shall be classified as class nine property pursuant to section 42-12009. If only part of the parcel or improvements is leased to a veterans' organization and primarily used or held for the operations of the veterans' organization, only the portion so leased qualifies as class nine property. To qualify under this subsection, the veterans' organization must annually file with the assessor an affidavit that it:

Continues to use or hold the property primarily for the operations of the veterans' organization.
Is the sole economic beneficiary of the classification of the property as class nine pursuant to section 42-12009, subsection A, paragraph 6.

B. Property, buildings and fixtures that are owned by a veterans' organization, that are leased to a veterans' organization and that are primarily used for the operations of the veterans' organization are exempt from taxation.

C. If the veterans' organization that owns the property files with the assessor the affidavit required by section 42-11152, evidence of the veterans' organization's tax-exempt status under section 501(c)(3) or 501(c)(19) of the internal revenue code and an affidavit by the veterans' organization that it uses or holds the property primarily for the operations of the veterans' organization as described in subsection B of this section, the property qualifies for the tax exemption under this section. The veterans' organization shall notify the county assessor in writing pursuant to section 42-11152 if all or part of the property is conveyed to a new owner or is no longer primarily used or held by the veterans' organization.

D. For the purposes of this section, "veterans' organization" means a United States veterans' organization that qualifies as a charitable organization and that is recognized under section 501(c)(3) or 501(c)(19) of the internal revenue code.

§ 42-11133 Exemption for affordable housing projects; definition

A. Property that is used exclusively for affordable rental housing pursuant to section 42 of the internal revenue code or another recorded restrictive covenant imposed by financing for affordable housing and related facilities are exempt from taxation if:

The property is owned and operated by, or is a wholly owned subsidiary of, a corporation that is qualified pursuant to section 501(c)(3) or 501(c)(4) of the internal revenue code or a limited partnership or limited liability company in which the general partner or the managing member, as applicable, is an eligible nonprofit corporation or a single purpose entity that is wholly owned by one or more eligible nonprofit corporations.
Either of the following applies:

(a) The acquisition, rehabilitation, development or operation of the property, or any combination of these factors, is financed with tax exempt mortgage revenue bonds or general obligation bonds or is financed by local, state or federal loans or grants and the amount of rent paid by or on behalf of the occupants does not exceed the amount of rent that is prescribed by deed restrictions or by regulatory agreements pursuant to the property's financing or financial assistance terms.

(b) The owner of the property is eligible for and receives tax credits for low-income or moderate-income residential housing established under section 42 of the internal revenue code and the amount of rent paid by or on behalf of the occupants does not exceed the amount that is prescribed by deed restrictions or by regulatory agreements pursuant to the property's financing or financial assistance terms.

B. To qualify under this section, the owner of the property must:

For any claim that is filed in any fiscal year, certify and ensure, subject to paragraph 2 of this subsection, that there is an enforceable and verifiable agreement with a public agency, a recorded deed restriction or any other legal document that restricts the use of the property and requires that the rents do not exceed the terms that are prescribed by the financing or financial assistance terms.
Certify that the monies that would have been necessary to pay the property taxes are used to maintain the affordability of or otherwise reduce the rents of the units that are occupied by eligible low-income households.

C. For the purposes of this section, "eligible nonprofit corporation" means a corporation that is qualified pursuant to section 501(c)(3) or 501(c)(4) of the internal revenue code and for which one of its exempt purposes includes providing affordable housing.

Article 4 Qualifying for Exemptions

§ 42-11151 Procedure, affidavits and forms

The department shall prescribe the procedure, affidavits and forms that are required to effectuate the property tax exemptions prescribed by article IX, Constitution of Arizona, and article 3 of this chapter.

§ 42-11152 Affidavit; electronic submission; acknowledgment of receipt; false statements

A. Except for property described in sections 42-11125 and 42-11127, a person who claims exemption from taxation under article IX, section 2, Constitution of Arizona, shall:

When initially claiming the exemption, file an affidavit with the county assessor, signed under penalty of perjury, as to the person's eligibility.
Fully answer all questions on the eligibility form or otherwise required by the assessor for that purpose.
Notify the county assessor in writing if all or part of the property is conveyed to a new owner, the property is no longer used for the purpose that qualifies the property for the exemption or there is any event that otherwise disqualifies the person or property from the exemption.

B. At the assessor's discretion, the assessor may require additional proof of the facts stated by the person before allowing an exemption.

C. The county assessor may accept affidavits required by this section electronically. If the county assessor accepts electronic affidavits, the county assessor shall provide an electronic acknowledgment of receipt to the person who submitted the affidavit.

D. A false statement that is made in the affidavit is perjury.

§ 42-11153 Deadline for filing affidavit

A. A failure by a taxpayer who is entitled to an exemption to make an initial affidavit as required by section 42-11152 or furnish evidence required by this article between the first Monday in January and March 1 of the year constitutes a waiver of the exemption.

B. If a widow or widower or a person with a disability whose property is exempt from tax under section 42-11111, or an organization that is exempt from federal income tax under section 501(c) of the internal revenue code and is exempt from property tax under article 3 of this chapter, submits a petition after the deadlines prescribed by subsection A of this section, the person or organization may have the waiver redeemed by the county board of supervisors at any regular meeting, except that taxes that were due and payable before the petition was submitted may not be refunded or abated.

§ 42-11154 Establishing nonprofit status

For the purposes of article 3 of this chapter:

Nonprofit organization status may be established by a letter of determination issued in the organization's name by the United States internal revenue service recognizing the organization's tax-exempt status under section 501 of the internal revenue code, except that:

(a) A church, synagogue, temple, mosque or similar organization is not required to provide a letter of determination to establish its status as a tax-exempt organization.

(b) If the nonprofit organization is included in a group exemption letter by the internal revenue service, the group exemption letter satisfies the requirement under this paragraph provided the central organization that received the group exemption from the internal revenue service provides a letter certifying that the nonprofit organization is included in the group exemption.

(c) An organization that meets the requirements of section 501(c)(3) of the internal revenue code but that is exempt from the notification requirements pursuant to section 508(c) of the internal revenue code shall not be required to provide a letter of determination from the internal revenue service.

The requirement that property is not used or held for profit may be met by a letter of determination described in paragraph 1 of this section and issued in the name of the organization holding title to the property and for each organization using the property.

§ 42-11155 Property owned by charitable institutions but used for other purposes

The exemptions provided by article 3 of this chapter relating to charitable institutions do not apply to property owned by charitable institutions but primarily held or used by others whose use is not exempt from taxation by article 3 of this chapter or by the Constitution of Arizona.

Chapter 12 Property Classification

Article 1 Classes of Property

§ 42-12001 Class one property

For purposes of taxation, class one is established consisting of the following subclasses:

Producing mines and mining claims, personal property used on mines and mining claims, improvements to mines and mining claims and mills and smelters operated in conjunction with mines and mining claims that are valued at full cash value pursuant to section 42-14053.
Standing timber that is valued at full cash value.
Real and personal property of gas distribution companies, electric transmission companies, electric distribution companies, combination gas and electric transmission and distribution companies, and companies engaged in the generation of electricity that are valued at full cash value pursuant to section 42-14151.
Real and personal property of airport fuel delivery companies that are valued pursuant to section 42-14503.
Real and personal property that is used by producing oil, gas and geothermal resource interests that are valued at full cash value pursuant to section 42-14102.
Real and personal property of water, sewer and wastewater utility companies that are valued at full cash value pursuant to section 42-14151.
Real and personal property of pipeline companies that are valued at full cash value pursuant to section 42-14201.
Real and personal property of shopping centers that are valued at full cash value or pursuant to chapter 13, article 5 of this title, as applicable, other than property that is included in class nine.
Real and personal property of golf courses that are valued at full cash value or pursuant to chapter 13, article 4 of this title.
All property, both real and personal, of manufacturers, assemblers or fabricators, other than property that is specifically included in another class described in this article, that is valued under this title.
Real and personal property that is used in communications transmission facilities and that provides public telephone or telecommunications exchange or interexchange access for compensation to effect two-way communication to, from, through or within this state.
Real property and improvements that are devoted to any other commercial or industrial use, other than property that is specifically included in another class described in this article, and that are valued at full cash value.
Personal property that is devoted to any other commercial or industrial use, other than property that is specifically included in another class described in this article, and that is valued at full cash value.
Real and personal property of electric cooperatives that are valued at full cash value pursuant to section 42-14159.

§ 42-12002 Class two property

For purposes of taxation, class two is established consisting of three subclasses:

Class two (R) consists of:

(a) Real property and improvements to property that are used for agricultural purposes and that are valued at full cash value or pursuant to chapter 13, article 3 of this title, as applicable.

(b) Real property and improvements to property that are primarily used for agricultural purposes to produce trees other than standing timber, vines, rosebushes, ornamental plants or other horticultural crops, regardless of whether the crop is grown in containers, soil or any other medium, that are not included in class one, three, four, six, seven or eight and that are valued at full cash value or pursuant to chapter 13, article 3 of this title, as applicable.

(c) Real property and improvements to property that are owned and controlled by a nonprofit organization that is exempt from taxation under section 501(c)(3), (4), (7), (10) or (14) of the internal revenue code if the property is not used or intended for the financial benefit of members of the organization or any other individual or organization, unless the financial benefit is for charitable, religious, scientific, literary or educational purposes, and that are valued at full cash value.

(d) Real property of golf courses that is valued at full cash value or pursuant to chapter 13, article 4 of this title.

(e) Real property and improvements to property of a guest ranch that meets the requirements prescribed in chapter 13, article 12 of this title, that are not included in class four and that are valued at full cash value.

(f) All other real property and improvements to property, if any, that are not included in class one, three, four, six, seven or eight and that are valued at full cash value.

Class two (P) consists of:

(a) Personal property that is used for agricultural purposes and that is valued at full cash value or pursuant to chapter 13, article 3 of this title, as applicable.

(b) Personal property that is primarily used for agricultural purposes to produce trees other than standing timber, vines, rosebushes, ornamental plants or other horticultural crops, regardless of whether the crop is grown in containers, soil or any other medium, that is not included in class one, three, four, six, seven or eight and that is valued at full cash value or pursuant to chapter 13, article 3 of this title, as applicable.

(c) Personal property that is owned and controlled by a nonprofit organization that is exempt from taxation under section 501(c)(3), (4), (7), (10) or (14) of the internal revenue code if the property is not used or intended for the financial benefit of members of the organization or any other individual or organization, unless the financial benefit is for charitable, religious, scientific, literary or educational purposes, and that is valued at full cash value.

(d) Personal property of golf courses that is valued at full cash value or pursuant to chapter 13, article 4 of this title.

(e) Personal property of a guest ranch that meets the requirements prescribed in chapter 13, article 12 of this title and that is not included in class four and that is valued at full cash value.

(f) All other personal property that is not included in class one, three, four, six, seven or eight and that is valued at full cash value.

Class two (C) consists of real property, and improvements to real property, that is burdened by a conservation easement that has been created and is currently in effect pursuant to title 33, chapter 2, article 4.

§ 42-12003 Class three property; definition

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

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

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

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

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

§ 42-12004 Class four property

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

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

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

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

Real and personal property and improvements to the property that are used for residential purposes and solely leased or rented, that are not included in class one, two, three, six, seven or eight and that are valued at full cash value.
Child care facilities that are licensed under title 36, chapter 7.1 and that are valued at full cash value.
Real and personal property and improvements to property that are used to operate nonprofit residential housing facilities that are structured to house or care for persons with disabilities or who are at least sixty-two years of age and that are valued at full cash value.
Real and personal property and improvements that are used to operate licensed residential care institutions or licensed nursing care institutions that provide medical services, nursing services or health-related services and that are structured to house or care for persons with disabilities or who are at least sixty-two years of age and that are valued at full cash value.
Real and personal property consisting of not more than eight rooms of residential property that are leased or rented to transient lodgers, together with furnishing not more than a breakfast meal, by the owner who resides on the property and that is valued at full cash value.
Real and personal property that consists of residential dwellings maintained for occupancy by agricultural employees as a condition of employment or as a convenience to the employer, that is not included in class three and that is valued at full cash value. The land associated with these dwellings shall be valued as agricultural land pursuant to chapter 13, article 3 of this title.
Real property and improvements to property constituting common areas that are valued pursuant to chapter 13, article 9 of this title.
Real and personal property that is defined as timeshare property by section 32-2197 and valued pursuant to chapter 13, article 10 of this title, except for any property used for commercial, industrial or transient occupancy purposes and included in class one to the extent of that use.
Real and personal property and improvements that are used for residential purposes and that are leased or rented to lodgers, except for:

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

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

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

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

§ 42-12005 Class five property

For purposes of taxation, class five is established consisting of:

Real and personal property of railroad companies used in the continuous operation of railroads that are valued at full cash value under chapter 14, article 8 of this title.
Real and personal property used in the operation of private car companies that are valued at full cash value under chapter 14, article 7 of this title.
Flight property that is valued at full cash value under chapter 14, article 6 of this title.

§ 42-12006 Class six property

For the purposes of taxation, class six is established consisting of:

Noncommercial historic property as defined in section 42-12101 and valued at full cash value.
Real and personal property that is located within the area of a foreign trade zone or subzone established under 19 United States Code sections 81a through 81u and title 44, chapter 18, that is activated for foreign trade zone use by the district director of the United States customs service pursuant to 19 Code of Federal Regulations section 146.6 and that is valued at full cash value. Property that is classified under this paragraph shall not thereafter be classified under paragraph 6 of this section.
Real and personal property and improvements that are located in a military reuse zone that is established under chapter 1, article 7 of this title and that is devoted to providing aviation or aerospace services or to manufacturing, assembling or fabricating aviation or aerospace products, valued at full cash value and subject to the following terms and conditions:

(a) Property may not be classified under this paragraph for more than five tax years.

(b) Any new addition or improvement to property already classified under this paragraph qualifies separately for classification under this paragraph for not more than five tax years.

(c) If a military reuse zone is terminated, the property in that zone that was previously classified under this paragraph shall be reclassified as prescribed by this article.

(d) Property that is classified under this paragraph shall not thereafter be classified under paragraph 6 of this section.

Real and personal property and improvements or a portion of such property comprising an environmental technology manufacturing, producing or processing facility that qualified under section 41-1514.02, valued at full cash value and subject to the following terms and conditions:

(a) Property shall be classified under this paragraph for twenty tax years from the date placed in service.

(b) Any addition or improvement to property already classified under this paragraph qualifies separately for classification under this subdivision for an additional twenty tax years from the date placed in service.

(c) After revocation of certification under section 41-1514.02, property that was previously classified under this paragraph shall be reclassified as prescribed by this article.

(d) Property that is classified under this paragraph shall not thereafter be classified under paragraph 6 of this section.

That portion of real and personal property that is used on or after January 1, 1999 specifically and solely for remediation of the environment by an action that has been determined to be reasonable and necessary to respond to the release or threatened release of a hazardous substance by the department of environmental quality pursuant to section 49-282.06 or pursuant to its corrective action authority under rules adopted pursuant to section 49-922, subsection B, paragraph 4 or by the United States environmental protection agency pursuant to the national contingency plan (40 Code of Federal Regulations part 300) and that is valued at full cash value. Property that is not being used specifically and solely for the remediation objectives described in this paragraph shall not be classified under this paragraph. For the purposes of this paragraph, "remediation of the environment" means one or more of the following actions:

(a) Monitoring, assessing or evaluating the release or threatened release.

(b) Excavating, removing, transporting, treating and disposing of contaminated soil.

(d) Treating, containing or removing contaminants in groundwater or soil.

Real and personal property and improvements constructed or installed from and after December 31, 2004 through December 31, 2024 and owned by a qualified business under section 41-1516 and used solely for the purpose of harvesting, transporting or processing qualifying forest products removed from qualifying projects as defined in section 41-1516. The classification under this paragraph is subject to the following terms and conditions:

(a) Property may be initially classified under this paragraph only in valuation years 2005 through 2024.

(b) Property may not be classified under this paragraph for more than five years.

(c) Any new addition or improvement, constructed or installed from and after December 31, 2004 through December 31, 2024, to property already classified under this paragraph qualifies separately for classification and assessment under this paragraph for not more than five years.

(d) Property that is classified under this paragraph shall not thereafter be classified under paragraph 2, 3 or 4 of this section.

Real and personal property and improvements to the property that are used specifically and solely to manufacture from and after December 31, 2006 through December 31, 2023 biodiesel fuel that is one hundred percent biodiesel and its by-products or motor vehicle biofuel and its by-products and that are valued at full cash value. This paragraph applies only to the portion of property that is used specifically for manufacturing and processing one hundred percent biodiesel fuel, or its related by-products, or motor vehicle biofuel, or its related by-products, from raw feedstock obtained from off-site sources, including necessary on-site storage facilities that are intrinsically associated with the manufacturing process. Any other commercial or industrial use disqualifies the entire property from classification under this paragraph. For the purposes of this paragraph, "motor vehicle biofuel" means a solid, liquid or gaseous fuel that is derived from biological material such as plant or animal matter, excluding organic material that has been transformed by geological processes into substances such as coal or petroleum or derivatives thereof, and that:

(a) Contains fuel additives in compliance with federal and state law.

(b) Is manufactured exclusively for use in a motor vehicle.

Real and personal property and improvements that are used for renewable energy manufacturing or headquarters operations as provided by section 42-12057. This paragraph applies only to property that is used in manufacturing and headquarters operations of renewable energy companies, including necessary on-site research and development, testing and storage facilities that are associated with the manufacturing process. Up to ten percent of the aggregate full cash value of the property may be derived from uses that are ancillary to and intrinsically associated with the manufacturing process or headquarters operation. Any additional ancillary property is not qualified for classification under this paragraph. No new properties may be classified pursuant to this paragraph from and after December 31, 2014. Property that is classified under this paragraph shall not thereafter be classified under any other paragraph of this section.

§ 42-12007 Class seven property

For purposes of taxation, class seven is established consisting of real and personal property and improvements that meet the criteria for property included in class one, paragraphs 12 and 13 and also the criteria for commercial historic property as defined in section 42-12101.

§ 42-12008 Class eight property

For purposes of taxation, class eight is established consisting of real and personal property and improvements that meet the criteria for property included in class four and also the criteria for commercial historic property as defined in section 42-12101.

§ 42-12009 Class nine property

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

Improvements that are located on federal, state, county or municipal property and owned by the lessee of the property if:

(a) The improvements are required to become the property of the federal, state, county or municipal owner of the property on termination of the leasehold interest in the property.

(b) Both the improvements and the property are used exclusively for convention activities or athletic, recreational, entertainment, artistic or cultural facilities.

Improvements that are located on federal, state, county or municipal property and owned by the lessee of the property if:

(a) The improvements are required to become the property of the federal, state, county or municipal owner of the property on termination of the leasehold interest in the property.

(b) Both the improvements and the property are:

(i) Used for or in connection with aviation, including hangars, tie-downs, aircraft maintenance, sales of aviation-related items, charter and rental activities, parking facilities and restaurants, stores and other services located in a terminal.

(ii) Located on a state, county, city or town airport or a public airport operating pursuant to sections 28-8423, 28-8424 and 28-8425.

Property that is defined as "contractor-acquired property" or "government-furnished property" in the federal acquisition regulations (48 Code of Federal Regulations section 45.101) and that is leased to or acquired by the government and used to perform a government contract.
Property of a corporation that is organized by or at the direction of this state or a county, city or town to develop, construct, improve, repair, replace or own any property, improvement, building or other facility to be used for public purposes that the state, county, city or town pledges to lease or lease-purchase with state, county or municipal special or general revenues and that is not otherwise exempt under chapter 11, article 3 of this title.
Real property and improvements, including land, buildings, furniture and equipment, regardless of ownership, that are leased for the entire valuation year to, and used exclusively by, a nonprofit organization that is recognized under section 501(c)(3) of the internal revenue code and that operates on the premises as either a charter school pursuant to section 15-183 or a residential treatment and education facility or that are leased for the entire valuation year to, and used exclusively by, a nonprofit church, religious assembly or religious institution. If only part of a parcel of real property or improvements to real property, including land, buildings, furniture and equipment, is leased for operation of a charter school or residential treatment and education facility or a church, religious assembly or religious institution as provided by this paragraph, only the portion so leased qualifies for classification under this section. A property owner that leases property to a charter school or residential treatment and education facility or a church, religious assembly or religious institution as provided by this paragraph shall file an affidavit with the county assessor stating that the charter school or residential treatment and education facility or the church, religious assembly or religious institution shall be the sole beneficiary of the change in property tax classification pursuant to this section and that the lease rate that is charged to the charter school or residential treatment and education facility or the church, religious assembly or religious institution is consistent with the lease rates that are charged to other tenants of the property or a fair market rate.
Real property and improvements, including land, buildings, furniture and equipment, regardless of ownership, that are leased for the entire valuation year to, and used exclusively by, a United States veterans' organization that qualifies as a charitable organization and that is recognized under section 501(c)(3) or 501(c)(19) of the internal revenue code and that operates the United States veterans' organization's post on the premises. If only part of a parcel of real property or improvements to real property, including land, buildings, furniture and equipment, is leased for operation of a United States veterans' organization as provided by this paragraph, only the portion so leased qualifies for classification under this section. A property owner that leases property to a United States veterans' organization as provided by this paragraph shall file an affidavit with the county assessor stating that the United States veterans' organization shall be the sole beneficiary of the change in property tax classification pursuant to this section and that the lease rate that is charged to the United States veterans' organization is consistent with the lease rates that are charged to other tenants of the property or a fair market rate.

B. Improvements that are located in an area defined as a research park pursuant to section 35-701 may not be classified under this section.

C. All property classified as class nine is subject to valuation at full cash value.

§ 42-12010 Purpose of classification of property

A. The classes of property are established by this article for the common treatment of the property in each class for purposes of the assignment of a common assessment percentage under chapter 15, article 1 of this title and other purposes prescribed by statute, but the statutory classes under this article are not considered to constitute classes of property for purposes of article IX, section 1, Constitution of Arizona.

B. The valuation of properties in individual subclasses established by this article shall be determined in the distinct manner prescribed by law for each subclass in compliance with article IX, section 1, Constitution of Arizona.

Article 2 Rules and Procedures

§ 42-12051 Treatment of partially completed or vacant improvements; notification; exception

A. For the purposes of classifying property under article 1 of this chapter, partially completed or vacant improvements on the land including improved common area tracts shall be classified according to their intended use as demonstrated by objective evidence.

B. For property that is not valued by the department, an improvement on the land is considered to be partially completed when the foundation of the structure or structures to be located on the property is in place.

C. The only portion affected by the reclassification is the improvement on the land and that portion of the land that is necessary to support the use of the structure or structures, except that common area tracts in residential developments associated with partially completed improvements shall receive the same classification as the partially completed improvements.

D. Property that is not valued by the department, that does not have a structure or structures and that is actively used for commercial purposes shall be classified as prescribed by article 1 of this chapter.

E. The department shall prescribe a form to be completed by the owner to notify the assessor that the requirements of this section have been completed. The form shall state the requirements for classification and shall provide the owner with information concerning the reclassification of property. Filing the notice is mandatory, but failing to notify the assessor does not prevent the reclassification of property if the requirements are completed.

F. This section does not apply to property that is classified as agricultural pursuant to article 4 of this chapter.

§ 42-12052 Review and verification of class three property; civil penalty; appeals

A. Each county assessor shall review assessment information, on a continuing basis, to ensure proper classification of residential dwellings. The assessor may enter into intergovernmental agreements with the department for an exchange of information to ensure a coordinated and comprehensive review and identification of property that may be rented while classified as class three pursuant to section 42-12003.

B. If the assessor has reason to believe that a parcel of property that is classified as class three pursuant to section 42-12003 is not the owner's primary residence or as a qualifying family member residence pursuant to section 42-12053, the assessor shall notify the owner, in a form prescribed by the department as provided by subsection D of this section, and request that the owner respond as to whether the property meets the requirements of section 42-12003 or 42-12053, is a secondary residence or is used as a rental property. If the owner fails to respond to the assessor within thirty days after the notice is mailed, the assessor shall mail the owner a final notice within thirty days requesting that the owner provide information as to whether the property meets the requirements of a primary residence, a secondary residence or is used as a rental property. If the owner fails to respond to the assessor within fifteen days after the final notice is mailed, the assessor shall:

Reclassify the property as class four. In addition to other appeal procedures provided by law, the owner of the property that is reclassified as class four under this paragraph may appeal the reclassification to the county board of supervisors within thirty days after the notice of classification is mailed. If the owner proves to the board's satisfaction that the property is occupied as the owner's primary residence, the board shall order the property to be reclassified as class three property pursuant to section 42-12003.
Notify the county treasurer, who shall assess a civil penalty against the property equal to the amount of additional state aid paid pursuant to section 15-972 with respect to the property in the preceding tax year. The civil penalty shall not be assessed if the ownership of the property has changed after notification. The owner of the property shall pay a penalty under this paragraph to the county treasurer within thirty days after the notice of the penalty is mailed. The owner may appeal the penalty to the county board of supervisors within the time required for payment. If the owner proves to the board's satisfaction that the property is occupied by the owner, the board shall waive the penalty, and the property shall be listed as class three pursuant to section 42-12003. Until paid or waived, the penalty constitutes a lien against the property. The county treasurer shall deposit all revenue received from penalties assessed under this paragraph in the county general fund.

C. Beginning in 2013 and during each elective term of office thereafter, the county assessor shall send notices under subsection B of this section to each owner of property classified as class three pursuant to section 42-12003 described by any of the following:

The owner has a mailing address outside the county in which the property is located.
The owner has a mailing address, other than a post office box, that is different than the situs address of the property.
The owner has the same mailing address listed for more than one parcel of class three property in this state.
The owner appears to be a business entity.

D. The department shall:

Prescribe all forms used to notify property owners under this section. The forms shall contain information as to criteria for the reclassification of property and the civil penalties that may result if the owner fails to respond to the notice.
Monitor and review the procedures and practices used by assessors and treasurers to accomplish the verification of class three property and the assessment and collection of penalties prescribed by this section and propose suggested improvements to establish uniform processes and performance among the counties.

E. The department may inspect the records of county assessors and county treasurers to determine compliance with the requirements of this section and the accuracy of the classification of owner-occupied residential property and rental property.

§ 42-12053 Criteria for distinguishing primary residential property, secondary residential property and rental property

A. For the purpose of classifying residential property under sections 42-12003, 42-12004 and 42-12052, a parcel is not considered a secondary property or rental property if the property is occupied by a member of the owner's family, who must be:

The owner's natural or adopted child or a descendant of the owner's child.
The owner's parent or an ancestor of the owner's parent.
The owner's stepchild or stepparent.
The owner's child-in-law or parent-in-law.
The owner's natural or adopted sibling.

B. For the purpose of classifying owner-occupied residential property under sections 42-12003, 42-12004 and 42-12052, the department shall adopt standard criteria for use in determining whether the property is considered to be the owner's or relative's primary residence, including:

The period of occupancy each year.
The owner's registered voting precinct.
The owner's driver license address.
The registration address of the owner's motor vehicles.
Other appropriate indicators of primary residency.

§ 42-12054 Change in classification of owner-occupied residence

A. If a person purchases or converts property that is listed as class one pursuant to section 42-12001, paragraph 12 or 13, class two or class four pursuant to article 1 of this chapter and occupies the property as the person's primary residence, the person may have the classification reviewed for change to class three from the date of conversion and occupancy as a primary residence and may appeal from the decision resulting from the review in the same manner as provided by law for review of a valuation for ad valorem property taxes and appeal from that review.

B. If a person purchases or converts property that is listed as class one pursuant to section 42-12001, paragraph 12 or 13, class two or class four pursuant to article 1 of this chapter and the property is occupied by a member of the owner's immediate family as described in section 42-12053, the person may have the classification reviewed for change to class three from the date of occupancy and may appeal the decision resulting from the review in the same manner as provided by law for review of a valuation for ad valorem property taxes and appeal from that review.

C. If a person makes such a conversion or occupancy or appeals the classification after the county assessor has closed the rolls, the person may petition the county board of supervisors to change the classification and reduce the assessed valuation from the date of conversion or occupancy.

D. The board of supervisors shall entertain the petition in the same manner as a board of equalization hears a request for reduction in valuation.

E. The petitioner may appeal the board of supervisors' decision in the same manner as provided in section 42-16111, except that the petitioner shall file the notice of appeal within fifteen days after the board's finding.

F. If the board of supervisors finds that the property is in fact the owner's primary residence and should be listed as class three property, the board shall change the classification on the roll and fix the assessed valuation from the date of occupancy. The amount of taxes that is assessed against the property shall be computed by applying the current tax rate to the original assessed valuation prorated for the portion of the tax year before the property was occupied plus the current tax rate applied to the reassessed value of the property prorated for the balance of the year.

G. The board of supervisors shall notify the department, assessor and county treasurer of the change in classification, the change in assessed valuation and the amount of tax assessed. The department and the assessor may appeal any such decision in the same manner as provided in section 42-16111. The assessor and treasurer shall note the change on their records, and the treasurer may issue a future tax credit, endorsed by the board, to the person whose property is liable for the tax. The tax credit shall be used on the next or several succeeding property tax assessments that the person may owe thereafter.

§ 42-12055 Review of and appeal from classification

A person may have the classification assigned to that person's property reviewed and may appeal the decision in the same manner as provided by law for a review of a valuation for property taxes and an appeal from that review.

§ 42-12056 Renewable energy systems valuation; definition

A. For properties subject to this chapter and that are class three as defined in section 42-12003 or class four as defined in section 42-12004, renewable energy systems and any other device or system designed primarily for the production of renewable energy in which the majority of the energy is consumed on-site, are considered to add no value to the property.

B. For the purposes of this section, "renewable energy systems" means electric generation systems and electric transmission and distribution that is used or useful for the generation, storage, transmission or distribution of electric power, energy or fuel derived from solar, wind or other nonpetroleum renewable sources, including materials and supplies.

§ 42-12057 Criteria for renewable energy property

A. To qualify for the classification as class six pursuant to section 42-12006, paragraph 8, the owner of a manufacturing facility or headquarters facility must provide documentation to the county assessor each year that the facility is primarily dedicated to renewable energy manufacturing or regional, national or global renewable energy business headquarters operations.

B. For the purposes of this section, renewable energy operations are limited to manufacturers of, and headquarters for, systems and components that are used or useful in manufacturing renewable energy equipment for generating, storing, testing and research and development, transmitting or distributing electricity from renewable resources, including specialized crates necessary to package the renewable energy equipment manufactured at the facility.

§ 42-12058 Registry of real property burdened by conservation easements

A. The county assessor in each county shall establish and maintain a public digital registry of each parcel of property in the county that is classified as class two (C) pursuant to section 42-12002, paragraph 3 from and after December 31, 2016 because it is burdened by a conservation easement.

B. The registry shall include the following information regarding each parcel:

The name of the owner or owners of the real property that is burdened by the conservation easement.
The name of the holder of the conservation easement and the name of any governmental body, charitable corporation or trustee of a charitable trust having a third-party right of enforcement.
The date the conservation easement was created or recorded.
Whether the conservation easement is perpetual or limited in duration and, if so limited, the date or conditions under which the conservation easement terminates.
The value of the real property that is burdened by the conservation easement as determined by an independent appraisal prior to the creation and recording of the conservation easement.

C. The assessor shall periodically review and revise as necessary the information contained in the registry for the purpose of verifying that the listed properties should remain classified as class two (C).

Article 3 Historic Property Classification

§ 42-12101 Definitions

In this article, unless the context otherwise requires:

"Commercial historic property" means real property that:

(a) Meets the criteria for classification as class one, paragraph 12 pursuant to section 42-12001 or class four pursuant to section 42-12004, subsection A, paragraphs 2 through 9.

(b) Is listed in the national register of historic places established and maintained under the national historic preservation act (P.L. 89-665; 80 Stat. 915; 16 United States Code section 470 et seq.), as amended.

"Noncommercial historic property" means real property:

(a) That is listed in the national register of historic places established and maintained under the national historic preservation act (P.L. 89-665; 80 Stat. 915; 16 United States Code section 470 et seq.), as amended.

(b) That meets the minimum standards of maintenance established by rule by the Arizona state parks board.

§ 42-12102 Application for classification as historic property; period of classification

A. An owner of property who desires that it be classified as historic property for purposes of taxation shall:

Apply to the county assessor on forms that are approved by the department.
Consent in writing to allow the state historic preservation officer to view the property.

B. Applications shall be filed with the assessor during the valuation year preceding the first tax year for which classification is requested.

C. Classification as class six property under section 42-12006 may be granted only for the fifteen consecutive tax years immediately following the calendar year in which the application is filed. The assessor may accept an application by the owner during the final year of each fifteen year assessment period for continuation of the classification for a succeeding period of fifteen years.

D. Classification as class seven property under section 42-12007 or class eight property under section 42-12008 may be granted only for the ten consecutive tax years immediately following the calendar year in which the application is filed.

E. Within ten days after receiving each application, the county assessor shall refer the application to the state historic preservation officer.

§ 42-12103 Review of application by state historic preservation officer; approval or denial

A. The state historic preservation officer, with the assistance of the Arizona historical advisory commission, shall review the application and may view the premises.

B. The state historic preservation officer shall notify the county assessor and the applicant of the approval or denial of the application on or before August 1 of the valuation year. An application that is not approved by August 1 is considered to be denied.

C. The state historic preservation officer shall not deny an application solely because of the potential loss of revenue that may result from granting the application if the officer finds that the property is historic property. The state historic preservation officer may approve the application with respect to only part of the property that is subject to the application.

D. If any part of the application is denied, or at any time before approval, the applicant may withdraw the application.

E. An owner whose application has been denied may appeal to either the tax court or the superior court pursuant to section 12-163, subsection B.

F. If the state historic preservation officer determines that the property qualifies for classification as historic property, the officer shall certify the determination in writing and shall file a copy of the certificate with the county assessor within ten days. The certificate shall state the facts on which the approval was based.

§ 42-12104 Valuation and assessment

A. The county assessor shall determine the assessed valuation of historic property as provided by chapter 15, article 1 of this title. Each year that the property is classified and assessed as historic property the assessor shall enter on the rolls that the property is so assessed and may be subject to additional taxes under section 42-12107 by adding the notation "historic property (potential additional tax)".

B. The assessor shall determine the valuation of commercial historic property that is classified as class seven under section 42-12007 or class eight under section 42-12008 by using the market approach to valuation as described in section 42-16051, subsection B, paragraph 2 or by using the cost approach to valuation as described in section 42-16051, subsection B, paragraph 3, using the year of application as the base year.

§ 42-12105 Disqualification

A. Property shall remain classified and assessed as noncommercial historic property until it becomes disqualified through either:

Notice by the taxpayer to the assessor to remove the assessment as noncommercial historic property.
Sale or transfer to an ownership that makes it exempt from property taxation.
Notification by the state historic preservation officer to the assessor that the property no longer qualifies as noncommercial historic property.

B. Property shall remain classified and assessed as commercial historic property until it becomes disqualified through either:

Notice by the taxpayer to the assessor to remove the assessment as commercial historic property.
Sale or transfer to an ownership that makes it exempt from property taxation.
Notification by the state historic preservation officer to the assessor that the property no longer qualifies as commercial historic property.
The failure to maintain the property in a manner consistent with the minimum standards of maintenance established by rule by the Arizona state parks board.

§ 42-12106 Effect of changing circumstances

A. A sale or transfer of historic property to a new owner or a transfer of historic property to a new owner by reason of the death of the former owner does not disqualify the property from assessment as historic property if the property continues to qualify as historic property under this article.

B. If all or part of a parcel of property ceases to qualify as historic property under this article, the person who owns the property at the time of the change shall notify the county assessor of the change before the next January 1.

C. The owner of property that is classified and assessed as commercial historic property shall apply to the state historic preservation officer for approval of any improvement, alteration or demolition of the property. Each modification that is intended to restore or rehabilitate commercial historic property must be approved by the historic preservation officer to qualify for classification and assessment as class seven or class eight property.

§ 42-12107 Penalties

A. If property that is classified as historic property becomes disqualified for that classification, a penalty shall be added to the tax levied against the property on the next tax roll equal to the lesser of:

Fifty per cent of the total amount by which property taxes on the property were reduced during the years the property had been classified as historic property.
Fifty per cent of the market value of the property.

B. If property that is classified as historic property becomes disqualified for that classification and the owner fails to give the notice required by section 42-12106, subsection B:

The county assessor shall determine the date that the notice should have been given and shall notify the owner and the county treasurer.
The treasurer shall add to the tax levied against the property on the next tax roll in addition to the penalty prescribed by subsection A of this section an amount equal to fifteen per cent of that penalty. The treasurer shall deposit monies collected pursuant to this paragraph in the taxpayers' information fund established by section 11-495.

C. Before assessing a penalty under this section in the case of disqualification pursuant to section 42-12105, subsection A, paragraph 3 or subsection B, paragraph 3 or 4, the assessor shall notify the property owner of the disqualification by mail, return receipt requested.

D. A penalty shall not be imposed under this section:

On the sale or transfer of the property to an ownership that makes the property exempt from taxation.
If the historic property is destroyed by fire or act of God unless the fire was the result of an intentional act by the owner or by an agent of the owner acting on the owner's behalf.

E. A penalty that is determined to be due under this section shall be paid to the county treasurer before the next tax roll is completed. Except as provided in subsection B of this section, the county treasurer shall distribute the penalty under this section among the respective taxing jurisdictions in proportion to their current primary property tax levies on the property.

F. The penalties prescribed by this section apply only to:

The current fifteen year assessment period with respect to noncommercial historic property.
The current ten year assessment period with respect to commercial historic property.

§ 42-12108 Reports

A. If requested by the state historic preservation officer, an owner of historic property shall make an annual report as to the continued qualification of the property for classification as historic property.

B. The state historic preservation officer may demand reports from owners of historic property as to the continued qualification of the property at any other time considered to be necessary.

C. If an owner fails to make a required report after ninety days' written notice by mail, return receipt requested, to make the report, the state historic preservation officer shall notify the assessor, and the assessor shall withdraw the property from historic classification and assess the penalties prescribed by section 42-12107.

Article 4 Agricultural Property Classification

§ 42-12151 Definition of agricultural real property

In this article, unless the context otherwise requires, "agricultural real property" means real property that is one or more of the following:

Cropland in the aggregate of at least twenty gross acres.
An aggregate ten or more gross acres of permanent crops.
Grazing land with a minimum carrying capacity of forty animal units and containing an economically feasible number of animal units.
Land and improvements devoted to commercial breeding, raising, boarding or training equine, as defined in section 3-1201 or equine rescue facilities registered with the department of agriculture pursuant to section 3-1350.
Land and improvements devoted to high density use for producing commodities.
Land and improvements devoted to use in processing cotton necessary for marketing.
Land and improvements devoted to use in processing wine grapes for marketing.
Land and improvements devoted to use in processing citrus for marketing.
Land and improvements devoted to use as fruit or vegetable commodity packing plants that do not cut or otherwise physically alter the produce.
Land and improvements owned by a dairy cooperative devoted to high density use in producing, transporting, receiving, processing, storing, marketing and selling milk and manufactured milk products without the presence of any animal units on the land.
Land of at least five acres and improvements devoted to algaculture. For the purposes of this paragraph "algaculture" means the controlled propagation, growth and harvest of algae.
Land and improvements devoted to agritourism as defined in section 3-111.

§ 42-12152 Criteria for classification of property used for agricultural purposes; exception; affidavit

A. Property is not eligible for classification as property used for agricultural purposes unless it meets the following criteria:

The primary use of the property is as agricultural land and the property has been in active production according to generally accepted agricultural practices for at least three of the last five years. Property that has been in active production may be:

(a) Inactive for a period of not more than twelve months as a result of acts of God.

(b) Inactive as a result of participation in:

(i) A federal farm program that allows voluntary land conserving use acreage or acreage conservation, or both.

(ii) A scheduled crop rotation program.

(c) Inactive or partially inactive due to a temporary or partial reduction in or transfer of the available water supply or irrigation district water allotments for agriculture use in the farm unit. For land within an irrigation district in a county with a population of less than nine hundred thousand persons, the temporary or partial reduction or transfer may be verified by an official certification from the irrigation district to the county assessor that confirms the reduction or transfer, except that if that land is located in an active management area and the land does not have an irrigation grandfathered groundwater right, the land is not eligible as cropland. A certification for temporary or partial reduction is not valid for full inactivity of the farm unit for more than one year.

(d) Grazing land that is inactive or partially inactive due to reduced carrying capacity or generally accepted range management practices.

There is a reasonable expectation of operating profit, exclusive of land cost, from the agricultural use of the property.
If the property consists of noncontiguous parcels, the noncontiguous parcels must be managed and operated on a unitary basis and each parcel must make a functional contribution to the agricultural use of the property.

B. If feedlot or dairy operations that are in active production are moved to another property at which the operations are in active production, the requirement that the property be in active production for at least three of the last five years does not apply to the property to which the operations are moved for the first three years after the operations are moved.

C. The requirement in subsection A, paragraph 2 of this section is satisfied if the owner files with the assessor an affidavit of agricultural use, signed by the owner attesting that all information in the affidavit is true and the property is actively producing with an expectation of profit.

§ 42-12153 Application for classification of property used for agricultural purposes

A. The county assessor shall make agricultural use application forms available that require the following information in addition to any other information prescribed by the department:

The size of the property.
The type of crops grown on the property.
The type and number of animal units raised on the property.
The number of acres leased for agricultural purposes and the terms of the lease for each parcel leased.
A verification that the property meets the requirements prescribed in section 42-12152.

B. The owner of property or the owner's designated agent under section 42-16001 shall file a completed agricultural use application form with the county assessor before the property may be classified as being used for agricultural purposes. If the ownership of a property changes, an agricultural use application form must be filed by the new owner within sixty days after the change in ownership to maintain the agricultural use status. If the owner or the owner's agent fails to file an application form as prescribed in this subsection, the assessor shall not classify the property, on notice of valuation, as being used for agricultural purposes. The owner or agent may appeal the classification as prescribed by chapter 16, article 2 or 5 of this title regardless of whether the owner or agent filed an application form.

§ 42-12154 Approval of nonconforming property

A. The county assessor may:

Approve the agricultural classification of property if the property has either:

(a) Fewer than the minimum number of acres or animal units as prescribed in section 42-12151.

(b) Been in commercial agricultural production for less than the period prescribed in section 42-12152, subsection A, paragraph 1.

Continue the agricultural classification of owner occupied property if a change in classification of the property would cause extreme hardship to the property owner.

B. The county assessor may continue the agricultural classification of owner occupied property that has fewer than the minimum number of animal units as prescribed in section 42-12151, paragraph 3 if the number of animal units equals, as nearly as practicable, the property's carrying capacity.

§ 42-12155 Notice of approval or disapproval; appeal

A. The county assessor shall notify the property owner whether the assessor has approved or disapproved the agricultural classification of the property on or before the date on which the assessor next mails the owner the notice of valuation for the property.

B. If the assessor disapproved the agricultural classification, the assessor shall notify the owner of the reason for disapproval within one hundred twenty days of the application.

C. The owner may appeal the decision of the assessor as prescribed by chapter 16, article 2, 5 or 6 of this title.

§ 42-12156 Notice of change in use

A. If all or part of the property ceases to qualify as agricultural property under this article, the person who owns the property at the time of change shall notify the county assessor within sixty days after the change.

B. If the county assessor determines that there has been a change of use and the property ceases to qualify as agricultural property under this article, the county assessor shall notify the property owner by certified mail of the reason for reclassifying the property and include information for the property owner to appeal the reclassification.

§ 42-12157 Recapture and penalty for false information or failure to notify of change in use

If an owner of property or the owner's agent intentionally provides false information on an application form, or fails to provide the notice required under section 42-12156:

The property shall be reclassified immediately as being used for a nonagricultural use and shall be valued at its nonagricultural full cash value.
The owner is liable for the additional taxes on the difference between the nonagricultural full cash value and the full cash value of the property for all of the tax years in which the property was classified based on the false information.
The owner shall also pay a penalty equal to twenty-five per cent of the additional taxes computed under paragraph 2 of this section. The assessor may abate this penalty for good cause. Twenty per cent of the penalty shall be deposited in the state general fund, and eighty per cent of the penalty shall be deposited with the county treasurer to be used by the county assessor's office.

§ 42-12158 Inspections by county assessor

The county assessor or the assessor's deputies shall:

Make an on-site inspection of twenty-five percent of the property classified as being used for agricultural purposes each year.
Make an on-site inspection and appraise all of these properties within every four years.
If the county assessor or the assessor's deputy determines that the property does not meet the criteria for agricultural classification, notify the property owner pursuant to section 42-12156.

§ 42-12159 Restoration of agricultural classification and valuation; refund

A. A county assessor may reclassify real property as class two pursuant to section 42-12002 and this article under the following conditions:

The current owner previously held title to the property but sold the property before September 1, 1989.
Title to the property has reverted to the current owner involuntarily, or voluntarily in lieu of foreclosure or forfeiture, from the buyer or a successor in title, and the current owner did not receive a notice of valuation for the tax year in question.
The former owner of the property failed to apply for classification of the property as used for agricultural purposes pursuant to this article or prior law and failed to appeal the denial of agricultural status during the property tax appeal period for the tax year in question.
The property met the requirements prescribed by section 42-12152, subsection A.
The current reversionary owner of the property applies to the county assessor for reclassification and revaluation within four years after the date the property was reverted.

B. If the applicant submits a complete, correct and timely application under subsection A of this section, together with a sworn statement, under penalty of perjury, that the information contained in the application is true according to the applicant's best belief and knowledge and if the county assessor is satisfied that the property meets the requirements prescribed by subsection A of this section, the assessor shall:

Reclassify the property as class two under section 42-12002.
Redetermine the valuation of the property for the tax year in question pursuant to this article.
Issue a certificate of revaluation to the applicant.

C. The owner shall submit the certificate of revaluation to the county treasurer. After receiving the certificate, the county treasurer shall refund any taxes paid by the current owner with respect to the property for the tax year in question in excess of the taxes that would be due under the reclassification and revaluation, if the applicant submits proof that the applicant has paid the taxes for the tax year in question. The county treasurer is entitled to credit for the refund in the next accounting period with each taxing jurisdiction to which the tax monies may have been transmitted.

Chapter 13 Valuation of Locally Assessed Property

Article 1 General Administrative Provisions

§ 42-13002 Relationship between department and county assessors

A. The department shall:

Exercise general supervision over county assessors in administering the property tax laws to ensure that all property is uniformly valued for property tax purposes.
Prescribe forms to be used by county assessors for:

(a) Listing and valuing property for tax purposes.

(b) Reporting changes in valuations.

Assist county assessors:

(a) In maintaining uniform maps and records.

(b) In placing on the rolls the valuations determined under this chapter.

(c) To ensure a uniform valuation of all property throughout the state for property tax purposes, including providing the services of department personnel to the assessors. The department may charge to the county the costs of department personnel provided to that county.

