Assigned to FIN AS
PASSED BY COMMITTEE
Assigned to FIN AS
PASSED BY COMMITTEE
ARIZONA STATE SENATE
Fifty-Third Legislature, Second Regular Session
AMENDED
corporate income tax allocation; sales
Purpose
Effective January 1, 2020, modifies existing statute relating to the allocation of corporate income for tax purposes to include credit and charge card sales.
Background
Laws 2012, Chapter 2 allowed a multistate service provider to make an election regarding how its revenues are categorized for state corporate income tax purposes. Under this type of election, a scaled combination of income-producing sales and market-based sales is used. Income‑producing sales are used to locate the sale where the activity is performed while market‑based sales are used to source the sale to the location of the customer receiving services. Under the election, sales are weighted as follows:
1) 85 percent market‑based and 15 percent income‑producing in tax year (TY) 2014;
2) 90 percent market‑based and 10 percent income‑producing in TY 2015;
3) 95 percent market‑based and 5 percent income‑producing in TY 2016; and
4) 100 percent market‑based in TY 2017, and thereafter.
A multistate service provider is defined as either: 1) a taxpayer that derives more than 85 percent of its sales from services provided to purchasers who receive the benefit of the service outside of Arizona in the taxable year of election; or 2) a taxpayer that is a regionally accredited institution of higher education with at least one university campus in Arizona that has more than 2,000 students residing on the campus (A.R.S. § 43-1147).
According to the Arizona Department of Revenue, there may be a fiscal impact to the state General Fund associated with this legislation, which is indeterminate at this time.
Provisions
1. Modifies the definition of multistate service provider to include sales from intangibles.
2. Specifies, beginning in TY 2020, that sales from intangibles include sales derived from credit and charge card receivables, including fees, merchant discounts, interchanges, interest and related revenue.
3. Makes technical and conforming changes.
4. Becomes effective on January 1, 2020.
Amendments Adopted by Committee
· Adds sales from intangibles to the multistate service provider statute.
Senate Action
FIN 2/14/18 DPA 7-0-0
Prepared by Senate Research
February 16, 2018
FB/lb