Arizona bill proposes significant transaction privilege tax changes

February 2013


House Bill 2657, which generally incorporates Arizona Governor Jan Brewer's proposed transaction privilege tax reforms, was introduced on February 12, 2013. The bill proposes several significant tax changes, including: (1) providing tangible personal property sales sourcing rules for state and municipal taxes; (2) changing the incidence of tax for contractor related transactions from contractors' gross receipts to contractors' purchases of tangible personal property incorporated into a project; (3) providing for the Department of Revenue to serve as the centralized point to collect and enforce the tax; and (4) authorizing county use taxes. The sourcing and county use tax provisions would be effective from and after December 31, 2013, and the remaining changes would be effective from and after December 31, 2014.

Taxpayers selling to or using the services of contractors should consider the effect the bill's changes may have on their Arizona privilege tax liability. Additionally, Arizona taxpayers should understand how the potential sourcing and centralized reporting changes proposed by the bill will impact their compliance responsibilities. [Arizona House Bill 2657, introduced 2/12/13]

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