SB1125 - 541R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 28-5601, Arizona Revised Statutes, is amended to read:

START_STATUTE28-5601. Definitions

In this article and articles 2 and 5 of this chapter, unless the context otherwise requires:

1. "Blending":

(a) Means the mixing of one or more products, regardless of the original character of the product blended, if the product obtained by the blending is capable of use or otherwise sold for use in the generation of power for the propulsion of a motor vehicle, aircraft or watercraft.

(b) Does not include blending that occurs in the process of refining by the original refiner of crude petroleum or the blending of products known as lubricating oil and greases.

2. "Bulk end user" means a person who receives into the person's own storage facilities in transport truck lots motor fuel for the person's own consumption.

3. "Bulk plant" means a motor fuel storage and distribution facility that is not a terminal and from which motor fuel may be removed at a rack.

4. "Bulk transfer" means any transfer of motor fuel from one location to another by pipeline tender or marine delivery within the bulk transfer terminal system.

5. "Bulk transfer terminal system" means the motor fuel distribution system consisting of refineries, pipelines, marine vessels and terminals. Motor fuel in a refinery, pipeline, vessel or terminal is in the bulk transfer terminal system. Motor fuel in the fuel supply tank of any engine, or in any tank car, rail car, trailer, truck or other equipment suitable for ground transportation, is not in the bulk transfer terminal system.

6. "Consumer" means the end purchaser of motor vehicle fuel for use on the highways in this state, the end purchaser of motor vehicle fuel for use in watercraft on waterways of this state or the end purchaser of aviation fuel for use in aircraft.

7. "Destination state" means the state, territory or foreign country to which motor fuel is directed for delivery into a storage facility, a receptacle, a container or a type of transportation equipment for the purpose of resale or use.

8. "Distributor" means a person who acquires motor fuel from a supplier or another distributor for subsequent sale or use and who may blend or import into or export from this state motor fuel in the original package or container or otherwise but excluding a person who imports motor fuel in the fuel tank of a motor vehicle or aircraft.

9. "Dyed diesel fuel" means diesel fuel that is dyed pursuant to United States internal revenue service regulations or requirements, including any invisible marker requirements.

10. "Fuel tank" means a receptacle on a motor vehicle, watercraft or aircraft from which fuel is supplied for the propulsion of the motor vehicle, watercraft or aircraft, excluding a cargo tank but including a separate compartment of a cargo tank used as a fuel tank and an auxiliary tank or receptacle of any kind from which fuel is supplied for the propulsion of the motor vehicle, watercraft or aircraft, whether or not the tank or receptacle is directly connected to the fuel supply line of the motor vehicle, watercraft or aircraft.

11. "Highway" means any way or place in this state of whatever nature that is maintained by public monies and that is open to the use of the public for purposes of vehicular travel, including a highway under construction.

12. "In this state" means any way or place within the exterior limits of the state of Arizona that is maintained by public monies, including any such way or place that is owned by or ceded to the United States of America.

13. "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 Indian tribes by treaty, law or executive order and that are currently recognized as Indian reservations by the United States department of the interior.

14. "Indian tribe" means any organized nation, tribe, band or community recognized as an Indian tribe by the United States department of the interior.

15. "Interstate user" means a person registering a use class motor vehicle under chapter 7, article 7 or 8 of this title or section 28‑2321 or 28‑2324.

16. "Invoiced gallons" means the gallons actually billed on an invoice in payment to a supplier.

17. "Light class motor vehicle" means a motor vehicle that uses use fuel on the highways in this state but excludes a road tractor, truck tractor, truck or passenger carrying vehicle having a declared gross vehicle weight of more than twenty‑six thousand pounds or having more than two axles.

18. 17. "Motor fuel" means motor vehicle fuel, use fuel and aviation fuel.

19. 18. "Motor vehicle" means a self‑propelled vehicle required to be licensed or subject to licensing for operation on a highway.

20. 19. "Permissive supplier" means an out‑of‑state supplier that elects, but is not required, to have a supplier's license pursuant to this article.

21. 20. "Person" means an individual, firm, partnership, joint venture, association, corporation, estate, trust, business trust, receiver or syndicate, this state, any county, city, town, district or other subdivision of this state, an Indian tribe, or any other group or combination acting as a unit.

22. 21. "Position holder":

(a) Means the person who holds the inventory position in motor fuel in a terminal, as reflected on the records of the terminal operator. For the purposes of this subdivision, "a person who holds the inventory position in motor fuel" means a person who has a contract with the terminal operator for the use of storage facilities and terminaling services for fuel at the terminal.

(b) Includes a terminal operator who owns fuel in the terminal.