B. The department may:

Require the reclassification of property, if necessary.
Require information from the county assessor's office and the county treasurer's office to verify compliance with the procedures prescribed by section 42-12052.
Audit the valuation of new construction as determined by each county as prescribed by section 42-17051.

C. The director and county assessors shall meet at the state capitol, or at a place designated by the director, at least twice each year to consider matters relating to property taxation. The traveling expenses of assessors in attending these meetings shall be paid by the respective counties.

§ 42-13003 Report on property that has not been appraised

A. On or before November 15 of each year each county assessor shall report to the department each parcel of property that has not been appraised during the preceding three years. The assessor shall include a statement of the reasons for the failure to appraise each such parcel.

B. The department may direct the assessor to adjust the valuation of any such parcel to reflect its full cash value.

§ 42-13004 Data processing equipment and systems

A. County assessors shall use data processing systems that are prescribed by the department, but a county assessor who has a data processing system that is compatible with the system prescribed by the department may continue to use that system if it is coordinated with the system prescribed by the department.

B. A county may contract with a private supplier or with another political subdivision for equipment or services that are necessary to meet the requirements of the department if the data processing system is compatible and coordinated with the system prescribed by the department.

C. If a county does not own, lease or contract for data processing equipment or services that are necessary to meet the department's requirements, the department may contract with the county to furnish the equipment or services to the county.

D. On application by the board of supervisors, the department shall authorize a county to prepare its own tax rolls and assessment abstracts if the data processing system used by the county in preparing the rolls and abstracts is compatible and coordinated with the system prescribed by the department.

E. The office of the county assessor is responsible for paying the cost of its data processing system and permanent records that are prescribed by the department.

F. Monies collected by the department pursuant to subsections C and E of this section shall be deposited in the state general fund.

§ 42-13005 Sales-ratio studies

A. The department shall perform and issue the results of sales-ratio studies using sales or appraisal data according to statistical principles that apply to the studies.

B. If the studies disclose discrepancies with county assessors' full cash values, the department may request the assessor or assessors to conduct field appraisals in the county, area, class or classification of discrepancy, using the standard appraisal methods and techniques adopted by the department. Adjustments to property valuations may be based on the results of the assessors' field appraisals.

C. The department shall not issue equalization orders under article 6 of this chapter affecting commercial or industrial property based exclusively on the results of sales-ratio studies.

§ 42-13006 Qualifications of appraisers and assessing personnel; certification program

A. A person may not perform the duties or exercise the authority of an assessor or appraiser of property in or on behalf of a county unless the person holds an assessor's or appraiser's certificate, respectively, that is issued or recognized by the department. This subsection does not apply to an elected official or to clerical and secretarial personnel.

B. The department shall provide for examining applicants for assessor's and appraiser's certificates. A certificate may not be issued to a person who has not demonstrated to the department's satisfaction that the person is competent to perform the work of an assessor or appraiser, as the case may be.

C. The department shall conduct or sponsor in-service and preentry training programs on the technical, legal and administrative aspects of the assessment process. For this purpose, the department may cooperate with educational institutions, regional, state or national assessors' organizations and other organizations that are interested in improving assessment practices.

D. The department shall provide for a graduated certification program that encompasses provisional certification, basic certification, intermediate certification and advanced certification. Each certification level shall encompass gradually increasing professional standards and qualifications.

E. At the request of any of the following the department shall prepare and submit a report on the achievements and problems of the education, training and certification activities under this section:

The education, training and certification advisory committee established by section 42-13007.
The president of the senate.
The speaker of the house of representatives.
The chairman of the senate finance committee or its successor.
The chairman of the house of representatives ways and means committee or its successor.

§ 42-13007 Education, training and certification advisory committee

A. The education, training and certification advisory committee is established consisting of the following members:

A member of the state board of equalization who is appointed by the chairman of the state board.
Three county assessors or deputy county assessors who are appointed by the director.
A training coordinator in the property valuation and equalization division of the department who is appointed by the director.

B. The members who are appointed pursuant to subsection A, paragraphs 1 and 2 shall be appointed to one year terms. The training coordinator who serves pursuant to subsection A, paragraph 3 serves at the pleasure of the director, shall serve as secretary to the committee and shall keep written minutes of all committee meetings. The members of the committee shall choose a chairman from among the members. The committee shall meet at least semiannually at a time and place set by the chairman. Additional meetings shall be held on the call of the chairman or at the request of two or more members.

C. The committee shall evaluate:

The guidelines proposed by the department for placing persons who apply for admission to the assessor certification program into the proper professional level of certification.
The guidelines proposed by the department pertaining to appraisal reports, experience, education or training submitted for credit in the assessor certification program.
The curriculum proposed by the department for the assessor certification program.
The procedures proposed by the department for grading demonstration appraisal reports, including any graders who are designated for the reports.
The form and content of examinations that are given for credit in the assessor certification program.

Article 2 Property Valuation by Assessors

§ 42-13051 Duties of county assessor

A. Not later than December 15 of each year the county assessor shall identify by diligent inquiry and examination all real property in the county that is subject to taxation and that is not otherwise valued by the department as provided by law.

B. The assessor shall:

Determine the names of all persons who own, claim, possess or control the property, including properties subject to the government property lease excise tax pursuant to chapter 6, article 5 of this title.
Determine the full cash value of all such property as of January 1 of the next year by using the manuals furnished and procedures prescribed by the department.
List the property with the determined valuation for use on the tax roll and report to the department of education the determined valuations of properties that are subject to the government property lease excise tax pursuant to chapter 6, article 5 of this title.

C. In identifying property pursuant to this section, the assessor shall use aerial photography, applicable department of revenue records, building permits and other documentary sources and technology.

§ 42-13052 Continuing valuation of class two, three and four property

In the case of property that is classified as class two, three or four pursuant to section 42-12002, 42-12003 or 42-12004, the assessor may use the same valuation for up to three consecutive tax years if:

The assessor files a specific plan for the valuations with the department.
The plan is implemented uniformly throughout the county.

§ 42-13053 Exception list; review of valuation

A. If the county assessor initially determines the valuation of property under this article by using a computerized data processing or valuation program, and if the valuation found by that method constitutes a change in the valuation methodology and the resulting change in valuation in any year is more than fifteen per cent above or below the valuation found for the same parcel of property in the preceding year, the assessor shall place the parcel on an exception list. The assessor shall review the valuation to determine if the change in valuation reflects the current status and conditions affecting each property on the exception list before mailing the notice of valuation.

B. This section does not apply in the case of parcel splits or consolidations, construction or destruction of improvements, changes in use or classification of the property, or other occurrences that would account for the change in valuation.

§ 42-13054 Taxable value of personal property; depreciated values of personal property in class one, class two (P) and class six

A. The taxable value of personal property that is valued by the county assessor is the result of acquisition cost less any appropriate depreciation as prescribed by tables adopted by the department. The taxable value shall not exceed the market value.

B. Except as provided in subsection C of this section and notwithstanding any other statute, the assessor shall adjust the depreciation schedules prescribed by the department as follows to determine the valuation of personal property:

For personal property that is initially classified during tax year 1994 through tax year 2007 as class one, paragraph 8, 9, 10 or 13 pursuant to section 42-12001 and personal property that is initially classified during tax year 1995 through tax year 2007 as class two (P) pursuant to section 42-12002:

(a) For the first tax year of assessment, the assessor shall use thirty-five percent of the scheduled depreciated value.

(b) For the second tax year of assessment, the assessor shall use fifty-one percent of the scheduled depreciated value.

(d) For the fourth tax year of assessment, the assessor shall use eighty-three percent of the scheduled depreciated value.

(e) For the fifth and subsequent tax years of assessment, the assessor shall use the scheduled depreciated value as prescribed in the department's guidelines.

For personal property that is initially classified during tax year 2008 through tax year 2011 as class one, paragraph 8, 9, 10 or 13 pursuant to section 42-12001 and personal property that is initially classified during tax year 2008 through tax year 2011 as class two (P) pursuant to section 42-12002:

(a) For the first tax year of assessment, the assessor shall use thirty percent of the scheduled depreciated value.

(b) For the second tax year of assessment, the assessor shall use forty-six percent of the scheduled depreciated value.

(d) For the fourth tax year of assessment, the assessor shall use seventy-eight percent of the scheduled depreciated value.

(e) For the fifth tax year of assessment, the assessor shall use ninety-four percent of the scheduled depreciated value.

(f) For the sixth and subsequent tax years of assessment, the assessor shall use the scheduled depreciated value as prescribed in the department's guidelines.

For personal property that is initially classified during tax year 2012 through tax year 2021 as class one, paragraph 8, 9, 10 or 13 pursuant to section 42-12001, personal property that is initially classified during tax year 2012 through tax year 2021 as class two (P) pursuant to section 42-12002 and personal property that is acquired during tax year 2017 through tax year 2021 and initially classified during tax year 2018 through tax year 2021 as class six pursuant to section 42-12006, paragraph 2 or 3:

(a) For the first tax year of assessment, the assessor shall use twenty-five percent of the scheduled depreciated value.

(b) For the second tax year of assessment, the assessor shall use forty-one percent of the scheduled depreciated value.

(d) For the fourth tax year of assessment, the assessor shall use seventy-three percent of the scheduled depreciated value.

(e) For the fifth tax year of assessment, the assessor shall use eighty-nine percent of the scheduled depreciated value.

(f) For the sixth and subsequent tax years of assessment, the assessor shall use the scheduled depreciated value as prescribed in the department's guidelines.

For personal property that is initially classified during or after tax year 2022 as class one, paragraph 8, 9, 10 or 13 pursuant to section 42-12001 personal property that is initially classified during or after tax year 2022 as class two (P) pursuant to section 42-12002 and personal property that is acquired during or after tax year 2022 and initially classified during or after tax year 2022 as class six pursuant to section 42-12006, paragraph 2 or 3, the assessor shall use a valuation factor of two and one-half percent.

C. The additional depreciation prescribed in subsection B of this section:

Does not apply to any property valued by the department.
Shall not reduce the valuation below the minimum value prescribed by the department for property in use.

§ 42-13055 Reducing minimum value for property in use

A. Beginning in valuation year 2000, the department shall reduce the minimum value prescribed for class one, paragraphs 8, 9, 10 and 13 and class two (P) valued by the assessor by 2.5 per cent good each year.

B. This section does not require the department to reduce the minimum value for any property in use below 2.5 per cent good.

§ 42-13056 Taxable value of solar energy devices classified as personal property; depreciated value; definition

A. When characterized as personal property, subject to any applicable constitutional exemption from taxation, the property specified in section 42-11054, subsection C, paragraph 3 shall be valued annually, at its taxable original cost, minus any appropriate depreciation as prescribed by tables adopted by the department. Each taxpayer that owns the property specified in section 42-11054, subsection C, paragraph 3 shall annually report to the assessor in each county where the property is located the taxable original cost of the property.

B. As the annual scheduled depreciated value for this section, the county assessor shall use the depreciation table prescribed by the department for personal property with a ten-year life, based on the date each device or system was placed into service.

C. Notwithstanding any other law, the county assessor shall adjust the depreciation schedules prescribed by the department as follows:

For the first tax year of assessment, the assessor shall use three percent of the scheduled depreciated value.
For the second tax year of assessment, the assessor shall use three percent of the scheduled depreciated value.
For the third tax year of assessment, the assessor shall use three percent of the scheduled depreciated value.
For the fourth tax year of assessment, the assessor shall use four percent of the scheduled depreciated value.
For the fifth tax year of assessment, the assessor shall use five percent of the scheduled depreciated value.
For the sixth tax year of assessment, the assessor shall use six percent of the scheduled depreciated value.
For the seventh tax year of assessment, the assessor shall use eight percent of the scheduled depreciated value.
For the eighth tax year of assessment, the assessor shall use eleven percent of the scheduled depreciated value.
For the ninth tax year of assessment, the assessor shall use twenty-four percent of the scheduled depreciated value.
For the tenth tax year of assessment, the assessor shall use one hundred percent of the scheduled depreciated value.

D. For the purposes of this section, "taxable original cost" means the original cost minus the value of any investment tax credits, production tax credits or cash grants in lieu of investment tax credits applicable to the taxable renewable energy equipment.

Article 3 Valuation of Agricultural Property

§ 42-13101 Valuation of agricultural land

A. Land that is used for agricultural purposes shall be valued using only the income approach to value without any allowance for urban or market influences.

B. The income of agricultural property shall be determined using the capitalized average annual net cash rental of the property. For purposes of this subsection the average annual net cash rental of the property:

Is the average of the annual net cash rental, excluding real estate and sales taxes, determined through an analysis of typical arm's length rental agreements collected for a five year period before the year for which the valuation is being determined for comparable agricultural land used for agricultural purposes and located in the vicinity, if practicable, of the property being valued.
Shall be capitalized at a rate 1.5 percentage points higher than the average long-term annual effective interest rate for all new farm credit services loans for the five year period before the year for which the valuation is being determined.

§ 42-13102 Statement of agricultural lease

A. Each lease of agricultural land or agreement to rent agricultural land for a period of more than ninety days shall be abstracted in a written statement in a form approved by the department containing at least the following information:

The name and address of the lessor and lessee.
The complete legal description of the property.
The situs address, if any, of the property.
The cash or cash equivalent of the lease payments.
The conditions of the lease, including the relationship, if any, of the parties.
The lessor expenses associated with the property excluding land cost, interest on land cost, income tax depreciation and capital improvements.

B. The county assessor shall not use the information listed pursuant to chapter 15, article 2 of this title to supplement the information obtained pursuant to this section.

C. The owner or lessor or an agent of the owner or lessor shall file the statement with the county assessor for use by the assessor for the valuation process under section 42-13101. If the ownership or the lessor or lessee of the property changes or if there is a change in the lease as abstracted pursuant to subsection A of this section, a new statement shall be filed with the assessor within three months after the change or before January 31, whichever is later.

D. The assessor shall transmit a copy of the statement to the department.

Article 4 Valuation of Golf Courses

§ 42-13151 Definition of golf course

In this article, unless the context otherwise requires, "golf course" means substantially undeveloped land, including amenities such as landscaping, irrigation systems, paths and golf greens and tees, that may be used for golfing or golfing practice by the public or by members and guests of a private club. Golf course does not include:

Commercial golf practice ranges that are operated exclusive of golf courses that are valued under this article.
Clubhouses, pro shops, restaurants and similar buildings that are associated with the golf course, which are generally used by the public or by members and guests who are entitled to use the golf course.

§ 42-13152 Computing valuation of golf courses

A. In recognition of the importance of the open space and economic benefits of golf courses, county assessors shall value all golf courses uniformly based on guidelines prescribed by the department.

B. Subject to section 42-13154, values shall be made on the assumption that no other property use is possible.

C. Land shall be valued at five hundred dollars per acre.

D. The improvement value of the golf course is established by the department's 1988 per hole cost, as prescribed in subsection E of this section for the grade of the golf course as described in the department's assessment practices manual for golf course assessment effective January 1, 1986. The per hole cost shall be multiplied by the number of holes included. The value shall be adjusted to reflect the application of economic obsolescence, which shall be uniformly determined as follows:

Determine the number of actual rounds of golf played during the most recent twelve months ending on July 31.
Multiply the rounds played during the peak month by twelve to determine the number of rounds of play the course would have had under optimum conditions.
Divide the actual number of rounds played during the year by the optimum rounds played.
The quotient is the relationship between the actual rounds played and projected play under optimum conditions or the per cent good after the economic obsolescence has been deducted.
Apply the obsolescence by multiplying the total per hole cost by the per cent good.
The obsolescence factors developed by applying the procedures prescribed by paragraphs 1 through 5 shall be applied to the data submitted to the county assessor annually by golf course owners or managers on a form prescribed by the department. The assessor shall mail the form to the last known mailing address of each golf course owner or manager on or before August 1 of each year. The form shall reflect the number of rounds played by month for the most recent twelve months ending on July 31. The form shall be returned to the county assessor not later than September 30 to receive the economic obsolescence adjustment.
Add the replacement cost new less the depreciation for the structures and additional items to determine the full cash value of the facility improvements.
To determine the full cash value of the golf course, add the per acre value as reflected in this section, the valuation of the golf course improvements, adjusted for obsolescence pursuant to paragraphs 1 through 6, and the valuation of the structures and additional items pursuant to paragraph 7.

E. For tax year 1995, the 1988 per hole improvement cost described in subsection D of this section shall be used to value golf courses. In each subsequent tax year the per hole improvement costs shall be adjusted using the change in the GDP price deflator as defined in section 41-563. For purposes of this subsection, the per hole improvement cost values include landscaping, bridges, lakes, lake liners, practice ranges, irrigation systems, paths, golf greens and tees.

§ 42-13154 Covenant not to convert golf course to another use; notice; violation; penalty; definition

A. As a condition for valuation under this article, the owner of a golf course shall record a deed restriction with the county recorder and file a copy of the restriction with the county assessor, requiring and restricting the property to use as a golf course for at least ten years. The deed restriction must be refiled as necessary, including when the property is split or combined, to ensure that the deed restriction always applies for at least ten years.

B. The valuation of a golf course under this article constitutes a covenant between the county assessor and the owner of the golf course that the use of the property as a golf course will remain unchanged for the duration of the deed restriction in order to receive valuation as a golf course and to avoid the penalty prescribed in subsection E of this section for converting the property to a different use.

C. The county assessor shall maintain a record of the value of the property determined under this article and the value of the property if it had not been determined under this article. The county assessor shall maintain the record for at least ten years for use in computing the penalty under subsection E if the property is converted to a different use in violation of the covenant.

D. If any part of the property is converted to a different use in violation of the covenant, the owner of the golf course must submit notification to the county assessor in person, electronically or by certified mail within thirty days after the property is converted to a different use.

E. On receipt of the owner of the golf course's notice pursuant to subsection D of this section or the county assessor discovering that any part of the property has been converted to a different use, the county assessor shall add to the tax levied against the property on the next tax roll a penalty equal to the difference between the total amount of property taxes that would have been levied on the property for the preceding ten years or the period of time the property was valued under this article, whichever period is shorter, if the property had not been valued under this article and the property taxes that were actually paid for the same period. The penalty due under this subsection shall be paid before completion of the next property tax roll and is enforceable and subject to the same penalties and interest as if the penalty were a tax levied against the property.

F. If the county assessor accepts electronic filings or notices, the county assessor shall provide an electronic acknowledgment of receipt.

G. For the purposes of this section, "converted to a different use" means the terms of this article have been violated or the deed restriction has been removed, has expired without the refiling of a replacement restriction or has been violated.

Article 5 Valuation of Shopping Centers

§ 42-13201 Definition of shopping center

In this article, unless the context otherwise requires, "shopping center" means an area that is comprised of three or more commercial establishments, the purpose of which is primarily retail sales, that has a combined gross leasable area of at least twenty-seven thousand square feet, that is owned or managed as a unit with at least one of the establishments having a gross leasable area of at least ten thousand square feet and that is either owner-occupied or subject to a lease that has a term of at least fifteen years.

§ 42-13202 Exclusive method and procedure for valuing shopping centers; confidentiality

A. A shopping center that is subject to valuation for purposes of property tax shall be valued pursuant to this article. This article establishes the exclusive valuation methods and procedure for determining the valuation of a shopping center.

B. All information that a taxpayer submits pursuant to this article is confidential pursuant to chapter 2, article 1 of this title.

§ 42-13203 Replacement cost less depreciation method of valuing shopping centers; election to use income method on appeal

A. Except as provided by section 42-13204, the county assessor shall determine the valuation of a shopping center by using the replacement cost less depreciation method.

B. This method shall use base rates in existence on January 1, 1982 subject to any changes that are necessary to reflect changes in costs of construction. The base rates shall be based on average costs that relate to this state as reported in professional cost manuals and publications that are approved by the department.

C. The depreciation schedule used under the replacement cost less depreciation method, including any adjustment for obsolescence, shall be the schedule in existence on January 1, 1982 and used by the county assessor.

D. On review or appeal of a valuation determined under this section, the owner of a shopping center may elect to have the valuation of the shopping center determined by the income method commonly known as the straight line building residual method if the owner submits all reasonably necessary income and expense information. The reviewing body shall use the information submitted by the owner and may also use any other information customarily analyzed under this method. The capitalization rate used for purposes of this subsection shall be comprised of:

For the 1983 tax year a discount rate of 10.5 per cent, adjusted each year thereafter according to the percentage change in the weighted average cost of monies derived from interest paid on savings accounts, federal home loan bank advances and other borrowed money as reported by the federal home loan bank of San Francisco for this state for the most recent twelve month period ending June 30. The discount rate shall not be less than ten per cent.
A recapture rate based on a thirty-five year economic life.
The effective tax rate for the property for the most recent tax year.

E. The department shall:

Determine the average differences in valuations for similar size and age shopping centers that result from the two valuation methods prescribed by this section and section 42-13204 and from which the department shall develop a schedule of obsolescence factors that can be added to the depreciation schedule used in the replacement cost less depreciation method. County assessors shall incorporate the obsolescence factors into the depreciation schedule.
Develop obsolescence factors prescribed by paragraph 1 of this subsection based on statistical research in order to, on average, equalize the valuations that result from the two valuation methods prescribed in this section and section 42-13204. The department may use data from state sources, nationally recognized publications and journals and other related research.

§ 42-13204 Election to use income method of valuation initially

In lieu of valuation under section 42-13203, the owner of a shopping center may elect to have the valuation of the shopping center determined by the income method commonly known as the straight line building residual method if the owner submits all reasonably necessary income and expense information for the owner's three most recent fiscal years to the county assessor before September 1 of the year immediately preceding the year for which the property will be valued.

§ 42-13205 Valuation method applied on appeal

On appeal of a valuation determined by the income method pursuant to section 42-13204 or an appeal in which the owner has elected the income method pursuant to section 42-13203, subsection D, the valuation of a shopping center shall be determined by whichever one of the following valuation methods most closely approximates fair market value:

The income method commonly known as the straight line building residual method pursuant to section 42-13203, subsection D. If the reviewing body finds that other information that is customarily analyzed under the income method must be used to properly apply the income method to the property, it may use the other information to supplement information provided by the owner if:

(a) The credible and accurate information provided by the owner remains the primary basis for the valuation under the income method.

(b) The supplementary information is credible, is derived from properties or circumstances that are substantially comparable to the property and is valid under the income method.

(c) The reviewing body specifies in its written order what other information was considered, the manner in which it was applied and the change in the valuation under the income method, if any, resulting from the use of the supplementary information.

The replacement cost less depreciation method pursuant to section 42-13203.
The market comparison method, if a sale of the subject property occurred within two years before the date of valuation and no material change to the property, its lease terms, tenants or occupancy rates or any other material fact has occurred since the sale. If the market comparison method is applicable, the reviewing body may consider information on sales of other properties that occurred within two years before the date of valuation and that are determined to be comparable to the subject property by clear and convincing evidence.

§ 42-13206 Valuation of dedicated parking or common areas

For the purposes of this article any part of the land of a shopping center that is limited by a zoning requirement or contractual covenant to parking or common area use shall be valued on the assumption that no other use is possible.

Article 6 Equalization of Valuations

§ 42-13251 Equalization of valuations by department

A. The department may adopt a schedule of examining and comparing the valuations of property in the several counties every year.

B. The review shall be according to and consistent with the valuation directives, rules and guidelines adopted by the department.

C. Each county assessor shall provide complete copies of data files and proposed assessments to the department on or before December 15 of the year preceding the valuation year. If the data is not complete or is in a format that is not readable by the department, the department may use the latest available data for the purposes of complying with this article.

§ 42-13252 Scope of equalization

A. If the department finds that inequalities exist between or within counties or between or within classes or classifications, the department may equalize them so that all property that is subject to taxation is listed on the rolls at its full cash value.

B. The department shall not issue an equalization order or directive except as provided by this article.

C. The department may equalize valuations of property:

Between or within counties.
Between any designated areas authorized under the guidelines established by the department.
Between or within the statutory classes of property established by chapter 12, article 1 of this title or the standard use classifications of property established by the department including between or within counties or between any designated area authorized under the guidelines established by the department.

D. The equalization may be based on a deviation from the standard median or on a deviation from the coefficient of dispersion, as prescribed by law.

§ 42-13253 Notice of equalization order

On determining that an equalization order is necessary, the department shall:

Notify the assessor of any county that is affected by the order.
At the same time, notify by certified mail or by e-mail the governor, the president of the senate and the speaker of the house of representatives including the reasons that necessitated the order.

§ 42-13254 Date of issue; effective date

A. The department shall issue an equalization order no later than January 15 of the valuation year.

B. The equalization order is for the valuation year in which the order is issued.

C. The assessor shall not issue a notice for property affected by the equalization order pursuant to section 42-15101 until the assessor has complied with the equalization order issued pursuant to this article and the compliance is confirmed by the department, unless the assessor has filed an appeal with the court pursuant to section 42-16212. On a showing of good cause, the department may extend the date for issuing the notice of valuation under section 42-15101 for not more than fifteen days.

§ 42-13255 Appeal

The county assessor who receives an equalization order may appeal the order to the state board of equalization pursuant to section 42-16159 on or before February 15 of the valuation year.

§ 42-13256 Adjustments of equalized property values by assessor

On reviewing the effect of an equalization order on individual property valuations, the county assessor may adjust the level of valuation of a property if the equalization order would result in the property being valued at a level greater than full cash value.

§ 42-13257 Report to property tax oversight commission

In conjunction with the valuation examinations under this article, the department shall report to the property tax oversight commission established by section 42-17002 on the accuracy of valuations reported in prior years pursuant to section 42-17052.

Article 7 Limitation on Valuation Increases

§ 42-13301 Limited property value

A. The limited property value of property for property taxation purposes is the limited property value of the property in the preceding valuation year plus five per cent of that value.

B. The current limited property value of a parcel of property shall not exceed its current full cash value.

C. The limited property value of a parcel of property shall be determined and shown on notices and tax rolls as the total limited property value of the property. Separate determinations shall not be made for the limited property value of land and for the improvements on the land in reference to property parcels.

§ 42-13302 Determining limited value in cases of modifications, omissions and changes

A. In the following circumstances the limited property value shall be established at a level or percentage of full cash value that is comparable to that of other properties of the same or a similar use or classification:

Property that was erroneously totally or partially omitted from the property tax rolls in the preceding tax year, except as a result of this section.
Property for which a change in physical, objectively verifiable use has occurred on the property since the preceding tax year. For the purposes of this paragraph and section 42-16002:

(a) A change in the occupant or classification of a single-family residence is not a change in use, in and of itself.

(b) A change in the classification of a guest ranch as defined in section 42-13551 is not a change in use, in and of itself.

Property that has been modified by construction, destruction or demolition since the preceding valuation year such that the total value of the modification is equal to or greater than fifteen percent of the full cash value.
Property that has been split, subdivided or consolidated from January 1 through September 30 of the valuation year, except for cases that result from an action initiated by a governmental entity.
Property that previously qualified for property valuation protection under article IX, section 18, subsection (7), Constitution of Arizona, if title to the property is conveyed to a person that does not qualify for property valuation protection or the current owner of the property no longer qualifies or did not reapply for property valuation protection.
Property that previously qualified for a statutory valuation and no longer qualifies, unless otherwise provided in law. For the purposes of this paragraph, "statutory valuation" means a specific formula for the calculation of full cash value prescribed in chapter 12, 13, 15 or 19 of this title.

B. In the case of property that is split, subdivided or consolidated after September 30 through December 31 of the valuation year, except for cases that result from an action initiated by a governmental entity, the total limited property value of the new parcel or parcels is the same as the total limited property value of the original parcel or parcels. For the following valuation year, the limited property value shall be established at a level or percentage of full cash value that is comparable to that of other properties of the same or a similar use or classification. The new parcel or parcels shall retain the same value-adding characteristics that applied to the original parcel before being split or consolidated, except as provided in subsection A, paragraph 3 of this section.

C. In the case of property that was split, subdivided or consolidated from January 1 through September 30 of the valuation year as a result of an action initiated by a governmental entity, the limited value is the lower of either:

The level or percentage of full cash value that is comparable to that of other properties of the same or similar use or classification.
The total limited value for the original parcel or parcels as determined under section 42-13301, and in the following valuation year, the limited property value shall be established pursuant to section 42-13301.

D. In the case of property that was split, subdivided or consolidated after September 30 through December 31 of the valuation year as a result of an action initiated by a governmental entity, the total limited value for the resulting parcel or parcels is the same as the total limited value for the original parcel or parcels as determined under section 42-13301, and in the following valuation year, the limited property value shall be established as the lower of either:

The level or percentage of full cash value that is comparable to that of other properties of the same or similar use or classification.
The limited property value established pursuant to section 42-13301.

§ 42-13304 Exemptions from limitation

The limitations prescribed by this article do not apply to:

Personal property, other than mobile homes. The full cash value of personal property, other than mobile homes, shall be used for all purposes in lieu of limited property value.
Property included in property class one under section 42-12001, paragraphs 1 through 7, 11 and 14. The full cash value of that property shall be used for all purposes in lieu of limited property value.

Article 8 Valuation of Property of Manufacturers, Assemblers or Fabricators

§ 42-13351 Method and procedures for valuing property of manufacturers, assemblers or fabricators; confidentiality

A. Real or personal property that is subject to valuation for property tax purposes and that is used by any manufacturer, assembler or fabricator of tangible personal property, except property that is included in class one, paragraphs 1 through 9 and paragraphs 11 through 14 and classes two, three, four, five, six, seven, eight or nine, shall be valued pursuant to this article.

B. All information that a taxpayer submits pursuant to this article is confidential pursuant to chapter 2, article 1 of this title.

§ 42-13352 Determining valuation of property of manufacturers, assemblers or fabricators

A. The county assessor shall determine the valuation of both real and personal property valued under this article.

B. For purposes of determining the valuation of property valued under this article, the county assessor shall use standard appraisal methods and techniques as provided in section 42-11001, paragraph 6 and section 42-11054, except as otherwise provided in this article.

C. The taxable value of personal property is the result of acquisition costs less any appropriate depreciation as prescribed by the department. The taxable value shall not exceed the market value.

§ 42-13353 Depreciated values of personal property of manufacturers, assemblers and fabricators

A. Except as provided in subsection D and notwithstanding any other statute, the department shall adjust depreciation schedules for use by the assessors to determine the valuation of personal property valued under this article that was or is initially assessed during tax year 1994 through tax year 2007 as follows:

For the first tax year of assessment, the assessor shall use thirty-five per cent of the scheduled depreciated value.
For the second tax year of assessment, the assessor shall use fifty-one per cent of the scheduled depreciated value.
For the third tax year of assessment, the assessor shall use sixty-seven per cent of the scheduled depreciated value.
For the fourth tax year of assessment, the assessor shall use eighty-three per cent of the scheduled depreciated value.
For the fifth and subsequent tax years of assessment, the assessor shall use the scheduled depreciated value as prescribed by the department's guidelines.

B. Except as provided in subsection D and notwithstanding any other law, the department shall adjust depreciation schedules for use by the assessors to determine the valuation of personal property valued under this article that was or is initially assessed during tax year 2008 through tax year 2011 as follows:

For the first tax year of assessment, the assessor shall use thirty per cent of the scheduled depreciated value.
For the second tax year of assessment, the assessor shall use forty-six per cent of the scheduled depreciated value.
For the third tax year of assessment, the assessor shall use sixty-two per cent of the scheduled depreciated value.
For the fourth tax year of assessment, the assessor shall use seventy-eight per cent of the scheduled depreciated value.
For the fifth tax year of assessment, the assessor shall use ninety-four per cent of the scheduled depreciated value.
For the sixth and subsequent tax years of assessment, the assessor shall use the scheduled depreciated value as prescribed in the department's guidelines.

C. Except as provided in subsection D and notwithstanding any other law, the department shall adjust depreciation schedules for use by the assessors to determine the valuation of personal property valued under this article that was or is initially assessed during or after tax year 2012 as follows:

For the first tax year of assessment, the assessor shall use twenty-five per cent of the scheduled depreciated value.
For the second tax year of assessment, the assessor shall use forty-one per cent of the scheduled depreciated value.
For the third tax year of assessment, the assessor shall use fifty-seven per cent of the scheduled depreciated value.
For the fourth tax year of assessment, the assessor shall use seventy-three per cent of the scheduled depreciated value.
For the fifth tax year of assessment, the assessor shall use eighty-nine per cent of the scheduled depreciated value.
For the sixth and subsequent tax years of assessment, the assessor shall use the scheduled depreciated value as prescribed in the department's guidelines.

D. The additional depreciation prescribed in this section shall not reduce the valuation below the minimum value prescribed by the department for property in use.

§ 42-13354 Assessing personal property construction work in progress; definition

A. The county assessor shall not value or assess personal property construction work in progress until the construction work has progressed to a sufficient degree for the personal property to be useful for the purposes for which it is being constructed.

B. For the purposes of this section, "personal property construction work in progress" means the amount spent and entered on the taxpayer’s accounting records as of December 31 of the preceding calendar year as construction work in progress.

§ 42-13355 Assessing clean rooms as personal property; definition

A. Clean rooms that are used for manufacturing, processing, fabrication or research and development of semiconductor products shall be valued and assessed as tangible personal property.

B. For the purposes of this section:

"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 rooms include 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 productions machinery and equipment operating in conjunction with the clean room environment.
Clean rooms do not include the building or a permanent, nonremovable component of the building that houses the clean room environment.

Article 9 Common Areas

§ 42-13401 Exclusive method of identifying and valuing common areas

This article establishes the exclusive method for identifying and valuing common areas.

§ 42-13402 Identifying common areas; definition

A. The county assessor shall identify common areas for valuation under this article.

B. In general, common areas consist of improved or unimproved real property that is intended for the use of owners and residents of a residential subdivision or development and invited guests of the owners or residents and include common beautification areas and common areas used as an airport. Areas that do not qualify as common areas shall be valued using standard appraisal techniques. The following are not considered to be common areas:

Common elements of a condominium, as defined in section 33-1202.
A golf course, as defined in section 42-13151 and valued pursuant to article 4 of this chapter.

C. Property must meet all of the following requirements to be considered a common area:

The property must be owned by a nonprofit homeowners' association, community association or corporation.
The association or corporation must be organized and operated to provide for the maintenance and management of the common area property.
All residential property owners in the development must be required to be and must actually be members of the association or corporation, or must be obligated to pay mandatory assessments to maintain and manage the common areas.
All members of the association or residential property owners in the development, their immediate families and, if provided by rules of the association or corporation, guests must have a right to use and enjoy the common areas. This right must be appurtenant to and pass with title to each lot and parcel. The association or corporation may assess fees for particular uses of individual common areas.
The common areas must be deeded to the association or corporation.

D. For purposes of this section "airport" means runways and taxiways that are used primarily by residents of the residential subdivision but that may be designated as a reliever airport by the federal aviation administration and that receives no public funding.

§ 42-13403 Computing valuation

A. Subject to section 42-13404, values for common areas shall be made on the assumption that no other property use is possible.

B. Land, buildings and improvements used for common areas shall be valued at five hundred dollars per parcel. The county assessor may divide the assessment amount per parcel to depict an assessment for land and an assessment for buildings and improvements provided that the total assessment for the parcel does not exceed five hundred dollars.

§ 42-13404 Deed restriction on common area use

A. As a condition for valuation under this article, the subdivider of a residential subdivision, on approval of the subdivision by the state real estate department pursuant to title 32, chapter 20, article 4, or the community or homeowners' association that owns the common area shall record a deed restriction with the county recorder and file a copy of the restriction with the county assessor restricting the property to use as a common area.

B. If the property is converted to a different use in violation of the restrictions, the assessor shall change the classification and revalue the property according to standard appraisal methods and techniques.

C. The county assessor may consolidate parcel combinations within the same taxing district if requested by the community or homeowners' association. A community or homeowners' association may provide a one-time list of common area tracts by parcel number to the assessor, in a form prescribed by the department of revenue.

D. The county assessor shall automatically consolidate parcel combinations within the same taxing district. If after further review by the assessor the parcel does not meet the requirements of a common area as described in section 42-13402, the assessor may revoke the statutory valuation made pursuant to section 42-13403 and shall value the parcel according to standard appraisal techniques. The revocation does not waive a community or homeowners' association's right to request the common area valuation.

Article 10 Timeshare Property

§ 42-13451 Definitions

In this article, unless the context otherwise requires:

"Accommodation" means any apartment, condominium or cooperative unit, cabin, lodge, hotel or motel room or other private or commercial structure containing toilet facilities that is designed and available for use and occupancy as a residence by one or more individuals and that is included in the offering of a timeshare plan.
"Association" means any organized body consisting of the purchasers of interests in a timeshare plan.
"Developer" means either of the following:

(a) Any person, corporation, partnership, limited liability company, trust or other entity, other than a sales agent, that creates a timeshare plan or is in the business of selling timeshare interests or employs sales agents to sell timeshare interests.

(b) Any person or entity that succeeds to the interest of the developer by sale, lease, assignment, mortgage or other transfer if the person offers at least twelve timeshare interests in a particular timeshare plan and the person is in the business of selling timeshare interests or employs sales agents to sell timeshare interests.

"Managing entity" means the association or other person that undertakes the duties, responsibilities and obligations of the management of a timeshare plan.
"Promotion" means a plan or device, including one involving the possibility of a prospective purchaser receiving a vacation, discount vacation, gift or prize, used by a developer or the developer's employee, or on the developer's behalf by an agent or the agent's employee, an independent contractor or the independent contractor's employee in connection with the offering and sale of timeshare interests in a timeshare plan.
"Timeshare interest" includes either a timeshare estate or a timeshare use.
"Timeshare property" means one or more accommodations subject to the same timeshare instrument, together with any other property or rights to property appurtenant to those accommodations.
"Transient occupant" means any person who occupies an accommodation in a timeshare property and provides rental income to the developer or association to occupy the accommodation. Transient occupant does not include any person who uses an accommodation as a promotion, timeshare interest or exchange program.

§ 42-13452 Computing valuation

A. Except as provided by subsection B, the county assessor shall determine the valuation of timeshare property based on the original gross sales price of the timeshare interests of the timeshare property to a buyer. If there are insufficient original sales, the county assessor may use the sales of comparable timeshare interests. When using the original gross sales price of the timeshare interests, the county assessor shall deduct a reasonable amount representing nonrealty components of the original gross sales price. The deductions may include extraordinary initial marketing costs, business going concern value, excess sales commission costs, unusual financing, transactions that are not at arms length, atypical developer risks, extended marketing time, the value of any personal property and other nonrealty components, including vacation conveniences and services, club memberships, exchange programs and unusual closing costs. The amount of the deductions shall be presumed to be sixty-five per cent of the original gross sales price of the timeshare interest, except that the presumption is rebuttable by the county assessor or the managing entity.

B. If the value of the timeshare interests can be appropriately determined by using resale prices of the timeshare interests for the timeshare property, the county assessor shall determine the value of the timeshare property based on the resale prices of the timeshare interests. If there are insufficient resale prices, the county assessor may use resale prices of comparable timeshare interests. When using the resale price, the county assessor shall deduct from the resale price the nonrealty components, including:

Atypical costs associated with the resale, including marketing costs, holding costs, commissions and financing costs.
The value of any personal property and rights associated with the timeshare interest being resold.

C. If the county assessor rebuts the presumption in subsection A, the county assessor, on or before mailing the notice of valuation, shall notify the managing entity of the reason for the disapproval and establish the methodology the county assessor will use in determining the value of the timeshare property.

§ 42-13453 Timeshare use form

A. On or before September 30 of each year, each managing entity shall file with the county assessor a timeshare use form, prescribed by the department, for each timeshare property. The form shall contain:

The name and mailing address of the managing entity.
The total number of accommodations included within the managing entity's timeshare property and the total number of available nights for all accommodations.
The total number of nights for all accommodations that were used by a transient occupant during the reporting year.
The estimated original gross sales price of any timeshare interest if an affidavit of legal value is not required pursuant to section 11-1133. The estimated original gross sales price shall be determined by equating the actual sales price for a timeshare interest to an estimated sales price for the timeshare interest on a weekly use basis.

B. The county assessor shall mail the timeshare use form to the last known mailing address of the managing entity on or before August 1 of each year.

C. If the managing entity does not file the timeshare use form, the managing entity retains its right to appeal the classification pursuant to chapter 16 of this title.

D. If the transient occupant use of the timeshare property was less than ten per cent of all available nights for all accommodations during the reporting period, the county assessor shall treat the timeshare property as if no transient occupant use occurred on the property.

§ 42-13454 Managing entity as agent of owner

A. Except as provided in subsection B, for the purpose of ad valorem taxation the managing entity identified on the timeshare use form is considered to be the taxpayer as agent of the person who owns the timeshare property.

B. For the purpose of an appeal pursuant to chapter 16 of this title, the managing entity may be considered the agent of the person who owns the timeshare property.

Article 11 Valuation of Abandoned Leased Property

§ 42-13501 Limit on valuation of real property with abandoned renewable energy equipment

A. The assessed value of a leased portion of real property that qualifies under subsection B of this section is the greater of the total lease payments collected by the real property owner during the tax year or the assessed value of the leased property if it were classified as class two property.

B. The real property must meet all of the following conditions:

The real property is being leased by the real property owner to a lessee that maintains renewable energy equipment on the leased real property.
The real property owner or any affiliate of the owner has no ownership interest in the lessee or any of its affiliates.
The lessee is in default on the lease, is not making lease payments under the lease and has abandoned its renewable energy equipment on the leased real property.
The leased real property was classified as class two agricultural property for the tax year before the lease term commenced.
The total lease payments collected by the real property owner under the lease in default are less than the assessed value of the leased real property under class one.

Article 12 Valuation of Guest Ranches

§ 42-13551 Definition of guest ranch

For the purposes of this article, "guest ranch" means real property and improvements to property being used as a guest ranch that meets all of the following:

Consists of at least one thousand contiguous acres that are any of the following:

(a) Private property adjacent to the headquarters.

(b) Leased property adjacent to the headquarters. For the purposes of this subdivision, the lease agreement may be for private or public real property and must be in writing and include riding rights.

Provides recreational activities that include horseback riding, hiking, biking or a working cattle ranch experience for guests.
Has an organized and supervised horse program on the property with a horse herd that consists of a number of horses that is equal to or greater than the total number of guest accommodations during the operating season in which guests are present.
Uses at least one permanent structure that has running water, sewage disposal and a kitchen.
Provides guests with three meals each day as part of the guest ranch's primary package, commonly referred to as the "American plan".
Includes the word "ranch" or "rancho" in the guest ranch's name.

§ 42-13552 Deed restriction on guest ranch use; covenants; violation; penalty

A. As a condition for valuation under this article, the owner of a guest ranch shall record a deed restriction with the county recorder and file a copy of the restriction with the county assessor that restricts the property to use as a guest ranch for at least ten years. The deed restriction must be refiled as necessary to ensure that the deed restriction always applies for at least ten years. For initial valuation under this article, the deed restriction must be filed on or before August 31 of the year preceding the valuation.

B. The valuation of a guest ranch under this section constitutes a covenant between the county assessor and the owner of the guest ranch that the use of the property will remain unchanged for the duration of the deed restriction.

C. The county assessor shall maintain a record of the value of the property determined under this article and the value of the property if it had not been determined under this article. The assessor shall maintain the record for at least ten years for use in computing the penalty under subsection D of this section if the property is converted to a different use in violation of the covenant.

D. If the property is converted to a different use in violation of the covenant, the owner shall notify the county assessor of the change in use. The county assessor shall add to the tax levied against the property on the next tax roll a penalty equal to the difference between the total amount of property taxes that would have been levied on the property for the preceding ten years or the period of time the property was valued under this section, whichever period is shorter, if the property had not been valued under this section and the property taxes that were actually paid for the same period. The penalty due under this subsection shall be paid before the next property tax roll is completed and is enforceable and subject to the same penalties and interest as if the penalty were a tax levied against the property.

Article 13 Valuation of Low-Income Multifamily Residential Rental Property

§ 42-13601 Definitions

In this article, unless the context otherwise requires:

"Conventional multifamily property" means a residential rental property that does not meet the requirements prescribed in paragraph 3 of this section.
"Low-income housing tax credit program" means the federal low-income housing tax credit program established by the tax reform act of 1986, codified in section 42 of the internal revenue code and administered by the Arizona department of housing pursuant to section 35-728 to encourage construction and rehabilitation of low-income rental housing.
"Low-income multifamily residential rental property" means multifamily residential property to which all of the following apply:

(a) The owner received an allocation of federal income tax credits through the low-income housing tax credit program.

(b) The property remains both income and rent restricted consistent with the low-income housing tax credit program and the provisions of the declaration of affirmative land use restrictive covenants agreement recorded on the property. The requirement of this subdivision is met if an affirmative land use restrictive covenants agreement is not yet recorded on the property but the property is otherwise subject to both income and rent restrictions under the low-income housing tax credit program.

(c) A federal, state or tribal court has not entered a judgment or order based on a finding that an act or omission of an owner or operator of the property constitutes a breach or violation of either:

(i) The declaration of affirmative land use restrictive covenants agreement recorded on the property.

(ii) Restrictions under the low-income housing tax credit program imposed on the property but not contained within an affirmative land use restrictive covenants agreement.

(d) The restrictions apply to all units on the property except employee units.

§ 42-13602 Applicability of article; property

Property that is subject to valuation by the county assessor under this article consists of land and buildings of low-income multifamily residential rental property.

§ 42-13603 Valuation; income method; requirements; confidentiality; definitions

A. Subject to section 42-13604, this article allows the owner of low-income multifamily residential rental property to elect a statutory income method for valuing the low-income multifamily residential rental property.

B. On timely election by the owner of a low-income multifamily residential rental property, the county assessor shall value property under this article based on the income method to value using the actual annual income and actual annual expenses of the property and using a capitalization rate that is based on the prevailing capitalization rate for a conventional multifamily property in the same geographic area adjusted to account for the differences between low-income multifamily residential rental properties and conventional multifamily properties, including the additional risk that the recorded affirmative land use restrictive covenants agreement places on the net operating income from the property, the restriction to the use of the property for affordable housing, the time period that the income and use restrictions remain in effect on the property and the illiquidity caused by the reduced pool of qualified potential buyers. After the capitalization rate is determined, the county assessor shall add the capitalization rate to the effective tax rate before calculating the full cash value.

C. The owner of a low-income multifamily residential rental property may elect to have the valuation of the property determined by the income method to value by submitting the three most current annual audited financial statements required by the Arizona department of housing to the county assessor before September 1 of the year immediately preceding the year for which the property will be valued. If the owner does not yet have three annual audited financial statements because the property is too new to the low-income housing tax credit program to have three years of audited data, the owner may submit and the county assessor shall use for valuation purposes the available audited financial statements and the pro forma income and expense data that was provided to the Arizona department of housing at the time the low-income housing tax credit application was submitted to the Arizona department of housing.

