Assigned to FIN & APPROP FOR
COMMITTEE
Assigned to FIN & APPROP FOR
COMMITTEE
ARIZONA STATE SENATE
Fifty-Third Legislature, Second Regular Session
TPT exemption; hearing aid batteries
Purpose
Effective October 1, 2018, exempts hearing aid batteries from state transaction privilege tax (TPT) and use tax.
Background
TPT is a gross receipts tax levied by the state for the privilege of conducting business in the state. Unlike a "true" sales tax imposed by many other states, TPT is imposed upon the seller of the item being taxed, rather than the purchaser. While the burden of TPT may be passed on to the purchaser, the seller is the party that is ultimately liable for its payment to the state. TPT is currently imposed under 16 separate business classifications, including mining, retail, commercial lease, restaurant and personal property rental. Use tax is imposed upon the purchaser of an item which is used, stored or consumed in the state when the sale is not subject to TPT. Out-of-state retailers or utility businesses that sell to Arizona customers are required to collect use tax and remit it to the Arizona Department of Revenue. The state use tax rate is equal to the state TPT rate.
Current law defines hearing aid as any wearable instrument or device designed for, or represented as, aiding or improving human hearing or as aiding, improving or compensating for defective human hearing. The definition includes any parts, attachments or accessories of the instrument or device, such as ear molds, but excludes batteries and cords (A.R.S. § 36-1901). Hearing aids are currently exempt from TPT and use tax (A.R.S. §§ 42-5061 and 42-5159). Batteries used in hearing aids, however, are still taxable (A.A.C. § R15-5-156).
The Joint Legislative Budget Committee (JLBC) estimates that this legislation would
reduce state General Fund revenues by $1,000,000 annually. JLBC also estimates a $400,000 reduction in state TPT distributions to counties and municipalities.
Provisions
1. Exempts batteries used in hearing aids, including cochlear implants, from TPT and use tax.
2. Becomes effective on October 1, 2018.
Prepared by Senate Research
January 8, 2018
FB/lb