23. 22. "Public monies" means those monies that are received by this state and that are derived all or in part from tax revenues or other funding sources.

24. 23. "Qualified terminal" means a terminal that is designated as a qualified terminal pursuant to the United States internal revenue code, regulation and practices and that has been assigned a terminal control number by the United States internal revenue service.

25. 24. "Rack" means a mechanism for delivering motor fuel from a refinery, a terminal or a bulk plant into a railroad tank car, a transport truck or other means of transfer that is outside the bulk transfer terminal system.

26. 25. "Refiner" means any person who owns, operates or otherwise controls a refinery within the United States.

27. 26. "Refinery" means a facility that is used to produce motor fuel from crude oil, unfinished oils, natural gas liquids, transmix or other hydrocarbons or by blending and from which motor fuel may be removed by pipeline, by vessel or at a rack.

28. 27. "Road tractor" means a motor vehicle that is designed and used for drawing other vehicles and that is not constructed to carry either a load independently or any part of the weight of a vehicle or load so drawn.

29. 28. "Sell" includes a transfer of title or possession, exchange or barter in any manner or by any means.

30. 29. "Supplier":

(a) Means a person who is registered pursuant to section 4101 of the United States internal revenue code for transactions in motor fuels in the bulk transfer terminal distribution system and who is one of the following:

(i) The position holder in a terminal or refinery in this state.

(ii) A person who imports motor fuel into this state from a foreign country.

(iii) A person who acquires motor fuel from a terminal or refinery in this state from a position holder pursuant to a two party exchange.

(iv) The position holder in a terminal or refinery outside this state with respect to motor fuel that that person imports into this state on the account of that person.

(b) Includes a permissive supplier unless specifically provided otherwise. Supplier does not include a terminal operator merely because the terminal operator handles motor fuel consigned to the terminal operator within a terminal.

31. 30. "Terminal" means a storage and distribution facility for motor fuel, which is supplied by pipeline or marine vessel, that is registered as a qualified terminal by the United States internal revenue service and from which motor fuel may be removed at a rack.

32. 31. "Terminal bulk transfer" includes the following:

(a) A marine barge movement of motor fuel from a refinery or terminal to a terminal.

(b) Pipeline movements of motor fuel from a refinery or terminal to a terminal.

33. 32. "Terminal operator" means any person who owns, operates or otherwise controls a terminal and who does not use a substantial portion of the motor fuel that is transferred through or stored in the terminal for the person's own use or consumption or in the manufacture of products other than motor fuel. A terminal operator may own the motor fuel that is transferred through or stored in the terminal.

34. 33. "Transmix" means the buffer or interface between two different products in a pipeline shipment or a mix of two different products within a refinery or terminal that results in an off‑grade mixture that is not usable or salable as motor fuel.

35. 34. "Two party exchange" means a transaction:

(a) In which motor fuel is transferred from one licensed supplier or licensed permissive supplier to another licensed supplier or licensed permissive supplier.

(b) That includes a transfer from the person that holds the original inventory position for motor fuel in the terminal as reflected on the records of the terminal operator.

(d) In which the terminal operator in the terminal operator's books and records treats the receiving exchange party as the supplier that removes the product across a terminal rack for purposes of reporting the events to the department.

36. 35. "Use" includes the placing of fuel into any receptacle on a motor vehicle from which fuel is supplied for the propulsion of the vehicle unless the operator of the vehicle establishes to the satisfaction of the director that the fuel was consumed for a purpose other than to propel a motor vehicle on a highway in this state and, with respect to fuel brought into this state in any such receptacle on a use class motor vehicle, the consumption of the fuel in this state. A person who places fuel in a receptacle on a use class motor vehicle of another is not deemed to have used the fuel.

37. 36. "Use class motor vehicle" means a motor vehicle that uses use fuel on a highway in this state and that is a road tractor, truck tractor, truck or passenger carrying vehicle having a declared gross vehicle weight of more than twenty‑six thousand pounds or having more than two axles.

38. 37. "Use fuel" includes all gases and liquids used or suitable for use to propel motor vehicles, except fuels that are subject to the motor vehicle fuel tax imposed by this article.

39. 38. "User" includes a person who, within the meaning of the term use as defined in this section, uses fuel in a use class motor vehicle.