D. The department shall prescribe a form for an owner of a low-income multifamily residential housing tax credit project to elect to value the property pursuant to this article.

E. All information a taxpayer submits to the county assessor pursuant to this article is confidential pursuant to chapter 2, article 1 of this title.

F. If a property previously qualified for valuation under this article but has been fully transitioned to current use as a conventional multifamily property in compliance with 26 United States Code section 42(h)(6)(E), the property shall no longer be valued under this article and the property's limited value shall be calculated pursuant to section 42-13302.

G. For the purposes of this section:

"Actual annual expenses" means all operating expenses, as reflected in the annual income and expense documentation submitted pursuant to subsection C of this section, including the following:

(a) Maintenance and repair costs.

(b) Supplies.

(d) Utilities.

(e) Tenant internet service and other services required by the Arizona department of housing.

(f) Administrative costs, including costs for the following:

(i) Accounting and auditing.

(ii) Office supplies.

(iii) Compliance and asset management.

(iv) Monitoring imposed by the Arizona department of housing.

(v) Attorney fees.

(vi) Payroll and payroll taxes.

(vii) Employee benefits.

(viii) Security.

(ix) Supportive and any other services stipulated by the affirmative land use restrictive covenants agreement.

(x) Marketing, leasing, advertising and promotion.

(g) Property management fees.

(h) Ground and land lease costs.

(i) Property and liability insurance.

(j) Taxes, except property taxes determined pursuant to subsection B of this section.

(k) Required replacement and operating reserves.

(l) For properties for which the tenants pay their own utility costs, utility costs for common areas and vacant units.

(m) Any other costs imposed pursuant to the affirmative land use restrictive covenants agreement.

"Actual annual income":

(a) Means all operating income generated from the rental of real property, including rents, application and late fees and forfeited security deposits.

(b) Does not include the federal income tax credits or investment proceeds resulting from the federal income tax credits that are allocated to the owner.

§ 42-13604 Required documentation

A. As a condition of valuation under this article, an owner or operator of low-income multifamily residential rental property must provide written documentation to the county assessor confirming that the property has been placed in service as a low-income multifamily residential rental property consistent with section 42 of the internal revenue code.

B. Internal revenue service form 8609 or an equivalent successor form designated by the internal revenue code that is signed by the Arizona department of housing or the certificate of occupancy and the declaration of affirmative land use restrictive covenants agreement recorded on the property satisfy the documentation requirement prescribed by this section.

§ 42-13605 Appeals

A. An owner or operator of low-income multifamily residential rental property that opts into the income valuation method set forth in this article may appeal the value of the property pursuant to chapter 16 of this title. On appeal, the owner or operator may submit more recent income and expense data from the year preceding January 1 of the valuation year to be used in calculating the value of the property by the valuation method set forth in this article.

B. An owner or operator of low-income multifamily residential rental property that does not opt into the income valuation method set forth in this article may appeal the value of the property using the valuation method set forth in this article.

Chapter 14 Valuation of Centrally Assessed Property

Article 1 General Provisions and Procedures

§ 42-14001 Properties subject to valuation by the department; limitation on valuation increases

A. The department shall determine the valuation of the properties described in this chapter.

B. The limitations on increases in valuation prescribed by article IX, section 18, Constitution of Arizona, and by chapter 13, article 7 of this title apply to valuations determined by the department under this chapter except as provided by section 42-13304.

§ 42-14002 Notice of preliminary valuation; hearing

A. On or before June 15 the department shall notify owners of property that is valued by the department of the department's determination of the preliminary full cash value of the property.

B. On or before July 15 the property owner may file a written application to appear before the department and be heard concerning the value determined.

§ 42-14003 Information considered in determining valuation; notice of determination

A. In determining valuation under this chapter the department shall consider all additional information including information that is presented in an appeal and information that is otherwise available.

B. The department shall notify the property owner of the final full cash value on or before August 31.

§ 42-14004 Change of valuation

After the department determines the valuation of any property but before it transmits the valuation to the appropriate assessing authority, the department, on the property owner's written application or on its own motion, may change the valuation to properly reflect the property's full cash value. The department shall immediately send by mail or by e-mail a copy of the change to the property owner.

§ 42-14005 Appeal from valuation determined by department

A property owner who is not satisfied with the valuation of the owner's property as determined by the department may appeal:

To the state board of equalization pursuant to section 42-16158.
Directly to superior court pursuant to section 42-16204.

§ 42-14006 Signatures for documents; alternative methods

A. The department may prescribe by administrative rule alternative methods for signing, subscribing or verifying any report or statement required to be filed with the department pursuant to this article that have the same validity and consequence as the actual signature or written declaration of the taxpayer or other person required to sign, subscribe or verify the return, statement or other document.

B. While the department is adopting a rule prescribing alternative methods for signing, subscribing or verifying any report or statement required to be filed with the department pursuant to this article, the director, by tax ruling, may waive the requirement of a signature for a particular type or class of any report or statement required to be filed with the department pursuant to this article. For the purposes of this subsection, "tax ruling" has the same meaning prescribed in section 42-2052.

Article 2 Mines, Mills and Smelters

§ 42-14051 Annual determination of valuation

The department shall annually determine, in the manner prescribed by this article, the valuation of:

Producing mines.
Personal property used on producing mines.
Improvements to producing mines.
Mills and smelters that are operated in conjunction with producing mines.
Closed mines as provided by section 42-14054.

§ 42-14052 Annual report for determining valuation; failure to file; penalty; forfeiture of appeal rights

A. On or before April 1 of each year each company that is valued pursuant to this article shall file a report with the department, under oath, stating the information that the department requires to enable it to make a valuation of the company.

B. On written request and for good cause shown, the director may extend the time for filing the report required by this section.

C. If a company fails to file the report on or before April 1 of the valuation year, or the extended due date if an extension is granted, the department shall:

Estimate the value of the property based on one hundred five per cent of the preceding year's full cash value or on any information that is available to the department.
Also assess a penalty in the amount of the lesser of:

(a) One-half of one per cent of the value that is estimated by the department.

(b) One hundred dollars per day for each day the company fails to file the report beyond the due date.

D. If the report is not filed by May 20 of the valuation year, the company forfeits its right to appeal the valuation and classification pursuant to section 42-14005.

§ 42-14053 Determining and reporting valuation of producing mines and mining property

A. On or before August 31 of each year, the department shall find the full cash value of:

Patented and unpatented producing mines.
Personal property used on producing mines.
Improvements to producing mines.
Mills and smelters that are operated in conjunction with producing mines.

B. On or before November 30 of each year, the department shall transmit the valuations of these properties in each taxing district to the respective county assessors.

C. The valuations required by this section are the values determined as of January 1 of the valuation year.

§ 42-14054 Determining and reporting valuation of closed mines

A. On or before August 31 of each year, the department shall find the full cash value of all patented and unpatented mines that were producing mines on the first Monday in January of any of the three preceding years but that are no longer producing mines.

B. On or before November 30 of each year, the department shall transmit the valuations of these properties in each taxing district to the respective county assessors.

C. The valuation required by this section is the value determined as of January 1 of the valuation year.

D. The department shall value nonproducing mines for a period of three valuation years after the last valuation year in which it was valued as a producing mine.

Article 3 Oil, Gas and Geothermal Properties

§ 42-14101 Definitions

In this article, unless the context otherwise requires:

"Gas" means:

(a) Natural gas, including casinghead gas.

(b) All other hydrocarbons that are not defined as oil by this section.

"Geothermal resource" has the same meaning prescribed in section 27-651.
"Gross production" means all oil, gas or geothermal resources that are produced and saved except:

(a) Any interest of the United States or this state or of any other person or entity that is exempt under the laws of the United States or the constitution or laws of this state in any oil, gas or geothermal resources or in the proceeds of oil, gas or geothermal resources.

(b) Oil, gas or geothermal resources that are used in producing operations or for repressuring or recycling purposes to develop and operate the producer's interests in oil, gas or geothermal resource wells in this state.

"Gross yield" means the amount for which the gross production is sold in the immediate vicinity of the well or, if not sold on the property, the field or posted price or representative market price at the well of oil, gas or geothermal resources that are transported from the property.
"Oil" means crude petroleum oil and other hydrocarbons regardless of gravity that are produced at the well in liquid form by ordinary production methods and that are not the result of condensation of gas after it leaves the reservoir.
"Produced", "producing" or "production" means any taking of oil or gas from any land in this state that is under the state's jurisdiction.
"Producer" means a person who owns, controls or leases, either as lessor or lessee, or who has any other interest in oil, gas or geothermal resource lands or oil, gas or geothermal resource wells on January 1 of each year if any person produced any oil, gas or geothermal resource in any manner from the lands or wells during the preceding calendar year. Producer includes any person who owns any royalty or other interest in any oil, gas or geothermal resources, or its value, whether produced by that person or by another person on that person's behalf, either by lease, contract or otherwise.

§ 42-14102 Annual determination of valuation

The department shall annually determine the valuation of all producing oil, gas and geothermal resource interests in this state in the manner prescribed by this article.

§ 42-14103 Annual report for determining valuation; violation; classification

A. On or before April 1 of each year each producer shall make and file with the department a return showing the producer's gross production and gross yield from each of the producer's producing properties for the immediately preceding calendar year. On request and for good cause the department may grant a thirty day extension of time for filing the report.

B. The report shall show the county in which the production took place and the description of the property from which the oil, gas or geothermal resource was produced.

C. The producer or the producer's authorized representative shall verify the report.

D. A producer who knowingly fails to file the report prescribed by this section or who knowingly files a false report is guilty of a class 2 misdemeanor.

§ 42-14104 Determining and reporting valuation

A. On or before November 30 of each year the department shall transmit to the respective county assessors the valuation of the oil, gas or geothermal resource interests of each producer for each of the producer's properties in the county as of January 1 of the valuation year.

B. The valuation required by this section is the value determined as of January 1 of the valuation year.

C. After determining the valuation of any producing oil, gas or geothermal resource interest and before certifying the valuation to the county, the department, on the producer's application or on its own motion, may change the valuation to properly reflect the gross yield from the oil, gas or geothermal resource interest.

§ 42-14105 Basis for valuing producing oil, gas and geothermal resource interests

A. Producing oil, gas and geothermal resource interests shall be valued for tax purposes at the amount of the gross yield for the preceding calendar year. The gross yield is the valuation of the oil, gas or geothermal resource interests of the lands from which the oil, gas or geothermal resource is produced as of January 1 of the following year.

B. This valuation does not affect the valuation of property other than producing oil, gas or geothermal resource interests.

C. Notwithstanding any other law, the basis of valuation prescribed by this section is in lieu of any other method of valuing oil, gas or geothermal resource interests and the oil, gas and geothermal resource deposits for ad valorem tax purposes.

§ 42-14106 Separate listing, assessment and taxation

If producing oil, gas and geothermal resource interests are owned by a person other than the owner of the land, they shall be listed, the valuation shall be determined and the interests shall be taxed individually as separate parcels of real estate separate from the land.

Article 4 Gas, Water, Electric and Sewer and Wastewater Utilities

§ 42-14151 Annual determination of valuation; definition

A. The department shall annually determine the valuation, in the manner prescribed by this article, of all property, owned or leased, and used by taxpayers in the following businesses:

Operation of a natural gas distribution system.
Operation of a water utility system.
Operation of a sewer system or wastewater treatment facility.
Operation of an electric generation facility.
Operation of an electric transmission or distribution system or an energy storage system.

B. For the purposes of this article, "generation of electricity" means the process of taking a source of energy, including coal, natural gas, oil, nuclear fuel or renewable sources and converting the energy into electricity to be delivered to customers through a transmission and distribution system.

§ 42-14152 Annual report for determining valuation; failure to file; penalty; forfeiture of appeal rights

A. Except as provided by section 42-14155, on or before April 1 of each year, each company that is valued pursuant to this article shall file a report with the department, under oath, stating the information that the department requires to enable it to make a valuation of the property. On or before February 1 of each year, the department shall send by mail or by e-mail to each company the forms for filing the report.

B. On written request and for good cause shown, the director may extend the time for filing the report required by this section.

C. If a company fails to file the report on or before April 1 of the valuation year, or the extended due date if an extension is granted, the department shall:

Estimate the value of the property based on one hundred five percent of the preceding year's full cash value or on any information that is available to the department.
Also assess a penalty in the amount of the lesser of:

(a) One-half of one percent of the value that is estimated by the department.

(b) One hundred dollars per day for each day the company fails to file the report beyond the due date.

D. If the report is not filed by May 20 of the valuation year, the company forfeits its right to appeal the valuation and classification pursuant to section 42-14005.

§ 42-14153 Determining and reporting valuation

A. On or before August 31 of each year the department shall find the full cash value of the property of each property that is listed in section 42-14151 and that operates in this state.

B. On or before November 30 the department shall transmit to the respective county assessors:

The valuations of these properties in each taxing district.
An estimate of the net valuation of properties that are subject to voluntary contributions pursuant to section 48-242. The taxing jurisdiction shall use the estimate to estimate the amount of voluntary contributions to be received for the purpose of finalizing budget and property tax levies pursuant to chapter 17 of this title.

C. The valuations required by this section are the values determined as of January 1 of the valuation year.

§ 42-14154 Computing valuation of electric transmission, electric distribution, gas distribution, combination gas and electric transmission and distribution, and transmission and distribution cooperative property; definitions

A. The valuation of all electric transmission, electric distribution, gas distribution, combination gas and electric transmission and distribution, and transmission and distribution cooperative property that is subject to valuation for tax purposes shall be determined in the manner prescribed by this section except for:

The property of member-owned nonprofit electric distribution cooperatives.
Renewable energy equipment that is valued pursuant to section 42-14155.

B. Electric transmission, electric distribution, gas distribution, combination gas and electric transmission and distribution, and transmission and distribution cooperative property shall be valued as follows:

The department shall determine the original plant in service cost.
The original plant in service cost shall then be reduced by:

(a) The related accumulated provision for depreciation.

(b) The reduction in value caused by a state or federal governmental order prohibiting total or partial physical use of electric transmission, electric distribution, gas distribution, combination gas and electric transmission and distribution, and transmission and distribution cooperative property for periods of more than six months. Any reductions in value caused by a total or partial prohibition of the physical use of the property shall not exceed the cost of the restricted property less accumulated depreciation.

The department shall not value contributions in aid of construction.

C. The value of construction work in progress is fifty per cent of the amount spent and entered on the taxpayer's accounting records as of December 31 of the preceding calendar year as construction work in progress.

D. The value of materials and supplies is the total cost of such property as of December 31 of the preceding calendar year.

E. The value of environmental protection facilities that are required by law is fifty per cent of the depreciated cost of the facilities.

F. All terms and applications of terms shall be interpreted according to the federal energy regulatory commission uniform system of accounts for electric and gas utilities in effect on January 1, 1989.

G. For the purposes of this section, unless the context otherwise requires:

"Construction work in progress" means the total of the balances of work orders for an electric transmission, electric distribution, gas distribution, combination gas and electric transmission and distribution, and transmission and distribution cooperative plant in process of construction on December 31 of the preceding calendar year, exclusive of land rights and licensed vehicles.
"Depreciation" means straight line depreciation over the useful life of the item of property.
"Distribution cooperative" means a member-owned nonprofit electric distribution cooperative corporation that is organized under or becomes subject to title 10, chapter 19, article 2 or title 10, chapters 24 through 40.
"Electric transmission, electric distribution, gas distribution, combination gas and electric transmission and distribution, and transmission and distribution cooperative property" means plant, construction work in progress, materials and supplies and environmental protection facilities.
"Environmental protection facilities" means the acquisition or construction cost of any building, structure, equipment, facility or improvement that is designed and constructed solely to control, reduce, prevent or abate:

(a) Discharges or releases into the environment of gaseous, liquid or solid substances, heat or noise.

(b) Any other adverse impact of an activity on the environment.

"Materials and supplies" means the cost, including sales, use and excise taxes, and transportation costs to point of delivery in this state, less purchases and trade discounts, of all unapplied material and supplies on hand in this state as of December 31 of the preceding calendar year.
"Original plant in service cost" means the actual cost of acquiring or constructing property including additions, retirements, adjustments and transfers, but without deducting related accumulated provision for depreciation, amortization or other purposes.
"Plant" means all property that is situated in this state and that is used or useful for the transmission or distribution of electric power or distribution of natural gas. Plant does not include land rights, materials and supplies and licensed vehicles.
"Transmission cooperative" means a member-owned nonprofit electric transmission cooperative corporation that is organized under or becomes subject to title 10, chapter 19, article 4.

§ 42-14155 Valuation of renewable energy and storage equipment; definitions

A. Through December 31, 2040, the department shall determine the full cash value of taxable renewable energy and storage equipment in the manner prescribed by this section.

B. The full cash value of renewable energy and storage equipment is twenty percent of the depreciated cost of the equipment. Depreciated cost shall be determined by deducting depreciation from taxable original cost. Depreciation shall not exceed ninety percent of the adjusted original cost.

C. For the purposes of this section, all energy storage equipment, both colocated with renewable energy and stand-alone energy storage equipment, qualifies for valuation pursuant to this section.

D. For the purposes of this section:

"Depreciation" means straight-line depreciation over the useful life, as adopted by the department, of the item of property.
"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.
"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.
"Original cost" means the actual cost, without trending, of acquiring or constructing property, including additions, retirements, adjustments and transfers.
"Renewable energy and storage equipment" means electric generation facilities, electric transmission, electric distribution, energy storage, gas distribution or combination gas and electric transmission and distribution and transmission and distribution cooperative property that is located in this state, that is used or useful for generating, storing, transmitting or distributing electric power, energy or fuel derived from solar, wind or other nonpetroleum renewable sources not intended for self-consumption, including materials and supplies and construction work in progress, but excluding licensed vehicles and property valued under sections 42-14154 and 42-14156.
"Taxable original cost" means the original cost reduced by the value of any investment tax credits, production tax credits or cash grants in lieu of investment tax credits applicable to the taxable renewable energy and storage equipment.

§ 42-14156 Computing valuation of electric generation facilities; definitions

A. The valuation of electric generation facilities referred to in section 42-14151, subsection A, paragraph 4 shall be determined as follows:

The value of land used in operating the facility shall be the cost to the current owner as of December 31 of the preceding calendar year.
The valuation of real property improvements used in operating the facility is the cost multiplied by valuation factors prescribed by tables adopted by the department.
The valuation of personal property used in operating the facility is the cost multiplied by the valuation factors as prescribed by tables adopted by the department, adjusted as follows:

(a) For the first year of assessment, the department shall use thirty-five per cent of the scheduled depreciated value.

(b) For the second year of assessment, the department shall use fifty-one per cent of the scheduled depreciated value.

(d) For the fourth year of assessment, the department shall use eighty-three per cent of the scheduled depreciated value.

(e) For the fifth and subsequent years of assessment, the department shall use the scheduled depreciated value as prescribed in the department’s guidelines.

In addition to the computation prescribed in paragraphs 2 and 3 of this subsection, the taxpayer may submit documentation showing the need for, and the department shall consider, an additional adjustment to recognize obsolescence using standard appraisal methods and techniques.
The valuation prescribed in paragraph 2 of this subsection shall not reduce the valuation below ten per cent of the cost of the real property improvements. The valuation prescribed in paragraph 3 of this subsection shall not reduce the valuation below ten per cent of the cost of the personal property.
The following apply in determining cost for the purposes of this subsection:

(a) "Cost" means the cost of constructing the property or acquiring the property in an arm's length transaction.

(b) The cost of personal property is the invoice cost of the personal property, the cost of transporting the property to the facility site and the cost of labor to install the property, plus any transaction privilege or use taxes paid.

(c) The cost of leased property is the lessor's cost of the property, except that in the case of a lease financing transaction, the cost is the actual cost of construction based on the invoice cost similar to any other type of financing.

(d) In the case of a facility that is acquired from another taxpayer:

(i) If, after the acquisition, the buyer has possession of the cost information, the valuation of the facility shall continue based on the seller's cost as if there were no change in ownership, except for land as provided in subsection A, paragraph 1.

(ii) If, after the acquisition, the buyer does not possess the cost information, the acquisition cost in an arm's length transaction shall be used.

(e) For generation facilities that were in service before January 1, 2001, costs incurred before January 1, 2002 shall be computed in accordance with section 42-14158. For these facilities, all costs incurred on or after January 1, 2002 shall be reported in accordance with subdivisions (a) through (d) of this paragraph.

The department shall not value personal property construction work in progress until the property is first placed in commercial service. For the purposes of this paragraph, "commercial service" means:

(a) For machinery and equipment used in the generation of electricity being valued and placed on the tax roll for the first time, the official assumption of operation and ownership of the machinery and equipment from the contractor by the plant operator.

(b) For machinery and equipment added to existing electric generation facilities, that the construction work has progressed to a sufficient degree for the machinery and equipment to be useful for the purpose for which it is being constructed.

(c) For machinery and equipment related to self-constructed facilities, that the construction work has progressed to a sufficient degree for the machinery and equipment to be useful for the purpose for which it is being constructed.

B. For the purposes of this section:

"Electric generation facility" means all land, buildings and personal property that is situated in this state and that is used or useful for the generation of electric power.
"Personal property" means all tangible property except for land and real property improvements as defined in this section. Personal property includes foundations or supports for the machinery or apparatus for which they are provided, including water cooling towers.
"Real property improvements" means buildings, including administration buildings, maintenance warehouses and guard shacks, water retention ponds, sewage treatment ponds, reservoirs, sidewalks, drives, curbs, parking lots, tunnels, duct banks, canals, fencing and landscaping.

§ 42-14157 Allocation of electric transmission, distribution and generation values among taxing jurisdictions; definition

A. The value of property computed under sections 42-14154, 42-14156 and 42-14159 shall be allocated among the various taxing jurisdictions as follows:

Combine the values for plant in service and materials and supplies pursuant to section 42-14154 or 42-14159 with the value of electric generation facilities pursuant to section 42-14156 for the owner or the combined group.
Combine the original plant in service costs and materials and supplies pursuant to section 42-14154 or 42-14159 with the original cost of generation plant facilities pursuant to section 42-14156 for the owner or the combined group.
Allocate the value determined under paragraph 1 of this subsection among the respective taxing jurisdictions in proportion to the original cost determined under paragraph 2 of this subsection.

B. The unit value of environmental protection facilities under section 42-14154 or 42-14159 shall be allocated among the various taxing jurisdictions in proportion to the original cost of the environmental protection facilities of the owner or the combined group in the respective taxing jurisdiction.

C. Construction work in progress determined under sections 42-14154, 42-14156 and 42-14159 shall be allocated among the various taxing jurisdictions on a situs basis separately from the unit value of environmental protection facilities.

D. The unit value of renewable energy equipment determined under section 42-14155 shall be allocated among the various taxing jurisdictions in proportion to the original cost of the renewable energy equipment of the owner or the combined group in the respective taxing jurisdiction.

E. For the purposes of this section, "combined group" means all corporations and other entities that are at least eighty per cent owned or controlled by a common parent entity, determined by reference to voting shares.

§ 42-14158 Existing generation facilities; computing adjusted original cost; computing full cash value; definitions

A. To achieve equity in the full cash values of existing and new electric generation facilities, the department shall compute adjusted original costs for existing generation facilities in lieu of actual cost for use in determining the full cash values in accordance with section 42-14156. Adjusted original costs shall be used to determine full cash values for existing generation facilities for tax year 2004 and subsequent years. Retirements of property in service before January 1, 2002 shall be deducted based on the percentage of adjusted original cost to actual original cost for each vintage year. For any property added to an existing generation facility on or after January 1, 2002, or for an electric generation facility placed in service on or after January 1, 2001, cost shall be determined in accordance with the provisions of section 42-14156.

B. To compute the adjusted original cost of property placed in service before January 1, 2002 for existing generation facilities, the department shall:

Determine the full cash value ratio.
Determine the original cost by vintage year for 2001 and all prior years.
Multiply the original costs for real property improvements and personal property by vintage year by the full cash value ratio to reflect the tax year 2003 full cash value by vintage year.
Divide the full cash value by vintage year as calculated in paragraph 3 of this subsection of real property improvements and personal property by the valuation factors reflected in the department’s valuation tables as prescribed in section 42-14156, without phase-in adjustments prescribed in section 42-14156, subsection A, paragraph 3.

C. For the purposes of this section:

"Existing generation facility" means the property of an electric generation facility that was valued by the department as of January 1, 2001. It does not include any property added to the facility after January 1, 2002.
"Full cash value ratio" means the full cash value of the existing generation facility for tax year 2003, excluding the value of land associated with the facility, renewable energy equipment and materials and supplies as of December 31, 2001, divided by the total original cost, excluding the cost of land associated with the facility, renewable energy equipment and materials and supplies for the facility as of December 31, 2001.
"Original cost" means the actual cost of acquiring or constructing property, including additions, retirements, adjustments and transfers.
"Vintage year" means the first year of depreciation of the asset reflected on the owner’s balance sheet.

§ 42-14159 Computing valuation of distribution cooperatives; standard market value factor; definitions

A. The department shall determine the valuation of the electric distribution and transmission property of a distribution cooperative as defined in section 42-14154 that is operating in this state as follows:

Compute the value of the property pursuant to section 42-14154, subsection B.
Multiply the value computed under paragraph 1 of this subsection by the standard market value factor determined under subsection E of this section.

B. The value of construction work in progress is fifty per cent of the amount spent and entered on the taxpayer's accounting records as of December 31 of the preceding calendar year as construction work in progress.

C. The value of materials and supplies is the total cost of this property as of December 31 of the preceding calendar year.

D. The value of environmental protection facilities that are required by law is fifty per cent of the depreciated cost of the facilities.

E. The standard market value factor shall be determined as follows:

Using the most recent publicly available data obtained from annual reports produced by the federal energy regulatory commission or the publicly available data filed with the securities and exchange commission on form 10-k for each investor-owned electric utility operating in this state, calculate the following standard factors for each investor-owned electric utility:

(a) Megawatt hours sold to ultimate customers per ultimate customer.

(b) Megawatt hours sold to ultimate customers per net dollar invested in distribution plant.

(d) Megawatt hours sold to ultimate customers per dollar of distribution operating and maintenance expense.

(e) The number of ultimate customers per net dollar invested in distribution plant.

(f) The number of ultimate customers per mile of distribution line.

Determine the average of each of the six standard factors under paragraph 1 of this subsection for the investor-owned electric utilities operating in this state as follows:

(a) For each factor, add the values obtained for that factor for all investor-owned electric utilities operating in this state.

(b) Divide the sum obtained under subdivision (a) of this paragraph for each factor by the number of investor-owned electric utilities operating in this state that were included in the calculation under subdivision (a) of this paragraph for that factor.

Using information obtained from the most recent report filed with the department under section 42-14152, calculate each of the standard factors under paragraph 1 of this subsection for the distribution cooperative.
Divide each of the six standard factors for the distribution cooperative calculated under paragraph 3 of this subsection by the corresponding average standard factors calculated under paragraph 2 of this subsection.
Add the six ratios calculated pursuant to paragraph 4 of this subsection, and divide that sum by six. The quotient is the standard market value factor.

F. For the purposes of this section:

"Distribution line" means a line that is capable of transporting voltage of 69,000 volts or less and that is employed between the primary source of power supply and delivery to a customer.
"Distribution plant" means all property that is situated in this state and that is used or useful for the distribution of electric power except land rights, materials and supplies, and licensed vehicles.
"Investor-owned electric utility" means a business organization that provides electric power production and distribution, is regarded as a utility and is managed as a private enterprise rather than a function of a government or as a utility cooperative.

Article 5 Pipelines

§ 42-14201 Annual determination of valuation

The department shall annually determine, in the manner prescribed by this article, the valuation of pipelines that operate in this state.

§ 42-14202 Annual report for determining valuation; failure to file; penalty; forfeiture of appeal rights

B. On written request and for good cause shown, the director may extend the time for filing the report required by this section.

C. If a company fails to file the report on or before April 1 of the valuation year, or the extended due date if an extension is granted, the department shall:

Estimate the value of the property based on one hundred five per cent of the preceding year's full cash value or on any information that is available to the department.
Also assess a penalty in the amount of the lesser of:

(a) One-half of one per cent of the value that is estimated by the department.

(b) One hundred dollars per day for each day the company fails to file the report beyond the due date.

D. If the report is not filed by May 20 of the valuation year, the company forfeits its right to appeal the valuation and classification pursuant to section 42-14005.

§ 42-14203 Determining and reporting valuation

A. On or before August 31 of each year, the department shall find the full cash value of the property of each pipeline that operates in this state.

B. The valuation required by this section is the value determined as of January 1 of the valuation year.

C. On or before November 30 of each year, the department shall transmit the locations, descriptions and valuations to the respective county assessors.

§ 42-14204 Computing valuation of pipelines; definitions

A. The valuation of pipeline property that is subject to valuation for tax purposes shall be determined in the manner prescribed by this section.

B. The value of construction work in progress equals eighty-five percent of the amount spent and entered on the taxpayer's accounting records as of December 31 of the preceding calendar year as construction work in progress.

C. The value of materials and supplies equals the total cost of materials and supplies as of December 31 of the preceding calendar year.

D. The value of gas stored underground equals the total cost of gas stored underground as of December 31 of the preceding calendar year.

E. The value of noncapitalized leased operating property shall be determined by applying to the original cost of the noncapitalized leased operating property the ratio derived from dividing the preliminary system value by the original cost of the plant.

F. The department shall determine the valuation of a pipeline as follows:

Determine the base value.
Compute the value change factor.
Multiply the values in paragraphs 1 and 2 of this subsection to compute the preliminary system value. If the value change factor does not apply, the preliminary system value is the system net book value of plant in service as of December 31 immediately preceding the current year.
Add the value of construction work in progress, materials and supplies, noncapitalized leased operating property and gas stored underground to the preliminary system value.
Compute the allocation factor.
Multiply the sum computed pursuant to paragraph 4 of this subsection by the allocation factor.

G. All terms and applications of terms shall be interpreted as nearly as possible, under the circumstances, according to the federal energy regulatory commission uniform system of accounts for pipelines in effect on January 1, 1989.

H. For the purposes of this section:

"Allocation factor" means the factor used to assign a portion of the system value to this state and is computed by dividing the total Arizona original cost of plant in service, materials and supplies, construction work in progress, noncapitalized leased operating property and gas stored underground as of December 31 of the preceding calendar year by the corresponding total system original cost as of December 31 of the preceding calendar year.
"Asset change factor" means dividing the system net book value of plant in service as of December 31 immediately preceding the current valuation year by the system net book value of plant in service as of December 31 immediately preceding the prior valuation year. If the denominator is zero, the asset change factor does not apply.
"Base value" means the final full cash value of the system plant in service in the preceding valuation year. If the property was not subject to property valuation in this state in the preceding valuation year, the value is the net book value of plant in service plus the value of construction work in progress, materials and supplies, noncapitalized leased operating property and gas stored underground. If ownership changes, the base value shall be transferred to the new owner. If one of the circumstances described in section 42-14205 applies, the base value shall be adjusted.
"Capitalization rate" means the sum of the year-end thirty-year treasury bond rate plus 6.8 percent.
"Change in capitalization rate" means dividing the current year capitalization rate by the previous year capitalization rate.
"Change in earnings before interest and taxes" means dividing the average earnings before interest and income taxes for the three years immediately preceding the current valuation year by the average earnings before interest and income taxes for the three years immediately preceding the previous valuation year. If less than four years of earnings data are available, this factor does not apply. If four years of earnings data are available and a major plant addition or retirement occurs, for the valuation year after the addition or retirement occurs, this ratio shall be derived by dividing the earnings before interest and income taxes for the year immediately preceding the current valuation year by the earnings before interest and income taxes for the year immediately preceding the previous valuation year.
"Construction work in progress" means the total of the balances of work orders for plant in process of construction on the last day of the preceding calendar year.
"Gas stored underground" means the noncurrent portion of the cost of recoverable gas that is purchased or produced by the utility, that is stored in depleted or partially depleted gas or oil fields or other underground reservoirs and that is not held to meet the service requirements of the utility's customers.
"Income change factor" means dividing the change in earnings before interest and taxes by the change in the capitalization rate. If the change in earnings before interest and taxes does not apply, the income change factor does not apply.
"Major plant addition or retirement" means an addition or retirement of plant in the year preceding the current valuation year that results in an increase or decrease of at least twenty percent of the original cost of plant in service.
"Noncapitalized leased operating property" means property that is subject to an agreement that transfers the use of property to the lessee during the term of the lease and that is not capitalized on the lessee's balance sheet.
"Preliminary system value" means the base value multiplied by the value change factor.
"System net book value of plant" means the original cost of the system plant in service minus the related accumulated provision for depreciation.
"System value" means the sum of the system value of plant in service, construction work in progress, materials and supplies, noncapitalized leased property and gas stored underground.
"Value change factor" means the average of the income change factor and the asset change factor. If the income change factor does not apply, the value change factor is the asset change factor. If the asset change factor does not apply, the value change factor does not apply.

§ 42-14205 Adjustments to base value to reflect market value

To accurately assess ongoing business operations, income and property, the department shall adjust the base value used to determine the full cash value of pipeline property as necessary to reflect changed circumstances. The circumstances that require adjustments to the base value are as follows:

There is a final ruling by a court of competent jurisdiction in this state that the full cash value of a pipeline in this state using the method prescribed by section 42-14204 is more than the market value of the pipeline property using standard appraisal methods and techniques. In such cases, the final full cash value of the system plant in service determined by the court for the most recent tax year involved in any such tax appeal is the base value for the subsequent tax year, and the department shall adjust all valuations for future years pursuant to section 42-14204.
There is an agreement between a pipeline company and the department that is the result of a pending tax appeal, in which the parties enter into a binding stipulation, approved by a court of competent jurisdiction, to adjust the full cash value of the system plant in service as of a specific valuation date. In such cases, the department shall adjust the base value as set forth in the stipulation.
There is an agreement between a pipeline company and the department to correct an error in the calculation of the full cash value of the system plant in service for a pipeline that operates in this state. In such cases, the department shall adjust the base value as set forth in the agreement. Any agreement to adjust the base value to correct such an error shall be in writing and signed by the director and an officer of the pipeline company before the base value is adjusted.

Article 6 Valuation and Taxation of Airline Companies

§ 42-14251 Definitions

In this article, unless the context otherwise requires:

"Air commerce" means the scheduled transportation by aircraft of persons or property for hire in interstate, intrastate or international transportation.
"Aircraft" means any device that is used or designed for navigation or flight through the air.
"Aircraft time" means the number of minutes in the preceding calendar year in which flight property was in the possession of an airline company.
"Airline company" means any person who directly or indirectly undertakes to engage in the business of scheduled air commerce.
"Fleet type" means aircraft type and model.
"Flight property" means all airline company aircraft of the types used in this state except aircraft that are permanently removed from operations.
"Operating", "operations" or "operated" means regularly scheduled aircraft landings or takeoffs.
"Original cost" means the capitalized acquisition cost to the original purchaser from the manufacturer of airframes and engines plus substantial modifications. If the acquisition cost cannot be determined, original cost means the manufacturer's original list price for the model, type and year plus substantial modifications.
"Person" means any individual, corporation, firm, partnership, company or association and includes a guardian, trustee, executor, administrator, receiver or conservator or any person who acts in a fiduciary capacity.
"Small flight property" means all airline company aircraft of the types that are used in this state, not permanently removed from operations, with a maximum passenger capacity of less than fifty-six seats and a maximum payload capacity of less than eighteen thousand pounds.
"State ground time" means the number of minutes that flight property is considered to be on the ground in this state during the preceding calendar year and is computed by multiplying the number of departures of flight property in this state during the preceding calendar year by forty-five.
"System ground time" means the number of minutes that flight property is on the ground systemwide during the preceding calendar year and is computed by subtracting the number of revenue and nonrevenue airborne minutes of all flight property during the preceding calendar year from aircraft time.

§ 42-14252 Annual determination of valuation

The valuation of flight property and small flight property of airline companies operating in this state shall be determined annually by the department in the manner prescribed by this article.

§ 42-14253 Annual report for purposes of determining valuation; failure to file; penalty; forfeiture of appeal rights

A. On or before April 1 of each year each company that operates in air commerce in this state shall file a report with the department under oath stating specifically the information prescribed by the department to allow it to determine the valuation required by this article. The department shall consider the information in the report in determining the valuation under this article, but that information is not conclusive.

B. On written request and for good cause shown, the director may extend the time for filing the report required by this section.

C. If a company that operates in air commerce fails to file the report on or before April 1 of the valuation year, or the extended due date if an extension is granted, the department shall:

Estimate the value of the property based on one hundred five per cent of the preceding year's full cash value or on any information that is available to the department.
Also assess a penalty in the amount of the lesser of:

(a) One-half of one per cent of the value that is estimated by the department.

(b) One hundred dollars per day for each day the company fails to file the report beyond the due date.

D. If the report is not filed by May 20 of the valuation year, the company forfeits its right to appeal the valuation and classification pursuant to section 42-14005.

§ 42-14254 Determination of value

A. On or before August 31 the department shall determine the full cash value of all flight property that is operated in this state in air commerce by each airline company. The full cash value is the value determined as of January 1 of the valuation year.

B. The department shall:

Determine the valuation of flight property by fleet type.
Determine the valuation of each fleet type by the original cost less depreciation.
Compute depreciation using fifteen year straight line depreciation to salvage value. Salvage value is:

(a) Ten per cent of original cost of aircraft that are out of production.

(b) Twenty-five per cent of original cost of aircraft that are being manufactured as of January of the valuation year.

Allow additional obsolescence if supported by market evidence.

C. Small flight property that is operated in this state in air commerce shall be valued at thirty per cent of its original cost less depreciation and additional allowed obsolescence.

D. The department shall determine the valuation that is apportioned to this state of each fleet type as the proportion of the total valuation determined on the basis of the total of the following percentages:

Fifty per cent of the percentage that the total state ground time during the preceding calendar year is of the total system ground time during the preceding calendar year.
Fifty per cent of the percentage that the total mileage scheduled within this state of the fleet type on flights operated in this state during the preceding calendar year is of the total mileage scheduled within and without this state of the fleet type during the preceding calendar year.

§ 42-14255 Assessment, levy and collection of tax; limitation on small airline company tax

A. The department shall annually:

Enter in its records the full cash value as determined under this article of the flight property of the airline companies in this state.
Assess the property as provided by sections 42-12005 and 42-15005.
Levy a tax against the values so determined and assessed at a rate that equals the sum of the average rates for primary and secondary property taxes in the taxing jurisdictions in this state for the current year.
Collect the taxes according to the schedules prescribed by section 42-18052.
Deposit, pursuant to sections 35-146 and 35-147, the tax revenues in the state aviation fund.

B. The tax imposed by this section is in lieu of all other ad valorem taxes on the flight property of airline companies in this state.

C. Delinquent taxes bear interest at the rate determined pursuant to section 42-1123.

D. The full cash values that are used for tax purposes pursuant to subsection A of this section are a matter of public record and are not confidential information under chapter 2, article 1 of this title.

§ 42-14256 Administrative review and appeal

An airline company may apply for administrative review and appeal of any determination under this article pursuant to article 1 of this chapter.

§ 42-14257 Debt; lien

The tax imposed by this article:

Is a debt of the airline company.
May be collected by an action instituted and prosecuted by the attorney general on the director's request.
Is a lien pursuant to section 42-17154 against the assessed flight property.
Is also a lien against all other property of the taxpayer under section 42-1151.

Article 7 Valuation and Taxation of Private Car Companies

§ 42-14301 Definitions

In this article, unless the context otherwise requires:

"Entire receipts" means, as applied to a private car company operating partly in and partly outside this state, all earnings on business beginning and ending in this state, and a proportion based on the proportion of mileage in this state to the entire mileage over which the business is done, of earnings on all trans-state and interstate business passing through, into or out of this state.
"Private car company" means a person who is engaged in the business of operating, furnishing or leasing cars, whether or not owned by the person and regardless of what name is applied to the cars, to be used for transporting or accommodating persons or freight over railroad lines that are located wholly or partially in this state and that are not owned, leased or operated by that person.

§ 42-14302 Situs and valuation of cars for tax purposes

A car that is described in section 42-14301, paragraph 2 and that is used exclusively in this state or that is used partly in and partly outside this state:

Has a situs in this state for purposes of taxation.
Is subject to valuation under this article.

§ 42-14303 Annual statement

On or before April 1 each private car company shall file an annual statement with the department. The statement shall be in a form prescribed and furnished by the department and under the oath of a company officer who is designated by the company. The statement shall contain:

The name and nature of the business of the company, whether the company is an individual, association or corporation and under the laws of which state or country it is organized.
The location of its principal office.
The names and mailing addresses of the company's president, secretary, auditor, treasurer, superintendent and general manager and the officer designated by the company.
The entire receipts including all amounts that were earned or charged, whether or not actually received, for business done by the company in this state for the preceding calendar year.
The proportion of its entire receipts for business transacted in this state in connection with other persons for the year.
The total mileage made by the rolling stock of the company over railroads in this state and in other states during the same period.
The total miles of railroad in and outside this state over which the company's rolling stock has been run during the same period.
The average number of miles traveled by the cars of each class of cars during the year.
The number of cars necessary for the mileage traveled in this state, under circumstances that ordinarily attend the use of cars, and if different classes of cars are used by the company, of each class of cars.
The full cash value on that date of the cars necessary to provide for mileage to be reported as required by this article.
The real and personal property owned by the company that is subject to taxation in this state and the location and full cash value of the property in the county or municipality where it is located.
Such other facts and information as the department requires.

§ 42-14304 Failure to make annual statement; penalty; action for recovery; false or fraudulent statement; classification

A. If a private car company knowingly fails or refuses to file the statement required by this article, the department shall assess a penalty in the amount of the lesser of:

(a) One-half of one per cent of the value that is estimated by the department.

(b) One hundred dollars per day for each day the company fails to file the statement after April 1.

B. On the request of the director, the attorney general shall institute an action in the name of this state to recover the penalty.

C. If a private car company fails or refuses to make the statement or to furnish the department with the information it requests, the department shall obtain the information in another manner.

D. A person who makes a false or fraudulent statement with the intent to defeat or evade assessment is guilty of a class 2 misdemeanor.

§ 42-14305 Determination of valuation

A. On or before June 15 of each year, the department shall determine the full cash value of the company's property in this state whether it is used in intrastate or interstate business. That value constitutes the full cash value of the property of the private car company in this state for that year.

B. The valuation required by this section is the value determined as of January 1 of the valuation year.

C. The department shall immediately transmit the valuation to the private car company by first class mail or by e-mail.

§ 42-14306 Administrative review of valuation

A. On or before July 15 of each year, a private car company may request in writing that the department review its valuation. The department shall rule on any review of valuation on or before August 31 and shall notify the private car company of its ruling by first class mail or e-mail.

B. Representing a taxpayer before the department or appearing on a taxpayer's behalf is not considered to be the practice of law.

§ 42-14307 Appeals

A. On or before October 1 a private car company may appeal the department's valuation of its property to the state board of equalization as provided by section 42-16158. The state board shall immediately notify the department of the appeal.

B. The state board shall decide all private car company appeals on or before October 31.

C. A private car company may also apply for administrative review and appeal of any determination under this article pursuant to article 1 of this chapter.

§ 42-14308 Assessment, levy and collection of tax

A. The department shall annually:

Enter in its records the full cash value of each private car company in this state as determined under this article.
Assess the property as provided by sections 42-12005 and 42-15005.
Levy a tax against the values so determined and assessed at a rate that equals the sum of the average rates for primary and secondary property taxes in the taxing jurisdictions in this state for the current year.
Collect the taxes that are:

(a) Due and payable on the following October 1.

(b) Delinquent after the following November 1.

Deposit, pursuant to sections 35-146 and 35-147, the tax revenues in the state general fund.

B. The tax imposed by this section is in lieu of all other taxes on the property and business of private car companies in this state except for the annual license tax and registration fee.

C. Delinquent taxes bear interest at the rate determined pursuant to section 42-1123 for each subsequent month in which the tax remains unpaid.

§ 42-14309 Debt; lien

The tax imposed by this article:

Is a debt of the private car company.
May be collected by an action instituted and prosecuted by the attorney general on the director's request.
Is a lien pursuant to section 42-17154 against the private car property.
Is also a lien against all other property of the taxpayer under section 42-1151.

Article 8 Railroad Companies

§ 42-14351 Annual determination of valuation

The department shall annually determine the valuation, pursuant to this article, of all operating property of railroad companies in this state in the manner provided by this article.

§ 42-14352 Annual statement

A. On or before April 1 of each year each person that owns, operates or constructs a railroad in this state, by its president, secretary, tax agent or principal accounting officer, shall file with the department a sworn statement or schedule containing:

A statement of the railroad's right-of-way, track and roadbed, including:

(a) The entire length in this and other states.

(b) The proportion in each city, town and county in this state.

The length of all sidetracks, the aggregate length of sidetracks and the city, town and county in which they are located.
A complete list of all depots, station houses, machine shops and other buildings that are located wholly or in part on the right-of-way, and connected platforms, fuel and water stations and machinery and tanks, and showing:

(a) Their size.

(b) Their location as to city, town and county.

(d) Their value.

The number of ties in the track per mile, the weight per yard of iron or steel rails used in main tracks or sidetracks, what joints are used in main tracks or sidetracks, the ballasting of the tracks, whether with rock, gravel, dirt or other material, the length of time the iron and steel have been used and the length of time the road has been built.
A full list of the rolling stock, distinctly stating the number, class and value of locomotives and all kinds of cars that are owned or leased by the company and in this state at 12:00 noon on January 1.
The amount of capital stock authorized, the number of shares into which the capital stock is divided, the amount of capital stock paid up, the market value of the stock or, if it has no market value, the actual value of the shares of stock and the amount and market value of outstanding bonded indebtedness.
A correct detailed inventory of the number, kind and value of all tools and materials used for repairs and all other personal property.
A statement of the amount and value of the property designated in this section.
Any other information that the department requires.

B. On written request by the secretary, tax agent or principal accounting officer of any person that owns, operates or constructs a railroad in this state and for good cause shown, the director may enlarge or extend the time for filing the annual statement.

§ 42-14353 Failure or refusal to make annual statement; penalty

A. If a railroad company fails or refuses to file the statement or schedule, the department shall assess a penalty in the amount of the lesser of:

One-half of one per cent of the value that is estimated by the department.
One hundred dollars per day for each day the company fails to file the statement or schedule.

B. A refusal to make the statement or schedule of any item constitutes a separate offense.

C. The director may request the attorney general to commence an action in the name of this state to recover the penalty prescribed by subsection A.

§ 42-14354 Determining valuation of railroad company operating property

A. On or before August 31 of each year the department shall determine the valuation as of January 1 of the valuation year of all operating property of railroad companies in the manner prescribed by this article. Property that a railroad company owns or leases but that is not used in operating the railroad is not considered to be operating property and shall be valued by the county assessor.