40. 39. "Vendor" includes a person who sells use fuel in this state and who places the fuel or causes the fuel to be placed into any receptacle on a motor vehicle from which receptacle fuel is supplied for the propulsion, including a service station dealer, a broker and a user who sells use fuel to others. END_STATUTE

Sec. 2. Section 28-5605, Arizona Revised Statutes, is amended to read:

START_STATUTE28-5605. Use fuel tax collection; fuel dispenser labels; civil penalty

A. A vendor shall not collect more than the use fuel tax imposed pursuant to section 28‑5606, subsection B, paragraph 1 from a person who purchases use fuel for use in the propulsion of a light class motor vehicle on a highway in this state or for use in the propulsion of a use class motor vehicle that is exempt pursuant to section 28‑5432 from the weight fee prescribed in section 28‑5433 on a highway in this state.

B. Subject to the following, vendors shall label use fuel dispensers pursuant to standards established by the weights and measures services division of the Arizona department of agriculture:

1. Labels on use fuel dispensers shall notify the purchaser of the state use fuel tax rate. The department of transportation shall provide the use fuel dispenser labels to vendors.

2. If the vendor only sells use fuel to light class motor vehicles or use class motor vehicles that are exempt pursuant to section 28‑5432 from the weight fee prescribed in section 28‑5433, or both, the vendor shall post that limitation and include the tax rate prescribed in section 28‑5606, subsection B, paragraph 1.

3. If light class motor vehicles and use class motor vehicles are allowed to fuel at the same use fuel dispenser, the vendor shall include the tax rate prescribed in section 28‑5606, subsection B, paragraph 2 and post a notice that the tax rate for light class motor vehicles and use class motor vehicles that are exempt pursuant to section 28‑5432 from the weight fee prescribed in section 28‑5433 is the tax rate prescribed in section 28‑5606, subsection B, paragraph 1.

4. If the vendor prohibits light class motor vehicles or use class motor vehicles from dispensing fuel from a specific fuel dispenser, the vendor shall post that prohibition.

5. 2. In addition to posting a sign on a use fuel dispenser that indicates that the price of the use fuel dispensed from that dispenser includes the applicable federal and state taxes, a vendor that dispenses use fuel from a cardlock facility shall require the purchaser of use fuel for light class motor vehicles or use class motor vehicles that are exempt pursuant to section 28‑5432 from the weight fee prescribed in section 28‑5433, or both, to complete a declaration of status in a form and a manner approved by the director. For the purposes of this paragraph, "cardlock facility" means a use fuel vendor that satisfies all of the following:

(a) Is licensed in this state.

(b) Sells only to preapproved purchasers of use fuel who have been issued cards, keys or other controlled access to identify the exclusive withdrawal of that particular purchaser.

(d) Measures volumes of fuel dispensed by pump meters or other accurate recording devices.

C. A vendor who violates subsection B of this section is subject to a civil penalty of one hundred dollars $100 for each day the violation continues. END_STATUTE

Sec. 3. Section 28-5606, Arizona Revised Statutes, is amended to read:

START_STATUTE28-5606. Imposition of motor fuel taxes

A. In addition to all other taxes provided by law, a tax of eighteen cents $0.36 per gallon is imposed on motor vehicle fuel possessed, used or consumed in this state.

B. To partially compensate this state for the use of its highways:

1. A use fuel tax is imposed on use fuel used in the propulsion of a light class motor vehicle vehicles on a highway in this state at the same rate per gallon as the motor vehicle fuel tax prescribed in subsection A of this section, except that there is no use fuel tax on alternative fuels.

2. A use fuel tax is imposed on use fuel used in the propulsion of a use class motor vehicle on a highway in this state at the rate of twenty‑six cents for each gallon, except that there is no use fuel tax on alternative fuels and use class vehicles that are exempt pursuant to section 28‑5432 from the weight fee prescribed in section 28‑5433 are subject to the use fuel tax imposed by paragraph 1 of this subsection.

3. 2. Through December 31, 2024, a use fuel tax is imposed on use fuel used in the propulsion of a motor vehicle transporting forest products in compliance with the requirements of section 41-1516 on a highway in this state at the rate of nine $0.09 cents for each gallon, except that there is no use fuel tax on alternative fuels.

C. The motor vehicle fuel and use fuel taxes imposed pursuant to this section and the aviation fuel taxes imposed pursuant to section 28‑8344 are conclusively presumed to be direct taxes on the consumer or user but shall be collected and remitted to the department by suppliers for the purpose of convenience and facility only. Motor vehicle fuel, use fuel and aviation fuel taxes that are collected and paid to the department by a supplier are considered to be advance payments, shall be added to the price of motor vehicle fuel, use fuel or aviation fuel and shall be recovered from the consumer or user.