B. Assessments shall:

Be made on the entire railroad in this state as provided by subsection A.
Include the franchise, intangible values, right-of-way, roadbed, rolling stock, buildings and telecommunication lines and all other real and personal property used in operating the railroad.

§ 42-14355 Computing valuation; definitions

A. The department shall determine the valuation of a railroad as follows:

Determine the base value.
Compute the value change factor.
Compute the current year system full cash value by multiplying the base value determined under paragraph 1 of this subsection by the value change factor determined under paragraph 2 of this subsection.
Compute the allocation factor.
Multiply the current year system full cash value determined under paragraph 3 of this subsection by the allocation factor determined under paragraph 4 of this subsection.
Compute the Arizona full cash value by subtracting the Arizona licensed transportation equipment value from the value determined under paragraph 5 of this subsection.

B. For purposes of computing the valuation under this section:

The "allocation factor", used to assign a portion of the system value to this state, is computed by adding:

(a) The property factor, weighted by forty-seven per cent.

(b) The line haul factor, weighted by forty-four per cent.

The "Arizona licensed transportation equipment value" is computed as follows:

(a) Subtract the system accumulated depreciation of motor vehicles that are subject to a license tax in lieu of an ad valorem property tax pursuant to article IX, section 11, Constitution of Arizona, from the system original cost of those vehicles.

(b) Divide the current year system full cash value, determined under subsection A, paragraph 3, by net operating property.

(d) Multiply the value determined in subdivision (c) of this paragraph by the allocation factor.

The "base value" is the final full cash value of the system in the preceding calendar year. If the system was not subject to valuation in this state in the preceding calendar year, the base value is the acquisition cost. If the system's ownership changes, the base value is unaffected and shall be transferred to the new owner.
The "capitalization rate" is the rate determined and reported by the interstate commerce commission in its annual cost of capital report.
The "change in capitalization rate" is computed by dividing the current year capitalization rate by the preceding year capitalization rate.
The "change in earnings" is computed by dividing the average earnings for the five years immediately preceding the current valuation year by the average earnings for the five years immediately preceding the previous valuation year. If three or more years of data are available, those data should be used, but if only one or two years of data are available, the change in earnings shall not be considered in computations under this section.
The "current gross profit margin" is computed by dividing the average earnings for the five years immediately preceding the current valuation year by the average gross revenues for the five years immediately preceding the current valuation year.
The "current return on investment" is computed by dividing the average earnings for the five years immediately preceding the current valuation year by the average net operating property for the five years immediately preceding the current valuation year.
The "current year efficiency" is computed by dividing the average earnings for the two years immediately preceding the current valuation year by the average gross revenues for the two years immediately preceding the current valuation year.
"Earnings" means the income realized before deducting interest, taxes, depreciation and lease expenses.
The "efficiency change factor" is computed by dividing the current year's efficiency factor by the previous year's efficiency factor.
The "efficiency factor" is computed by dividing earnings by gross revenues.
The "gross profit margin factor" is computed by dividing the current gross profit margin by the previous gross profit margin.
"Gross revenues" means total revenues from operations.
The "income change factor" is computed by dividing the change in earnings by the change in capitalization rate.
"Leased property" means noncapitalized leased operating property that is subject to an agreement that transfers the use of the property to the lessee during the term of the lease and that is not capitalized on the lessee's balance sheet.
The "line haul factor" is computed by dividing total revenue ton miles in this state by the total system revenue ton miles.
The "net operating property" is computed by subtracting accumulated depreciation and amortization including leased property from system cost.
"Operating property" means real or personal property that is owned or leased and used in operating the railroad, including land, track, right-of-way, buildings and structures, equipment, materials, tools and rolling stock.
The "previous gross profit margin" is computed by dividing the average earnings for the five years preceding the previous valuation year by the average gross revenues for the five years preceding the previous valuation year.
The "previous return on investment" is computed by dividing the average earnings for the five years preceding the previous valuation year by the average net operating property for the five years preceding the previous valuation year.
The "previous year efficiency" is computed by dividing the average earnings for the two years preceding the previous valuation year by the average gross revenues for the two years preceding the previous valuation year.
"Profitability change factor" means the average of the gross profit margin factor and the return on investment factor. If three or more years of data are available, those data should be used, but if only one or two years of data are available, the profitability change factor shall not be considered in computations under this section.
The "property change factor" is computed by dividing the system cost as of December 31 immediately preceding the current valuation year by the system cost as of December 31 immediately preceding the previous valuation year.
The "property factor" is computed by dividing the total original cost of operating property in this state, including leased property, by the system cost.
The "return on investment factor" is computed by dividing the current return on investment by the previous return on investment.
"Revenue ton mile" means the amount of revenue derived from the number of tons hauled over a distance of one mile.
"System cost" means the total original cost of all operating property, including leased property, in and outside this state.
The "terminal factor" is computed by dividing the sum of tons originating, terminating, received and delivered in this state by the sum of tons originating, terminating, received and delivered in the system.
The "value change factor" is computed by adding:

(a) The income change factor, weighted by fifty per cent.

(b) The profitability change factor, weighted by twenty per cent.

(d) The property change factor, weighted by fifteen per cent, except that if the income change factor, efficiency change factor and profitability change factor do not apply, the property change factor is equivalent to the value change factor and is weighted at one hundred per cent.

§ 42-14356 Adjustments to achieve comparability

In attempting to accurately assess ongoing business operations, income and property, adjustment may be necessary to minimize differences. The overall objective is to achieve comparability in determining appropriate stabilized income and typical property changes from prior years. Occurrences that may prompt such an adjustment:

Are extraordinary, unusual and infrequent events.
Are material in nature, of a character different from the typical or customary business operations, not expected to recur frequently and not normally considered in evaluating the operating results of a business.
May include material increases or decreases in income and property as a result of such events as write-offs, write-downs and changes in accounting methods or practices.

§ 42-14357 Transmitting valuation to taxing jurisdictions; apportionment

A. On or before November 30 of each year the department shall transmit to the county assessors of each county through or into which a railroad runs a statement showing:

The valuation of the property for each taxing jurisdiction as determined by a pro rata distribution of the valuation of the whole property specified in this article.
A description of the whole of the assessed property in the county, city, town, school districts and special districts by metes and bounds or other description sufficient for identification.

B. The assessment and pro rata distribution shall be made with reference to the value of the property belonging to the company or corporation that owns the railroad located in each county, city, town, school district and special district through which the railroad extends.

C. If the railroad company lies in several counties:

Its rolling stock shall be apportioned among them so that a portion of the rolling stock may be assessed in each county.
Each county's portion shall bear to the whole rolling stock the same ratio that the number of miles in that county bears to the whole number of miles located in this state.

§ 42-14358 Entering statement on assessment roll

A. The board of supervisors of each county shall enter the statement and description provided by the department on the county assessment roll under appropriate columns with the total value of the assessed property carried out.

B. The property of railroad companies is taxable on the assessments by the same officers and for the same purposes as property of individuals in the county.

Article 9 Telecommunications Companies

§ 42-14401 Definition of telecommunications company

In this article, unless the context otherwise requires "telecommunications company" means any person that owns communications transmission facilities and that provides public telephone or telecommunications exchange or inter-exchange access for compensation to effect two-way communication to, from, through or within this state.

§ 42-14402 Annual statement; failure or refusal to make annual statement; penalty; action for recovery

A. On or before April 1 of each year each telecommunications company, under the oath of its chief officer in this state, shall make and file a statement with the department in a form prescribed by the department and containing:

The name and nature of the business of the company, whether an individual, association or corporation and under the laws of which state or country it is organized.
The location of its principal office.
The names and mailing addresses of its president, secretary, tax agent, auditor, treasurer, superintendent or general manager and the chief officer or managing agent in this state.
The par value and market value of its shares of stock.
A detailed schedule of the real property the company owns in this state including its location and valuation.
The total length of its lines in this state, including lines that are controlled or used under lease or otherwise and the number of miles of lines in each county.
A complete and correct inventory of all other personal property it owned in this state on the preceding January 1, where the property was located and its value.
The total gross receipts for the year ending January 1 from all sources and the portion of the receipts that was derived entirely in this state.
The operating expenses for the year ending January 1, itemized or divided as required by the department.
The amount that was paid in dividends and the percentage the dividends bear to its capital.

B. On written request by the secretary, tax agent or principal accounting officer of a telecommunications company and for good cause shown, the director may enlarge or extend the time for filing the annual statement.

C. If a company fails or refuses to make the required statement:

The department shall obtain the information in another manner.
The department shall assess a penalty in the amount of the lesser of:

(a) One-half of one per cent of the value that is estimated by the department.

(b) One hundred dollars per day for each day the company fails to file the statement.

D. The director may request the attorney general to commence an action in the name of this state to recover the penalty prescribed by subsection C.

§ 42-14403 Determining valuation; definitions

A. On or before August 31 of each year, the department shall determine the valuation as of January 1 of the property of all telecommunications companies operating in this state at its full cash value. Real estate shall be valued at market value, and personal property shall be valued on a unitary basis at its cost less depreciation. In addition, the taxpayer may submit documentation showing the need for, and the department shall consider, an additional adjustment to recognize obsolescence using standard appraisal methods and techniques.

B. For the purposes of this section:

Except as provided in paragraph 2 of this subsection, depreciation shall be computed on a straight-line basis using the lives set forth as follows:

(a) Buildings with a twenty-five-year life.

(b) Cable with a fifteen-year life.

(d) Any other telecommunications property that is not included in subdivisions (a), (b) and (c) of this paragraph with a seven-year life.

For qualifying broadband infrastructure, depreciation shall be computed as follows:

(a) Cable shall be computed on a straight-line basis using a ten-year life.

(b) Telecommunications equipment shall be computed on a straight-line basis using a five-year life.

(c) Any other telecommunications property that is not included in subdivisions (a) and (b) of this paragraph shall be computed on a straight-line basis using a seven-year life.

(d) Additional depreciation shall be applied to personal property as follows:

(i) For the first tax year of assessment, the department shall use twenty-five percent of the scheduled depreciation value.

(ii) For the second tax year of assessment, the department shall use forty-one percent of the scheduled depreciation value.

(iii) For the third tax year of assessment, the department shall use fifty-seven percent of the scheduled depreciation value.

(iv) For the fourth tax year of assessment, the department shall use seventy-three percent of the scheduled depreciation value.

(v) For the fifth tax year of assessment, the department shall use eighty-nine percent of the scheduled depreciation value.

(vi) For the sixth tax year of assessment and each subsequent tax year of assessment thereafter, the department shall use the scheduled depreciation value.

(e) The computation prescribed in this paragraph shall not reduce the valuation of property valued pursuant to subdivision (a) of this paragraph below two and one-half percent of the cost and shall not reduce the valuation of property valued pursuant to subdivisions (b), (c) and (d) of this paragraph below two and one-half percent of cost.

The computation prescribed in paragraph 1 of this subsection shall not reduce the valuation of property valued pursuant to paragraph 1, subdivision (a) of this subsection below twenty percent of cost and shall not reduce the valuation of property valued pursuant to paragraph 1, subdivisions (b), (c) and (d) of this subsection below ten percent of cost.
For cellular or other wireless telecommunications companies, the taxable unit is the applicable metropolitan statistical area or rural statistical area and does not include the value of any license that is issued by the federal communications commission.

C. For the purposes of this section:

"Cost" means the original cost as reported on the company's books and records.
"Obsolescence" means a reduction in the value of an asset resulting from functional or economic obsolescence.
"Qualifying broadband infrastructure" means cable, telecommunications equipment and other tangible personal property capable of being used for or in connection with the transmission of data at a rate that is at least equal to four megabits per second in at least one direction, including multiplexers, routers, servers, fiber optics, coaxial cable and equipment supporting the transmission function first placed in service on or after January 1, 2017.

§ 42-14404 Apportionment of valuation

A. On or before November 30 of each year, the department shall:

Apportion the valuation among the several counties, cities, towns and special taxing districts through which the company's lines run.
Transmit a statement of the company's locations, descriptions and valuations to the respective county assessors.

B. The counties, municipalities and districts shall tax the company as railroad companies are taxed under article 8 of this chapter.

Article 10 Airport Fuel Delivery Companies

§ 42-14501 Definitions

In this article, unless the context otherwise requires:

"Airport" means any area of land or water designed and set aside for the landing and taking off of aircraft and used, or to be used, in the interest of the public for those purposes.
"Airport fuel delivery company" means a company that meets all of the following requirements:

(a) The company is owned exclusively by a consortium of certified air carriers.

(b) The company is formed to provide its owners with jet fuel that is delivered by a fuel storage and hydrant delivery system at an airport in this state.

(d) The company operates on a break-even cash accounting basis under which member contributions and other revenues are equal to the company's total costs of operation.

§ 42-14502 Exclusive method and procedure of valuation

This article establishes the exclusive valuation methods and procedures for determining the valuation of property of an airport fuel delivery company.

§ 42-14503 Computing valuation of airport fuel delivery company property; definitions

A. The department shall determine the valuation of all real and personal property of an airport fuel delivery company as follows:

Determine the base value.
Compute the asset change factor.
Multiply the base value by the asset change factor to compute the preliminary system value. If the asset change factor does not apply, the preliminary system value is the system net book value of plant in service as of December 31 immediately preceding the current valuation year.
Add the value of construction work in progress, materials and supplies and noncapitalized leased operating property to the preliminary system value.
Compute the allocation factor.
Multiply the sum computed pursuant to paragraph 4 of this subsection by the allocation factor.

B. In this section, unless the context otherwise requires:

"Allocation factor" means the factor used to assign part of the system value to this state and is computed by dividing the total Arizona original cost of plant in service, materials and supplies, construction work in progress and noncapitalized leased operating property as of December 31 of the preceding calendar year by the corresponding total system original cost as of December 31 of the preceding calendar year.
"Asset change factor" means the ratio derived from dividing the system net book value of plant in service as of December 31 immediately preceding the current valuation year by the system net book value of plant in service as of December 31 immediately preceding the prior valuation year. If the denominator is zero, the asset change factor does not apply.
"Base value" means the final full cash value of the system plant in service in the previous valuation year. If the property was not subject to property valuation in this state in the previous valuation year, the value is the system net book value of plant in service plus the value of construction work in progress, materials and supplies and noncapitalized leased operating property. If ownership changes, the base value shall be transferred to the new owner.
"Construction work in progress" means eighty-five per cent of the total of the value of the balances of work orders for plant in process of construction on the last day of the preceding calendar year.
"Noncapitalized leased operating property" means property subject to an agreement that transfers the use of property to the lessee during the term of the lease and that is not capitalized on the lessee's balance sheet.
"Preliminary system value" means the base value multiplied by the asset change factor.
"System net book value of plant" means the original cost of the system plant in service less the related accumulated provision for depreciation.
"System value" means the sum of the system value of plant in service, construction work in progress, materials and supplies and noncapitalized leased operating property.

Chapter 15 Assessment Process

Article 1 Determining Assessed Valuation

§ 42-15001 Assessed valuation of class one property

The assessed valuation of class one property described in section 42-12001 is the following percentage of its full cash value or limited valuation, as applicable:

Twenty-five percent through December 31, 2005.
Twenty-four and one-half percent beginning from and after December 31, 2005 through December 31, 2006.
Twenty-four percent beginning from and after December 31, 2006 through December 31, 2007.
Twenty-three percent beginning from and after December 31, 2007 through December 31, 2008.
Twenty-two percent beginning from and after December 31, 2008 through December 31, 2009.
Twenty-one percent beginning from and after December 31, 2009 through December 31, 2010.
Twenty percent beginning from and after December 31, 2010 through December 31, 2012.
Nineteen and one-half percent beginning from and after December 31, 2012 through December 31, 2013.
Nineteen percent beginning from and after December 31, 2013 through December 31, 2014.
Eighteen and one-half percent beginning from and after December 31, 2014 through December 31, 2015.
Eighteen percent beginning from and after December 31, 2015 through December 31, 2021.
Seventeen and one-half percent beginning from and after December 31, 2021 through December 31, 2022.
Seventeen percent beginning from and after December 31, 2022 through December 31, 2023.
Sixteen and one-half percent beginning from and after December 31, 2023 through December 31, 2024.
Sixteen percent beginning from and after December 31, 2024 through December 31, 2025.
Fifteen and one-half percent beginning from and after December 31, 2025 through December 31, 2026.
Fifteen percent beginning from and after December 31, 2026.

§ 42-15002 Assessed valuation of class two property

The following percentages apply to the full cash value or limited valuation, as applicable, as a basis for determining the assessed valuation of class two property described in section 42-12002:

Class two (R): sixteen percent through December 31, 2015 and fifteen percent beginning from and after December 31, 2015.
Class two (P): sixteen percent through December 31, 2015, and fifteen percent beginning from and after December 31, 2015, of the value exceeding the maximum amount of valuation of personal property that is exempt from taxation pursuant to section 42-11127.
Class two (C): fifteen percent.

§ 42-15003 Assessed valuation of class three property

The assessed valuation of class three property described in section 42-12003 is ten per cent of its full cash value or limited valuation, as applicable.

§ 42-15004 Assessed valuation of class four property

The assessed valuation of class four property described in section 42-12004 is ten per cent of its full cash value or limited valuation, as applicable.

§ 42-15005 Assessed valuation of class five property

The director shall annually determine percentages to apply as a basis for determining the assessed valuation of class five property described in section 42-12005 equal to the ratios that the total net assessed valuation of all taxable property for primary and secondary tax purposes in class one and class six, paragraph 3 and personal property in class two bears to the total limited valuation used for primary tax purposes of such property, and that ratio shall be used for primary tax purposes as required by federal law.

§ 42-15006 Assessed valuation of class six property

The assessed valuation of class six property described in section 42-12006 is five per cent of the full cash value or limited valuation of class six property, as applicable.

§ 42-15007 Assessed valuation of class seven property

The assessed valuation of class seven property described in section 42-12007 is the percentage of value prescribed for class one property by section 42-15001, except that modifications intended to restore and rehabilitate the historic property as approved by the state historic preservation officer under section 42-12103 shall be assessed at one per cent for up to ten years.

§ 42-15008 Assessed valuation of class eight property

The assessed valuation of class eight property described in section 42-12008 is the percentage of value prescribed for class four property by section 42-15004, except that modifications intended to restore and rehabilitate the historic property as approved by the state historic preservation officer under section 42-12103 shall be assessed at one per cent for up to ten years.

§ 42-15009 Assessed valuation of class nine property

The assessed valuation of class nine property described in section 42-12009 is one per cent of its full cash value or limited valuation, as applicable.

§ 42-15010 Applying assessment percentages

A. In preparing the tax rolls, the county assessor shall apply the appropriate percentage to the full cash value or limited property value of property, as applicable, to show the assessed valuation.

B. If a parcel of property has more than one percentage applied to its full cash value under this section due to multiple uses, the county assessor shall apply the percentage to the limited property value of the parcel in the same proportion and in the same manner as the parcel's full cash value.

Article 2 Listing and Assessing Property

§ 42-15051 Time of assessment

Unless otherwise provided by law, property is assessed for taxes levied under this title when its valuation is determined and lawfully placed on the roll.

§ 42-15052 Compiling information; property report; examining documents; summoning witnesses

The county assessor may:

Demand from each person or firm or from the president, cashier, treasurer or managing agent of each corporation or association that owns, claims, controls or possesses property in the county a correct report under oath or affirmation of all property in the county that the person, firm, corporation or association owns, claims, possesses or controls.
Request information from each person, firm, corporation or association that bears on reporting or valuing taxable property.
Examine maps, drawings, books, invoices and papers.
Summon witnesses to appear and compel them to provide the information.

§ 42-15053 Duty to report personal property; exemption; contents of report; confidentiality

A. On or before February 1 of each year, the assessor shall mail a form, notice or demand to each person that owns or has charge or control of taxable personal property in this state. Each person shall prepare and deliver to the assessor a correct report of property on or before April 1 of each year. On written request and for good cause shown, the assessor may extend for up to thirty days the time for filing the report.

B. Property that is not required to be reported as provided by subsection D of this section is exempt from the reporting requirement of subsection A of this section. The county assessor may not require a person that owns or has charge or control of property that is not required to be reported as provided by subsection D of this section to apply to be exempt from the reporting requirement of subsection A of this section.

C. The duty to report taxable property pursuant to this section applies regardless of whether the person or entity that owns or has charge or control of the personal property also owns real property in the county with a value of $200 or more.

D. The assessor shall not require a report of:

The breed, number, age or location of livestock on hand from individuals, corporations, partnerships or any other business if the livestock is exempt from taxation pursuant to article IX, section 13, Constitution of Arizona.
The personal property that is class two (P) property pursuant to section 42-12002, paragraph 2 and that is used for agricultural purposes or that is class one, subclasses 8 through 11 and 13 property pursuant to section 42-12001 and that is used in a trade or business that is exempt from taxation pursuant to article IX, section 2, subsection E, Constitution of Arizona.

E. Every assessment made against property that is subject to taxation is valid whether or not the form, notice or demand was sent or received.

F. The department shall prescribe in detail the contents of property reports including the specific wording to be used by county assessors and the method of reporting property. The report shall not include any question that is not germane to the valuation function.

G. A report that is furnished under this section:

Is not open to public inspection, but the report may be used as evidence in any prosecution brought under section 42-15055.
May be subject to audit. On completing an audit or on discovering property that has not been reported, any property that was found to have escaped taxation is liable for the amount of taxes due determined under chapter 16, article 6 of this title, plus a penalty equal to ten percent of that amount. The county treasurer shall credit monies received as penalties under this paragraph to the county general fund.

§ 42-15054 Listing by assessor on failure to receive report; investigations

A. If a person refuses on demand to give under oath or affirmation the report as required by section 42-15052 or 42-15053, or if the owner of property that is not reported by another person is absent or unknown, the assessor shall fill out a report for that person and shall include all taxable property that the assessor has reason to believe that the person owns, possesses or controls. If the name of an absent owner is known to the assessor, the property shall be assessed in that name, but if the name is not known, it shall be assessed to "unknown owners".

B. The assessor shall make such investigation as necessary to ensure that all property subject to taxation in the county is properly included on the assessor's property lists.

C. If the assessor believes that a person has not returned a full and complete report of all property that the person possesses or controls, the assessor may investigate as necessary to ascertain the extent and value of the property. The assessor shall conduct the investigation in such a manner that would discover and correct any errors in the taxpayer's favor as well as discover and correct any errors not in the taxpayer's favor.

§ 42-15055 Failing to file report; false information; classification; evading tax; penalty

A. A person who knowingly fails to file any report of taxable property that is required by this article or to supply any information that is required by the assessor or the deputy assessor or who knowingly makes, renders, signs or verifies any false or fraudulent information is guilty of a class 2 misdemeanor.

B. A person who knowingly fails or refuses to furnish the assessor with such information or material as demanded under section 42-15052 is guilty of a class 2 misdemeanor.

C. If the person fails to deliver the report as required by section 42-15052, the assessor shall add a penalty of an additional ten per cent to the value of the property for the tax year.

D. If the person fails to file the report as required by section 42-15053, the assessor shall add a penalty of an additional ten per cent to the value of the property for the tax year. If the person fails to prepare and deliver the report within the specified period, but within thirty days thereafter, the assessor may abate all or part of the penalty.

E. Any property that is knowingly concealed, removed, transferred or misrepresented by the owner or agent of the owner to evade taxation is liable, on discovery, for the amount of the taxes due determined pursuant to section 42-15054, plus a penalty equal to the amount of taxes due for the year in which the discovery was made.

§ 42-15057 Information from political subdivisions

Each city, town, county or other governmental entity that requires that a building permit be issued to construct or add to residential or commercial buildings shall notify the county assessor in writing:

Of the parcel number for which the permit is issued at the time the permit is issued.
That the improvements are approved for their intended use at the time the building department makes the final inspection of the improvement.

§ 42-15058 Assessment of contiguous properties owned by the same person

If two or more contiguous lots, tracts of land or patented mines are owned by the same person, they may be jointly assessed and one valuation may be determined for the whole.

§ 42-15059 Liability for items of personal property

Each item of property in an assessment is liable for the taxes on all items of personal property in the same assessment.

§ 42-15060 Presumptions of ownership

For purposes of taxation the following personal property is considered to be the property of the person in possession:

Personal property in possession of a fiduciary.
Personal property that is mortgaged or pledged.

§ 42-15061 Deduction of liabilities from assessed solvent debts

If solvent debts are assessed, the person against whom they are assessed may deduct the person's liabilities from the amount of the debts.

§ 42-15062 Listing and valuing water ditches and toll roads

A. Water ditches that are constructed for mining, manufacturing or irrigation purposes and toll roads shall be valued in the same manner as real property at a rate per mile for the portion that lies in each county.

B. Each county assessor shall list water ditches and toll roads as a whole without separating the land and franchise, improvements and property in either the description or the valuation.

C. The valuation of private irrigation ditches that are owned entirely by the persons who use all of the supplied water on their own lands shall be determined as a part of the land.

§ 42-15063 Assessing livestock; lien

A. Except as provided in section 42-11126, range livestock shall be assessed, and the taxes levied against the livestock shall be collected, as taxes on real property.

B. The assessment constitutes a lien for taxes on all livestock under the same brand. If the owner of a brand sells any range livestock less than the entire number under the brand before the taxes are due, the owner may pay the tax on the number sold proportioned to the number assessed under the brand. That amount shall be credited on the amount due under the assessment against livestock under that brand, and the number sold are thereupon released from the lien.

§ 42-15065 Assessing personal property construction work in progress; definition

A. The county assessor shall not:

Value or assess personal property construction work in progress until the construction work has progressed to a sufficient degree for the personal property to be useful for the purpose for which it is being constructed.
Place personal property construction work in progress on the roll unless it is valued by the department as provided by law.

B. For purposes of this section, "personal property construction work in progress" means the amount spent and entered on the taxpayer's accounting records as of December 31 of the preceding calendar year as construction work in progress.

§ 42-15066 Assessing clean rooms as personal property; definition

A. Clean rooms that are used for manufacturing, processing, fabrication or research and development of semiconductor products shall be valued and assessed as tangible personal property.

B. For purposes of this section, "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:

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.
Does not include the building or a permanent, nonremovable component of the building that houses the clean room environment.

Article 3 Assessment Notice

§ 42-15101 Annual notice of full cash value; amended notice of valuation

A. Except as provided by section 42-13254, on any date before March 1 of each year the county assessor shall notify each owner of record, or purchaser under a deed of trust or an agreement of sale, of property that is valued by the assessor as to the property's full cash value and the limited property value, if applicable, to be used for assessment purposes.

B. The notice under this section shall be in writing and shall be mailed, delivered by common carrier, or on request of the taxpayer transmitted electronically to the person's last known mailing, delivery or electronic address. With respect to any property transferred by a beneficiary deed pursuant to section 33-405, until the county assessor is notified by the beneficiary in writing, accompanied by a certified copy of the last surviving owner's death certificate and the change of address, mailing of the notice to the last known address of the deceased owner is deemed a mailing to the beneficiary's last known mailing, delivery or electronic address as required by this section.

C. On the same date each year the assessor shall certify to the board of supervisors and the department the date on which all notices under this section were mailed.

D. The director may extend the final date for mailing notices beyond March 1 for a period of not more than thirty days for delays caused by an act of God, flood or fire or a state of emergency declared pursuant to section 26-303. If the director extends the mailing date, the extension applies to all property valued by the assessor.

E. Within sixty days after the mailing of the notice of valuation pursuant to this section, if the assessor discovers that property characteristic data applicable to a grouping of properties delineated by neighborhood or classification resulted in an incorrect opinion of value, the assessor may amend the notice of valuation and, if amended, shall notify the property owner of the amended value pursuant to subsection B of this section. The assessor shall transmit any proposed amendments made under this subsection to the department as provided by section 42-11056, subsections B and C, in a format prescribed by the department. The assessor shall not mail the amended notices of valuation until the proposed amendments are transmitted to the department and the department approves the amended values. The assessor shall certify the amended notices of valuation pursuant to subsection C of this section.

F. After the mailing date of the notice, any person who owns, claims, possesses or controls property that is valued by the assessor may inquire of and be advised by the assessor as to the valuation of the property determined by the assessor, but the assessor shall not change the roll except as provided by chapter 16, article 2 of this title or as otherwise provided by law.

§ 42-15102 Notice information entered by assessor

A. The assessor shall include in the assessment notice:

The full cash value found by the assessor for the property for the preceding valuation year.
The classification of the property pursuant to chapter 12 of this title.
The mailing date of the notice.
The last date on which the owner may file an appeal from the valuation or classification assigned to the property.

B. Except for property that is listed as class three property under section 42-12003, owner-occupied residential property that is listed as class four property under section 42-12004, subsection A, paragraph 1 and single family rented residential property that is listed as class four property under section 42-12004, subsection A, paragraph 2, the notice shall separately list the full cash value of the land and the full cash value of the improvement or improvements associated with the land.

§ 42-15103 Contents of notice form

The notice form shall:

Prominently display a statement for all residential properties that:

(a) Defines class three properties as described in section 42-12003.

(b) Informs property owners that if the property listed on the notice does not meet the description provided pursuant to subdivision (a) of this paragraph, the owner must notify the county assessor of the usage of the property or the owner may be subject to a civil penalty prescribed by section 42-12052.

Include simplified instructions on the procedure and deadlines for appealing the assessed valuation shown on the notice.
Prominently display a statement informing owners of property that is used for residential rental purposes that:

(a) The parcel must be listed on the notice as class four, and the owner must register the residential rental property with the county assessor pursuant to section 33-1902 or the owner may be subject to a penalty.

(b) If the owner is required to register the rental property with the county assessor and fails to do so after receipt of this notice, the city or town may impose a civil penalty payable to the city or town in the amount of $150 per day for each day of violation, and the city or town may impose enhanced inspection and enforcement measures on the property.

(c) Residential rental properties are required to comply with the landlord tenant law pursuant to title 33, chapters 10 and 11.

§ 42-15104 Appeal

A person who is not satisfied with the valuation or classification of the person's property determined by the assessor may:

Petition the assessor for review pursuant to chapter 16, article 2 of this title.
Appeal to tax court pursuant to section 42-16201.

§ 42-15105 Supplemental notice and appeal of valuation or classification in case of new construction, changes to assessment parcels and changes in use

For property that is valued by the assessor, in the case of new construction, additions to, deletions from or splits or consolidations of assessment parcels and changes in property use that occur after September 30 of the preceding year and before October 1 of the valuation year:

The assessor shall notify the owner of the property of any change in the valuation or legal classification on or before September 30 of the valuation year.
Within twenty-five days after the date of the assessor's notice, the property owner may appeal the valuation or legal classification to the state board of equalization if the property is located in a county with a population of five hundred thousand persons or more or to the county board of equalization if the property is located in any other county.

Article 4 Real and Personal Property Assessment Roll

§ 42-15151 Preparation of county roll

The county assessor shall prepare the assessment roll in the form and containing the information prescribed by the department.

§ 42-15152 Inclusion of all property on the roll

A. In addition to all other property that is required by law to be placed on the roll, all real property that is subject to the jurisdiction of this state, regardless of ownership or by whom it is claimed, possessed or controlled, and regardless of whether it is exempt from taxation by law or by the Constitution of Arizona, shall be listed on the roll in the manner prescribed by this article. This subsection does not alter any statute or constitutional provision relating to property that is exempt from taxation.

B. The roll shall also include the total personal property tax roll as provided in section 42-17053.

§ 42-15153 Completion and delivery of property lists and assessment roll; use of lists by administrative appeals bodies

A. On or before December 20 of each year, the county assessor shall complete the assessment roll and attach the assessor's certificate to the roll with a cross-index of all property listed in the roll, showing the ownership of the property and all assessment lists from which the roll was compiled.

B. The assessor shall deliver the lists and certified roll to the clerk of the board of supervisors who shall file them in the clerk's office.

C. The county board of equalization and the state board of equalization may use the lists for any lawful purpose.

§ 42-15155 Abstract of assessment roll; contents; distribution

A. On or before January 20 of each year, the clerk of the board of supervisors shall make an abstract of the roll containing the valuations by taxing jurisdictions of all property in the county including:

The total personal property tax roll as provided by section 42-17053.
Such other information as prescribed by the department.

B. The clerk shall file one copy of the abstract in the office of the board of supervisors and shall transmit additional copies to the state or county board of equalization, as appropriate, and to the department.

§ 42-15156 Statewide abstract of property on county rolls; distribution

A. The department shall prepare an abstract containing the valuation by county and taxing jurisdiction of all property that is subject to property taxation in this state.

B. Before April 30 the department shall transmit copies of the statewide abstract to the state or county board of equalization, as appropriate, and each county board of supervisors.

§ 42-15157 Destruction of property after rolls closed; proration of valuation and taxes; definition

A. If a property is destroyed after the county assessor closes the rolls, the property owner may file a notice of claim pursuant to section 42-16254 or the county assessor may issue a notice of proposed correction pursuant to section 42-16252 to prorate the valuation of the property from the date of destruction.

B. If the county assessor finds that the property has been destroyed:

The county assessor shall prorate the value of the property from the lien date to the date of destruction.
For the purposes of classifying property under chapter 12, article 1 of this title, the county assessor may maintain the property classification in place on the date of destruction for a period of five years or until an objectively verifiable change in use occurs, whichever is sooner.
The county assessor shall notify the property owner of the property assessment pursuant to the applicable notice requirements provided in this chapter or chapter 16 of this title.
The county treasurer shall compute the amount of taxes assessed against the property by applying the tax rate for the appropriate tax year to the original valuation prorated for the portion of the year the property was intact, plus the tax rate for the appropriate tax year to the reassessed value of the property prorated for the balance of the year.

C. For the purposes of this section, "destroyed" means physical destruction caused by a verifiable accident, including fire, flood or any other act of God.

Article 5 Assessment of Permanently Affixed Mobile Homes

§ 42-15201 Definitions

In this article, unless the context otherwise requires:

"Mobile home" has the same meaning prescribed in section 42-19151.
"Permanently affixed" means the installation of a mobile home on real property that is owned by the owner of the mobile home.

§ 42-15202 Assessment of permanently affixed mobile homes as real property

A mobile home that has been permanently affixed to real property and for which an affidavit of affixture has been recorded pursuant to this article shall be assessed as real property.

§ 42-15203 Affidavit of affixture

A. A person who owns a mobile home that is permanently affixed to real property may file an affidavit of affixture with the county recorder of the county in which the real property is located.

B. An affidavit of affixture shall contain all of the following:

The vehicle identification numbers of the mobile home.
The legal description of the real property to which the mobile home has been affixed.
A statement that the mobile home has not previously been assessed and taxed in this state as personal property or the name and address of the person to whom the last tax statement for the mobile home was sent and the location of the mobile home when it was last taxed.
The name of the holder of any security interests in the mobile home that are not terminated by consent of the secured party contained on the affidavit of affixture pursuant to subsection C of this section and the original principal amount secured by the security interest.
As an attachment, the department of transportation's receipt issued pursuant to section 28-2063, subsection A, paragraph 3.

C. The recording of an affidavit of affixture does not impair the rights of any holder of a perfected security interest in the mobile home unless the affidavit of affixture contains the acknowledged consent of the secured party to the termination of the security interest. If a secured party so consents, that security interest terminates when the affidavit of affixture is recorded.

D. If an affidavit of affixture is submitted for recording on a mobile home entering this state for sale or installation, a certificate of compliance or waiver issued by the Arizona department of housing is required and shall be submitted with the affidavit of affixture.

E. If a release of a security interest that, according to its terms, recites that it secures an obligation having a stated indebtedness not greater than five hundred thousand dollars exclusive of interest has not been executed and recorded within sixty days of full satisfaction of the obligation secured by the security interest, a title insurer as defined in section 20-1562 may prepare, execute and record a full release of the security interest. At least thirty days before issuing and recording a release pursuant to this subsection, the title insurer shall mail by certified mail with postage prepaid, return receipt requested, to the holder of the security interest contained in the affidavit of affixture at the last known address shown of record and to any persons who according to the records of the title insurer received payment of the obligation at the address shown in the records, a notice of its intention to release the security interest accompanied by a copy of the release to be recorded. The release shall set forth:

The name of the holder of the security interest or any successors in interest of record of the security interest and, if known, the name of any servicing agent.
The name of the owner of the property shown on the affidavit of affixture.
The name of the current record owner of the property.
The recording reference to the affidavit of affixture.
The date and amount of payment, if known.
A statement that the title insurer has actual knowledge that the obligation secured by the security interest has been paid in full.

F. The release of security interest may be executed by a duly appointed attorney-in-fact of the title insurer, but such delegation does not relieve the title insurer from any liability pursuant to this section.

G. A release issued pursuant to subsection E of this section is entitled to recordation and, when recorded, constitutes a full release of security interest.

H. In addition to any other remedy provided by law, a title insurer preparing or recording the release of security interest pursuant to subsection E of this section is liable to any party for actual damage, including attorney fees, that any person may sustain by reason of the issuance and recording of the release of security interest.

I. The title insurer shall not record a release of security interest if, before the expiration of the thirty-day period specified in subsection E of this section, the title insurer receives a notice from the holder or servicing agent that states that the security interest continues to secure an obligation.

J. The title insurer may charge a reasonable fee for services to the owner of the land or other person requesting a release of security interest, including search of title, document preparation and mailing services rendered, and in addition may collect official fees.

K. A mobile home identified in an affidavit of affixture recorded pursuant to section 33-1501 shall be assessed as personal property.

§ 42-15204 Transition from personal property to real property roll

After the affidavit of affixture has been recorded, the mobile home shall remain on the personal property tax roll until the next real and personal property tax rolls are prepared, at which time the mobile home shall be transferred from the personal property tax roll to the real property tax roll and shall be considered for all purposes to be a fixture and a real property improvement.

§ 42-15205 Perfecting liens on permanently affixed mobile homes

Liens on permanently affixed mobile homes that are assessed under this article shall be perfected either in the manner provided by law for perfecting real property liens or in the manner provided by law for perfecting security interests in fixtures.

Article 6 Assessment of Remote Municipal Property

§ 42-15251 Definition of remote municipal property

In this article, unless the context otherwise requires, "remote municipal property" means either:

Property that is owned by a city, town or successor political subdivision and that is not located in the county in which all or part of the city, town or political subdivision is located and from which water may be withdrawn or diverted and transported for use on other property in the county in which the city, town or political subdivision is located. For purposes of this paragraph, property that is owned by a city, town or political subdivision includes property that is owned directly by the city, town or political subdivision and property that is owned indirectly through a nonprofit corporation or another entity that is owned or controlled by the city, town or political subdivision.
Property that is privately owned and that previously met the requirements of paragraph 1.

§ 42-15252 Determining assessed valuation of remote municipal property

A. The county assessor shall determine the full cash value and assessed valuation of remote municipal property at the same amount and using the same method of assessment as applied to private property that is used for the same purpose in the county.

B. Remote municipal property that is used for agricultural purposes as provided in chapter 12, article 4 of this title shall be valued pursuant to chapter 13, article 3 of this title. Remote municipal property that has been retired from irrigated agricultural use but that is not used for any commercial purpose shall be valued at its market value and assessed as class two property pursuant to sections 42-12002 and 42-15002.

C. The assessor shall transmit the determination of the value of the property to the county board of supervisors on or before the third Monday in June.

§ 42-15253 Computing amount of taxes otherwise payable on remote municipal property

A. On or before the third Thursday in August, the county board of supervisors shall compute and report to the city, town or political subdivision the amount of property taxes that would otherwise be payable on the city's, town's or political subdivision's remote municipal property by:

Multiplying the combined total primary property tax rates of the political subdivisions in which the property is located by the assessed valuation of the property.
Multiplying the combined total secondary property tax rates of the political subdivisions in which the property is located by the assessed valuation of the property.

B. The sum of the primary and secondary taxes so computed is the amount of property taxes otherwise payable on the remote municipal property.

§ 42-15254 Conveyance of remote municipal property to private ownership; payment of tax revenues

A. If the municipality conveys the title to the remote municipal property to private ownership, a political subdivision that receives property taxes from the property, and that has outstanding bonds or other long-term obligations that are secured by water transportation revenues under title 35, chapter 3, article 3.4, shall determine the amount of property taxes otherwise payable as prescribed by section 42-15253 as a result of that political subdivision's property tax rates and the value of the property.

B. The political subdivision shall make special payments to the county treasurer of the county in which the property is located in the amount determined pursuant to section 42-15253 in the manner prescribed in section 9-433.

Article 7 Assessment of Possessory Improvements on Government Property

§ 42-15301 Definition of possessory improvement

In this article, unless the context otherwise requires, "possessory improvement" means all residential, commercial and industrial buildings, together with appurtenant awnings, decks, docks, garages, carports, storage or other incidental buildings, located on federal, state, county or municipal property or the property of another political subdivision of this state that is owned by a nongovernmental possessor thereof.

§ 42-15302 Valuation of possessory improvements

The assessor shall use standard appraisal methods and techniques to value possessory improvements.

§ 42-15303 Determining limited property value of possessory improvements

The limited property value of possessory improvements shall be calculated pursuant to chapter 13, article 7 of this title and is not subject to the exemption for personal property as set forth in section 42-13304.

§ 42-15304 Tax levy of possessory improvements

A. Ownership of improvements on government property shall be considered sufficient security for the payment of taxes levied thereon and may be placed on the real property roll.

B. If the tax on any possessory improvement remains unpaid at the date set for selling the real property tax liens, the assessment together with interest, penalties and costs shall be subject to procedures for delinquent taxes as real property pursuant to chapter 18, article 3 of this title.

§ 42-15305 Applicability

This article does not alter the definition of, or the characteristics used to determine ownership under applicable law.

Chapter 16 Property Tax Appeals and Reviews

Article 1 General Provisions

§ 42-16001 Designation of taxpayer agent

A. A person who owns, controls or possesses property that is valued by the county assessor or the department of revenue may each year designate an agent to act on the person's behalf on any matter relating to the review of the property valuation before:

The assessor.
The department of revenue.
The county board of equalization.
The state board of equalization.

B. The designation of an agent under this section:

Shall be made annually in writing to the county assessor or the department of revenue on a form prescribed by the department.
Expires at the end of the calendar year.

C. The form shall be filed with the petition under article 2 of this chapter or chapter 14, article 1 of this title with the county assessor and the county board of equalization or the state board of equalization. Thereafter, notices issued by the assessor, by the department of revenue or by either board of equalization relating to reviewing the valuation of that property shall be sent to the agent.

§ 42-16002 Changes and corrections in tax roll to reflect determinations on review or appeal

A. The county assessor or county treasurer, whichever is appropriate, shall make the necessary changes in the tax roll and records to reflect the determinations that change valuations or classifications of property that result from reviews, administrative or judicial appeals or correction of errors and omissions under this title.

B. If a review or administrative appeal pursuant to article 2, 3 or 4 of this chapter or a judicial appeal pursuant to article 5 of this chapter results in a reduction of the valuation or a change in the classification of property, in the next year the valuation or classification of property shall be the valuation or classification that was determined by the review or appeal unless either:

There is new construction, a structural change or a change of use on the property as prescribed by section 42-13302, subsection A, paragraph 2.
Chapters 11 through 19 of this title require a specific annual formula for the valuation.

C. This section does not limit the right of a property owner to appeal the valuation or classification of the property.

Article 2 Administrative Review of Valuation by Assessor

§ 42-16051 Petition for assessor review of improper valuation or classification

A. An owner of property that in the owner's opinion has been valued too high or otherwise improperly valued or listed on the roll may file a petition with the assessor on a written form prescribed by the department.

B. The petition shall state the owner's opinion of the full cash value of the property and substantial information that justifies that opinion of value for the assessor to consider for purposes of basing a change in classification or correction of the valuation. For purposes of this subsection, the owner provides substantial information to justify the opinion of value by stating the method or methods of valuation on which the opinion is based and:

Under the income approach, including the information required in section 42-16052.
Under the market approach, including the full cash value of at least one comparable property in the same geographic area or the sale of the subject property.
Under the cost approach, including the cost to build or rebuild the property plus the land value.

C. The petition may include more than one parcel of property if they are part of the same economic unit according to department guidelines or if they are owned by the same owner, have the same use, are appealed on the same basis and are located in the same geographic area, as determined pursuant to department guidelines, and are on a form prescribed by the department.

D. The petition shall be filed within sixty days after the date the assessor mailed the notice of valuation or the amended notice of valuation under section 42-15101. United States postal service postmark dates are evidence of the date petitions were filed for purposes of this subsection.

E. The petition for review form for property that is listed as class three pursuant to section 42-12003 shall contain simplified instructions and shall be separate from the petition forms used for other classes of property.

§ 42-16052 Contents of petition based on income approach to value

A. A petition that is filed with the assessor, based on the income approach to value, shall include income and expense data relating to the property for the three most recent consecutive fiscal years of the petitioner ending on or before September 30 of the previous year. If the income and expense data are not available to the petitioner, the petitioner shall file with the petition such income and expense data as are available. The department, by rule, may establish additional information to be filed if the required income and expense data are not available.

B. If a petitioner under this article uses the income approach to determine valuation, the petitioner, an officer of a corporate petitioner, a general partner or a designated agent shall file a sworn affidavit under penalty of perjury that the information contained in the petition is true and correct to the best of the petitioner's knowledge.

§ 42-16053 Rejection of petition for failure to include substantial information; amended petition; appeal

If the county assessor rejects a petition because it fails to include substantial information required by sections 42-16051 and 42-16052, and if the notice of rejection is mailed:

On or before June 15, the petitioner may file an amended petition with the assessor within fifteen days after the notice of rejection is mailed.
After June 15, the petitioner may appeal within fifteen days to:

(a) The county board of equalization as provided by article 3 of this chapter, if a county board is established in the county.

(b) The state board of equalization, if a county board is not established in the county.

§ 42-16054 Meeting between assessor and petitioner

A. At the petitioner's written request, the assessor shall meet with the petitioner at a time and place designated at least ten working days in advance by the assessor.

B. If the petitioner is unable to appear and meet with the assessor at the time and place set by the assessor, the petitioner may submit written evidence to support the petition if it is submitted before the date of the meeting.

§ 42-16055 Ruling on petition

A. In all cases the assessor shall consider the petition and shall rule on each petition filed under this article by August 15 of each year.

B. In considering a petition filed under this article the assessor shall consider the valuation fixed by the assessor on other similar property that is similarly situated.

§ 42-16056 Appellate rights

A. If the assessor grants the requested relief, the petitioner may not appeal the ruling.

B. If the petitioner and the assessor reach an agreement within five business days after the conclusion of the meeting, both parties shall sign the agreement, and both parties waive the right to further appeal.

C. If all or part of the petitioner's request is denied, the assessor shall mail, on the date of the ruling, to the petitioner at the address shown on the petition notice of the grounds of the refusal to make the requested change with a copy of the petition. Within twenty-five days after the assessor's decision is mailed, a petitioner whose request is denied may appeal to:

The county board of equalization, if a county board is established in the county, as provided by article 3 of this chapter.
The state board of equalization, if a county board is not established in the county, as provided by article 4 of this chapter.
Superior court as provided by article 5 of this chapter.

D. A person who owns, controls or possesses property that is valued by the county assessor may not appear before the county or state board of equalization without first having filed a petition with the assessor as provided by this article unless otherwise authorized by law. A person shall not raise any issue if the issue was not included in the petition filed under this article.

Article 3 County Board of Equalization

§ 42-16101 Definition of county board

In this article, unless the context otherwise requires, "county board" means the county board of equalization.

§ 42-16102 County board of equalization

A. In each county with a population of less than five hundred thousand persons according to the most recent United States decennial census, the board of supervisors constitutes a county board of equalization. The clerk of the board of supervisors shall serve as the clerk of the board of equalization.

B. A county board of equalization shall not be established in any county with a population of five hundred thousand persons or more.

C. The board of supervisors, by a majority vote, may contract with the state board of equalization to review and hold hearings and make decisions on petitions filed under section 42-16105.

§ 42-16103 Hearing officers

A. In fulfilling the responsibilities of the board of equalization, the board of supervisors, by a majority vote, may appoint a hearing officer to review petitions filed under section 42-16105.

B. An appointed hearing officer must meet the qualifications prescribed by the county board of equalization that at a minimum shall include experience in at least one of the following areas:

Real estate appraisal or sales.
Hearing property valuation appeals at the county or state level.
Arbitration.

C. At least annually each hearing officer appointed pursuant to this section shall attend valuation review classes provided by the state board of equalization.

§ 42-16104 Operation of county board

A. One or more members of the county board or a hearing officer of the county board may hold hearings and take testimony to be reported for action by the county board.

B. The county board or hearing officer shall meet as often as necessary to hear all petitions filed under section 42-16105. The county board shall mail notice of each hearing to all parties at least fourteen days before the date of the hearing unless all parties waive the notice requirement. The county board shall complete all hearings and issue all decisions under this section on or before October 15 of each year.

C. The county board may change any valuation or legal classification of property that is valued by the assessor or hearing officer, if one is appointed.

§ 42-16105 Appeal of valuation or legal classification from county assessor to county board

A. If the county assessor denies all or part of a petition under section 42-16055, and if a county board of equalization has been established in the county, the petitioner may appeal the assessor's decision to the county board by filing with the clerk of the county board, within twenty-five days after the date that the assessor's decision was mailed to the petitioner, a copy of the written basis of the decision according to the instructions on the petition.

B. The department may contest any proposed valuation or classification or any proposed change in valuation or classification before the county board. If, in the director's opinion, a decision of an assessor is erroneous, the director may appeal the assessor's decision to the county board within twenty-five days after the assessor's decision was mailed to the taxpayer and the department. In such an action the taxpayer shall raise any defense the taxpayer has to liability for the tax and any additional tax sought to be imposed. If issues other than valuation or classification are raised by either party, the action shall be tried as if it were an action pursuant to section 42-11005 or 42-11052.

C. A property owner that receives a notice of valuation under section 42-15105 may appeal the valuation or legal classification to the county board as provided in subsection A of this section within twenty-five days after the date of the assessor's notice.

§ 42-16106 Hearing

A. The county board shall act on the petition, shall hear testimony presented in person at the hearing and may subpoena witnesses to testify regarding the petition. Unless all parties agree otherwise, each party shall submit evidence in person.

B. The petitioner shall pay the cost of producing the petitioner's witnesses at the hearing.

C. The assessor or the assessor's designated representative shall:

Attend all meetings and hearings of the county board.
Supply the board with all information that the assessor possesses.

§ 42-16107 Evidence; basis for decision

A. The decision shall be based on evidence presented by parties attending the hearing.

B. The county board shall consider the valuation or legal classification fixed by the assessor on similar property that is similarly situated.

C. The evidence permitted in an appeal relating to a petition based on the income approach to value is limited to the income and expense data filed with the petition, the testimony of the petitioner and any witnesses presented on the petitioner's behalf, and evidence presented by the assessor and the department.

§ 42-16108 Decision

A. Except as provided in subsection B of this section, the county board shall either grant or refuse the request of the petitioner, in whole or in part, as it considers just and proper within ten days after the date of the hearing, and in any event not later than October 15.

B. In the case of an appeal under section 42-16105, subsection C, the county board shall complete the hearing and issue a decision on or before the third Friday in November of the calendar year preceding the year in which the taxes are levied.

C. In the case of a personal property appeal under section 42-19052, the county board of equalization shall complete the hearing and issue a decision on or before December 1 of the calendar year in which the taxes are levied.

D. Within ten days after its decision, the county board shall mail a copy of the decision to the county assessor and to the petitioner at the address shown on the petition.

E. Any decision of the county board shall not exceed the county assessor's noticed valuation and recommended classification.

§ 42-16109 Corrections and changes to tax roll

A. The county board may correct any error or mistake in the assessor's valuation or legal classification under the law when the county board considers it necessary to list the property on the roll at its full cash value.

B. The county board shall require the assessor to place on the roll and determine the valuation or legal classification of any property that is subject to taxation but that is not on the roll. In the absence of the assessor, the county board shall determine the valuation or legal classification of the omitted property and transmit the proposed valuation or legal classification to the department as provided by section 42-11056.

C. The county assessor shall make the necessary changes in the tax roll and records to reflect the county board's determination.

D. The department has the right to intervene and be heard in any proceeding pursuant to this section.

§ 42-16110 Entry of changes and completion of roll

If the board of supervisors makes any changes to valuations or legal classifications ordered by the county board of equalization it shall:

Add up on the roll the entries of:

(a) Valuation of each description of property.

(b) Valuation of each class of property, as valued.

Enter all totals on the roll.

§ 42-16111 Appeal from county board of equalization

A. A property owner who is dissatisfied with the valuation or classification of the property as fixed by the county board, or a petitioner whose petition under this article is denied, in whole or in part, may appeal directly to court as provided by section 42-16202.

B. If the county board orders the valuation of any property to be reduced, the assessor or the department may appeal the decision to the court in the same manner as provided in subsection A of this section.

Article 4 State Board of Equalization

§ 42-16151 Definition of state board

In this article, unless the context otherwise requires, "state board" means the state board of equalization.

§ 42-16152 State board of equalization

The state board of equalization is established as an independent agency that is not subject to the supervision or control of the department of revenue.

§ 42-16153 Members

A. The state board of equalization consists of:

Ten members who are appointed by the board of supervisors of each county with a population of more than five hundred thousand persons according to the most recent United States decennial census.
Ten members who are appointed by the governor from each county with a population of more than five hundred thousand persons according to the most recent United States decennial census.
An additional member who is appointed by the governor, who is designated as chairman and who serves in a full-time capacity.

B. Other than the chairman, members of the state board of equalization shall be selected on the basis of their work experience and other qualifications in at least one of the following categories:

Experience in at least three of the preceding eight years in property valuation, property tax appeals or appraising real property.
A certified general appraiser under section 32-3612.
A property valuation hearing officer or member of the state board of equalization, or any predecessor to the board, for at least three of the preceding eight years.
A member of the state bar of Arizona with at least three years of experience in property valuation or condemnation practice.
Experience in at least three of the preceding eight years as a real estate broker.

C. Members who are appointed by the county board of supervisors serve at the pleasure of the county board for terms that expire at the same time as the elective term of the county supervisors. Members who are appointed by the governor serve a term of five years. Members may be reappointed.

D. Except as provided in section 42-16154, subsection A, members of the state board are eligible to receive:

Not more than three hundred dollars per day for time spent in performing official duties, prorated for partial days spent on official duty.
Reimbursement for travel and other expenses as provided by law for other state officers.

E. Members who are appointed by a county shall be paid by the county. Members who are appointed by the governor shall be paid by the state.

F. A member of the state board of equalization shall not:

Hold any other public office under the laws of this state or a political subdivision of this state except a position on a board or commission that does not regularly interact with the state board of equalization.
Be a candidate for an elective office under the laws of this or any other state.
Hold any position of trust nor provide or engage in any occupation or business that would conflict with the duties of a member of the board.
Other than the chairman, have been employed by a county assessor or county attorney or by the department of revenue or the department of law within two years before appointment.

G. The governor may remove any member of the state board who was not appointed by a county board of supervisors for any of the following reasons:

Cause.
Failure to carry out the duties and responsibilities of the position.
Failure to follow the rules of the board.
Failure to follow the directions of the chairman as provided by law.

§ 42-16154 Chairman; administration; meetings

A. The governor shall appoint the chairman of the state board who is responsible for the administration and operation of the board. The position of chairman is a full-time position. The chairman is eligible to receive compensation pursuant to section 38-611.

B. The state board shall meet at the call of the chairman as often as necessary to accomplish the duties prescribed by law and may hold meetings or hearings at any location in the counties that appoint members to the board. Members of the state board shall act under the direction of the chairman in carrying out their duties and responsibilities as provided by law and the rules of the board.

C. The members of the state board shall adopt administrative rules and rules of procedure for hearings before the board. The state board of equalization may adopt by reference judicial rules and rules of the state board of tax appeals to the extent that they apply to the proceedings of the state board of equalization. All hearings that are conducted before the state board, either by the board or a panel, a member or a hearing officer of the board, shall be conducted according to the rules.

§ 42-16155 Hearing officers and employees

A. Subject to title 41, chapter 4, article 4, the state board of equalization may employ one or more hearing officers who must meet the same qualifications prescribed for the members of the board by section 42-16153.

B. Any training activity for hearing officers shall be held in public with notice as prescribed by title 38, chapter 3, article 3.1.

C. A hearing officer is eligible to receive up to three hundred dollars per day for time spent in performing official duties.

D. Subject to title 41, chapter 4, article 4, the state board may appoint a chief clerk and any other employees that it considers to be necessary to carry out its duties.

§ 42-16156 Case assignment

A. The chairman or chief clerk of the state board shall assign tax cases on a random basis to members of the board to be heard as provided by this article. This subsection does not prevent the chairman or chief clerk from taking into account in assigning tax cases the availability of members, real or potential conflicts of interest of members or the convenience of petitioners or their representatives who file multiple petitions.

B. The chairman or chief clerk shall assign each case involving:

Appeals of property valuations that are determined by the department and equalization orders that are issued pursuant to statute to members of the board who are appointed by the governor. This paragraph does not apply to any properties that are valued by the department but would otherwise be valued by the county assessor.
Property listed as class three pursuant to section 42-12003 or property valued by the assessor at three million dollars or less to be heard by at least one member of the board or by a hearing officer who shall be from the county in which the property is located.
Any other property to a panel of either three or five members of the board, at least two of whom shall be from the county in which the property is located unless the chairman is sitting as a representative of that county. The chairman of the board shall designate a member to act as chairman of each panel. When possible, at the chairman's discretion, on any panel:

(a) Of three members, no more than one member may have been employed by a county assessor or county attorney or by the department of revenue or the department of law within four years.

(b) Of five members, no more than two members may have been employed by a county assessor or county attorney or by the department of revenue or the department of law within four years.

C. The chairman may sit on any case as a hearing officer representing any county.

§ 42-16157 Appeal of valuation or legal classification from county assessor to state board of equalization

A. Except as provided in subsection C or D of this section, if the county assessor denies all or part of a petition under section 42-16055, and if a county board of equalization is not established in the county where the property is located, the petitioner may appeal the assessor's decision to the state board of equalization by filing with the state board, within twenty-five days after the date that the assessor's decision was mailed to the petitioner, a copy of the written basis of the decision according to the instructions on the petition.

B. The department may contest any proposed valuation or classification or any proposed change in valuation or classification before the state board. If, in the director's opinion, a decision of an assessor is erroneous, the director may appeal the assessor's decision to the state board within twenty-five days after the assessor's decision was mailed to the taxpayer and the department. In such an action the taxpayer shall raise any defense the taxpayer has to liability for the tax and any additional tax sought to be imposed. If issues other than valuation or classification are raised by either party, the action shall be tried as if it were an action pursuant to section 42-11005 or 42-11052.

C. A property owner who receives a notice of valuation under section 42-15105 may appeal the valuation or legal classification to the state board as provided in subsection A of this section within twenty-five days after the date of the assessor's notice.

D. A property owner whose petition is denied, in whole or in part, pursuant to section 42-19051 may only appeal the valuation or legal classification to the state board as provided in subsection A of this section within twenty days after the date of the assessor's notice of refusal or decision.

E. The state board may contract with any county with a population of less than five hundred thousand persons according to the most recent United States decennial census to review and hold hearings and make decisions on petitions filed under section 42-16105. These hearings shall be conducted in the county in which the property of the subject hearings is located.

§ 42-16158 Appeal of valuation or legal classification from department to state board of equalization

A. A property owner who is not satisfied with the valuation or legal classification of the property as determined by the department may appeal to the state board by filing a petition with the state board that is postmarked on or before October 1 or within fifteen days after the department mails its decision to the property owner, whichever date is later. The state board shall prescribe the form of and procedure for filing the petition by administrative rule.

B. The state board shall notify the petitioner of the time and place of the hearing. The petitioner:

May appear before the state board at such time as the board may direct.
Is entitled to be heard at any hearing regarding the valuation or legal classification of the property.
Shall show cause why the valuation or legal classification should be changed.

C. If the state board orders the valuation or legal classification to be changed, it shall immediately transmit a copy of the order to the property owner and to the officers of this state and the county, city or town in charge of tax assessments who shall correct the tax roll accordingly.

§ 42-16159 Hearing on department equalization order

A. At the request of a county assessor who receives an equalization order issued by the department under chapter 13, article 6 of this title, the state board shall hold a hearing and issue its decision within fifteen days after receipt of an appeal pursuant to section 42-13255.

B. The state board shall receive testimony from the department and the assessor on the merits of the equalization order as to:

The proper application of standard appraisal methods and techniques.
The rules and guidelines of the department as they relate to the order.
Any errors in the information or methodology used by the department to determine the necessity for the order, including changes in the valuation of property that were not included in the information used by the department.
Any other evidence relating to the validity of the order.

C. Revisions to the equalization order are effective for the valuation year in which the equalization order was issued.

§ 42-16160 Recommendation for future equalization orders

The state board at any time may recommend to the department properties that in the state board's opinion should be included in the department's next review of property under chapter 13, article 6 of this title.

§ 42-16161 Filings and hearings

A. If the state board maintains an electronic filing system, a party may transmit required information to the board in a format that is compatible with the board's filing system. The board's transmitted receipt is evidence that the board acknowledges that the petitions were filed for purposes of this article.

B. A person whose petition under article 2 of this chapter was denied in whole or in part and who appeals to the state board shall file with the state board:

A copy of the notice of the assessor's original valuation and legal classification.
A copy of the written basis of the assessor's subsequent decision on the petition.

C. Each hearing shall be held in the county in which the property is located. With the permission of all parties, the state board may conduct telephonic hearings when appropriate.

D. The hearing officer, board member or panel shall act on the petition, shall hear testimony presented in person at the hearing and may subpoena witnesses to testify regarding the petition. Unless all parties agree otherwise, each party shall submit evidence in person.

E. The decision shall be based on evidence presented by the parties attending the hearing.

§ 42-16162 Decision of the state board

A. Based on the evidence presented at a hearing on an appeal, the state board shall either grant or refuse the request of the petition, in whole or in part, as the state board considers just and proper. The decision of the state board shall not exceed the assessor's noticed valuation and recommended classification. A decision by the state board does not limit a party from appealing the decision in a manner prescribed by law. The state board may increase individual parcels within an economic unit in a multiple parcel appeal when considering the equitable valuation of an economic unit not to exceed the total aggregate valuation of the multiple parcel appeal on the agreement of both parties.

B. In considering any petition filed by any person, the state board shall review and consider all competent evidence relating to full cash value, including, if presented, the valuation of similar property that is similarly situated.

§ 42-16163 Hearing notices

Unless otherwise provided by law, all notices of hearings on appeals before the state board shall be mailed at least fourteen days before the hearing.

§ 42-16164 Decisions

A. The hearing officer, board member or panel shall issue its decision at the conclusion of the hearing, except that in appropriate cases, the chairman of the state board may authorize the hearing to be continued for additional deliberation. The chairman of the state board may review any decision to ensure due process to all parties.

B. The board shall issue the decision in writing to each party and, in all cases, to the department by mail.

§ 42-16165 Deadlines for issuing decisions

The state board shall complete all hearings and issue all decisions under this article on or before October 15 of each year, except for:

Cases involving property valued by the department, in which case the decisions shall be issued on or before November 15.
An appeal under section 42-16157, subsection C, which shall be completed on or before the third Friday in November of the calendar year preceding the year in which the taxes are levied.
In the case of a personal property appeal under section 42-19052, the state board of equalization shall complete the hearing and issue a decision on or before December 1 of the calendar year in which the taxes are levied.

§ 42-16166 Transmitting changes in valuations or legal classifications

On or before the fourth Friday in November of each year the state board shall transmit to:

The assessor of each county a statement of changes, if any, that it has made in the valuation or legal classification of any property in the county that is valued by the county assessor.
The department a statement of changes, if any, that it has made in the valuation or legal classification of:

(a) Any property that is valued by the department.

(b) Property of taxpayers who pay their taxes to the department, except that in the case of private car companies, the statement shall be transmitted on or before October 31.

§ 42-16167 Entry of changes and completion of roll

If the board of supervisors makes any changes to valuations ordered by the state board of equalization it shall:

Add up on the roll the entries of:

(a) Valuation of each description of property.

(b) Valuation of each class of property, as valued.

Enter all totals on the roll.

§ 42-16168 Appeal to court

A. Any party, or the department, that is dissatisfied with the valuation or classification of property reviewed by the state board may appeal to court as provided by section 42-16203.

B. Appeals from all other orders and decisions of the state board shall be as provided by law.

§ 42-16169 Finality of decision

Any decision of the state board of equalization pertaining to the valuation or classification of property is final when an appeal has not been taken within the time prescribed by section 42-16203. No person may plead such a decision in any proceeding as a bar to raising any valuation or classification issue relating to any other year.

Article 5 Property Tax Appeals to Court

§ 42-16201 Appeal from county assessor to court

A. A property owner who is dissatisfied with the valuation or classification of the property as determined by the county assessor may appeal directly to the court as provided by this article on or before December 15 regardless of whether the person has exhausted the administrative remedies under this chapter, except as provided in subsection B of this section.

B. A person who files a petition with the county assessor pursuant to section 42-16051 may file an appeal with the court within sixty days after the date of mailing the most recent administrative decision relating to the petition or subsequent administrative appeal.

C. Filing an appeal with the court suspends and renders subject to dismissal any pending administrative proceeding filed by the taxpayer relating to any issue that is or may be determined by the court under a pending appeal.

§ 42-16202 Appeal from county board of equalization to court

A. A property owner who is dissatisfied with the valuation or classification of the property as determined by a county board of equalization or a petitioner whose petition is denied by the county board of equalization, in whole or in part, may appeal directly to court within sixty days after the date of mailing of the decision, or by December 15, whichever is later.

B. If the county board orders the valuation of any property to be reduced, the assessor or the department may appeal the decision to court in the same manner as provided by subsection A.

§ 42-16203 Appeal from state board of equalization to court

A. Any party, or the department, that is dissatisfied with the valuation or classification of property reviewed by the state board of equalization may appeal to court as provided by this article.

B. The department or a county assessor who is dissatisfied with the determination by the state board of an equalization order under section 42-16159 may appeal to the court as provided by this article.

C. An appeal to court shall be taken within sixty days after the date of mailing of the state board's final decision.

D. Appeals resulting from a change in value due to correcting a property tax error pursuant to article 6 of this chapter shall be filed within sixty days after the date of mailing of the state board's decision.

§ 42-16204 Appeal from department to court

A property owner who is not satisfied with the valuation or legal classification of the property as determined by the department may appeal directly to superior court as provided by this article on or before December 15.

§ 42-16205 Appeal to court in the case of new construction, changes to assessment parcels and changes in use

An appeal to court from the state board of equalization or a county board of equalization relating to changes in assessments under section 42-15105 due to new construction, additions to or deletions from assessment parcels or changes in property use that occur after September 30 of the preceding year and before October 1 of the valuation year shall be filed within sixty days after the date of mailing of the decision.

§ 42-16205.01 New owner of property; review and appeal

A. If a former owner of property did not have a pending court appeal or receive final judgment or dismissal in court regarding the appeal of the valuation or legal classification, both of the following apply to the new owner of property:

A new owner of property that was valued by the assessor and that changed ownership before December 15 of the valuation year may appeal the valuation or legal classification to court on or before December 15 of the valuation year.
If the change of ownership occurs after December 15 of the valuation year, the new owner may appeal to tax court by December 15 of the year in which the taxes are levied.

B. A new owner may intervene, assume, consolidate, maintain or continue the former owner's position in any pending petition for review or tax appeal under this article for the tax years in which the new owner owns the property.

C. This section does not limit the new owner's right to file in tax court under subsection A or B of this section.

§ 42-16206 Appeal to court by the director

A. If, in the director's opinion, a decision by a county board of equalization or the state board of equalization is erroneous, the director may appeal the decision to superior court in the manner provided by this article on or before the final date that a taxpayer may file an appeal from the valuation or classification of property.

B. In such an action the taxpayer shall raise any defense that the taxpayer has to liability for the tax and any additional tax sought to be imposed.

C. If issues other than valuation or classification are raised by either party, the action shall be tried as if it were an action pursuant to section 42-11005 or 42-11052.

§ 42-16207 Commencement of appeal; notice

A. A court appeal relating to valuation or classification of property is commenced by filing a notice of appeal with either the tax court or the superior court pursuant to section 12-163, subsection B.

B. The notice of appeal shall contain a statement of the reasons why the valuation or classification is excessive or erroneous.

C. If the department or the county requests an increase in full cash value, the response filed shall contain a statement of the reasons why the valuation or classification is insufficient or erroneous.

§ 42-16208 Parties to the appeal; right of intervention

A. Except as provided in subsection B, the appellant shall name as defendants:

In an appeal by the taxpayer involving property that is valued by the department, both the department and either this state or the county in which the property is located, whichever collects the tax.
In an appeal by the taxpayer involving property that is valued and assessed by a county, the county. The county is responsible for defending all defendants named in the appeal unless, in the department's opinion, the appeal involves an issue of statewide importance, in which case the department and the attorney general's office are responsible for defending on the issue of statewide importance. The department may periodically advise the county of issues that the department considers to be of statewide importance. The county shall inform the department if any of these issues arise at any time during an appeal.
In an appeal by the department, the taxpayer.
In an appeal by a county or county assessor, the taxpayer. The department may periodically advise the county of issues that the department considers to be of statewide importance. The county shall inform the department if any of these issues arise at any time during an appeal.

B. In an appeal of a decision by the state board of equalization reviewing equalization orders, the appellant shall name as defendants:

In an appeal by a taxpayer, the department and the county in which the property is located.
In an appeal by the department, both the county in which the property is located and the taxpayer who appealed the equalization order to the board.
In an appeal by the county or county assessor, the taxpayer and the department.

C. The department or the county in which the property is located has the right to intervene in any appeal in which it is not named as a party pursuant to rule 24(a), Arizona rules of civil procedure.

§ 42-16209 Service on defendants

A. A copy of the notice of appeal shall be served on the defendant or defendants within ten days after filing in the manner provided for service of process in the rules of civil procedure or by certified mail.

B. In an appeal taken by the county or the department, service shall be on the person in whose name the property is listed at the address shown on the current tax roll within ten days after filing.

C. An affidavit showing service shall be filed with the clerk of the court.

§ 42-16210 Payment of tax

A. All taxes levied and assessed against property for the year on which an appeal has been filed by the property owner shall be paid before they become delinquent.

B. If the taxes are not paid before becoming delinquent, the court shall dismiss the appeal except when either of the following occur:

The full year tax for the year is paid on or before December 31 of the tax year pursuant to section 42-18053.
The remaining one-half tax that is unpaid is delinquent after the immediately following May 1 at 5:00 p.m. is paid by July 1, including all interest due.

§ 42-16211 Payment of fees

Any taxpayer who appeals to court shall pay the filing and appearance fees prescribed by section 12-167 to the clerk of the court.

§ 42-16212 Hearing

A. If two or more actions have been filed under this article for the same taxable year with respect to the same property, the actions shall be consolidated for the purpose of the hearing.

B. At the hearing both parties may present evidence of any matters that relate to the classification or to the full cash value of the property in question as of the date of its assessment. The valuation or classification as approved by the appropriate state or county authority is presumed to be correct and lawful.

C. For appeals from the state board relating to equalization orders issued by the department, the court shall hear the appeal and render its decision by September 1 of the year in which the appeal is filed.

§ 42-16213 Findings and judgment

A. If the court finds that the valuation is excessive or insufficient, the court shall find the property's full cash value. The court may find a full cash value that is higher or lower than the full cash value that was appealed regardless of which party filed the appeal, except as follows:

If the appeal is taken by a county assessor and the court finds that the valuation is insufficient, the court's finding of the real property's full cash value shall be not greater than the full cash value that was appealed by the taxpayer to the board of equalization.
Paragraph 1 of this subsection does not apply if the valuation of the property for the tax year was set pursuant to section 42-16002, subsection B.

B. If the court finds that the valuation is:

Excessive, the court shall render judgment for the taxpayer and against the state or county, whichever is appropriate, in an amount equal to the excess in taxes levied and assessed together with the costs of the appeal.
Correct, the court shall dismiss the action with costs against the plaintiff except in appeals taken pursuant to section 42-16206.
Insufficient, the judgment, consistent with subsection A of this section, shall be for the state or county, whichever is appropriate, and against the taxpayer for the costs of the appeal and any taxes due on the property in excess of the amount originally levied and assessed. The judgment is a lien on the appellant's real and personal property as though the assessment had originally been in the amount of the judgment.

C. If the court finds that the classification is in error, the court shall determine the correct classification. The taxes due on the property shall be determined using the classification determined by the court regardless of whether the department filed an appeal pursuant to section 42-16206.

§ 42-16214 Refund or credit of excess payments

A. If judgment is awarded to a taxpayer who paid the taxes to the county treasurer:

The county treasurer of the county in which the property is located shall pay the judgment out of monies collected from property taxes during the next fiscal year, unless there are sufficient amounts available in funds budgeted for that purpose by the county to allow an immediate refund, or, if both parties agree, the amount of the judgment may be credited toward any taxes that may be remaining due on the property that is the subject of the appeal, subject in either case to the approval of the board of supervisors.
The amount of the judgment shall be subtracted from the amounts due to taxing jurisdictions in the next fiscal year in proportion to the amount each received from the appellant's overpayment of taxes. The affected taxing jurisdictions shall include in their budgets for the next fiscal year the proportional amount of the judgment for which each is liable. Any increase in the budget because of the portion of the judgment being included is not subject to any budget limitation that may be prescribed by law.
Interest at the legal rate on the overpayment or underpayment is payable from the date of overpayment or underpayment. For the purpose of computing interest under the judgment, if the tax was paid in installments, a pro rata share of the total overpayment or underpayment is considered to be attributable to each installment. For the purposes of this paragraph, "legal rate" means the rate set by the department as prescribed by section 42-1123.

B. A judgment in favor of an appellant who paid the taxes to the department shall be paid from the state general fund.

§ 42-16215 Transmitting judgment to county or department; correcting tax rolls

A. The clerk of the court shall transmit the judgment to the clerk of the board of supervisors or to the department, whichever is appropriate, and to the county treasurer.

B. Unless an appeal is taken according to the rules of civil procedure, the board of supervisors, county assessor, county treasurer or department, whichever is appropriate, shall correct the rolls within fifteen days according to the judgment.

C. The full cash value found by the court shall be entered on the tax roll and shall be used to determine the taxes due on the property.

Article 6 Correcting Property Tax Errors

§ 42-16251 Definitions

In this article, unless the context otherwise requires:

"Board" means the county board of equalization or the state board of equalization, as appropriate.
"Court" means either the superior court or tax court.
"Error" means any mistake in assessing or collecting property taxes resulting from:

(a) An imposition of an incorrect, erroneous or illegal tax rate that resulted in assessing or collecting excessive taxes.

(b) An incorrect designation or description of the use or occupancy of property or its classification pursuant to chapter 12, article 1 of this title.

(d) Misreporting or failing to report property if a statutory duty exists to report the property.

(e) Subject to the requirements of section 42-16255, subsection B, a valuation or legal classification that is based on an error that is exclusively factual in nature or due to a specific legal restriction that affects the subject property and that is objectively verifiable without the exercise of discretion, opinion or judgment and that is demonstrated by clear and convincing evidence, such as:

(i) A mistake in the description of the size, use or ownership of land, improvements or personal property.

(ii) Clerical or typographical errors in reporting or entering data that was used directly to establish valuation.

(iii) A failure to timely capture on the tax roll a change in value or legal classification caused by new construction, the destruction or demolition of improvements, the splitting of one parcel of real property into two or more new parcels or the consolidating of two or more parcels of real property into one new parcel existing on the valuation date.

(iv) The existence or nonexistence of the property on the valuation date.

(v) Property that is destroyed after the lien date.

(vi) Any other objectively verifiable error that does not require the exercise of discretion, opinion or judgment.

Error does not include a correction that results from a change in the law as a result of a final nonappealable ruling by a court of competent jurisdiction in a case that does not involve the property for which a correction is claimed.

"Tax officer" means the department, county assessor or county treasurer, as applicable.
"Taxpayer" means the owner of real or personal property that is liable for tax.

§ 42-16252 Notice of proposed correction; response; petition for review; appeal

A. Subject to the limitations and conditions prescribed by this article, if a tax officer determines that any real or personal property has been assessed improperly as a result of a property tax error, the tax officer shall send the taxpayer a notice of proposed correction at the taxpayer's last known address by:

Certified mail, return receipt requested, if correction of the error results in an increase in the full cash value or change in legal classification of the property.
First class mail or, at the taxpayer's written request, delivery by common carrier or electronic transmittal, if correction of the error does not result in an increase in the valuation of the property.

B. The notice shall:

Be in a form prescribed by the department.
Clearly identify the subject property by tax parcel number or tax roll number and the year or years for which the correction is proposed.
Explain the error, the reasons for the error and the proposed correction of the error.
Inform the taxpayer of the procedure and deadlines for appealing all or part of the proposed determination before the tax roll is corrected.

C. Within thirty days after receiving a notice of proposed correction, the taxpayer may file a written response to the tax officer that sent the notice to either consent to or dispute the proposed correction of the error and to state the grounds for disputing the correction. A failure to file a written response within thirty days constitutes consent to the proposed correction. A taxpayer may file a request for an extension of time within thirty days after receiving the notice of proposed correction. The extension of time may not exceed thirty days. If an extension is granted, any response that is not filed within the extended due date constitutes consent to the proposed correction.

D. The taxpayer may appeal any valuation or legal classification issue that arises from the proposed correction as provided in this section.

E. If the taxpayer consents to the proposed correction, or consents to the proposed correction but disputes the proposed valuation or legal classification as provided on the form prescribed by the department, the tax roll shall be promptly corrected to allow property taxes to be levied and collected in all subsequent tax years, but no additional tax, interest or penalty may be imposed for the current tax year or any tax year preceding the date of the notice of proposed correction.

F. If the taxpayer disputes the proposed correction or the proposed valuation or legal classification, the tax officer shall meet with the taxpayer or the taxpayer's representative in any case in which the taxpayer has timely filed a written response to discuss the proposed correction. If after the meeting the tax officer and the taxpayer reach an agreement on all or part of the proposed correction, the tax officer and the taxpayer shall each sign an agreement and the tax roll must be promptly corrected to the extent agreed on.

G. If after the meeting the parties fail to agree on all or part of the proposed correction, the tax officer shall serve a notice on the taxpayer by certified mail within thirty days after the meeting date advising the taxpayer that the tax roll will be corrected to the extent agreed on. The taxpayer may file a petition on a form prescribed by the department with the board of equalization within thirty days after the date of the notice or it is barred. On receiving the petition, the board shall hold a hearing on the disputed issues in the proposed correction within thirty days and shall issue a written decision pursuant to the board's rules.

H. A party that is dissatisfied with the decision of the board may appeal the decision to court within sixty days after the date the board's decision is mailed, but any additional taxes that are determined to be due must be timely paid before delinquency for the court to retain jurisdiction of the matter.

§ 42-16253 Reporting personal property tax error before notice of proposed correction is issued

If a taxpayer whose personal property taxes have been assessed in error reports the error to the taxing authority before receiving a notice of proposed correction, no penalty may be applied and the tax roll shall be corrected to allow property taxes for the period affected by the error to be levied and collected.

§ 42-16254 Notice of claim; response; petition for review; appeal; acknowledgment of receipt

A. If a taxpayer believes that the taxpayer's property has been assessed improperly as a result of a property tax error, the taxpayer shall file a notice of claim with the appropriate tax officer, either personally, electronically or by certified mail, as follows:

If the alleged error concerns the valuation or classification of property by the county assessor, the notice shall be filed with the assessor. On receiving the notice, the assessor shall immediately transmit a copy to the department.
If the alleged error concerns the valuation or classification of property by the department, the notice shall be filed with the department.
If the alleged error concerns the imposition of any tax rate, the notice shall be filed with the county board of supervisors. The clerk of the board of supervisors shall notify each affected taxing entity to allow the entity to file a response to the claim.

B. The notice shall:

Be in a form prescribed by the department.
Clearly identify the subject property by tax parcel number or tax roll number and the year or years for which the correction is proposed.
State the claim and the evidence to support the claim for correcting the alleged error.

C. Within sixty days after receiving a notice of claim, the tax officer may file a written response to the taxpayer to either consent to or dispute the error and to state the grounds for disputing the error. A failure to file a written response within sixty days constitutes consent to the error, and the board of supervisors shall direct the county treasurer to correct the tax roll on the taxpayer's written demand supported by proof of the date of the notice of claim and the tax officer's failure to timely dispute the error.

D. If the tax officer disputes the error, the tax officer shall notify the taxpayer of a time and place for a meeting between a representative of the tax officer and the taxpayer or the taxpayer's representative within sixty days to discuss the basis for the dispute.

E. If, after the meeting, the parties agree on all or part of the notice of claim, the tax roll must be corrected promptly to the extent agreed on and any taxes that have been overpaid shall be refunded pursuant to section 42-16259.

F. If the parties fail to agree on all or part of the notice of claim, the taxpayer may file a petition with the board of equalization on a form prescribed by the department and shall send a copy to the tax officer by certified mail. The petition must be filed with the board within ninety days after the date of the meeting or it is barred. On receiving the petition, the board shall hold a hearing on the disputed issues in the notice of claim within thirty days and shall issue a written decision pursuant to the board's rules.

G. A party that is dissatisfied with the decision of the board may appeal the decision to court within sixty days after the date the board's decision is mailed, but any additional taxes that are determined to be due must be timely paid before delinquency for the court to retain jurisdiction of the matter. In addition, in order for a taxpayer to recover a refund for taxes paid in a preceding tax year as a result of an error, all taxes that were levied and assessed against the property for the tax year must be paid before delinquency in order for the court to retain jurisdiction of the matter.

H. If a tax officer accepts electronic notice of claim from a taxpayer, the tax officer shall provide an electronic acknowledgement of receipt to the taxpayer.

§ 42-16255 Evidence that may be considered at hearings; pending administrative and judicial appeals

A. In any hearing before the county board, state board or court in an appeal under this article, either party may present any evidence regarding property tax errors regardless of whether the evidence was presented when the notice of proposed correction or notice of claim was filed. The board or court has jurisdiction to make any such correction.

B. If an administrative or judicial appeal is pending regarding the subject property, any alleged error that was already the subject of a notice of proposed correction under section 42-16252 or a notice of claim under section 42-16254 shall be adjudicated as part of the administrative or judicial appeal for the affected tax year without requiring the parties to exhaust their administrative appeal remedies under this article. If a specific error of fact, not previously known, was not addressed in a prior appeal, an appeal may be brought pursuant to this section.

§ 42-16256 Limitations

A. In the case of real or personal property, the correction of errors under this article is limited to the period during which the current owner of record held title to the property, if the owner is a purchaser in good faith and without notice of any error that could have caused proceedings to be initiated to correct the tax roll when the owner purchased the property.

B. Except as provided in subsection C of this section, and subject to section 42-16252, subsection E, a notice of proposed correction or notice of claim filed under this article is limited to the current tax year in which the notice of proposed correction or notice of claim is filed and the three immediately preceding tax years.

C. If a specific error involving a particular property is established by a final nonappealable ruling by a court of competent jurisdiction in favor of the party who brought the action, the error may be corrected as of the date the action was filed or as of the date a notice of claim or notice of proposed correction was filed pursuant to this article, whichever is earlier, but no additional assessment or refund for any period before that date is permitted.

D. This article does not authorize an independent review of the overall valuation or legal classification of property that is not the result of an error as defined in section 42-16251.

E. The correction of errors under this article is limited to real property that has not been issued a certificate of purchase pursuant to chapter 18, article 3 of this title.

§ 42-16257 Valuation of property

In valuing any property pursuant to this article, the tax officer shall use the valuation and legal classification criteria that were in effect on the valuation date for the tax year of the correction.

§ 42-16258 Correcting tax roll by county treasurer

A. After receiving the tax roll, if the county treasurer determines that any property is omitted from the roll, or has reason to believe that any personal property that is omitted from the roll has not been taxed in any other county for that year, the treasurer shall request the assessor to determine the valuation of the property.

B. The treasurer shall enter the valuation on the roll following the levies made and delivered by the county board of supervisors. The entries shall be designated as additional valuations, and the taxes so computed by the county treasurer are valid for all purposes.

C. If there is an error on the roll in the name of the taxpayer who should be assessed or taxed, the county treasurer may change the name and collect the tax from the correct taxpayer.

D. If an error or omission is determined under this section, the taxpayer shall be notified of the proposed correction and the taxpayer may appeal the proposed correction pursuant to section 42-16252.

§ 42-16259 Transmittal of corrected billing to taxpayer; delinquency; refunds; interest

A. The county treasurer shall mail a corrected billing to the taxpayer on the occurrence of any of the following:

The consent of the taxpayer to a tax roll correction.
The consent of the tax officer to the notice of claim.
The decision of the board of equalization.
The final nonappealable ruling by a court of competent jurisdiction.

B. Any taxes that are assessed pursuant to this article are delinquent if not paid within ninety days after the date the corrected billing is mailed to the taxpayer.

C. If taxes have been overpaid, the amount of taxes overpaid shall be refunded with interest at the legal rate set by the department as prescribed by section 42-1123 within ninety days after the tax roll is corrected. For the purpose of computing interest under this subsection, if the tax was paid in installments, a pro rata share of the total overpayment is considered to be attributable to each installment.

Chapter 17 Levy

Article 1 Property Tax Oversight Commission

§ 42-17001 Definitions

In this chapter, unless the context otherwise requires:

"Commission" means the property tax oversight commission established by section 42-17002.
"Fire district" means a fire district established pursuant to title 48, chapter 5.
"Political subdivision" means a county, charter county, city, charter city, town, community college district or school district.

§ 42-17002 Property tax oversight commission

A. The property tax oversight commission is established to:

Further the public confidence in property tax limitations.
Provide a uniform methodology for determining those limitations.
Provide a continuing review of practices for ensuring a fair and equitable administration of the property tax laws.

B. The commission consists of:

The director of the department of revenue or the director's designee, who serves as chairman.
Four persons who are knowledgeable in the area of property tax assessment and levy, one appointed by the governor and three appointed jointly by the president of the senate and the speaker of the house of representatives. The appointive members' terms are three years.

C. An appointment to fill a vacancy on the commission resulting from other than expiration of a term is for the unexpired portion of the term only.

D. The department shall provide secretarial and staff support services to the commission.

E. The private citizen members of the commission shall receive fifty dollars per day for time spent in performing their duties.

F. The commission shall meet at least annually and, in addition, at the call of the chairman. The commission shall meet at such other times and places as convenient or necessary to conduct its affairs and shall render its findings, reports and recommendations in writing to the governor, to the director of the department of revenue and to the legislature.

§ 42-17003 Duties; notification

A. The commission shall:

Establish procedures for deriving the information required by sections 15-905.01, 15-1461.01 and 42-17107, article 2 of this chapter, section 48-254 and paragraph 4 of this subsection.
Review the primary property tax levy of each political subdivision to determine violations of sections 15-905.01, 15-1461.01 and 42-17107 and article 2 of this chapter.
Beginning in tax year 2017, review the secondary property tax levy of each special taxing district to determine violations of section 48-254.
Review the secondary property tax levy of each county, city, town and community college district to identify violations of constitutional and statutory requirements.
Review the secondary property tax levy of each fire district to determine violations of section 48-807.
Review for accuracy the tax levy and rate as prescribed by section 15-992.
Review the reports made by the department concerning valuation accuracy.
Hold hearings to determine the adequacy of compliance with articles 2 and 3 of this chapter.
Upon the request of a county, city, town or community college district, hold hearings as prescribed in section 42-17004 regarding the calculation of the maximum allowable primary property tax levy limits prescribed in section 42-17051, subsection A.

B. If the commission determines that a political subdivision has violated section 15-905.01, 15-1461.01 or 42-17107 or article 2 of this chapter, that a special taxing district has violated section 48-254, that a fire district has violated section 48-807 or that a school district incorrectly calculated the tax levy and rate as prescribed by section 15-992, on or before September 15 the commission shall notify the political subdivision or district, and the county board of supervisors, in writing, of:

The nature of the violation.
The necessary adjustment to:

(a) The primary property tax levy and tax rate to comply with section 15-905.01, 15-1461.01 or 42-17107 or article 2 of this chapter.

(b) The secondary property tax levy and tax rate to comply with sections 48-254 and 48-807.

C. If the commission determines that a county, city, town or community college district has levied a secondary property tax in violation of constitutional or statutory law, on or before December 31 the commission shall notify in writing the affected political subdivision, the county board of supervisors, the county attorney and the attorney general of the violation.

§ 42-17004 Hearing and appeals of commission findings

A. If the commission notifies a political subdivision of a violation of section 15-905.01, 15-1461.01 or 42-17107 or article 2 of this chapter, notifies a special taxing district of a violation of section 48-254, notifies a fire district of a violation of section 48-807 or notifies a school district of an incorrect calculation of the tax levy and rate as prescribed by section 15-992, and the political subdivision, special taxing district or fire district disputes the commission's findings, then on or before October 1 the political subdivision, special taxing district or fire district may request a hearing before the commission to attempt to resolve the dispute.

B. A governing body of a county, city, town, community college district, school district or fire district may request a hearing before the commission regarding the calculation of the maximum allowable primary or secondary property tax levy limits prescribed in section 42-17051 or 48-807 or the calculation of the tax levy and rate as prescribed in section 15-992, as applicable. The commission may resolve any disputes.

C. The commission shall conduct the hearing as prescribed in title 41, chapter 6, article 10.

D. If the dispute is resolved at the hearing, the commission shall immediately notify the county board of supervisors of the proper primary or secondary tax levy and tax rate.

E. If a political subdivision, special taxing district or fire district continues to dispute the commission's findings after the hearing under this section, the political subdivision, special taxing district or fire district may:

Appeal the matter to tax court within thirty days after the commission renders the decision.
Levy primary or secondary property taxes in the amount that the political subdivision, special taxing district or fire district considers to be proper, pending the outcome of the appeal.

§ 42-17005 Adjustments to levy

A. If a governing body of a political subdivision or a fire district receives written notice of a violation of its allowable levy limit or truth in taxation limit under section 42-17003, and has not appealed the commission's decision pursuant to section 42-17004, the governing body shall correct its property tax levy and tax rate to properly reflect the allowable levy for the current year. The county board of supervisors shall make the necessary adjustments to the political subdivision's or district's property tax levy and tax rate to ensure that the corrected information is contained in the assessment and tax roll that is transmitted to the county treasurer pursuant to section 42-18003. If the governing body receives the notice after it is too late to correct the levy in the current year, the difference between the amount actually levied and the allowable property tax levy shall be set aside in a special fund and used to reduce the property taxes levied in the following year.

B. If, after a hearing under section 42-17004, the commission determines that errors were made in the calculation of the maximum allowable primary property tax levy limit pursuant to section 42-17051, subsection A, the primary property tax levy pursuant to section 15-992 or the secondary property tax levy limit pursuant to section 48-807, the commission shall have five days to notify the governing body of the county, city, town, community college district, school district or fire district of the corrected levy limit. The commission shall also notify the county board of supervisors within five days. The corrected maximum allowable primary property tax levy shall be used in section 42-17051, subsection A, paragraph 1 in determining the following year's levy limit. The corrected maximum allowable secondary property tax levy shall be used in section 48-807 in determining the following year's levy limit.

C. If, after a hearing under section 42-17004, it is impossible for the board of supervisors to correct a property tax levy in the current year, the political subdivision or fire district shall hold the difference between the amount the political subdivision or district actually levied and the allowable property tax levy prescribed by the commission in a separate fund to be used to reduce the property taxes levied by the political subdivision or district in the following year.

D. If the commission discovers that it has made an error in computing the levy limit after September 15, it shall notify the political subdivision's or fire district's governing body about the error. The error shall be corrected as prescribed in subsection A of this section. If the error results in the maximum allowable property tax levy being raised:

The corrected maximum allowable primary property tax levy shall be used in section 42-17051, subsection A, paragraph 1 in determining the following year's levy limit.
The corrected maximum allowable secondary property tax levy shall be used for the purposes of section 48-807 in determining the following year's levy limit.

E. If, on appeal under section 42-17004, subsection E, the ruling of the court provides for a property tax levy in an amount that is less than the amount levied by the political subdivision or fire district, the political subdivision or district shall hold the difference between the amounts in a separate fund to be used to reduce the property taxes levied by the political subdivision or district in the following year.

Article 2 Primary Property Tax Levy Limits

§ 42-17051 Limit on county, municipal and community college primary property tax levy

A. In addition to any other limitation that may be imposed, a county, charter county, city, charter city, town or community college district shall not levy primary property taxes in any year in excess of an aggregate amount computed as follows:

Determine the maximum allowable primary property tax levy limit for the jurisdiction for the preceding tax year.
Multiply the amount determined in paragraph 1 of this subsection by 1.02.
Determine the assessed value for the current tax year of all property in the political subdivision that was subject to tax in the preceding tax year.
Divide the dollar amount determined in paragraph 3 of this subsection by one hundred and then divide the dollar amount determined in paragraph 2 of this subsection by the resulting quotient. The result, rounded to four decimal places, is the maximum allowable tax rate for the political subdivision.
Determine the finally equalized valuation of all property, less exemptions, appearing on the tax roll for the current tax year including an estimate of the personal property tax roll determined pursuant to section 42-17053.
Divide the dollar amount determined in paragraph 5 of this subsection by one hundred and then multiply the resulting quotient by the rate determined in paragraph 4 of this subsection. The resulting product is the maximum allowable primary property tax levy limit for the current year for all political subdivisions.
The allowable levy of primary property taxes for the current fiscal year for all political subdivisions is the maximum allowable primary property tax levy limit less any amounts required to reduce the levy pursuant to subsections B and C of this section.

B. Any monies that a political subdivision received from primary property taxation in excess of the sum of the amount of taxes collectible pursuant to section 42-15053, subsection G, paragraph 2 and the allowable levy determined under subsection A of this section shall be maintained in a separate fund and used to reduce the primary property tax levy in the following year. Monies that are received and that are attributable to the payment of delinquent taxes that were properly assessed in prior years shall not be applied to reduce the levy in the following year.

C. If, pursuant to section 41-1279.07, the auditor general determines that in any fiscal year a county has exceeded its expenditure limitation, the allowable levy of primary property taxes of the county determined under subsection A of this section shall be reduced in the fiscal year following the auditor general's hearing by the amount of the expenditures that exceeded the county's expenditure limitation.

D. The limitations prescribed by this section do not apply to levies made pursuant to article 5 of this chapter.

E. The levy limitation for a political subdivision is considered to be increased each year to the maximum permissible limit under subsection A of this section regardless of whether the county, city, town or district actually levies taxes in any year up to the maximum permissible amount.

F. For purposes of determining a county's levy limit under this article, remote municipal property, as defined in section 42-15251, is considered to be taxable property in the county.

§ 42-17052 Values furnished by county assessor and fire districts

A. On or before February 10 of the tax year, the county assessor shall transmit and certify to the property tax oversight commission and to the governing body of the political subdivision or district in the county the values that are required to compute the levy limit prescribed by sections 42-17051 and 48-807. For the purposes of this section, these values shall not be changed for the official calculation of levy limits and tax rates after February 10 without the approval of the property tax oversight commission. These values shall include:

The finally equalized valuation of all property, less estimated exemptions, appearing on the tax roll for the current tax year to be used to fix, levy and assess the political subdivision's taxes.
The value of the property on the personal property tax roll determined pursuant to section 42-17053.

B. On or before February 10 of the tax year, the county assessor shall determine the limited property value for the current tax year of each school district in the county and shall transmit the values to the county school superintendent to assist the superintendent in computing equalization assistance for education as provided in section 15-991.

C. On or before February 10 of the tax year, the county assessor shall transmit to the staff of the joint legislative budget committee and to the governor's office of strategic planning and budgeting the values that are required to compute the truth in taxation rates prescribed by section 41-1276.

D. On or before February 10 of the tax year, the governing board of each fire district shall transmit to the property tax oversight commission the total assessed value of all property annexed by the district in the preceding calendar year.

§ 42-17053 Estimate of personal property tax roll

A. When a tax rate is to be determined and taxes are levied, the county assessor shall make an estimate of the personal property to be added to the tax roll for purposes of computing the property tax rates pursuant to section 42-17151.

B. The estimate shall be at least equal to the prior year's taxable personal property value, except that if the assessor has verifiable information that an item or items on the personal property tax roll during the current tax year will not be in the county during the next tax year, the assessor shall not include that item or items in the estimate under this section.

§ 42-17054 Levy limit worksheet

A. When the county assessor transmits valuations under section 42-17052, the assessor shall prepare and transmit a final levy limit worksheet to each city, town and community college district that imposes a primary property tax, to each fire district that imposes a secondary property tax and to the property tax oversight commission.

B. Each city, town, community college district and fire district shall notify the property tax oversight commission in writing within ten days of its agreement or disagreement with the final levy limit worksheet.

§ 42-17055 Public inspection of values used in computing levy limitation

A. On or before February 15 of the tax year, the governing body of each county, city, town, community college district and fire district shall make available for public inspection the values determined in each numbered paragraph of section 42-17051, subsection A and in section 48-807.

B. The property tax oversight commission shall not alter the values that have been determined and made available for public inspection under this section unless the county assessor transmits and certifies new values to the governing body. The new values shall be made available for public inspection on the request of any individual.

§ 42-17056 Initial base levy limit if no primary property taxes were levied in the preceding tax year; subsequent levy amount

A. If a county, city, town or community college district did not levy primary property taxes in the preceding tax year, the governing body shall submit a proposed amount to be raised by primary property taxes for approval of the voters.

B. The election shall be held on the third Tuesday in May before the beginning of the fiscal year in as nearly as practicable the same manner as prescribed by title 35, chapter 3, article 3. The ballot shall state that if the amount is approved by the voters, it will be the base for determining levy limitations for the county, city, town or district for subsequent fiscal years.

C. If a majority of the qualified electors voting approve the proposed levy amount for primary property taxes, the levy applicable for the county, city, town or district for the next fiscal year shall be an amount not exceeding the approved amount.

D. On acceptance by the voters, the governing body shall send a copy of the approved resolution to the property tax oversight commission.

E. If the proposed levy amount is not approved, the county, city, town or community college district shall not levy a primary property tax for that year.

F. At least twenty but not more than thirty-five years after the date of an initial approval pursuant to this section, a community college district with a primary property tax levy that was initially established pursuant to this section may resubmit a proposed amount to be raised by primary property taxes for approval by the voters. The proposed amount must be less than or equal to two times the otherwise authorized levy amount for the same year. The election shall be conducted as prescribed in subsection B of this section. If a majority of the qualified electors voting:

Approve the proposed levy amount, the levy applicable for the district for:

(a) The first tax year following approval pursuant to this paragraph must be less than or equal to the previously approved amount plus one-third of the difference between the previously approved amount and the amount approved pursuant to this paragraph.

(b) The second tax year following approval pursuant to this paragraph must be less than or equal to the previously approved amount plus two-thirds of the difference between the previously approved amount and the amount approved pursuant to this paragraph.

(c) The third tax year following approval pursuant to this paragraph and each subsequent tax year must be less than or equal to the amount approved pursuant to this paragraph.

Disapprove the proposed levy amount, the district shall levy a primary property tax based on the previously authorized levy and may not resubmit another proposed amount until at least two years after the proposed levy amount was disapproved.

G. This section does not apply to community college tuition financing districts formed pursuant to section 15-1409, except that the property tax oversight commission shall set a property tax levy limit that is not less than the amount required pursuant to section 15-1409, subsection C.

§ 42-17057 Computing new levy limits in the case of county division or consolidation; election on revised levy limit

A. In the event of a division of a county into two or more new counties or the consolidation of counties, the property tax oversight commission shall determine the maximum allowable levy of primary property taxes in each new county for the first full fiscal year after the new county governments are established by:

Computing the maximum levy allowable for the fiscal year under section 42-17051 for the old county or counties, assuming no division or consolidation had occurred.
Assigning that maximum amount to the new county, in the case of a consolidation, or apportioning that maximum amount among the new counties, in the case of a division, according to their respective net assessed limited property valuations.

B. The amounts thus assigned to the new counties are the levy limits for purposes of this article for that fiscal year.

C. On or before April 1 of the first full fiscal year after the new county government is established, the board of supervisors of a new county, by a two-thirds vote, may call a special election to submit a revised levy limit to the qualified electors of the county. The special election shall be held on the third Tuesday in May. Immediately after calling the election the board shall publicize and distribute to the registered voters of the county information regarding the date and polling places of the election and a comparison of the current levy limit and the proposed levy limit. The ballot shall be printed with the question "Shall the proposed levy limit be adopted for _______________ county?" followed by squares marked "yes" and "no" in which the voter may indicate a vote for or against the proposition. If a majority of the voters voting:

Approves the proposed levy limit, it shall be applied to the county for all purposes under this article for the next fiscal year and is the basis from which to determine the levy limit under section 42-17051 for subsequent fiscal years.
Rejects the proposed levy limit, the levy limit for the county assigned pursuant to subsection A of this section is the basis from which to determine the levy limit under section 42-17051 for subsequent fiscal years.

§ 42-17058 Values for computing levy limit in the case of a merger of a community college district with a contiguous county

If an existing community college district merges with a contiguous county that is not a part of a community college district, the values used in computing the levy limit under section 42-17051 for the first year of the new district shall be:

For section 42-17051, subsection A, paragraph 2, the sum of the values of the existing community college district and the values of the contiguous county that is not a part of a community college district.
For section 42-17051, subsection A, paragraph 1, the maximum allowable primary property tax levy for the existing community college district for the preceding year plus the amount of out county tuition paid by the contiguous county that is not part of a community college district in the preceding year.

Article 3 Local Government Budgeting Process

§ 42-17101 Annual county and municipal financial statement and estimate of expenses

On or before the third Monday in July each year the governing body of each county and incorporated city or town shall prepare:

A full and complete statement of the political subdivision's financial affairs for the preceding fiscal year.
An estimate of the different amounts that will be required to meet the political subdivision's public expense for the current fiscal year entered in the minutes of the governing body and containing the items prescribed by section 42-17102.
A summary schedule of estimated expenditures and revenues that shall be:

(a) Entered in the minutes of the governing body.

(b) Prepared according to forms supplied by the auditor general.

§ 42-17102 Contents of estimate of expenses

A. The annual estimate of expenses of each county, city and town shall include:

An estimate of the amount of money required for each item of expenditure necessary for county, city or town purposes, which must include, by fund:

(a) Beginning in fiscal year 2013-2014, the estimated number of full-time employees.

(b) Beginning in fiscal year 2013-2014, the total estimated personnel compensation, which shall separately include the employee salaries and employee related expenses for retirement costs and health care costs.

The amounts necessary to pay the interest and principal of outstanding bonds.
The items and amounts of each special levy provided by law.
An amount for unanticipated contingencies or emergencies.
A statement of the receipts for the preceding fiscal year from sources other than direct property taxes.
The amounts that are estimated to be received during the current fiscal year from sources other than direct property taxes and voluntary contributions.
The amounts that were actually levied and the amounts that were actually collected for county, city or town purposes on the primary and secondary property tax rolls of the preceding fiscal year.
The amounts that were collected through primary property taxes and secondary property taxes levied for the years before the preceding fiscal year.
The amount that is proposed to be raised by direct property taxation for the current fiscal year for the general fund, bonds, special assessments and district levies.
The separate amounts to be raised by primary property tax levies and by secondary property tax levies for the current fiscal year.
The amount of voluntary contributions estimated to be received pursuant to section 48-242, based on the information transmitted to the governing body by the department of revenue.
The maximum amount that can be raised by primary property tax levies by the county, city or town pursuant to article 2 of this chapter for the current fiscal year.
The amount that the county, city or town proposes to raise by secondary property tax levies and the additional amounts, if any, that the county, city or town will levy pursuant to the authority given to the governing body by the voters at an election called pursuant to article 5 of this chapter.
The property tax rate for county, city or town purposes for the preceding fiscal year for the primary property tax and the secondary property tax.
The estimated property tax rate for county, city or town purposes for the current fiscal year for the primary property tax and the secondary property tax.
The expenditure limitation for the preceding fiscal year and the total amount that was proposed to be spent for the preceding fiscal year.
The total expenditure limitation for the current fiscal year.
The amount of monies received from primary property taxation in the preceding fiscal year in excess of the maximum allowable amount as computed pursuant to article 2 of this chapter.

B. The estimate shall be fully itemized according to forms supplied by the auditor general showing under separate headings:

The amounts that are estimated as required for each department, public office or official.
A complete disclosure and statement of the contemplated expenditures for the current fiscal year, showing the amount proposed to be spent from each fund and the total amount of proposed public expense.

C. The total of amounts proposed in the estimates to be spent shall not exceed the expenditure limitation established for the county, city or town.

§ 42-17103 Public access to estimates of revenues and expenses; notice of public hearing; access to adopted budget

A. The governing body of each county, city or town shall publish the estimates of revenues and expenses, or a summary of the estimates of revenues and expenses, and a notice of a public hearing of the governing body to hear taxpayers and make tax levies at designated times and places. The summary shall set forth the total estimated revenues and expenditures by fund type, truth in taxation calculations and primary and secondary property tax levies for all districts. A complete copy of the estimates of revenues and expenses shall be made available at the city, town or county libraries and city, town or county administrative offices and shall be posted in a prominent location on the official website of the city, town or county no later than seven business days after the estimates of revenues and expenses are initially presented before the governing body. A complete copy of the budget finally adopted under section 42-17105 shall be posted in a prominent location on the official websites no later than seven business days after final adoption.

B. Beginning with fiscal year 2011-2012, both the estimates of revenues and expenses initially presented before the governing body and the budget finally adopted under section 42-17105 shall be retained and accessible in a prominent location on the official website of the city, town or county for at least sixty months.

C. The summary of estimates and notice, together with the library addresses and websites where the complete copy of estimates may be found, shall be published once a week for at least two consecutive weeks after the estimates are tentatively adopted in the official newspaper of the county, city or town, if there is one, and, if not, in a newspaper of general circulation in the county, city or town.

D. If a truth in taxation notice and hearing is required under section 42-17107, the governing body may combine the notice under this section with the truth in taxation notice.

§ 42-17104 Public hearing on expenditures and tax levy

A. The governing body of each county, city or town shall hold a public hearing on or before the fourteenth day before the day on which it levies taxes as stated in the notice under section 42-17103. Any taxpayer may appear and be heard in favor of or against any proposed expenditure or tax levy.

B. If a truth in taxation notice and hearing is required under section 42-17107, the governing body may combine the hearing under this section with the truth in taxation hearing.

§ 42-17105 Adoption of budget

A. After the hearing on estimates under section 42-17104 is concluded, the governing body shall convene in a special meeting and finally determine and adopt estimates of proposed expenditures for the purposes stated in the published proposal.

B. The adopted estimates constitute the budget of the county, city or town for the current fiscal year.

C. The total amounts that are proposed to be spent in the budget shall not exceed the total of amounts that were proposed for expenditure in the published estimates.

§ 42-17106 Expenditures limited to budgeted purposes; transfer of monies

A. Except as provided in subsection B, a county, city or town shall not:

Spend money for a purpose that is not included in its budget.
Spend money or incur or create a debt, obligation or liability in a fiscal year in excess of the amount stated for each purpose in the finally adopted budget for that year, except as provided by law, regardless of whether the county, city or town has received at any time, or has on hand, monies or revenue in excess of the amount required to meet expenditures, debts, obligations and liabilities that are incurred under the budget.

B. A governing body may transfer monies between budget items if all of the following apply:

The monies are available.
The transfer is in the public interest and based on a demonstrated need.
The transfer does not result in a violation of the limitations prescribed in article IX, sections 19 and 20, Constitution of Arizona.
A majority of the members of the governing body votes affirmatively on the transfer at a public meeting.

§ 42-17107 Truth in taxation notice and hearing; roll call vote on tax increase; definition

A. On or before February 10 of the tax year, the county assessor shall transmit and certify to the property tax oversight commission and to the governing body of the county, city or town the total net assessed values that are required to compute the levy limit prescribed by section 42-17051. If the proposed primary property tax levy, excluding amounts that are attributable to new construction, is greater than the amount levied by the county, city or town in the preceding tax year in the county, city or town:

The governing body shall publish a notice that meets all of the following requirements:

(a) Is published twice in a newspaper of general circulation in the county, city or town. The first publication shall be at least fourteen but not more than twenty days before the date of the hearing. The second publication shall be at least seven but not more than ten days before the date of the hearing.

(b) Is published in a location other than the classified or legal advertising section of the newspaper in which it is published.

(d) Is in the following form, with the "truth in taxation hearing notice of tax increase" headline in at least eighteen-point type:

Truth in Taxation Hearing

Notice of Tax Increase

In compliance with section 42-17107, Arizona Revised Statutes, (name of county, city or town) is notifying its property taxpayers of (name of county, city or town)'s intention to raise its primary property taxes over last year's level. (name of county, city or town) is proposing an increase in primary property taxes of $__________ or _____%.

For example, the proposed tax increase will cause (name of county, city or town)'s primary property taxes on a $100,000 home to be $(total proposed taxes including the tax increase). Without the proposed tax increase, the total taxes that would be owed on a $100,000 home would have been $_____.

This proposed increase is exclusive of increased primary property taxes received from new construction. The increase is also exclusive of any changes that may occur from property tax levies for voter approved bonded indebtedness or budget and tax overrides.

All interested citizens are invited to attend the public hearing on the tax increase that is scheduled to be held (date and time) at (location).

(e) Is included in the estimates of revenues and expenses pursuant to section 42-17103 and in the budget finally adopted pursuant to section 42-17105.

In lieu of publishing the truth in taxation notice, the governing body may mail the truth in taxation notice prescribed by paragraph 1, subdivision (d) of this subsection to all registered voters in the county, city or town at least ten but not more than twenty days before the date of the hearing on the estimates pursuant to section 42-17104.
In addition to publishing the truth in taxation notice under paragraph 1 of this subsection or mailing the notice under paragraph 2 of this subsection, the governing body shall issue a press release containing the truth in taxation notice. The press release must:

(a) Include the name of the newspaper of general circulation in which the truth in taxation notice will be published and the dates on which the truth in taxation notice will be published.

(b) Be posted on the official website of the county, city or town.

The governing body shall consider a motion to levy the increased property taxes by roll call vote. If the proposed levy, exclusive of increased property taxes received from new construction, constitutes an increase over the preceding tax year's levy by fifteen percent or more, the motion to levy the increased property taxes must be approved by a unanimous roll call vote of the governing body.
Within three days after the hearing, the governing body shall mail a copy of the truth in taxation notice, a statement of its publication or mailing and the result of the governing body's vote under paragraph 4 of this subsection to the property tax oversight commission.
The governing body shall hold the truth in taxation hearing on or before the adoption of the county, city or town budget under section 42-17105.

B. If the governing body fails to comply with the requirements of this section, the governing body shall not fix, levy or assess an amount of primary property taxes that exceeds the preceding year's amount, except for amounts attributable to new construction.

C. For the purposes of this section, "amount attributable to new construction" means the net assessed valuation of property added to the tax roll since the previous year multiplied by a property tax rate computed by dividing the primary property tax levy of the county, city or town in the preceding year by the estimate of the total net assessed valuation of the county, city or town for the current year, excluding the net assessed valuation attributable to new construction.

§ 42-17108 Encumbering municipal monies to pay obligations after close of fiscal year

A. A city or town may encumber monies at the end of a fiscal year for any liabilities incurred during that fiscal year and still outstanding at the end of the fiscal year.

B. Payments may be made from encumbered monies for a period of sixty days immediately after the end of the fiscal year. After the expiration of the sixty day period:

Any remaining encumbered balance lapses.
No further payments may be made from the budget of the preceding fiscal year.

§ 42-17109 Alternative and additional method of leasing municipal facilities

A. This section provides an alternative and additional method for leasing municipal facilities. This section does not apply to leases entered into before or after March 31, 1965, nor to leases executed and existing on March 31, 1965, if the leases would have been valid regardless of the enactment of this section.

B. Nothing contained in this article shall be construed to limit the right of a city or town, as lessee, to enter into leases of real or personal property to be used for municipal auditorium and convention center purposes running for a term of not more than fifty years. A city or town may enter into such leases if title to the property leased is to vest in the lessee at the expiration of the term of the lease if the lessee has performed all of its obligations under the lease. No such lease need be included in the budget for the fiscal year in which it is executed, but provision shall be made in each annual budget thereafter during the term of the lease for the levy of taxes or the provision of other revenues fully sufficient to pay any rental falling due during that fiscal year. No such lease may be entered into without submitting the question to the qualified electors of the municipality and approval of the lease by a majority of those voting on the issue at an election to be ordered, conducted and canvassed in the manner provided in title 9, chapter 7, article 3.

C. Monies for any rental payments due under any lease pursuant to subsection B shall be derived from revenues other than those collected to pay the general obligation bonds of the city or town and shall be used for municipal auditorium and convention center purposes. A tax shall not be imposed on real property to support the operation or maintenance of a municipal auditorium or convention center financed under this section. A tax shall not be imposed, or the proceeds of a tax shall not be used, for the payment of rentals under any lease entered into under this section.

§ 42-17110 Budget of a newly incorporated city or town

A. Notwithstanding any other provision of this article, a city or town that is incorporated after the third Monday in July or before June 30 in any fiscal year may adopt an interim budget by ordinance for the remainder of the fiscal year in which the city or town was incorporated.

B. The city or town shall hold hearings on the proposed budget as prescribed by this article.

C. The city or town may issue warrants pursuant to sections 9-247 through 9-250 to pay necessary expenses, which shall be redeemed when monies become available in the next fiscal year.

D. The interim budget is not a base for computing allowable increases in the budget for the succeeding full fiscal year. The budget for the succeeding full fiscal year may be made as if no interim budget had been adopted.

Article 4 Levy

§ 42-17151 County, municipal, community college and school tax levy

A. On or before the third Monday in August each year, the governing body of each county, city, town, community college district and school district shall:

Fix, levy and assess the amount to be raised from primary property taxation and secondary property taxation. This amount, plus all other sources of revenue, as estimated, and restricted and unrestricted unencumbered balances from the preceding fiscal year, shall equal the total of amounts proposed to be spent in the budget for the current fiscal year.
Designate the amounts to be levied for each purpose appearing in the adopted budget.
Fix and determine a primary property tax rate and a secondary property tax rate, each rounded to four decimal places on each $100 of taxable property shown by the finally equalized valuations of property, minus exemptions, that appear on the tax rolls for the fiscal year, as determined by the assessor on or before February 10 of the tax year pursuant to section 42-17052, and that when extended on those valuations will produce, in the aggregate, the entire amount to be raised by direct taxation for that year. Amounts levied for debt service on bonds payable from the secondary tax are and shall be considered special revenues of the county, city, town or district, shall be kept in a special, segregated fund, are not and shall not be general property taxes and may not be used for any other purpose of the county, city, town or district.

B. The governing body of a county, city, town or community college district shall not fix, levy or assess an amount of primary property taxes in excess of the amount permitted by section 42-17051, subsection A, paragraph 7 or section 42-17005 as determined by the property tax oversight commission.

C. The governing board of a common school district, a high school district or a unified school district shall not fix, levy or assess a primary property tax rate higher than the current year's rate if the district meets both of the following criteria, as determined by the property tax oversight commission:

The total primary property taxes levied for all taxing jurisdictions on at least one-half of the residential property of the district exceed the limitation described in section 15-972, subsection E.
The school district primary property tax rate exceeds one hundred fifty percent of the applicable qualifying tax rate pursuant to section 41-1276. For the purposes of this paragraph, the school district primary property tax rate does not include the tax rates computed pursuant to section 15-992, subsections B and F.

D. Not later than December 31, the property tax oversight commission shall notify those school districts that meet the criteria described in subsection C of this section and the county school superintendents and boards of supervisors of the counties in which the school districts are located.

E. Within three days after the final levies are determined for a county, city, town or community college district, the chief county fiscal officer shall notify the property tax oversight commission of the amount of the primary property tax levied.

F. Pursuant to section 15-465.01, subsection E, an accommodation school governing board shall not levy a primary or secondary property tax. The property tax oversight commission shall consider any amount of property tax levied by a county in support of an accommodation school to be part of the county's primary levy for the purposes of determining the county's compliance with subsection B of this section.

§ 42-17152 Extending tax roll; limitation on residential property tax; effect of informalities

A. As soon as the county board of supervisors finally determines the estimated amounts provided for in article 2 of this chapter, it shall assess taxes for the estimated amounts on the taxable property of the county, according and in proportion to the individual and particular valuation as specified in the assessment roll for the year, except that pursuant to article IX, section 18, Constitution of Arizona, primary property taxes may not be assessed in any tax year against real property, improvements and personal property classified as class three pursuant to section 42-12003 in excess of one per cent of the property's limited property value.

B. The board of supervisors shall compute and list the property taxes and totals of taxes of each parcel, shall add the several taxes levied and shall compute the totals. The completed document constitutes the assessment and tax roll for the year.

C. In addition to the requirements of subsection B of this section, if the board of supervisors authorizes tax statements to be delivered to the taxpayers of the county, the board shall list and compute the totals of the taxes by jurisdiction, for the current and the previous year.

D. Any informality in complying with the requirements of this chapter does not render any tax collection proceeding illegal.

E. For the purposes of this section, items of merchandise property that are exempt pursuant to article IX, sections 2 and 13, Constitution of Arizona, need not be listed on the tax rolls or tax statements.

§ 42-17153 Lien for taxes; time lien attaches; priority

A. Except as provided in subsection B of this section, a tax that is levied on real or personal property is a lien on the assessed property.

B. A tax that is levied against personal property of a person who owns real property of a value of less than two hundred dollars in the county is a personal liability of the property owner, in addition to being a lien against the property.

C. The lien:

Attaches on January 1 of the tax year.
Is not satisfied or removed until one of the following occurs:

(a) The taxes, penalties, charges and interest are paid.

(b) Title to the property has finally vested in a purchaser under a sale for taxes.

Is prior and superior to all other liens and encumbrances on the property, except:

(a) Liens or encumbrances held by this state.

(b) Liens for taxes accruing in any other years.

D. For taxpayers valued by the department pursuant to section 42-14151, the lien shall attach to all property, real and personal, regardless of the taxing jurisdiction where such property is located. Such lien will attach to the entire system and may not be released by payment of a portion of the tax liability relating to a single portion or component of the system.

E. If a political subdivision of this state acquires title to property after December 31, 1998, any lien for delinquent taxes on the property:

Is not abated, extinguished, discharged or merged in the title to the property unless approved by the county board of supervisors.
Is enforceable in the same manner as other delinquent tax liens.

§ 42-17154 Attachment of lien to real and personal property, improvements and severed mineral rights

A. Personal property is liable for taxes levied on real property, and real property is liable for taxes levied on personal property. A judgment against real property for nonpayment of taxes or assessed to the personal property of the same person shall not be prevented by a showing that the owner was possessed of personal property from which the taxes could have been made, but real property occupied as a homestead shall not be charged for taxes other than taxes due on the homestead.

B. Taxes that are imposed on improvements to real estate and that are assessed to a person who is not the owner of the real estate are a lien on the land and improvements.

C. If the owner of minerals or mineral rights in land does not also own the remaining interest in the land:

The taxes on the minerals or mineral rights are not a lien on the remaining interest in the land.
The taxes on the remaining interest in the land are not a lien on the separately owned minerals or mineral rights.
A tax sale resulting from failing to pay taxes on the minerals or mineral rights does not affect the ownership of the remaining interest in the land.
A tax sale resulting from failing to pay taxes on the remaining interest in the land does not affect the ownership of the minerals or mineral rights.
The failure to assess the minerals or mineral rights separately from the remaining interest in the land does not result in any lien for taxes imposed on the land being a lien on the minerals or mineral rights.

§ 42-17155 County property tax information worksheet

Within seven days after adopting the rates and levies pursuant to section 42-17151, the county board of supervisors shall compile and make available to the public the adopted property tax rates, levies and valuations for all taxing jurisdictions in the county on a worksheet prescribed by the department. The board shall post a complete copy of the worksheet in a prominent location on the county's official website.

Article 5 Special Secondary Property Tax Levies

§ 42-17201 County levy limit override

A. The board of supervisors of a county may conduct an election to authorize a property tax levy that is not within the limitations on primary property taxation otherwise prescribed by section 42-17051.

B. In order to levy taxes exceeding the limitations prescribed on primary property tax, the board of supervisors shall adopt a resolution, by an affirmative vote of at least two-thirds of its membership, requesting the voters to approve a secondary property tax levy.

C. The board of supervisors shall submit the question to the qualified electors of the county at an election held on the first Tuesday following the first Monday in November as prescribed by section 16-204, subsection B, paragraph 1, subdivision (d).

D. In the resolution requesting the voters to approve the levy, the board shall state:

The number of years in which the authority to levy taxes in excess of the limitations otherwise prescribed is to be in effect. The board shall not request authority from the voters for a period of less than two years nor more than seven years.
The purpose for providing revenue to the county.
The maximum dollar amount of secondary property tax that may be collected in each year of the authority if voters approve the levy.
The estimated secondary property tax rate that will be levied in the first year if the voters approve the levy.

E. If the levy is approved by the voters, the maximum amount of taxes that the board may levy for any year in which the authority is in effect is the amount stated in the resolution requesting voter approval of the levy. The board shall levy the tax in the same manner as county secondary property taxes as provided in section 42-17151.

F. The board may use monies it collects pursuant to this section only for the purposes stated in the resolution requesting approval of the levy. If an unexpended balance of the monies collected pursuant to this section remains after satisfying the requirements of the resolution requesting the approval of the levy, the board shall use the balance to reduce the levy in the following year. If the balance exceeds the requirements for the following year or if the authority granted by the voters to collect the taxes pursuant to this section expires and is not renewed, the board shall use the balance to reduce the county primary property tax in the following year.

G. The board shall deposit and separately account for the amounts collected pursuant to this section in a fund in the county treasury.

H. The amounts collected pursuant to this section:

Shall not be included in the primary property tax levy limitation prescribed by section 42-17051 for any subsequent year, except as provided in this section.
Shall be collected from a levy of secondary property taxes.
Are not subject to limitations on taxes prescribed by article IX, section 18, Constitution of Arizona.

§ 42-17202 Community college district levy limit override

A. If the governing board of a community college district determines that the amounts permitted to be levied as primary property taxes in any year pursuant to section 42-17051 would provide insufficient revenue to the district, the board may conduct an election to authorize a property tax levy that is not within the limitations on primary property taxation.

B. In order to levy taxes exceeding the limitations prescribed on primary property tax, the board shall adopt a resolution, by an affirmative vote of at least two-thirds of its membership, requesting the voters to approve a secondary property tax levy.

C. The resolution shall state:

The maximum dollar amount of secondary property tax that may be collected in each year of the authority if the voters approve the levy.
The number of years for which the authority to levy in excess of the levy limitation is to be in effect, which shall be at least two years but not more than seven years.

D. The election shall be held at a regularly scheduled election on the first Tuesday after the first Monday in November as prescribed by section 16-204, subsection B, paragraph 1, subdivision (d).

E. The impact of the proposal shall appear on the ballot and in publicity pamphlets in the same manner as provided for local alternative expenditure limitations pursuant to section 41-563.03.

F. If a majority of the qualified electors voting at the election approves, the governing board may levy the additional amount as authorized in the election. The additional amount approved by the voters:

Shall not be included in computing the primary property tax levy limitation for any subsequent year.
Shall be collected from a levy of secondary property taxes.
Is not subject to the limitations on taxes prescribed by article IX, section 18, Constitution of Arizona.

§ 42-17203 County levy for community college; election

A. A county that is not in an organized community college district may conduct an election to authorize a property tax levy for community college purposes that is not within the limitation on primary property taxes that is otherwise prescribed by section 42-17051.

B. In order to levy taxes for community college purposes in excess of the limitations otherwise prescribed on primary property tax, the board of supervisors of a county that is not in an organized community college district shall adopt a resolution by an affirmative vote of at least two-thirds of its membership requesting the voters to approve a community college reimbursement levy and setting the time and place for the election.

C. The board shall submit the questions to the qualified electors at an election held on the first Tuesday following the first Monday in November as prescribed by section 16-204, subsection F. Except as otherwise provided in this section, the election shall be held according to the provisions applying to bond issuance elections in title 35, chapter 3, article 3.

D. In the resolution requesting the voters to approve the levy and setting the time and place for the election, the board shall state:

The estimated maximum dollar amount of secondary property taxes that could be collected in the first year if the voters approve the levy for payment of tuition under section 15-1469, subsection C, paragraph 1.
The estimated secondary property tax rate that will be levied if the voters approve the levy.
The estimated decrease of the primary property tax rate if the voters approve the levy for the payment of tuition under section 15-1469, subsection C, paragraph 1.
That the amount of community college reimbursement levy will vary from year to year to pay tuition under section 15-1469, subsection C, paragraph 1.
The maximum dollar amount of secondary property taxes that could be collected in the first year if the voters approve the levy for payment of tuition under section 15-1469, subsection B, paragraph 2 or to establish a campus in the county that is affiliated with a community college district as provided in subsection E of this section.
The maximum growth rate that will be allowed for secondary property taxes collected in each subsequent year if the voters approve the levy for payment of tuition under section 15-1469, subsection B, paragraph 2 or to establish a campus in the county that is affiliated with a community college district as provided in subsection E of this section.

E. The board may use monies it collects under this section to either:

Reimburse the costs of students pursuant to section 15-1469, subsection B, paragraphs 1 and 2 as approved by the voters.
Establish a campus in the county that is affiliated with a community college district.

F. If the levy is approved by the voters for purposes of reimbursement pursuant to section 15-1469, the maximum amount of taxes that the board may levy for any year in which the authority is in effect is the amount of reimbursement pursuant to section 15-1469, subsection C, paragraph 1 and any portion of the reimbursement as specified in the resolution pursuant to subsection D, paragraphs 5 and 6 of this section as approved by the board of supervisors.

G. The board of supervisors shall levy the tax in the same manner as county property taxes as provided in section 42-17151. If an unexpended balance of the monies collected pursuant to this section remains after satisfying the requirements of subsection E of this section, the board shall use the balance to reduce the community college levy under this section in the following year. If the balance exceeds the requirements for the following year, the board shall use the balance to reduce any other property tax authorized by law to be collected by the county.

H. The amounts collected pursuant to this section:

Shall not be included in the levy limitation pursuant to section 42-17051 for any subsequent year.
Shall be collected from a levy of secondary property taxes.
Except as provided in this section, are exempt pursuant to article IX, section 19, subsection (5), Constitution of Arizona, from levy limitations.

Article 6 Assessment, Levy and Collection of Local Taxes

§ 42-17251 Extension of assessment roll to all taxing jurisdictions in the county; equalization

A. Each county assessor shall compile the assessment roll, showing:

The total valuations of all property subject to taxation.
The valuation assessed to each taxpayer for each taxing jurisdiction in the county to show each assessment.
The total valuation of all of the property that is subject to taxation in the county and in each taxing jurisdiction in the county.

B. The county roll constitutes the assessment roll for each taxing jurisdiction.

C. The state and county boards of equalization shall equalize the assessments for each taxing jurisdiction to the same extent, in the same manner and at the same time that taxes for general county purposes are equalized.

§ 42-17252 Municipal assessment and tax roll

A. The board of supervisors shall compute and carry out separate entries for each city and town in the county. This constitutes the assessment and tax roll for the city or town.

B. When the roll is completed and the extensions are revised and equalized, no other roll may be made for the purpose of collecting a general tax for any city or town.

§ 42-17253 Computing municipal tax rate; levy

A. Within five days after the assessment roll has been finally made, revised and equalized, the clerk of the board of supervisors shall:

Compute the assessed valuations of all cities and towns whose taxes are included in the roll.
Arrive at the total assessed valuation of all property that is subject to taxation by cities and towns in the county.

B. The clerk shall deliver to the governing body of each city and town the aggregate total amount of valuation of all the property in the city or town.

C. The governing body of each city and town shall:

Compute the tax rate per one hundred dollars of valuation to be levied for each separate fund for which taxes are to be levied and collected.
By resolution levy the tax for the city or town.
Deliver a certified duplicate of its tax levy to the county board of supervisors on or before the day on which the board of supervisors levies the county tax.

§ 42-17254 Assessment and collection of municipal taxes

A. On or before the third Monday in August each year the county board of supervisors shall:

Assess the amount of taxes that is certified as having been levied for city and town purposes.
Designate the amount to be levied for such purposes on each one hundred dollars of assessed valuation.

B. The county treasurer shall collect the city and town taxes at the same time and in the same manner provided for collecting county taxes.

C. The resolution by the county board of supervisors authorizing the collection of taxes shall include city and town taxes and shall provide the treasurer with the same powers respecting the collection of city and town taxes and the return and sale of property for delinquent city and town taxes as are conferred with respect to state and county taxes.

§ 42-17255 Remitting tax collections to municipality

A. On or before the fifteenth day of each month the county treasurer shall pay to each city and town treasurer in the county all money collected during the previous month as taxes for the city or town. All interest earned on the monies collected shall be paid into the county general fund for use as determined by the board of supervisors.

B. The city or town treasurer shall give the county treasurer a receipt for each payment. The county treasurer shall retain the receipt for one year after the annual report to the board of supervisors under section 11-501. The city or town treasurer shall retain a copy of the receipt to be available for purposes of auditing the city or town treasurer's accounts.

§ 42-17256 Application of tax law to municipal taxes; special taxes and assessments

A. General city and town taxes that are levied and assessed under this article are due and become delinquent and attach to and become a lien on the assessed property at the same time as county taxes.

B. The provisions of law relating to county taxes, including the provisions of this chapter relating to reviewing and equalizing assessments, proceedings for collection and enforcement and return and sale of property for delinquent taxes, apply and are effective with respect to city and town taxes and to the persons to whom they are assessed.

C. Special taxes and assessments shall be levied and collected in the manner and form by the officers and under the proceedings prescribed by law and the ordinances of the respective city or town.

§ 42-17257 Notice of establishment or change in city, town or taxing district boundaries

A. On or before November 1 of the year preceding the year in which assessments or taxes are to be levied, the governing body of each city, town, school district and community college district and other special taxing districts and assessment districts that are organized by law or in the process of organizing by law shall file with the department and the county assessor information prescribed by the director of the department relating to changes in boundaries and the boundaries of newly created taxing jurisdictions.

B. At the request of the governing body of any taxing jurisdiction, on or before November 30 of the year preceding the year in which assessments or taxes are to be levied, the director may extend the deadline prescribed by subsection A of this section to allow the taxing jurisdiction to file the required information. The director may not extend this deadline beyond December 20 of the year preceding the year in which assessments or taxes are to be levied.

C. A change in boundaries of an existing taxing jurisdiction or the establishment of a new taxing jurisdiction is not effective for assessment and tax levying purposes for the tax year unless notice has been given as prescribed by this section. If the change in boundaries of an existing taxing district or if the establishment of a new taxing jurisdiction for the following fiscal year is not complete by December 20, a preliminary filing, which shall include all information prescribed by law, may be submitted pursuant to this section. After the governing board of the new taxing jurisdiction is authorized to act, but not later than May 15, the appropriate governing body or bodies shall notify the department and the county assessor of the formation effective for the following fiscal year.

Article 7 Residential Property Tax Deferral

§ 42-17301 Definitions

In this article, unless the context otherwise requires:

"Property taxes" means all ad valorem taxes that are levied by all taxing jurisdictions and that become a lien on a residence, including special assessments.
"Residence" means real and personal property and improvements that constitute an owner-occupied dwelling that is classified as class three pursuant to section 42-12003.
"Tax deferred residence" means a residence on which property taxes are deferred pursuant to this article for the current or any prior tax year.
"Taxable income" has the same meaning prescribed in section 43-1001.
"Taxpayer" means an individual or an individual's legal representative who files a claim for deferral pursuant to this article.

§ 42-17302 Election to defer residential property taxes; qualifications

A. An individual who meets the qualifications prescribed by this section, or the individual's legal representative, may elect to defer property taxes on the individual's qualifying residence for a taxable year pursuant to this article.

B. To qualify for the deferral the individual shall meet all of the following requirements:

The individual shall be at least seventy years of age on the date the deferral claim form is filed.
The individual, either individually or with another individual who resides in the residence, shall own the residence or be purchasing the residence under a recorded instrument of sale or shall hold the property under the terms of a real estate trust.
The individual must either:

(a) Have lived in the current residence for at least six years immediately preceding the date the deferral claim form is filed.

(b) Have lived in this state for at least ten years immediately preceding the date the deferral claim form is filed.

The individual may not own or have any legal, equitable, beneficial or security interest in any other residence or other real property, wherever it may be located, except indirectly through an investment security, such as a mutual fund, that includes real property among its assets.

C. In the case of a married couple, both spouses shall:

Meet the requirements prescribed by subsection B.
Consent to the deferral of taxes, regardless of whether both spouses have an ownership interest in the residence.

D. In addition to the requirements prescribed by subsections B and C, the total taxable income of all persons residing in the residence for the taxable year immediately preceding the current year may not exceed ten thousand dollars.

§ 42-17303 Property entitled to tax deferral

To qualify for deferral of property taxes the residence shall meet all of the following requirements:

It must be the taxpayer's primary residence.
It must not be income producing.
It may not have a full cash value, as determined by the county assessor for the current tax year, of more than one hundred fifty thousand dollars.
It may not be subject to the lien of any mortgage, reverse mortgage, deed of trust or other real property security interest that has been of record for less than five years before the date the deferral claim form is filed.
All property taxes must be paid for years preceding the year for which the initial election is made.

§ 42-17304 Deferral claim

A. The claim for deferral shall be on a form that is prescribed by the state treasurer and that provides an explanation of the requirements of this article and instructions for completing and filing the claim. The claim shall:

Identify the residence by street address and tax parcel number.
Recite the facts establishing the individual's and residence's eligibility for deferral, including all mortgages, reverse mortgages, deeds of trust and other security interests that constitute current liens on the residence with the year or years they were recorded.
State the maximum amount of taxes that can be deferred on the residence. The cumulative amount of deferred taxes and interest that attaches to a tax deferred residence under this article, plus any amounts secured by mortgages, reverse mortgages, deeds of trust and other real property security interest with respect to the residence, may not exceed ninety per cent of the full cash value of the residence determined by the county assessor for the tax year.
State the total taxable income of all persons residing in the residence for the taxable year immediately preceding the current year. The taxpayer shall attach a copy of the state income tax return filed by each person who resided in the residence during the preceding taxable year. If any person residing in the residence was not required to file a state income tax return under title 43 for the preceding taxable year, the taxpayer shall certify that the total taxable income of all persons residing in the residence for the taxable year immediately preceding the current year does not exceed ten thousand dollars.

B. In addition to the claim form, the taxpayer shall submit copies of all relevant documentation that is necessary to establish eligibility for the deferral.

C. The taxpayer shall sign the claim form under penalty of perjury.

§ 42-17305 Filing the claim for deferral; appealing denied claim

A. A taxpayer shall file the claim form with the assessor of the county in which the residence is located. The tax that is due for a tax year may be deferred if a valid claim is filed after January 1 but before April 1 of the tax year for which the deferral is claimed.

B. On the taxpayer's request, an employee in the county assessor's office may assist the taxpayer in completing the claim form.

C. The county assessor shall review the claim, may request additional documentary evidence to support the claim and shall make the final determination on the validity of the claim, based on the submitted documentation, on or before June 1.

D. If the assessor denies the claim, the taxpayer may appeal the denial to tax court as provided in section 42-16201, except that the taxpayer shall file the notice of appeal within fifteen days after the assessor's denial.

§ 42-17306 Certificate of deferral; record

A. The county treasurer shall issue a certificate of deferral for each residence whose property taxes are deferred under this article that names the individual, describes the property and states the tax year, the amount of taxes that is deferred and the rate of interest that accrues to the certificate, computed pursuant to section 42-17309. The treasurer shall:

Transmit a copy of the certificate to the taxpayer.
Record a copy of the certificate in the office of the county recorder, which serves as actual notice of the lien of deferred taxes.
Transmit a copy of the certificate to the county assessor.
Maintain a permanent record of all taxes that are deferred under this article in the county each year.
Enter the deferral on the current year's tax roll.

B. The issuance of a certificate of deferral under this article has the effect of:

Deferring the payment of property taxes for the tax year for which the claim is filed.
Attaching the lien for deferred taxes to the residence as described in section 42-17308.

C. Deferred property taxes are not considered to be delinquent, and the treasurer shall not include them in the tax record of delinquent taxes.

§ 42-17307 Refund of deferred taxes deposited in escrow

If a tax deferred residence is subject to any mortgage, deed of trust or other real property security interest and the secured party maintains an escrow account into which payments are deposited for the payment of property taxes, the taxpayer may submit a copy of the certificate of deferral to the secured party. Within thirty days after receiving the certificate the secured party shall refund to the taxpayer all monies held in the escrow account to pay property taxes on the tax deferred residence.

§ 42-17308 Lien of deferred taxes and accrued interest

Deferred taxes and accrued interest under this article are a lien against the property. The lien:

Attaches on the date the certificate of deferral is recorded.
Has priority over:

(a) Any mortgage, reverse mortgage, deed of trust or other real property security interest that is recorded before the certificate of deferral is recorded.

(b) Any lien attaching after the certificate of deferral is recorded.

May not be enforced except as provided in this article.

§ 42-17309 Sale of deferred tax liens to state; interest on lien

A. On or before January 15 of each year, the county treasurer shall sell to the state treasurer or to the county, or both, all certificates of deferred taxes issued in the county under this article during the previous tax year.

B. The amount of the sale shall include reimbursement for the county treasurer's cost of administering this article in an amount of ten dollars, which shall be deposited in the taxpayers' information fund established by section 11-495, plus the cost of recording the copy of the certificate of deferral.

C. A certificate that is sold under this section bears simple interest monthly, payable on redemption or payment of tax or on enforcement of the lien as provided by this article. On or before October 1 of each year, the state treasurer shall compute the rate of interest that applies to certificates that will be sold during the following tax year. The rate shall equal the average annual rate earned on the local government investment pool under section 35-316 plus two percentage points, rounded to the next higher full percentage.

D. Certificates of deferral are valid investments of state trust monies pursuant to section 35-313. The state treasurer shall keep a record of certificates of deferral that are sold to the state in the same manner as other investment securities.

§ 42-17310 Notices

A. On or before January 31, the county assessor shall mail a notice to each taxpayer who claimed a deferral of taxes for the preceding tax year that the taxpayer must file another claim to receive a deferral of taxes for the new tax year. The notice shall be substantially as follows:

To: (name of taxpayer)

Notice -

If you want to defer the collection of property taxes on your residence for tax year _____, you must file a claim for deferral with the county assessor before April 1, _____. Forms for filing the claim are available from the county assessor's office (telephone number).

If you fail to file your claim before April 1, _____, your property taxes on your residence for tax year _____ will be due and payable according to law, but at this time you will not have to pay the property taxes that you have already deferred in prior years.

You must promptly notify the county assessor if you change your permanent address or if you sell or transfer title to your residence.

B. The county assessor shall include with the notice of assessed valuation under chapter 15, article 3 of this title for each tax deferred residence parcel, either on the face of the notice or attached to the notice, the words "Notice: this residence is subject to a lien of deferred taxes. Contact the county assessor's office (telephone number) for details."

C. The county treasurer shall include with any statement of property taxes on each residence that is subject to a lien of deferred taxes, either on the face of the statement or attached to the statement, the words "Notice: this residence is subject to a lien of deferred taxes. Contact the county assessor's office (telephone number) for details."

§ 42-17311 Events requiring payment of deferred tax

A. The total amount of deferred property taxes, plus interest and costs, that has accrued with respect to a tax deferred residence is due and payable if:

The individual who claimed the deferral dies without a surviving spouse who qualifies under section 42-17302.
The tax deferred residence is sold or becomes subject to a fully executed, binding contract of sale or title to the residence is otherwise transferred to persons other than the individual or the individual's spouse who qualifies under section 42-17302. A tax deferred residence may not be transferred or conveyed unless the deferred property taxes, interest and costs are paid in full.
The residence is no longer the residence of the individual and, in the case of a married individual, the individual's spouse who qualifies under section 42-17302, unless the individual or spouse is required to be absent from the residence due to illness.
The residence becomes income producing property.

B. If the county assessor has reason to believe that any of the circumstances listed in this section has occurred, the assessor shall immediately notify the county treasurer and the state treasurer.

§ 42-17312 Payment of deferred taxes; due dates and delinquency; enforcement of lien

A. If payment is required pursuant to section 42-17311, all deferred taxes, interest and costs are due and payable one hundred twenty days after an event requiring payment of deferred property taxes except in the case of the individual's death, in which case the taxes, interest and costs are due and payable one year after the individual's death. Nothing in this subsection allows a contract of sale for the tax deferred residence to be executed or title to a tax deferred residence to be transferred or conveyed unless the deferred property taxes, interest and costs are paid in full at or before execution of the contract or transfer or conveyance of the title. All amounts payable under this section shall be paid to the county treasurer. If the certificate for deferred taxes was sold to the state treasurer, the county treasurer shall immediately remit the payment to the state treasurer.

B. The taxpayer or any other person may pay in full the lien for deferred taxes with respect to any tax year at any time before payment is required pursuant to section 42-17311. An advance payment under this subsection does not affect the current deferred tax status of the residence.

C. On payment, the state or county treasurer holding the certificate of deferred taxes shall immediately issue a release of the deferred tax lien, record the release with the county recorder and send a copy of the release to the taxpayer, the county assessor and the county treasurer.

D. If the deferred taxes, interest and costs are not paid in full when due and payable, the amounts are delinquent, and the lien may be enforced as provided by this chapter for tax liens that are assigned to the state.

§ 42-17313 Report

Not later than September 1 of each year, the state treasurer shall compile a report containing the following information:

The number of deferral claims received in each county that year.
The number of claims finally approved in each county for deferral that year.
The total assessed valuation of tax deferred residences in each county as of July 1 of the current year.
The amount of taxes that was deferred on the current tax roll in each county.

Article 8 Elderly Assistance

§ 42-17401 Elderly assistance fund; primary school district tax reduction; definition

A. An elderly assistance fund shall be established by the board of supervisors in a county with a population of more than two million persons to be administered by the county treasurer. The fund shall be used to reduce the primary school district taxes pursuant to subsection C of this section.

B. The board of supervisors shall spend any unspent monies that remain in the elderly assistance fund from and after December 31, 2015 solely on the elderly assistance program. Any subsequent appropriations made to the elderly assistance fund shall also be spent solely on the elderly assistance program.

C. On June 30 of each year, the county treasurer shall determine the total amount of monies in the elderly assistance fund and the total number of qualified individuals who live in the county. The county treasurer shall use the monies in the fund to proportionately reduce the primary school district taxes that are levied against the property of all qualified individuals in the county for the following tax year.

D. The county treasurer shall invest monies in the fund. Interest earned on fund monies shall be deposited in the taxpayer's information fund established by section 11-495.

E. For the purposes of this section, "qualified individual" means an individual who lives in an organized school district and who is approved for the property valuation protection option pursuant to article IX, section 18, subsection (7), Constitution of Arizona.

Article 9 Refunds

§ 42-17451 Refund; failure to abate public nuisance; applicability; definitions

(Caution: 1998 Prop. 105 applies; Rpld. 1/1/36)

A. Notwithstanding any other law, subject to subsection C, paragraph 3 and subsection I of this section, beginning in tax year 2025, a property owner may apply for a refund in an amount determined pursuant to subsection B of this section if either of the following occurs:

The city, town or county in which the real property is located adopts and follows a policy, pattern or practice of declining to enforce existing laws, ordinances or other legislation prohibiting illegal camping, obstructing public thoroughfares, loitering, panhandling, public urination or defecation, public consumption of alcoholic beverages or possession or use of illegal substances and the property owner incurs documented expenses to mitigate the effects of the policy, pattern or practice or the public nuisance on the property owner's real property.
The city, town or county in which the real property is located maintains a public nuisance and the property owner incurs documented expenses to mitigate the effects of the policy, pattern or practice or the public nuisance on the property owner's real property.

B. The amount of the refund is equal to the documented expenses incurred by the property owner that were reasonably necessary to mitigate the effects of the policy, pattern or practice or the public nuisance on the property owner's real property.

C. The refund allowed under this section:

Shall be paid in the same manner prescribed by section 42-1118.
Notwithstanding section 12-1134, subsection H, is in lieu of any claim for monetary damages or any rights under title 12, chapter 8, article 2.1.
May not exceed the amount the property owner paid for the prior tax year in primary property taxes for the tax year to the affected city, town or county. If the total amount of the refund determined pursuant to subsection B of this section is more than the amount the property owner paid for the prior tax year in primary property taxes to the affected city, town or county for the tax year and the refund is accepted, the department shall issue the refund for that tax year in an amount equal to the amount the property owner paid for the prior tax year in primary property tax to the affected city, town or county. The property owner must apply to the department for the remaining portion of the refund the following and successive tax years, as needed.

D. Within fifteen days after the department receives an application from a property owner for a refund under this section, the department shall notify the affected city, town or county. Within thirty days after receiving the notice, the affected city, town or county shall accept or reject the refund and notify the department of that determination. If the affected city, town or county:

Accepts the refund, the department shall pay the refund to the property owner pursuant to subsection C of this section.
Rejects the refund, the department may not pay the refund to the property owner. The property owner may file a cause of action in the superior court of the county in which the real property is located to challenge the rejection of the refund. The questions of whether the property owner is entitled to the refund and whether the amount of the refund is reasonable are judicial questions. In a cause of action filed pursuant to this paragraph:

(a) The city, town or county shall bear the burden of demonstrating that its actions are lawful or that the amount of the refund is unreasonable.

(b) The property owner is not liable to the city, town or county for attorney fees or costs.

Does not respond to the department within the thirty-day period, the refund is deemed accepted and the department shall pay the refund to the property owner.

E. On notice from the department, the state treasurer shall withhold from the distribution of monies pursuant to section 42-5029, subsection D to the affected city, town or county the respective aggregate amount of refunds issued under this section. The state treasurer shall continue to withhold monies pursuant to this subsection until the entire amount provided by the department has been withheld. The state treasurer shall credit any monies withheld pursuant to this subsection to the department as reimbursement for issuing the refunds. The state treasurer may not withhold any payments for debt service on bonds or other long-term obligations of the affected city, town or county that were issued or incurred before the refund was issued.

F. The property owner may not be required to submit any claim as a prerequisite to demanding or receiving just compensation in the form of a refund pursuant to this section.

G. A property owner may apply for a refund under this section once per tax year.

H. If the policy, pattern, practice or public nuisance remains in place after the property owner applies for a refund pursuant to this section, the property owner is entitled to another refund under this section in a subsequent tax year, unless the affected city, town or county and the property owner enter into a knowing and voluntary settlement, or the affected city, town or county ends the policy, pattern or practice or abates the public nuisance.

I. A property owner whose real property is located in the corporate boundaries of a city or town is eligible to apply for a refund only from that city or town. A property owner whose real property is located in an unincorporated area of a county is eligible to apply for a refund only from that county.

J. Except for any rights under title 12, chapter 8, article 2.1 that are fully waived by receiving a refund under this section pursuant to subsection C, paragraph 2 of this section, the remedy established by this section is in addition to any other remedy that is provided by the laws and constitution of this state or the United States and is not intended to modify or replace any other remedy.

K. The department shall prescribe the procedure and form required to administer this section.

L. This section does not apply to:

Decisions by city, town or county authorities to exercise prosecutorial discretion not to prosecute alleged offenders if the decisions are made on a case-by-case basis and the justifications for each decision are published on a monthly basis by the city, town or county.
Acts of executive clemency.
Acts or omissions taken pursuant to section 26-303.
Acts or omissions mandated by federal law.

M. For the purposes of this section:

"Affected city, town or county" means a city, town or county in which a property owner is applying for a refund provided under this section.
"Property owner" means the holder of fee title to the real property.

Chapter 18 Collection and Enforcement

Article 1 Tax Collector

§ 42-18001 County treasurer as tax collector; bond

A. The county treasurer is ex officio tax collector and shall:

Collect all property taxes.
Apportion the taxes to the respective funds on or before the end of each month.

B. Before assuming the duties of tax collector the county treasurer shall execute to the state a bond in such penal amount as the county board of supervisors requires, but not more than twice the amount of money that may come into the county treasurer's possession as tax collector in one year.

§ 42-18002 Annual report by county treasurer; settlement of accounts; liability for failure to settle

A. On or before August 15 of each year the county treasurer shall report to the board of supervisors:

The amount of taxes charged for collection during the preceding fiscal year on the roll.
The total collections for that year.
The amount of increase and decrease due to corrections.
The total amount of unpaid taxes on the roll as of June 30.

B. The board shall credit the treasurer with the amounts of collections made and corrections made according to law and shall balance them against the amounts originally charged against the county treasurer, plus the errors of debit or credit that may be discovered in the rolls.

C. If a county treasurer refuses for a period of five days or wilfully neglects to make the settlement with the clerk of the county board of supervisors and the board of supervisors as required by law, the treasurer and the treasurer's sureties are liable to pay the full amount of taxes charged on the roll. The county attorney, on request of the board, shall bring an action for the full amount due on the roll.

D. The treasurer shall keep the accounts of ex officio tax collector and of county treasurer separate and distinct. All collections of the tax collector shall be transferred to the accounts of the county treasurer on the last day of each month, and the records of both the tax collector and county treasurer shall so indicate.

§ 42-18003 Delivery of roll to county treasurer; resolution for collecting taxes

A. On or before October 1 of each year the assessment and tax roll and the cross-index shall be delivered to the county treasurer.

B. On completing the assessment and tax roll, the county board of supervisors shall adopt a resolution for the collection of taxes by the county treasurer as provided by law from the persons who are listed in the roll. The county treasurer is thereafter responsible for collecting the totals of all taxes levied on the roll.

C. The roll attached to the county board of supervisors' resolution for collecting taxes is the treasurer's authority to collect the levied taxes.

§ 42-18004 Transmitting statement of taxes due state to state treasurer

Within ten days after the board of supervisors adopts the resolution for collection of taxes levied in the annual roll, the clerk of the board shall transmit to the state treasurer a written statement showing the amount of taxes due the state and contained in the annual roll, as appears from the data entered by the board.

§ 42-18005 Property tax collection; liens assigned to state

The county treasurer or board of supervisors, as applicable, may act as the agent for the state for the collection of property taxes under this chapter with respect to any tax liens that are assigned to the state or any property that is held by the state.

Article 2 Payment

§ 42-18051 Notice of tax; payment by electronic funds transfer

A. Immediately on receiving the tax roll from the county board of supervisors, the county treasurer shall publish an official notice stating:

That the assessment and tax roll is now in the treasurer's possession for collecting the taxes levied.
That the taxes on real property and personal property are due and payable and become delinquent at the dates and times prescribed by section 42-18052, and interest will be added to the tax from the time of the delinquency as prescribed by section 42-18053, unless either:

(a) The first half of the taxes are paid before they are delinquent.

(b) The full year tax is paid on or before December 31, as provided by section 42-18053.

That all taxes may be paid at the time the first installment is due and payable.
When and where tax payments may be made.

B. The county treasurer shall publish the notice once a week for four consecutive weeks in a newspaper of general circulation in the county.

C. No other demand for taxes is necessary.

D. Each person who is subject to taxation shall pay the taxes at the county treasurer's office, or at any other location designated by the treasurer, before they become delinquent.

E. The county treasurer may require electronic transmission of supporting documentation and payment that includes the name of the taxpayer, tax parcel number and amount of tax, on or before the dates prescribed by section 42-18052, by any person or entity, acting on behalf of multiple owners of property who submit tax payments to the county treasurer in a lump sum exceeding fifty thousand dollars or owners who submit fifty or more tax payments. If the sum of funds submitted fails to balance with the tax parcel information and supporting documentation submitted electronically, and there have been no changes to the tax bills as a result of assessor resolutions or tax court judgments, the funds shall not be accepted and the treasurer shall return the funds and request that the correct amount be submitted. If any payment is received after a delinquent date as prescribed in section 42-18052, interest accrues as prescribed by section 42-18053.

§ 42-18052 Due dates and times; delinquency

A. Except as provided in subsection C of this section, one-half of the amount of the taxes on real property and personal property is due and payable on October 1, and the remaining one-half of the taxes is due and payable on the following March 1.

B. Except as provided in subsection C of this section, one-half of the amount of the taxes that are unpaid is delinquent after November 1 at 5:00 p.m. and the remaining one-half that is unpaid is delinquent after the following May 1 at 5:00 p.m.

C. If the total amount of taxes is one hundred dollars or less:

The entire amount of the taxes is due and payable on October 1.
The entire amount that is unpaid is delinquent after December 31 at 5:00 p.m.

D. If the delinquency date is a Saturday, Sunday or other legal holiday, the time of delinquency is 5:00 p.m. on the next business day.

§ 42-18053 Interest on delinquent taxes; exceptions; waiver

A. Except as provided in subsection B of this section, all taxes bear interest from the time of delinquency at the rate of sixteen percent per year simple until paid. A fraction of a month is counted as a whole month.

B. Interest shall not be collected:

If the delinquency is the result of an error by the county assessor or county treasurer.
If the full year tax for the year is paid on or before December 31 of the tax year. This paragraph applies regardless of whether payment of tax is due pursuant to section 42-18052, subsections A and B or pursuant to section 42-18052, subsection C for an amount of tax that is $100 or less.

C. Subject to the approval of the county board of supervisors, the county treasurer may waive the interest that accrues pursuant to this section, and any other penalties, for a delinquency that occurs during the one-year period after a mortgage or deed of trust is satisfied or otherwise released on the property. A taxpayer may receive a waiver under this subsection only once per property.

§ 42-18054 Tax statements for mortgaged property; liability

A. If property that is subject to taxation by the county assessor is mortgaged and the mortgagee, or a person acting for the mortgagee, by the terms of the mortgage agreement pays the tax on behalf of the mortgagor:

The county treasurer shall mail or, on the request of the mortgagor, email a statement of taxes due on the property to the mortgagor at the mortgagor's last known mailing address or, if requested, email address. If the mortgagor of the property changes, the county treasurer shall mail the tax statement to the new mortgagor at the address of the property until the new mortgagor requests email delivery of the tax statement. The tax statement shall be sent to the mortgagor before November 1. The tax statement shall separately list the following for the current and previous tax years for the property:

(a) The amount of primary taxes and secondary taxes applicable to the property that is due to each taxing jurisdiction.

(b) If applicable, the amount of additional state aid to school districts provided to property classified as class three pursuant to section 42-12003.

The county treasurer, on request, shall send a statement of taxes due on the property to the mortgagee. The tax statement sent to the mortgagee may be in any form established by the county treasurer.
The liability for the tax, and any subsequent interest, fees and penalties, does not depend on either the mortgagor or the mortgagee receiving the tax statement.

B. When a mortgagee either continues to receive or possesses an unsatisfied tax statement from the county treasurer after the mortgage is satisfied, the mortgagee shall either:

Return the tax statement to the county treasurer within thirty working days, together with the last known address of the mortgagor as shown on the records of the mortgagee.
Forward the tax statement or current taxes due information to the mortgagor and notify the county treasurer of this action.

C. If a mortgagee fails to comply with subsection B of this section and, as a result of the mortgagee's failure to comply, the tax on the mortgagor's property becomes delinquent, the mortgagee is liable to the mortgagor for all interest and penalties imposed by law for the delinquent tax.

§ 42-18055 Posting payments; receipts

A. When a tax is paid, the county treasurer shall record the date of payment and credit the payment to the person or property that is liable for the tax.

B. Except as provided in subsection C, the treasurer shall provide a receipt for the payment stating:

The total amount paid.
The date of payment.
The parcel identification number.

C. The treasurer shall establish procedures for issuance or nonissuance of receipts.

§ 42-18056 Partial payment of taxes; certificates of purchase; delinquent taxes; payment plan agreement; fee

A. At any time before either installment of the tax becomes delinquent, the county treasurer shall accept a partial payment or payments of the tax in an amount of at least ten percent of the installment and in an amount of at least $10. The treasurer shall credit the taxpayer with the payment, and if any part of the tax or any installment remains unpaid at the date of delinquency, the delinquency relates only to the amount remaining unpaid.

B. In accepting payments under subsection A of this section, the county treasurer shall issue a receipt to the taxpayer, subject to section 42-18055, subsection C, stating that it covers a partial payment of taxes.

C. For all certificates of purchase sold during calendar year 2016 and afterwards for tax year 2014 and afterwards in a county with a population of more than three million persons if no prior year certificates of purchase are outstanding, the county treasurer shall accept a partial payment in an amount equal to at least twenty-five percent of the principal amount shown on the oldest remaining year of the delinquency plus any accrued interest and fees due on the principal payment amount.

D. In accepting payments under subsection C of this section, the county treasurer shall issue a partial payment statement to the taxpayer as provided by section 42-18154, subsection C.

E. Partial payments on delinquent taxes shall be impounded and disbursed by the county treasurer as prescribed by section 42-18152, subsection C, when the impounded monies are sufficient to fully redeem the oldest outstanding certificate of purchase.

F. If no certificate of purchase is outstanding, the county treasurer shall credit the taxpayer with the payment, and if any part of the tax or any installment remains unpaid at the date of delinquency, the delinquency relates only to the amount remaining unpaid.

G. Notwithstanding any other law, a county treasurer may enter into a payment plan agreement with a taxpayer for a period of up to thirty-six months for paying the taxpayer's delinquent business personal property taxes of more than $1,000. The county treasurer may charge a fee of not more than $150 for administrative costs associated with processing a payment plan agreement.

§ 42-18057 Payment of tax by part owner; lien for contribution; allocation of tax lien in event of parcel split or consolidation

A. If a parcel of real property is assessed in its entirety to one or more persons and part of the property belongs to another person who does not appear on the assessment roll:

That person may pay a portion of the whole tax in proportion to the person's interest in the property.
The county treasurer shall receive the tax and give a receipt to the person, subject to section 42-18055, subsection C, showing what part of the tax was paid.

B. A person who pays the tax on the whole parcel of which the person is a part owner has a lien on the share of the other part owner for that portion of the tax that was paid, with interest. The person may enforce the lien in the same manner as any other lien.

C. After the tax roll is delivered to the county treasurer pursuant to section 42-18003 and after all other means to allocate taxes among parties have been exhausted, the county treasurer may allocate the tax due for parcels of real property that were split or consolidated after September 30 of the valuation year as follows:

The allocation of the tax to the parcel or parcels shall be in equitable proportions.
There shall be no change in the total valuation or classification of the property as determined by the assessor.
The total primary and secondary taxes of the new parcel or parcels must be the same as the primary and secondary taxes assessed to the original parcel or parcels.
The county treasurer shall apportion the new tax amounts among the taxing authorities in the same manner that applied to the original parcel or parcels before being split or consolidated.

§ 42-18058 Collection and payment of tax on livestock in feedlot or stockyard; exceptions

A. The operator of a feedlot or stockyard shall collect and remit the tax on feeder livestock that are confined at the feedlot or stockyard for fattening before sale for slaughter. The operator shall remit the tax quarterly to the county treasurer based on the aggregate of the applicable tax rates that were in effect for the preceding tax year.

B. Tax shall not be collected or remitted on the following livestock:

Livestock that die before leaving the feedlot or stockyard.
Livestock that have previously been taxed in this state during the current tax year before arriving at the feedlot or stockyard.
Livestock that are held in the feedlot or stockyard for less than forty-five days.

C. The department shall prescribe procedures and provide forms that are necessary to implement this section.

§ 42-18059 Payment of tax on property sold at judicial sale or by fiduciary

If the tax has not been paid on property sold at judicial sale, or sold by an executor, administrator, guardian or trustee, the person making the sale shall pay the taxes, penalties and costs from the proceeds of the sale.

§ 42-18060 Lien of fiduciary paying tax

If the tax on property is assessed to a person as agent for another, or in a representative capacity, that person has a lien on that property or any property of the principal in the fiduciary's possession until the fiduciary is indemnified against the tax payment, or if the fiduciary has paid the tax, until the fiduciary is reimbursed for the payment.

§ 42-18061 Refund of overpayment due to change in tax roll; reversion of unclaimed refund

A. If a change is made in the tax roll pursuant to law, the county treasurer shall refund any taxes that have been overpaid as a result of the change as follows:

If monies are available, the county treasurer shall pay the refunds out of those monies in the current year.
If monies are not available, the board of supervisors shall budget for the refund in the next fiscal year.
The county treasurer is entitled to credit for the refunds in the next accounting after the repayment with each of the political subdivisions and this state to which the overpayment of tax was distributed.
The state and any affected political subdivision shall include in their budgets for the fiscal year the proportional amount of the refund for which each is liable.

B. If a refund that is authorized by this section is unpaid and unclaimed two years after the fiscal year in which it was budgeted, the monies that were budgeted for the refund revert to the appropriate fund of the political subdivision that levied the tax.

Article 3 Sale of Tax Lien for Delinquent Taxes

§ 42-18101 Sale and foreclosure of tax liens; effect of insubstantial failure to comply

A. The county treasurer shall secure the payment of unpaid delinquent taxes by using the provisions of this article and articles 4, 5 and 6 of this chapter to sell the tax liens provided for in section 42-17154 and to foreclose the right to redeem.

B. An insubstantial failure to comply with these provisions does not affect the validity of:

The assessment and levy of taxes.
Any tax lien on real property for delinquent unpaid taxes.
The sale of a tax lien or the foreclosure of the right to redeem by which tax collection is enforced.

§ 42-18102 Delinquent tax record

A. The county treasurer shall maintain a record of delinquent taxes, listing the properties, owners of record and the amount of taxes, penalties and interest due.

B. Any informality in maintaining the record does not affect its validity.

§ 42-18103 Notice of delinquent taxes

On or before September 1 of each year the county treasurer shall send by mail to the last known address of each person or firm that owes delinquent taxes notice that there are delinquent taxes against the real property that is assessed in the taxpayer's name.

§ 42-18104 Taxes for which lien may be sold

A. The delinquent taxes for which a real property tax lien may be sold pursuant to this article are not limited to unpaid taxes for any particular year or years.

B. The county treasurer shall advertise and sell the tax lien for the aggregate amount of all unpaid taxes that are delinquent on the property, together with all penalties, interest and charges respectively due for the current or preceding years, whether or not the aggregate amount or any part has been reduced to judgment, and any outstanding fees attached to the parcel.

C. The failure to include the unpaid taxes of any year does not invalidate a sale for unpaid taxes that are delinquent for any other year or years.

§ 42-18105 Limitation on sale for unpaid tax; exceptions

No sale for an unpaid tax may be commenced at a date later than five years after delinquency unless:

The sale is advertised within the five year period.
The failure to advertise within five years of the delinquency is due to a restraining order or injunction issued by a court of competent jurisdiction.

§ 42-18106 Delinquent tax list and notice of sale

A. On or before December 31 of each year, the county treasurer shall prepare:

A list of all real property on which the taxes for prior tax years are unpaid and delinquent, describing the property as it is described on the tax roll.
An accompanying notice stating that the treasurer will sell a tax lien on each parcel of real property at public auction for taxes, penalties, interest and charges on the real property.

B. The notice of sale shall include:

The name of the owner.
The property account number, if available, and the parcel number of the property.
The tax years for which taxes are delinquent.
The taxes, penalties, interest and charges assessed.

C. If the board of supervisors by resolution elects to pursue any other remedy provided by law, the board may dispense with the notice of sale under this section, but that action does not affect sections 42-18109 and 42-18110.

D. The county shall make available to the public on a county website the description of the property associated with a parcel number.

§ 42-18107 Additional penalty on listed property

A. A penalty of five dollars or five per cent of the delinquent taxes for which the tax lien is being sold, whichever is more, shall be added to the amount of taxes that are delinquent on each parcel of real property that is separately assessed and described in the list and notice.

B. This penalty:

Is imposed and is due on January 1 after the list is prepared pursuant to section 42-18106.
Shall be collected by the county treasurer.

§ 42-18108 Personal notice of proposed sale

The county treasurer shall mail a copy of the notice of proposed sale to the owner of each parcel of property on the delinquent tax list at the owner's last known address.

§ 42-18109 Publication and posting of list and notice

A. The county treasurer shall post a correct copy of the list and notice required under section 42-18106 near the outer door of the office of the county treasurer. The list and notice shall remain posted for at least two weeks before the start date of the sale.

B. The county treasurer shall publish a correct copy of the list and notice required under section 42-18106 at least one time in a newspaper of general circulation in the county. The publication shall be at least two weeks but not more than three weeks before the start date of sale stated in the notice.

C. The newspaper that prints the list and notice required under section 42-18106 shall also post the list and notice from the first publication date through March 1 of the current year on the internet on a website that posts the legal notices of ten or more Arizona newspapers.

§ 42-18110 Affidavits of posting and publication

A. The county treasurer shall record an affidavit stating the posting of the delinquent tax list and notice of the tax lien sale.

B. Immediately after the last publication, each publisher who publishes the list and notice on the order of the county treasurer shall deliver to the treasurer and record an affidavit of publication made by the publisher, manager or editor of the newspaper to whom the facts of publication are known. A publisher who fails to furnish and record the affidavit within ten days after the last publication shall not be paid for the publication of the list and notice. The recorded affidavit is prima facie evidence of the recited facts in any action in the courts of this state.

§ 42-18111 Parcels; property description; designation of owner unnecessary

A. If two or more lots or parcels are assessed as one parcel, the tax liens on them may be sold as a single tax lien on one parcel.

B. The county assessor's parcel number and description of property with sufficient certainty to identify the quarter section or lot, block and tract may be used to describe real property in the delinquent tax list and notice of sale.

C. For all other entries, notices, certificates, deeds, pleadings, judgments and proceedings made or had under this chapter, it is sufficient to designate the sections, townships, ranges, lots, blocks and portions by initial letters, figures and abbreviations.

D. If a real property tax lien is offered for sale, it is not necessary to advertise or sell it as being against the property of any specific person. The sale is not invalid by reason of the fact that the property was assessed or advertised in the name of a person other than the rightful owner, or to an unknown person, if the description of the real property in the list and notice is sufficient to identify it and includes the amount of taxes for which the tax lien is advertised to be sold.

§ 42-18112 Time of sale

A. The tax lien sale shall be held in February.

B. On the day designated in the list and notice, the county treasurer shall begin the sale of all tax liens on real property that is described in the list and notice on which the taxes and charges have not been paid. The county treasurer shall continue the sale from day to day, Sundays and holidays excluded, until the tax lien on each parcel has been offered for sale and no more bids are offered by purchasers.

§ 42-18113 Procedure in the case of no bid; assignment to state

A. If there is no bid for a tax lien, the county treasurer shall pass it for the time and shall reoffer it at the beginning of the sale on the next day until all tax liens are sold or until the county treasurer becomes satisfied that no more sales can be made. At that time the treasurer shall:

Assign to the state the property tax liens remaining unsold for the amount of the taxes, interest, penalties and charges.
Issue a certificate of purchase to the state as provided in other cases.

B. If a tax lien has been assigned to the state:

Taxes that are assessed against that property are not payable until they have been derived from the sale or redemption of the property or from the assignment of a certificate of purchase pursuant to section 42-18122.
The rate of interest payable on redemption shall be as prescribed by section 42-18053.

§ 42-18114 Successful purchaser

A real property tax lien shall be sold pursuant to this article to the person who pays the whole amount of delinquent taxes, interest, penalties and charges due on the property, and who in addition offers to accept the lowest rate of interest on the amount so paid to redeem the property from the sale, which may not exceed the rate prescribed by, and computed pursuant to, section 42-18053. The lien bears interest at the bid rate from the first day of the month following the purchase of the tax lien.

§ 42-18115 Easements and liens not extinguished by sale

A. The sale of a real property tax lien does not extinguish any easement on or appurtenant to the property.

B. The sale of a real property tax lien does not extinguish any lien for an assessment levied pursuant to title 48, chapter 4, 6 or 14, or section 9-276.

§ 42-18116 Payment; resale or recovery on reneged bid; processing fee

A. The purchaser of a tax lien shall pay the purchase price in cash at a time the county treasurer determines but within fifteen days after the close of the sale.

B. If the purchaser fails to pay the amount due:

The county treasurer shall resell the tax lien if the sale has not been closed.
If the sale has been closed, the treasurer may either:

(a) Recover the amount bid by civil action in a court of competent jurisdiction.

(b) Prohibit the purchaser who failed to pay the amount due from purchasing tax liens from any county in this state for a period of not more than one year.

C. The purchaser shall pay a processing fee of not more than $10 per tax lien. The treasurer shall deposit monies collected pursuant to this subsection in the taxpayers' information fund established by section 11-495.

§ 42-18117 Record of tax lien sales

The county treasurer shall make a correct record of all sales of real property tax liens, known as the record of tax lien sales, containing:

The date of sale.
A description of each parcel on which a tax lien was sold.
The name of the owner, if known.
The name of the purchaser.
The total amount of taxes, interest, penalties and charges for which the tax lien was sold.
The amount of subsequent taxes and interest paid by the purchaser.
The name of the assignee and the date of assignment of the certificate.
The name of the person redeeming and the date of redemption.
The total amount paid for redemption.
The name of any person to whom conveyed and the date of the deed.

§ 42-18118 Certificate of purchase or registered certificate; form; assignment; fee

A. The county treasurer shall make, execute and deliver a certificate of purchase to each purchaser at the sale for delinquent taxes or to each assignee. The treasurer may provide for a registered certificate in the treasurer's records in lieu of delivering a physical certificate.

B. The certificate of purchase or registered certificate shall:

Describe the real property on which a tax lien is sold as it is described in the record of tax lien sales.
Recite the date of the sale.
State the name of the purchaser.
Recite the tax year or years for which the tax lien was sold.
Recite the amount of all taxes, interest, penalties and charges for which the tax lien was sold and the rate of interest payable in order to redeem.

C. The certificate of purchase, whether registered or paper or whether issued to this state or to a person, is assignable by endorsement or as provided by section 42-18121.01. An assignment, when noted on the record of tax lien sales in the office of the county treasurer vests in the assignee all the right and title of the original purchaser.

D. The county treasurer shall collect from the purchaser or assignee a fee of ten dollars for each certificate.

§ 42-18119 Certificate of purchase as evidence of valid procedure

The certificate of purchase or its certified copy is prima facie evidence of the correct performance and regularity of all acts pertaining to the tax lien sale and the validity and enforceability of the tax lien.

§ 42-18120 Duplicate certificate of purchase; fee

A. If a certificate of purchase is lost, destroyed or wrongfully withheld from the rightful owner, the purchaser of the certificate may file a notarized affidavit with the county treasurer attesting to the loss of the certificate. On presentation of the notarized affidavit, the county treasurer shall issue to the holder an exact duplicate of the certificate of purchase.

B. The county treasurer shall collect a fee of five dollars for each duplicate certificate of purchase.

§ 42-18121 Payment of subsequent taxes by certificate holder; separate certificate of purchase by assignment; fee

A. On or after June 1, if a person who holds a certificate of purchase desires to pay subsequent taxes, accrued interest and related fees due on the property, the person shall exhibit the certificate or receipt of registered certificate to the county treasurer. The treasurer shall enter the amount of the payment on the certificate and on the record of tax lien sales. The amount of subsequent taxes bears interest at the rate stated in the certificate of purchase from the first day of the month following the purchase of the subsequent tax lien. The county treasurer shall collect a fee of five dollars from the holder of the certificate for making the entries.

B. Beginning in calendar year 2016, on or after June 1 in a county with a population of more than three million persons if no prior year certificates of purchase are outstanding, if a person who holds a certificate of purchase for tax year 2014 and afterwards desires to pay subsequent taxes, the county treasurer shall issue a separate certificate of purchase by assignment for each subsequent year's taxes, accrued interest and related fees due on the property. The principal amount of each subsequent year's certificate of purchase bears interest at the rate stated in the original certificate of purchase exhibited by the person from the first day of the month following the purchase of the subsequent certificate. The treasurer shall collect a fee of five dollars for assignment of a certificate of purchase for each subsequent year. Except as provided by section 42-18201, subsection B, subsequent certificates of purchase by assignment carry the same foreclosure right as the original certificate of purchase, and partial payments shall be accepted by the treasurer as prescribed by section 42-18056, subsection C, by any party with a vested interest in the property.

§ 42-18121.01 Subsequent purchaser; assignment

A. If a person who holds a certificate of purchase does not exercise the option to pay subsequent taxes, accrued interest and related fees due on the property pursuant to section 42-18121, the county treasurer may require a person who desires to purchase a subsequent certificate of purchase on the property to acquire by assignment all currently outstanding certificates of purchase previously issued on the property. The county treasurer shall process the sale as an assignment on behalf of the previous holder of the certificate of purchase.

B. An assignment made pursuant to this section vests in the person all the right and title of the original purchaser with the lien date effective from the original lien sale date.

§ 42-18122 Resale of tax liens assigned to the state; fee

A. If a tax lien is assigned to this state as provided by this article, the county treasurer shall sell, assign and deliver the certificate of purchase to any person who pays to the county treasurer the whole amount then due under the certificate, including interest, penalties and charges, and in addition the entire amount of subsequent taxes assessed on the property described in the certificate.

B. The county treasurer shall collect a fee of not more than ten dollars from the assignee for making each assignment.

§ 42-18123 Distribution of monies

The county treasurer shall:

Distribute all monies collected or received under this chapter as delinquent or back taxes in the same manner and proportions as required by law with respect to other taxes.
Credit to the county general fund interest, penalties, charges and fees collected under this chapter in the process of collecting taxes, except as provided in section 42-18116, subsection C.

§ 42-18124 Compromising taxes, interest and penalties; omission of tax or fund from action for collection

A. If it appears to the board of supervisors that any property is not worth the amount of taxes, interest, costs and penalties due or that the tax lien on the property would not sell for that amount, the board may compromise the taxes, interest and penalties with the owner or with the holder of a certificate of purchase that was issued pursuant to section 42-18118.

B. On payment to the county treasurer of the amount agreed on the treasurer shall:

Issue a certificate of redemption releasing the property from the tax lien.
Distribute the monies paid to the various funds to which the taxes are due in the proportion the amount received bears to the whole amount charged against the property for the current tax year.

C. The board may:

Order that no action be brought on any specified property if in its judgment the property is not worth or will not bring an amount equal to the taxes, interest and costs.
Direct that any tax or fund, the validity of which is being contested in the courts, be omitted from any action brought under this article. The judgment rendered in an action in which the tax is omitted does not bar or affect a subsequent action for the tax so omitted.
Condition the relief under this section by requiring the holder of a certificate of purchase to complete a judicial foreclosure under article 5 of this chapter.

D. If the board of supervisors determines that property described in subsection A of this section is also substantially contaminated with hazardous substances or petroleum, the board may reduce the lien for the delinquent taxes, interest, costs and penalties as follows:

The delinquent taxes, interest, costs and penalties may be reduced in an amount not to exceed the actual expenses to mitigate conditions at the property for:

(a) Removal actions as defined by 42 United States Code section 9601.

(b) Preparation and implementation of a remedial investigation and feasibility study pursuant to section 49-287.03.

(d) Preparation and implementation of an agreement for work pursuant to section 49-282.05.

(e) Preparation and implementation of a corrective action plan pursuant to section 49-1005.

(f) Preparation and implementation of a work plan approved pursuant to section 49-177.

For property acquired after December 31, 2001, the expenses must have been incurred by or on behalf of the property owner within five years after acquiring title to the property.
For property acquired on or before December 31, 2001, the expenses must be incurred by or on behalf of the property owner on or before December 31, 2006.
Only expenses that are reasonable and necessary to remediate contamination at the property may be considered for purposes of this section.
Expenses that were inconsistent with or in violation of requirements imposed by the department of environmental quality may not be used to reduce taxes, interest, costs and penalties under this section.
A person that is a responsible party pursuant to section 49-283, or that person’s partner, officer, employee or relative, is not eligible to redeem the property from the reduced tax lien. For the purposes of this paragraph, "relative" means:

(a) Spouse.

(b) Parent or ancestor of a parent.

(d) Sibling.

(e) Cousin, aunt, uncle, niece or nephew of the first degree.

(f) The spouse of a relative listed in subdivisions (b) through (e).

(g) A relative listed in subdivisions (b) through (e) by the half-blood or by adoption.

A person seeking a reduction under this subsection shall submit to the board of supervisors an affidavit attesting that:

(a) The expenses were reasonable and necessary to address contamination at the property.

(b) The person is not a responsible party pursuant to section 49-283 or a relative as described in this section.

The county treasurer shall apply the reduction in delinquent taxes, interest, costs and penalties pro rata among the jurisdictions imposing the taxes on the property and shall note the reduction in the delinquent tax record under section 42-18102.

E. Subsection D of this section does not affect the personal liability of a property owner for acts or omissions that caused or contributed to the contamination.

§ 42-18125 Erroneous sales

If by mistake or wrongful act of the county treasurer, recorder or assessor, or as a result of double assessment, a real property tax lien is sold on property on which no tax is due, the county treasurer shall hold the purchaser harmless by paying the purchaser the amount of the principal and interest at the rate bid and endorsed on the certificate of purchase or ten per cent per year simple, whichever is less.

§ 42-18126 Failure to perform duty by county treasurer; classification

A county treasurer who knowingly refuses or fails to publish and post the list and notice of delinquent tax sales before February 15 or who knowingly refuses or fails to perform any of the duties imposed by this chapter is guilty of a class 2 misdemeanor.

§ 42-18127 Expiration of lien and certificate; notice; applicability

A. If the certificate of purchase is not redeemed and the purchaser or the purchaser's heirs or assigns fail to commence an action to foreclose the right of redemption as provided by this chapter within ten years after the last day of the month in which the original certificate of purchase, including any subsequent taxes paid, was acquired pursuant to section 42-18114, the certificate of purchase or registered certificate expires and the lien is void.

B. Within three hundred sixty-five days before the expiration date, the county treasurer shall notify the purchaser by certified mail of the pending expiration. Within thirty days after expiration, the treasurer shall notify the purchaser by mail or email, if practicable, that the lien and certificate of purchase or registered certificate have expired.

C. This section does not apply if, at the time of expiration:

The parcel for which the lien was purchased is subject to a judicial proceeding or a thirty-day notice pursuant to section 42-18202.
Other applicable law or a court order prohibits the commencement of an action to foreclose the right to redeem. The expiration date of the tax lien shall be extended to twelve months after the termination of such a prohibition.

Article 4 Redemption of Tax Liens

§ 42-18151 Who may redeem real property tax liens; persons owning partial interest

A. A real property tax lien that is sold under article 3 of this chapter may be redeemed by:

The owner.
Any person that wants to pay on behalf of the owner by making a charitable gift.
The owner's agent, assignee or attorney.
Any person who has a legal or equitable claim in the property, including a certificate of purchase of a different date.

B. A person who owns an interest in real property less than the whole may redeem a tax lien against that interest as a percentage of the entire liability reported by the county assessor by paying the proportionate part of the whole amount due.

§ 42-18152 When lien may be fully redeemed; partial payment refund

A. A real property tax lien may be fully redeemed at any time:

Within three years after the date of tax lien sale.
After three years but before the delivery of a treasurer's deed to the certificate of purchase holder or the certificate of purchase holder's heirs or assigns.

B. A lien that has been partially redeemed under section 42-18056, subsection C must be fully redeemed before the delivery of a treasurer's deed to the purchaser.

C. The county treasurer shall refund all partial payment amounts impounded under section 42-18056, subsection E to the person or persons or their heirs or assigns within thirty days after delivering the treasurer's deed to the purchaser or entry of a judgment directing the sale of the property for excess proceeds pursuant to article 6 of this chapter.

§ 42-18153 Amount required for redemption

To redeem a real property tax lien, a person must pay to the county treasurer:

The amount for which the real property tax lien was sold, with interest at the rate stated in the certificate of purchase.
The amount of all taxes accruing on the real property after the sale and paid by the purchaser and endorsed on the certificate of purchase, with interest on the subsequent taxes at the same rate as stated in the certificate of purchase.
Any statutory fees paid by the purchaser or the purchaser's assigns in connection with the certificate, except the processing fee imposed by section 42-18116, subsection C, with interest at the rate stated in the certificate of purchase except as otherwise provided by this chapter.

§ 42-18154 Certificate of redemption; statement of partial payment; issuance; contents; fee

A. If a person requests to redeem a real property tax lien that was sold under article 3 of this chapter, and if the county treasurer is satisfied that the person has the right to redeem the tax lien, and if the person pays the amount due, the county treasurer shall issue to the person a certificate of redemption.

B. The certificate shall:

Describe the parcels on which the tax lien is redeemed.
State:

(a) The date of redemption.

(b) The amount paid.

C. If a person requests to make a partial payment on a certificate of purchase in a county with a population of more than three million persons and if the county treasurer is satisfied that the person has the right to make a partial payment and if the person pays the amount due pursuant to section 42-18056, subsection C, the treasurer shall issue to the person a statement of partial payment. The partial payment statement shall:

Identify the person or entity making the partial payment.
Describe the parcels on which the partial payment is made.
State:

(a) The date of the partial payment.

(b) The amount paid.

D. For each certificate of redemption and statement of partial payment, the county treasurer shall:

Make the proper entries in the treasurer's record of tax lien sales.
Collect a fee of five dollars for the first and last partial payment and ten dollars for a full redemption if no partial payments were made.

E. A holder of a certificate of redemption may record the certificate in the office of the county recorder.

§ 42-18155 Payment of redemption money to holder of certificate of purchase or registered certificate

A. On demand of any person who is entitled to redemption money held by the county treasurer, the treasurer shall pay the money to that person on the surrender of the certificate of purchase or on the redemption of the registered certificate for the redeemed tax lien.

B. If only a portion of the tax lien on the property described in the certificate of purchase or the registered certificate has been redeemed, the treasurer shall endorse on the certificate or annotate the record of the registered certificate the portion redeemed and the amount of money paid to the person holding the certificate and shall take a receipt for the money paid.

Article 5 Judicial Foreclosure of Right of Redemption

§ 42-18201 Action to foreclose right to redeem; subsequent certificates of purchase by assignment

A. Except as provided in subsection B of this section, at any time beginning three years after the sale of a tax lien but not later than ten years after the last day of the month in which the lien was acquired pursuant to section 42-18114, if the lien is not redeemed, the purchaser or the purchaser's heirs or assigns, or the state if it is the assignee, may bring an action to foreclose the right to redeem. The action to foreclose the right to redeem shall be filed in the superior court in the county in which the real property is located and shall name the county treasurer as a party to the action. If any applicable law or court order prohibits bringing an action to foreclose the right to redeem, the limitation provided herein shall be extended twelve months following the termination of such prohibition.

B. For a subsequent year certificate of purchase by assignment issued under section 42-18121, subsection B, at any time beginning three years after the date the subsequent year certificate of purchase was assigned but not later than ten years after the last day of the month in which the tax lien was assigned under section 42-18121, if the lien is not redeemed, the purchaser or the purchaser's heirs or assigns, or the state if it is the assignee, may bring an action to foreclose the right to redeem the lien represented by certificates of purchase acquired by assignment and held by the party that filed the action to foreclose. All certificates of purchase held by other parties remain in place. The action to foreclose the right to redeem shall be filed in the superior court in the county in which the real property is located and shall name the county treasurer as a party to the action. If any applicable law or court order prohibits bringing an action to foreclose the right to redeem, the limitation provided in this subsection shall be extended twelve months following the termination of the prohibition.

§ 42-18202 Notice

A. At least thirty days before filing an action to foreclose the right to redeem under this article, but not more than one hundred eighty days before such an action is commenced or may be commenced under section 42-18201, the certificate of purchase holder shall send notice of intent to file the foreclosure action by certified mail to:

The property owner of record according to the records of the county recorder in the county in which the property is located or to all of the following:

(a) The property owner, as determined by section 42-13051, at the property owner's mailing address according to the records of the county assessor in the county in which the property is located.

(b) The situs address of the property, if shown on the tax roll and if different from the property owner's address under subdivision (a) of this paragraph.

(c) The tax bill mailing address according to the records of the county treasurer in the county in which the property is located if that address is different from the addresses under subdivisions (a) and (b) of this paragraph.

The treasurer of the county in which the real property is located. The county treasurer may not accept partial payments under section 42-18056, subsection C after the date the treasurer receives a notice of action to foreclose the right to redeem.

B. The notice shall include:

The property owner's name.
The real property tax parcel identification number.
The county assessor's description of the real property.
The certificate of purchase number.
The proposed date of filing the action.
The following statement in substantially the following form:

Notice: If you believe that your property has value beyond the tax burden on the property and you do not want to lose any interest or equity in the property, you must request an excess proceeds sale pursuant to section 42-18204, Arizona Revised Statutes.

C. If the certificate of purchase holder:

Complies with subsection A, paragraph 1, subdivisions (a), (b) and (c) of this section, the certificate of purchase holder is considered to have substantially complied with the requirements of this section and is not required to send the notice to any other address.
Fails to send the notice required by this section, the certificate of purchase holder is considered to have substantially failed to comply with this section. A court may not enter any judgment to foreclose the right to redeem under this article until the certificate of purchase holder sends the notice required by this section.

§ 42-18203 Application of law and rules of procedure

A. The provisions of law relating to civil actions and rules of civil procedure control the proceedings in an action to foreclose the right to redeem, including the right of appeal.

B. In an action to foreclose the right to redeem with respect to tax liens sold on real property of minors and legally incapacitated persons, the provisions of law relating to the prosecution of civil actions against persons under those disabilities apply.

§ 42-18204 Judgment foreclosing right to redeem; effect

A. In an action to foreclose the right to redeem:

If the court finds that the tax lien sale is valid, the tax lien has not been redeemed and the defendant's request for an excess proceeds sale is unreasonable or the defendant did not request an excess proceeds sale, the court shall enter judgment:

(a) Foreclosing the right of the defendant to redeem.

(b) Directing the county treasurer to expeditiously execute and deliver to the party in whose favor judgment is entered, including the state, a deed conveying the property described in the certificate of purchase.

If the court finds that the tax lien sale is valid, the tax lien has not been redeemed and the defendant's request for an excess proceeds sale is reasonable, the court shall enter judgment:

(a) Foreclosing the right of the defendant to redeem.

(b) Directing the sale of the property pursuant to article 6 of this chapter.

(c) Setting the opening bid for the property as the total of the amounts described in subsection B, paragraph 1, subdivisions (a), (b), (c) and (e) of this section and any other reasonable fees as determined by the court.

B. A property owner whose right to redeem is being foreclosed may request the court to determine if the sale of the property to recover excess proceeds is reasonable. The court shall determine that the sale of the property for excess proceeds is reasonable if the sale price of the property is likely to be more than $2,500 above the total of the amounts described in paragraph 1 of this subsection. If a request is made for an excess proceeds sale, the following information shall be provided to the court for the purposes of determining if an excess proceeds sale is reasonable:

The certificate of purchase holder shall provide all of the following:

(a) The costs related to filing the claim to foreclose the right to redeem, including estimated attorney fees and costs to be incurred through the date of the excess proceeds sale, if ordered.

(b) The amount for which the real property tax lien was sold, with interest at a rate of sixteen percent per annum from the date of the tax lien sale through the date of the excess proceeds sale, if ordered.

(c) The amount of any statutory fees the certificate of purchase holder paid in connection with the certificate of purchase, except the processing fee imposed by section 42-18116, subsection C, with interest at a rate of sixteen percent per annum from the date of the tax lien sale through the date of the excess proceeds sale, if ordered.

(d) The amount of all other recorded state liens or encumbrances on the state property as indicated on a title report provided by the certificate of purchase holder, including other years in which taxes are delinquent. For the purposes of this subdivision, the certificate of purchase holder does not have to determine the actual balance owed on any lien or encumbrance on the property, except for property taxes owed.

(e) The estimated cost of the sale of property pursuant to article 6 of this chapter.

(f) Any other evidence relating to the value of the property or objecting to the excess proceeds sale that the certificate of purchase holder deems necessary.

The property owner whose right to redeem is being foreclosed shall provide a reasonable estimate of the market value of the property.

C. After entering judgment the parties whose rights to redeem the tax lien are thereby foreclosed have no further legal or equitable right, title or interest in the property subject to the right of appeal and stay of execution as in other civil actions.

D. The foreclosure of the right to redeem does not extinguish any of the following:

An easement on or appurtenant to the property.
A lien for an assessment levied pursuant to title 48, chapter 4, 6, 14 or 18 or section 9-276. For the purposes of this paragraph, assessment does not include an abatement lien imposed under section 9-499.
If the court finds that the request for an excess proceeds sale is reasonable, the property owner's interest in the excess proceeds from the sale of the property pursuant to article 6 of this chapter.

§ 42-18205 County treasurer's deed; form

A. On receiving a certified copy of a judgment foreclosing the right to redeem issued pursuant to section 42-18204, subsection A, paragraph 1 and a fee of $50 per parcel, the county treasurer shall execute and deliver to the party in whose favor the judgment was entered a deed conveying the property described in the judgment.

B. The deed shall include the following information:

The date, court action number and name of the judgment.
The name of the purchaser.
The property description.
The date of the conveyance.
A formal acknowledgment by the treasurer.

§ 42-18206 Redemption during pendency of action to foreclose

Any person who is entitled to redeem under article 4 of this chapter may redeem at any time before judgment is entered, notwithstanding that an action to foreclose has been commenced, but if the person redeems after a notice is recorded pursuant to section 12-1191, judgment shall be entered in favor of the plaintiff against the person for the costs incurred by the plaintiff, including all of the following:

The cost of a litigation guarantee or other insured title report.
The cost of identifying interests of record.
Reasonable attorney fees to be determined by the court.

§ 42-18207 Prosecution of action brought by state; disposition of costs

If the state brings an action to foreclose, it shall be prosecuted by the county attorney. The costs and attorney fees awarded shall be deposited in the county general fund.

§ 42-18208 Expiration of lien and certificate; notice

A. If a tax lien that was purchased pursuant to section 42-18114 on or before August 31, 2002 is not redeemed and the purchaser or the purchaser's heirs or assigns fail to commence an action to foreclose the right of redemption on or before ten years from the date that the lien was purchased, the certificate of purchase or registered certificate expires and the lien is void.

B. At least six months before the certificate of purchase or registered certificate expires, the county treasurer shall:

Notify each purchaser by certified mail of the pending expiration.
Post the names of purchasers who hold liens that are subject to pending expiration:

(a) Near the outer door of the office of the county treasurer.

(b) On the county treasurer's web site.

Publish the names of purchasers who hold liens that are subject to pending expiration at least one time in a newspaper of general circulation in the county.

C. Subsection A of this section does not apply if the tax lien is assigned to the state pursuant to section 42-18113 unless the lien is resold pursuant to section 42-18122.

D. If a judicial proceeding prohibits bringing an action to foreclose the right to redeem, the time of expiration under this section shall be extended by twelve months following the completion of the judicial proceeding.

Article 6 Sale of Property for Excess Proceeds

§ 42-18231 Definition of qualified entity

For the purposes of this article, "qualified entity" means an association or corporation doing business in this state as a bank pursuant to title 6, chapter 2, credit union pursuant to title 6, chapter 4, consumer lender pursuant to title 6, chapter 5, escrow agent pursuant to title 6, chapter 7, insurance company pursuant to title 20, law firm or special master appointed by the court.

§ 42-18232 Notice of sale

A. The qualified entity conducting the sale of the property shall provide notice of the time and place of the sale, a description of the property to be sold and the amount of the opening bid by each of the following methods:

Recording a notice in the office of the recorder of each county where the property is situated.
If the property is reasonably accessible, posting a copy of the notice of sale in a conspicuous place on the property to be sold at least twenty days before the sale. If access to the property is denied because a common entrance to the property is restricted by a limited access gate or similar impediment, the notice shall be posted at that gate or impediment.
Posting at one of the places provided for posting public notices at any building that serves as a location of the superior court in the county where the property is to be sold.
Publishing the notice of sale in a newspaper of general circulation in the county in which the property to be sold is situated. The notice of sale shall be published at least once a week for four consecutive weeks. The last date of publication may not be less than ten days before the date of sale. The newspaper that publishes the notice shall also post the notice on a website that posts the legal notices of ten or more Arizona newspapers.
Sending the notice to the property owners notified pursuant to section 42-18202.

B. The notice of sale shall contain:

The date, time and place of the sale. The date, time and place shall be set pursuant to section 42-18233. The date may not be later than the sixtieth day after the date that the notice of sale was recorded.
The street address, if any, or identifiable location as well as the legal description of the property.
The county assessor's tax parcel number for the property.
The amount of the opening bid. The opening bid shall be set pursuant to section 42-18204.
The telephone number of the qualified entity conducting the sale.

C. The notice of sale is sufficient if made in substantially the following form:

Notice of Sale for Excess Proceeds

There are unpaid taxes on the property located at (address) that you may own or have a legal interest in or that may be contiguous to your property. The property will be sold at public auction at (specific place of sale) on (date and time) and that sale will be final unless the outstanding taxes are paid. The opening bid at the public auction is (opening bid amount).

To make payment or to receive further information, contact the (county) county treasurer immediately at (address) or (telephone number) or the (qualified entity) at (address) or (telephone number).

(date)

(acknowledgment)

Legal description of property to be sold:

(street address, if any, or identifiable

location of property)

(legal description of property)

(tax parcel number)

D. Any error or omission in the information required by subsection B or C of this section, other than an error in the legal description of the property or an error in the date, time or place of sale, does not invalidate the sale. Any error in the legal description of the property does not invalidate the sale if, considered as a whole, the information provided is sufficient to identify the property being sold. If there is an error or omission in the legal description so that the property cannot be identified, or if there is an error in the date, time or place of sale, the qualified entity shall record a cancellation of notice of sale. The qualified entity or any person furnishing information to the qualified entity is not subject to liability for any error or omission in the information required by subsection B or C of this section except for the wilful and intentional failure to provide such information.

E. The notice of sale for excess proceeds may not be rerecorded for any reason. This subsection does not prohibit the recording of a new or subsequent notice of sale regarding the same property.

§ 42-18233 Date, time and place of sale

The sale shall be held:

Not later than sixty days after the date of a judgment entered pursuant to section 42-18204, subsection A, paragraph 2.
On a day other than a Saturday, Sunday or legal holiday.
Between 9:00 a.m. and 5:00 p.m. mountain standard time.
At a specified place on the property, at a specified place at any building that serves as a location of the superior court or at a specified place at a place of business of the qualified entity conducting the sale, in any county in which the property to be sold is situated.

§ 42-18234 Sale by public auction; bidder requirements; postponement of sale

A. On the date and at the time and place designated in the notice of sale, the qualified entity shall offer to sell the property at public auction for cash to the highest bidder. The minimum bid shall be the total of the amounts described in section 42-18204, subsection B, paragraph 1. The qualified entity may schedule more than one sale for the same date, time and place.

B. Any person, including the qualified entity or the certificate of purchase holder, may bid at the sale. Only the certificate of purchase holder may make a credit bid in lieu of cash at the sale. The qualified entity shall require every bidder, except the certificate of purchase holder, to provide a nonrefundable deposit in an amount equal to ten percent of the opening bid or $2,500, whichever is greater, in any form that is satisfactory to the qualified entity as a condition of entering a bid.

C. The qualified entity or the qualified entity's auctioneer may control the means and manner of the auction, except the opening bid shall be an amount equal to the total of the amounts described in section 42-18204, subsection B, paragraph 1. Every bid shall be deemed an irrevocable offer until the sale is completed, except that a subsequent bid by the same bidder for a higher amount shall cancel that bidder's lower bid. The qualified entity shall return deposits to all but the bidder whose bid resulted in the highest bid price. The sale is deemed completed on payment by the purchaser of the price bid in a form satisfactory to the qualified entity.

D. The subsequent execution, delivery and recording of the qualified entity's deed as prescribed by section 42-18235 are ministerial acts. If the qualified entity's deed is recorded in the county in which the property is located within fifteen business days after the date of the sale, the sale is deemed perfected at the appointed date and time of the sale.

E. The qualified entity may postpone or continue the sale from time to time or change the place of the sale to any other location authorized pursuant to this chapter by giving notice of the new date, time and place by public declaration at the time and place last appointed for the sale. Any new sale date shall be a fixed date within sixty calendar days after the date of the declaration. After a sale has been postponed or continued, the qualified entity, on request, shall make available the date and time of the next scheduled sale and, if the location of the sale has been changed, the new location of the sale until the sale has been conducted or canceled and providing this information shall be without obligation or liability for the accuracy or completeness of the information. Other notice of the postponed, continued or relocated sale is not required.

F. A sale is postponed by operation of law to the next business day at the same scheduled time and place if an act of force majeure prevents access to the sale location for the conduct of the sale.

G. Except for the assessments provided in section 42-18204, subsection D and property tax liens on the property, a sale concluded under this article extinguishes any other liens and encumbrances held by this state on the property, whether satisfied or not from the proceeds of the sale. To the extent not satisfied from the proceeds of the sale, liens and encumbrances held by this state as to the taxpayer and the taxpayer's other property are not affected.

§ 42-18235 Payment of bid; qualified entity's deed

A. The highest bidder at the sale, other than the judgment holder to the extent of the credit bid, shall pay the price bid by not later than 5:00 p.m. mountain standard time of the day after the sale, other than a Saturday, Sunday or legal holiday. If the highest bidder fails to pay the amount bid for the property struck off to the bidder at the sale, the qualified entity, in the qualified entity's sole discretion, shall either continue the sale to reopen bidding or immediately offer the property to the second highest bidder who may purchase the property at that bidder's bid price. The deposit of the highest bidder who fails to pay the amount bid shall be applied to the costs of facilitating the sale and the balance, if any, and treated as additional sale proceeds to be distributed pursuant to section 42-18236, subsection A. If the second highest bidder does not pay that bidder's bid price by 5:00 p.m. mountain standard time of the next day, excluding Saturdays, Sundays and legal holidays after the qualified entity offers the property to that bidder, the qualified entity shall either continue the sale to reopen bidding or offer the property to each of the prior bidders on successive days excluding Saturdays, Sundays and legal holidays in order of their highest bid, until a bid price is paid, or if there is no other bidder, the sale shall be deemed to be continued to a time and place designated by the qualified entity, or if not designated, the sale shall be continued to the same place and at the same time twenty-eight days after the last scheduled sale date. If the twenty-eighth day is a Saturday, Sunday or legal holiday, the sale shall be continued to the next business day. If the sale is continued, the qualified entity shall provide notice of the continuation of the sale by registered or certified mail, with postage prepaid, to all bidders who provide their names, addresses and telephone numbers in writing to the qualified entity. In addition to the forfeit of deposit, a highest bidder who fails to pay the amount bid by that bidder is liable to any person who suffers loss or expenses as a result, including attorney fees. In any subsequent sale of property, the qualified entity may refuse to accept any bid of that person. In any sale that is continued pursuant to this subsection, the qualified entity shall reject a bid from any previous bidder who elected not to pay that bidder's bid price.

B. The price bid shall be paid at the office of the qualified entity or the qualified entity's agent, or any other reasonable place designated by the qualified entity. The payment of the bid price may be made at a later time if agreed on in writing by the qualified entity. Within seven business days after receipt of payment by the qualified entity or the qualified entity's agent, made in a form that is satisfactory to the qualified entity, the qualified entity shall execute and submit the qualified entity's deed to the county recorder for recording and, on request, shall provide an unrecorded copy of the signed qualified entity's deed to the purchaser. The recording of the qualified entity's deed on sale constitutes delivery of the deed to the purchaser. The qualified entity is not liable for any damages resulting from the failure to record the deed on sale after physical delivery of the deed to the purchaser. The deed shall include the following information:

The date, court action number and name of the judgment ordering the sale of the property.
The name of the purchaser.
The property description.
The date of the conveyance.
A formal acknowledgment by the qualified entity.

C. All persons to whom the qualified entity mails a notice of a sale pursuant to section 42-18232 shall waive all defenses and objections to the sale not raised in an action that results in an injunction before the scheduled date of the sale. A copy of the injunction shall be delivered to the qualified entity within twenty-four hours after the order is entered.

D. A sale is not complete if the sale violates subsection C of this section because of an undisclosed order entered by the court within the time provided for in subsection C of this section. A sale held in violation of subsection C of this section shall be continued to a date, time and place announced by the qualified entity at the sale and shall comply with section 42-18234. If not announced, the sale shall be continued to the same place and at the same time twenty-eight days later. If the twenty-eighth day falls on a Saturday, Sunday or legal holiday, the sale shall be continued to the next business day.

E. The deed conveyed pursuant to this section shall operate to convey to the purchaser title of the purchased property. That conveyance shall be absolute without right of redemption and clear of all subordinate liens, claims or interests.

§ 42-18236 Disposition of proceeds of sale

A. The qualified entity shall distribute the proceeds of the sale as follows:

To the qualified entity, an amount equal to the cost of facilitating the sale of the property, including the costs of providing the notice required by section 42-18232, subsection A.
To the certificate of purchase holder, an amount equal to the amounts provided in section 42-18204, subsection B, paragraph 1, subdivisions (a), (b) and (c).
To the county treasurer to redeem any other property tax liens on the parcel and pay current taxes due, then other state lien and encumbrance holders, an amount equal to their respective lien or encumbrance as indicated on a title report provided by the certificate of purchase holder and provided to the court pursuant to section 42-18204, subsection B, paragraph 1, subdivision (d), adjusted by any lien or encumbrance amount that has been paid or increased due to delinquencies since the title report was provided to the court.
To the property owner whose right to redeem was foreclosed, any remaining proceeds of the sale. The property owner is not required to be present at the excess proceeds sale in order to receive the property owner's distribution of proceeds from the sale under this subsection.

B. The qualified entity shall distribute the proceeds of the sale pursuant to subsection A of this section within ninety days after the sale of the property and notify the court that the distributions have been made. The qualified entity shall dispose of any monies unclaimed after ninety days pursuant to title 44, chapter 3. If the qualified entity fails to comply with this subsection, the qualified entity shall pay interest at the rate provided for judgments pursuant to section 44-1201 from the date of completion of the sale until the qualified entity complies with this subsection. Any party in the action to foreclose the right to redeem relating to the property may commence a civil action against the qualified entity for the qualified entity's failure to comply with this subsection. The court may award the prevailing party its reasonable attorney fees and costs incurred in that civil action.

Article 6.1 Conveyance to State on Failure to Redeem

§ 42-18261 Application for treasurer's deed by board of supervisors on behalf of state

If a lien is not redeemed at any time beginning five years after the lien is assigned to this state, the county board of supervisors, acting on behalf of this state, may apply for and receive a treasurer's deed to the property under this article.

§ 42-18262 Costs; charge against county general fund

A. The costs incurred by the county treasurer under this article are a charge against the county general fund until recovered through redemption of the tax lien or sale of the land under tax deed.

B. After the board of supervisors applies for a treasurer's deed pursuant to this article, no person may redeem the tax lien unless the person first pays to the county treasurer, in addition to the amount necessary to redeem, the entire amount of the costs that are prescribed by this section and that have been incurred by the treasurer.

C. Preparation and delivery costs for a treasurer's deed may include the costs of the title search and of mailing, publishing and posting notice as provided by this article. The cost of posting the notice on the property shall include a mileage fee in the same amount and manner as allowed by law to the sheriff in serving civil process.

§ 42-18263 Title search

Before preparing a treasurer's deed under this article, the county treasurer shall cause a limited title search to be made that is sufficient to identify all parties who have a legal or equitable interest in the property recorded with the county recorder.

§ 42-18264 Personal notice by certified mail

A. At least ninety days before the date of delivering a treasurer's deed on a parcel of property under this article the county treasurer shall mail notice to the owner of the parcel as shown on the current tax roll and any other party who is identified in the title search conducted under section 42-18263 as having a legal or equitable interest in the property.

B. The notice shall be sent by certified mail, return receipt requested, to the person's last known address.

C. The notice shall state that the county board of supervisors has applied for a treasurer's deed on behalf of this state and shall include a description of the property, the date the tax lien was assigned and the last date for redeeming the property. The notice may be in the following form:

Official Notice

Treasurer's office, ________________ county, state of Arizona.

The board of supervisors of ________________ county, acting on behalf of the state of Arizona, has applied for a treasurer's deed to the following described real property, owned by ________________ and located in ___________________ county, Arizona:

(Description)

A tax lien was assigned to the state of Arizona on (Date) for taxes, interest, penalties and charges. If this tax lien is not redeemed according to law before (Date) , I will convey the property to the state of Arizona.

County Treasurer

State of Arizona

§ 42-18265 Publishing notice

A. In addition to mailing notice pursuant to section 42-18264, the county treasurer shall publish notice once a week for two consecutive weeks in a newspaper of general circulation in the area in which the property is located, or in a newspaper of general circulation in the county.

B. The published notice shall state the application for a treasurer's deed and shall include:

The name of the applicant.
A description of the property.
The date on which the tax lien was assigned.
The amount of taxes, interest, penalties and charges for which the tax lien was assigned.
A statement that unless the property is redeemed before the stated date a treasurer's deed will be executed and delivered to the county board of supervisors acting on behalf of this state.
The last date for redeeming the tax lien.

§ 42-18266 Posting notice on the property

A. If the property to be conveyed is in an incorporated city or town, if it can be readily located and is reasonably accessible and if any notice sent by certified mail under section 42-18264 has not been delivered, the county treasurer or the treasurer's deputy shall place a sign on the property in a conspicuous place where the public is most likely to observe it.

B. The sign shall contain the words "this property is subject to foreclosure for delinquent taxes" and shall give notice of the method and date by which the owner may redeem the tax lien. The notice shall be in a form prescribed by section 42-18264.

§ 42-18267 Issuance of treasurer's deed; form

A. If the property is not redeemed before the date stated in the notice, the county treasurer shall execute and deliver to the board of supervisors, acting on behalf of this state, a treasurer's deed conveying to the state of Arizona the real property that was assigned at the tax sale. On the delivery of the deed, the redemption rights of all persons terminate, whether or not they were named in the notice.

B. The treasurer's deed may be in the following form:

Treasurer's Deed

On (Date) , I, treasurer of _______________ county, Arizona, published notice according to law in ______________, a newspaper of general circulation in _______ county, Arizona, that both:

The board of supervisors of ___________ county, acting on behalf of the state of Arizona, applied for a treasurer's deed to the real property described below.
Unless the tax lien was redeemed before (Date) , I would issue a treasurer's deed to the state of Arizona.

The property tax lien was not redeemed from that sale, and, therefore, I foreclose the right to redeem and convey to the state of Arizona the following real property located in __________ county, Arizona:

(Description)

County Treasurer

(Date)

(Acknowledgment)

C. The foreclosure of the right to redeem does not extinguish any easement on or appurtenant to the property.

Article 7 Sale of Land Held by State Under Tax Deed

§ 42-18301 List of real property held by state under tax deed

A. On or before the first Monday in November of each year, the county board of supervisors shall prepare a list of the real property in the county that is held by the state by tax deed.

B. The list shall include:

A full description of each parcel.
The name of the former owner, if known.
The total amount of taxes, interest, penalties, fees and costs, including the unpaid charges of the county treasurer and recorder.

§ 42-18302 Notice of sale

A. The board of supervisors shall advertise the real property for sale at a public sale. The advertisement shall be by:

Publishing the list and notice of sale in a newspaper of general circulation in the county at least once a week for at least two weeks, but not more than three weeks, before the stated date of the sale.
Continuously posting a current list and notice in the offices of the board of supervisors.

B. The newspaper that prints the list and notice shall also post the list and notice on the internet on a website that posts the legal notices of ten or more Arizona newspapers.

§ 42-18303 Auction and sale of land held by state under tax deed; disposition of proceeds

A. After advertisement, pursuant to section 42-18302, the board of supervisors may sell the real property in the county held by the state by tax deed to the highest bidder for cash except as provided in subsections E, F and G of this section. The property may also be posted on the treasurer's website. The sale may include a live auction or an online bidding process in which the board receives bids electronically over the internet in a real-time, competitive bidding event.

B. On selling the property, the board of supervisors shall execute and deliver to the purchaser, at the purchaser's cost, a deed conveying the title of the state in and to the parcel purchased. The deed shall be acknowledged by the chairman and clerk of the board.

C. The purchase money shall be paid to the county treasurer. After deducting and distributing interest, penalties, fees and costs charged against the parcel, the treasurer shall apportion monies to the funds of the various taxing authorities in proportion to their current share of the taxes charged against real property. Any balance remaining with the treasurer after payment of the taxes, interest, penalties, fees and costs shall be paid to the owner of the property who was dispossessed by the sale.

D. If the property is not sold before the time for the next succeeding notice of sale, the board of supervisors may omit it from the notice.

E. The board of supervisors may accept an offer from, and sell real property held by this state by tax deed to, the county or a city, town or special taxing district in the county for a public purpose related to transportation or flood control. The board of supervisors shall convey the deed and apportion the monies received in the transaction in the manner prescribed by this section.

F. The board of supervisors may sell real property in the county held by the state by tax deed to the owner of contiguous real property that is used for commercial, agricultural or residential purposes, and the board may accept an offer by the contiguous owner to purchase the property, if all of the following conditions apply:

Both the property offered for sale and the contiguous property were at one time under common ownership. If there is more than one contiguous property owner offering to purchase the property, the board shall accept the offer from the contiguous property owner that demonstrates that the owner's contiguous property was most recently under common ownership with the property offered for sale.
The property offered for sale cannot be separately used for commercial, agricultural or residential purposes, as applicable, pursuant to applicable building codes and ordinances of the jurisdiction in which the property is located due to its size or configuration.
The contiguous property owner agrees to submit a request to the county assessor to jointly assess the contiguous properties pursuant to section 42-15058.

G. The board of supervisors may sell real property in the county held by the state by tax deed to a homeowners' association if the real property is part of a common area maintained by the homeowners' association as determined by the county assessor.

H. If an offer under subsection E, F or G of this section is pending at the time of the auction under this section, the board of supervisors shall remove the property from the auction.

I. The board of supervisors may establish procedures for accepting monetary offers and sell real property in the county held by the state by tax deed over the counter if the real property is not eligible for sale under subsection E, F or G of this section and was offered for sale and not sold at the auction held pursuant to subsection a of this section.

J. The board of supervisors may establish procedures for accepting monetary offers under subsection f of this section.

§ 42-18304 Adverse occupation of land held by state under tax deed

A. If real property that is held by the state by tax deed is improved and occupied adversely to the title of the state, the board of supervisors may direct the county attorney to bring an action in the name of the state for possession of the property, and the county attorney shall commence and prosecute the action.

B. The costs incurred in the action are a charge against the county in which the property is located.

Article 8 Abatement of Tax and Removal of Lien

§ 42-18351 Circumstances for abating tax and removing tax lien

This article applies in the following situations:

An error or omission resulting in an improper imposition of a property tax.
An event or circumstance that existed at the time of the levy and assessment, or that occurred afterwards, and that invalidates the lien of the property tax or the sale of the lien.
The property tax lien was not advertised for sale pursuant to section 42-18105 within five years after the delinquency, unless the failure to advertise within five years after the delinquency was due to a restraining order or injunction issued by a court of competent jurisdiction.
The cost of pursuing the statutory lien sale and collection procedures or the sale of lands under article 7 of this chapter or the cost of the seizure and sale of personal property pursuant to section 42-18401 would equal or exceed the revenue that could be derived.
At the discretion of the county treasurer and if the county assessor agrees, for taxes levied against personal property only, the amount of the personal property taxes owing, including interest and penalties, is de minimis and the property taxes are six years or more past due.

§ 42-18352 Determining existence of circumstances for abating tax and removing lien; action to recover illegally collected tax

A. The county treasurer may, on the treasurer's own motion, and shall on the application of a property owner or a holder of a certificate of purchase that was issued pursuant to section 42-18118, determine the existence, in any prior year or years, with respect to real and personal property located in the county, of any of the situations described in section 42-18351.

B. If proceeding on the treasurer's own motion under this section, the county treasurer shall conduct an investigation that the treasurer considers to be necessary to determine the existence or nonexistence of any of the situations described in section 42-18351.

C. If a property owner or holder of a certificate of purchase applies under this section, the property owner or holder of a certificate of purchase shall submit to the county treasurer sufficient evidence to permit the county treasurer to determine the existence or nonexistence of one of the situations described in section 42-18351.

D. If the county treasurer determines that any of the situations described in section 42-18351 exists in a prior year or years, the treasurer shall grant appropriate relief, subject to the approval of the board of supervisors. The relief may include removing all or part of the lien or abating all or part of the tax.

E. A property owner who is aggrieved by an adverse determination on an application pursuant to this section and who pays the tax may maintain an action to recover the tax alleged to be illegally collected. If the tax due is determined to be less than the amount paid, the excess shall be refunded in the manner provided by this title.

§ 42-18353 Certificate of removal and abatement; purging record of tax, penalty and interest

A. On finding that a situation described in section 42-18351 exists for any taxable year or years, and on receiving the approval of the board of supervisors, the county treasurer shall prepare a certificate of removal and abatement stating:

The name of the property owner.
A description of the property.
The tax parcel number.
The years and amounts of tax, penalty and interest involved.
The extent to which the lien is proposed to be removed and the extent to which the tax, penalty and interest are proposed to be abated pursuant to this section.

B. The county treasurer shall present the certificate of removal and abatement to the board of supervisors for the board's approval. The certificate of removal and abatement is final and effective when approved by the board of supervisors.

C. When a certificate of removal and abatement becomes final and effective the county treasurer shall:

Delete from the delinquent list and the record of tax lien sales the tax, interest and penalty covered by the certificate.
Make a notation in those records that the deletion was made pursuant to a certificate that was duly issued pursuant to this section and stating the number of the certificate.

Article 9 Seizure and Sale of Personal Property for Delinquent Taxes

§ 42-18401 Collection of personal property tax by seizure and sale

A. At any time after receiving the roll the county treasurer may collect the taxes due on personal property by seizure and sale if not otherwise collected.

B. The sale shall be at public auction after notice of one week of the time and place of the sale by publication in a newspaper in the county or by posting notices of the sale in three public places in the county. The notice shall state that a sufficient amount of the property will be sold to pay the taxes, fees and costs.

C. For seizing and selling personal property the treasurer may charge in each case three dollars and the same mileage as allowed by law to the sheriff in serving civil process.

D. On payment of the purchase price and delivery of the property with a bill of sale, the title to the property vests in the purchaser.

E. Any amount collected that exceeds the taxes, fees and costs shall be returned to the owner of the property sold and, until claimed, shall be deposited in the county treasury subject to the order of the owner.

§ 42-18402 Seizure and sale of personal property about to be removed or concealed

If the county treasurer has reason to believe that a person whose personal property is assessed for taxes is about to remove the property from the county, or sell, conceal or otherwise dispose of the property, the treasurer shall immediately, after the taxes are due, collect the taxes with costs and charges by seizure and sale of any personal property of the person in the manner provided by section 42-18401.

§ 42-18403 Notice required before seizing railroad rolling stock

Before seizing the rolling stock of a railroad company, if the real property of the company in the county is not sufficient to secure payment of the tax on both the real and personal property assessed to the company, the county treasurer shall notify one of the agents, conductors or persons in charge of a station or freight depot of the company that unless the tax is paid within ten days the treasurer will seize the personal property belonging to the company for taxes due.

Chapter 19 Personal Property

Article 1 Assessment

§ 42-19001 Powers of county assessor

In administering this chapter the assessor has the same authority that is granted to county assessors under chapters 13 and 15 of this title and all other authority that is granted to county assessors under any law of this state and that does not conflict with this chapter.

§ 42-19002 Personal property tax roll

A. The county assessor shall enter the valuation of personal property on the personal property tax roll.

B. The personal property tax roll shall include:

The name and residence of the person who owns the personal property or who possesses the property and reports the property for taxation, if the person is known. If the name of the owner of the property is not known, the property shall be listed, valued and entered on the roll to "unknown owner".
A description of the property sufficient to identify it.
The location of the property.
The rate of taxation levied against the property.

C. The roll shall be in a proper format for extending the tax levied on the property.

D. The county assessor may administratively designate on the roll which property is subject to section 42-17153, subsection B and to section 42-19117 when forwarding the roll to the board of supervisors.

§ 42-19003 Improvements on unpatented land, mining claims or state land; exemption

A. Improvements, appurtenances, wells, stock tanks and any other fixed property that is located on unpatented land, a mining claim or state land not secured by patented real property:

Shall be valued as personal property.
Are subject to sale as provided by this chapter.

B. A description sufficient to identify the property shall be entered on the personal property tax roll of the county.

§ 42-19003.01 Computers and equipment; hardware; software; definition

A. Except as provided by subsection C of this section, personal computers and general purpose computers used in a trade or business shall be valued as personal property.

B. Operating system software necessary to enable the operation of personal computers, general purpose computers and peripheral equipment shall be valued as a part of the computer on which it is installed.

C. All other software, other than operating system software, whether it is canned or customized for a specific application by a personal computer or a general purpose computer, shall not be valued as personal property.

D. For the purposes of this section, "operating system software" means the collection of software that directs the computer's low-level operations, controlling and scheduling the execution of application programs and managing the low-level operation of storage, input, output and communication resources.

§ 42-19004 Property in transit and transient property

A. Personal property that is in transit through a county shall be assessed in the county where the owner is domiciled.

B. Transient property that is used in business or commerce in this state shall be assessed in the county where it is found.

§ 42-19005 Property leased or rented from inventory

A. Subject to section 42-19103, personal property that is periodically leased or rented from the inventory of retailers or wholesalers shall be assessed in the same manner as other personal property included in class one pursuant to sections 42-12001 and 42-15001.

B. The department shall:

Establish the method of determining the valuation of such property.
Prescribe all forms and reports required under this section.

C. Each retailer and wholesaler that leases or rents personal property from its inventory shall file an affidavit of particulars with the county assessor not later than the tenth day of each month for the preceding month's activity.

D. This section does not apply to property that is owned and held by persons primarily engaged in the business of renting personal property.

§ 42-19006 Notice of valuation

A. On or before August 30 the assessor shall mail a notice of valuation, in the form prescribed by the department, to either:

The owner of the personal property, if known.
The person in whose possession it is found at the time of valuation.

B. The owner or person in possession of the property may petition the assessor for review pursuant to section 42-19051.

§ 42-19007 Transmission of personal property valuation to county treasurer

A. On or before August 25 the assessor shall transmit the personal property valuations to the county treasurer.

B. The personal property tax roll shall contain all valuations of personal property made by the assessor since the last preceding personal property tax roll.

§ 42-19008 Violation; classification

A person who violates any provision of this article is guilty of a class 3 misdemeanor.

Article 2 Personal Property Tax Appeals

§ 42-19051 Administrative review of valuation or classification by assessor

A. The owner of property that is valued by the assessor or the person in whose possession it is found may appeal to the assessor within thirty days after the date the notice was delivered by filing a petition with the assessor on a form prescribed by the department. The petition shall set forth in writing:

The owner's opinion of the value or legal classification of the property.
Substantial information that justifies the opinion of value or legal classification in order for the assessor to consider the information for the purpose of basing a change in the valuation or legal classification.

B. The assessor shall rule on each petition within twenty days after it is filed.

C. The notice provided under this section shall be in the same manner as prescribed in section 42-16056.

D. If the request of the petitioner is denied, in whole or in part, the assessor shall deliver to the petitioner written notice of the grounds for refusing to grant the request contained in the petition.

§ 42-19052 Appeal from assessor

A. A person who appeals to the assessor pursuant to section 42-19051 may appeal to:

The county board of equalization, if a county board has been established in the county, within twenty days after the date of the assessor's notice of refusal or decision. The appeal shall be in the same manner as prescribed by chapter 16, article 3 of this title.
The state board of equalization, if a county board has not been established in the county, within twenty days after the date of the assessor's notice of refusal or decision. The appeal shall be in the same manner as prescribed by chapter 16, article 4 of this title.

B. Any party that is dissatisfied with the decision of the board may appeal the decision to court as prescribed in chapter 16, article 5 of this title.

Article 3 Levy and Collection

§ 42-19101 Extension and levy of tax

The rate of tax to be extended and levied against the personal property is the rate established pursuant to section 42-17151 in the taxing jurisdiction where the property is located.

§ 42-19103 Proration of tax on property that is leased or rented from inventory

The taxes that are levied on personal property that is periodically leased or rented from the inventory of retailers or wholesalers assessed pursuant to section 42-19005 shall be prorated by three hundred sixty-fifths to be determined by the number of days the property is leased or rented.

§ 42-19106 Lien of taxes

A. The tax that is levied against personal property is a lien against the property and is prior and superior to any other liens of every kind and description regardless of when another lien attached.

B. The lien shall not be discharged until the taxes are paid or the title to the property vests in a purchaser of the property for taxes.

§ 42-19107 Unlawful sale, transfer or removal of personal property; classification

A. It is unlawful for the owner, a lienholder, a conditional vendor or any other person to knowingly sell or transfer personal property or remove it from its location until the taxes on the property are paid.

B. A person who violates this section is guilty of a class 1 misdemeanor. Any fine collected under this subsection shall be deposited, pursuant to sections 35-146 and 35-147, in the state general fund.

§ 42-19108 Issuance of tax bill

A. After personal property tax becomes delinquent, the county treasurer shall make and deliver to the sheriff a tax bill directing the sheriff to seize and sell as much of the personal property as is necessary to pay the taxes, interest and costs of seizure and sale. The treasurer:

May issue the tax bill within thirty days after the first installment authorized by section 42-18052 becomes delinquent.
Shall issue the tax bill within thirty days after the second installment becomes delinquent or after the entire amount is delinquent under section 42-18052, subsection C.

B. The tax bill may be in the following form:

Tax bill

______________________ county, Arizona

In the matter of the delinquent

personal property tax assessed

against ______________________.

To the sheriff of _______________________ county, Arizona:

You are commanded to seize and sell the following personal property:

(Description)

Or as much of it as is necessary to pay the amount of $___________, constituting delinquent taxes assessed against the property, plus ____% interest on that amount from (Date) , as prescribed by law, and the cost of sale.

This tax bill is your warrant of authority to seize the property, make the sale and make and deliver a bill of sale to the purchaser of the property. You are authorized to seize and sell the property in any county where the property may be found.

__________________ County treasurer

(Date)

§ 42-19109 Authority to seize and sell personal property for delinquent taxes

A. The tax bill is the sheriff's warrant of authority to seize and sell the personal property as required by this article.

B. The sheriff's authority to seize and sell personal property extends to all counties in the state. Except for wilful misconduct, the sheriff is not liable for wrongfully seizing or selling property as directed by this article.

C. The sheriff shall charge the same fees for seizure and sale of personal property for taxes as provided on executions and other actual expenses that are not provided for under executions.

§ 42-19110 Seizure of property

A. After receiving a tax bill the sheriff shall:

Seize the property wherever it is found.
Advertise the property for sale at public auction for cash within one year after the date of the seizure.

B. Under authority of the tax bill, the sheriff:

Shall seize the property.
May enter any building, dwelling, grounds or other place or enclosure in order to seize the property.
May call any citizen to aid the sheriff if necessary.

C. If the property is located in a manner that requires a judicial warrant to achieve entry, any magistrate may issue the warrant on a showing that probable cause exists to believe that the property described in the tax bill is so located.

§ 42-19111 Notice of sale

A. After seizing the property the sheriff shall give notice of the time, place and terms of sale by:

Posting three notices in the county where the property is to be sold. One of the notices shall be posted at the place where the property is located, and the other two shall be posted in locations in the county that are commonly and regularly observed by the general public.
Either personal service on the owner of the property or mailing a copy of the notice to the owner by certified mail, return receipt requested. If notification under this paragraph cannot be completed because the owner is unknown or the owner's address is unknown, the sheriff shall publish notice in a newspaper of general circulation in the county in which the unsecured property was seized. If the notice is published in a weekly newspaper, the notice must appear once each week for two consecutive weeks. If the notice is published in a daily newspaper, the notice must appear six consecutive times. In either case, the last publication must appear at least three weeks but not more than four weeks before the date of the sale.

B. The notices shall:

Describe the property to be sold.
State the name of the owner or person to whom the property is assessed.
State the place and time of holding the sale.
State the amount of taxes for which the property is to be sold.

C. The sheriff may not sell personal property under section 42-19113 until at least three weeks after the notice is served on the property owner, after receiving confirmation that the owner received the notice by certified mail or after the last date of notice by publication, whichever method the sheriff used under subsection A, paragraph 2 of this section.

D. If a court determines that a sheriff failed to give notice as required by this section:

Any sale of the personal property by the sheriff is void.
The owner is entitled to redeem the property as provided by this article on paying the outstanding taxes, interest and costs associated with collecting the taxes.
The court may award fees and other expenses associated with the adjudication to the owner as provided by section 12-348.

§ 42-19112 Redemption

A. The owner of personal property, a lien claimant or a conditional vendor may redeem the property at any time before the actual sale by the sheriff by paying to the sheriff the taxes, interest and costs.

B. The right to redeem terminates after the property is sold.

§ 42-19113 Sale

A. The sheriff shall offer the personal property, or as much of the property as is necessary to pay the taxes, interest and costs of sale, at a public sale held at the time fixed in the notices.

B. Any person, including the county, may bid at the sale, and the property shall be sold to the highest bidder for cash.

C. If no bid is made for the property in an amount sufficient to pay the taxes, the sheriff may execute and deliver a bill of sale conveying the title of the property to the highest bidder, together with the property.

§ 42-19115 Return of sale; distribution of proceeds

A. The sheriff shall make return of the tax bill on or before the tenth day of the month following the sale and, if the property is sold to a person other than the county, shall pay to the county treasurer the total amount of all monies received.

B. The treasurer shall distribute the proceeds to the proper funds. The costs shall be placed in the county expense fund. Any balance remaining with the treasurer after payment of the taxes, interest and costs shall be paid to the owner of the personal property who was dispossessed by the sale.

§ 42-19117 Tax as debt against property owner; action to collect tax

A. The tax on personal property is a debt against the owner to whom the property is assessed and against the owner's successors and assigns.

B. At the request of the county treasurer, the county attorney shall bring an action against the owner to recover all or any part of the tax.

C. If the county treasurer or sheriff is unable to find sufficient personal property to pay the tax and costs that are assessed to the owner, and the owner or the owner's successors or assigns refuses or fails to pay the tax or to surrender property sufficient for that purpose, the county treasurer shall bring an action in court pursuant to section 12-163, subsection B, against the owner and the owner's successors and assigns, or any of them, for collection of the tax and costs.

D. Personal judgment may be rendered against any or all defendants.

§ 42-19118 Clearing uncollectible tax

A. If the county treasurer, sheriff and county attorney are unable to locate both the personal property on which taxes have been assessed and the person owning the property or the owner's successors or assigns, after diligent search by the sheriff, the tax may be declared uncollectible pursuant to this section.

B. The county treasurer shall:

Prepare and submit to the board of supervisors a certificate of clearance stating:

(a) The name of the person who is liable for the tax.

(b) A description of the property.

(d) The delinquent date of the tax.

(e) The year and the amount of tax, interest and penalty involved.

(f) The extent of any lien on the property.

Submit an affidavit from the sheriff stating that after a diligent search both the property and the person owning the property or the person's successors or assigns have not been located.

C. On being satisfied that the tax is uncollectible, the board of supervisors may approve the certificate of clearance.

D. On approval of the certificate, the treasurer shall:

Delete from the treasurer's records the tax, interest and penalty covered by the certificate.
Make a notation in the records that the deletion was made pursuant to the approval of a certificate of clearance together with the number and date of the certificate.

E. If the property or the person who owns the property or the owner's successors or assigns are located after the approval of the certificate of clearance, the county treasurer may reinstate and collect the taxes, penalties and interest as if there had been no approval of the certificate.

Article 4 Mobile Homes

§ 42-19151 Definition of mobile home

In this article, unless the context otherwise requires, "mobile home" means a structure that is transportable in one or more sections including the plumbing, heating, air conditioning and electrical systems that are contained in the structure and that, when erected on site, is either of the following:

More than eight feet in body width, thirty-two feet or more in body length and built on a permanent chassis.
Regardless of the size, used as a single family dwelling or for commercial purposes with or without a permanent foundation.

§ 42-19152 Taxation of mobile homes

A. Each mobile home is subject to ad valorem property tax to be assessed and collected in the same manner and at the same time as other personal property that is taxable under this chapter.

B. The department shall establish the method of determining the valuation of mobile homes that are taxable under this chapter to be set by the county assessor.

§ 42-19153 Application and exemptions

This article does not apply to:

A mobile home with respect to which an affidavit of affixture has been recorded pursuant to section 42-15203 and that has been placed on the real property tax roll.
Any trailer that is eight feet or less in width and less than thirty-two feet in length and that is not used as a place of residence or for a commercial purpose. A license tax in lieu of ad valorem property taxes is assessed on those trailers in the same manner as on other vehicles.
A mobile home that is properly licensed in another state and that is owned by a bona fide tourist in this state. This article does apply to a mobile home or trailer that is located in this state and that is owned by a resident of this state. For the purposes of this paragraph, "resident" includes:

(a) A person, except a tourist or out-of-state student, who owns, leases or rents a dwelling in this state and occupies it as a place of residence.

(b) A person who, regardless of domicile, remains in this state for a consecutive period of six months or more.

(c) A person who engages in a trade, profession or occupation in this state or who accepts employment in this state in other than seasonal agricultural work.

(d) A person who places a child in a public school without paying nonresident tuition.

(e) A person who declares that the person is a resident of this state for the purpose of obtaining or paying at resident rates a state license or tuition fees at an educational institution that is maintained by public monies.

(f) Any individual, partnership, company, firm, corporation or association that maintains a main office, a branch office or warehouse facilities in this state and that bases and operates motor vehicles in this state.

§ 42-19154 Landowner's register of mobile homes and monthly report; violation; classification

A. If a person permits a mobile home to be placed on land that the person owns, possesses or controls in a manner that permits the mobile home to be occupied as a dwelling or sleeping place for one or more persons for a period of thirty days or more, the person shall keep a register containing information that is required by the department.

B. The department shall prescribe, and the county assessor shall furnish, forms for maintaining the register. A copy of the information in the register for each month shall be sent to the county assessor within ten days after the month covered by the report.

C. A person who knowingly fails to maintain the register or make the report required by this section is guilty of a class 2 misdemeanor.

§ 42-19155 Unlawful sale or removal of mobile home; classification

A. It is unlawful to knowingly move or sell a mobile home on which applicable ad valorem taxes imposed under this chapter have not been paid and are delinquent.

§ 42-19156 Review and appeal

A person who is dissatisfied with the valuation of the person's mobile home may have the valuation reviewed, and may appeal from the decision resulting from the review, in the same manner as provided by law for review and appeal under this chapter.

§ 42-19157 Collection of delinquent taxes

A. Except as otherwise prescribed by this article, if a person who is liable for paying tax under this article evades or is delinquent in paying the tax, the tax shall be collected in the manner and by the officers prescribed by this chapter for collecting delinquent taxes on personal property.

B. Notwithstanding any other law, for a mobile home for which an affidavit of affixture has not been recorded pursuant to section 42-15203, that is not placed on the real property roll and that is the owner's primary residence, the delinquent tax may be collected pursuant to subsection A of this section only after both of the following occur:

The tax has been delinquent for a period of one year.
The person liable for paying the tax has not redeemed the property within six months after the end of the one-year period prescribed in paragraph 1 of this subsection.

C. For delinquent tax report purposes, the county treasurer and the officers prescribed by this chapter shall use the method and procedures of identifying mobile homes as prescribed by the department of transportation.

§ 42-19158 Notice of intent to seize mobile home in possession of person not listed on tax bill

A. If the sheriff is directed to seize and sell a mobile home that is found to be in the possession of a person who is other than the person listed on the tax bill issued by the county treasurer and who presents evidence of having purchased the mobile home from the person listed on the tax bill after the taxes became delinquent, the sheriff shall not seize the property. Instead, the sheriff shall:

Issue a notice of intent to seize the mobile home in five working days.
Advise the owner of the application procedure to extend the payment due date as provided in section 42-19160.

B. This section does not apply if the county treasurer or sheriff has reason to believe that the mobile home is in danger of being removed from the state.

§ 42-19159 Owner's action to collect delinquent tax from previous owner

A. A person who purchases a mobile home and who subsequently pays taxes that were imposed by this article on the mobile home and that were levied and became delinquent when the mobile home was the property of a previous owner may bring an action against the previous owner for the amount of the delinquent taxes paid.

B. If the purchaser prevails, the purchaser shall recover damages including reasonable attorney fees and treble the amount of delinquent taxes paid.

C. This section does not apply if the purchaser has specifically assumed the delinquent tax liability in writing, signed by the purchaser and seller, and the delinquent taxes assumed are correctly stated by year and amount due.

§ 42-19160 Delinquent taxes accruing under previous ownership

A. If delinquent taxes on a mobile home were levied and became delinquent when the mobile home was the property of a previous owner:

The county treasurer, on application and payment of a five dollar fee by the current owner, shall extend the due date for paying the taxes for one year with no interest and penalty.
Any accrued interest or penalty due on the delinquent tax amount shall be exempted from payment by the current owner.

B. Delinquent taxes that are extended under this section become due and payable immediately if the mobile home is sold.

C. This section does not apply to a permanently affixed mobile home that is assessed as real property pursuant to chapter 15, article 5 of this title.