D. Motor vehicle fuel and use fuel taxes imposed pursuant to this section on the use of motor vehicle fuel and use fuel and the aviation fuel taxes imposed pursuant to section 28‑8344 on the use of aviation fuel, other than by bulk transfer, arise at the time the motor vehicle, use or aviation fuel either:

1. Is imported into this state and is measured by invoiced gallons received outside this state at a refinery, terminal or bulk plant for delivery to a destination in this state.

2. Is removed, as measured by invoiced gallons, from the bulk transfer terminal system or from a qualified terminal in this state.

3. Is removed, as measured by invoiced gallons, from the bulk transfer terminal system or from a qualified terminal or refinery outside this state for delivery to a destination in this state as represented on the shipping papers if a supplier imports the motor vehicle, use or aviation fuel for the account of the supplier or the supplier has made a tax precollection election pursuant to section 28‑5636.

E. If motor fuel is removed from the bulk transfer terminal system or from a qualified terminal or is imported into this state, the original removal, transfer or importation of the motor fuel is subject to the collection of the tax. If this motor fuel is transported to another qualified terminal or reenters the bulk transfer terminal system, the subsequent sale of the motor fuel on which tax has been collected is not subject to collection of an additional tax if proper documentation is retained to support the transaction. END_STATUTE

Sec. 4. Section 28-5610, Arizona Revised Statutes, is amended to read:

START_STATUTE28-5610. Exemptions

A. The following are exempt from motor vehicle fuel and use fuel taxes imposed by section 28‑5606 and aviation fuel taxes imposed by section 28‑8344:

1. Motor fuel for which proof of export is available in the form of a terminal‑issued destination state shipping paper or bill of lading and that is either:

(a) Exported by a supplier who is licensed in the destination state.

(b) Sold by a supplier to a distributor for immediate export.

2. Motor fuel that was acquired by a distributor, as to which the tax imposed by this article or section 28‑8344 has previously been paid or accrued and that was subsequently exported by transport truck by or on behalf of the distributor in a diversion across state boundaries properly reported to the department. If diverted by a distributor, the distributor shall perfect the exemption by filing a refund application with the department within six months after the diversion.

3. Motor vehicle fuel or use fuel that is sold within an Indian reservation to an enrolled member of the Indian tribe who is living on the Indian reservation established for the benefit of that Indian tribe and that is used by the enrolled member for the enrolled member's own benefit. This exemption does not apply to sales within an Indian reservation by an Indian or Indian tribe to non‑Indian consumers or to Indian consumers who are not members of the Indian tribe for which the Indian reservation was established or to use fuel used to operate motor vehicles for a commercial purpose outside of the reservation on highways in this state. For the purposes of this paragraph, "Indian" means an individual who is registered on the tribal rolls of the Indian tribe for whose benefit the Indian reservation was created.

4. Motor vehicle fuel or use fuel used solely and exclusively as fuel to operate a motor vehicle on highways in this state if the motor vehicle is leased to or owned by and is being operated for the sole benefit of an Indian tribe for governmental purposes only.

5. Motor fuel that is moving in interstate or foreign commerce and that is not destined or diverted to a point in this state.

6. Motor vehicle or aviation fuel that is sold to the United States or an instrumentality or agency of the United States.

7. Taxable use fuel that has been accidentally contaminated so as to be unsalable as highway fuel as proved by proper documentation.

8. Dyed diesel fuel, including fuel used by either of the following:

(a) A farm tractor or implement of husbandry designed primarily for or used in agricultural operations and only incidentally operated or moved on a highway.

(b) A road roller or vehicle that is all of the following:

(i) Designed and used primarily for grading, paving, earthmoving or other construction work on a highway.

(ii) Not designed or used primarily for transportation of persons or property.

(iii) Incidentally operated or moved over the highway.

B. A use class vehicle shall pay the use fuel tax for light class motor vehicles prescribed by section 28-5606, subsection B, paragraph 1 if the vehicle is a truck and satisfies all of the following:

1. Is at least twenty-five years old.

2. Has been issued a historic vehicle license plate pursuant to section 28-2484.

3. Is not used as a commercial vehicle.

C. B. Notwithstanding subsection A, paragraph 8 of this section, the following are not exempt from use fuel taxes imposed by section 28‑5606:

1. A vehicle that was originally designed for the transportation of persons or property and to which machinery is attached or on which machinery or other property may be transported.

2. A dump truck.

3. A truck mounted transit mixer.

4. A truck or trailer mounted crane.

5. A truck or trailer mounted shovel.

D. C. Except as provided in subsection E D of this section, a person who claims an exemption pursuant to this section shall perfect the exemption by claiming a refund pursuant to section 28‑5612.

E. D. Subject to sections 28‑5645 through 28‑5649, dyed diesel fuel is exempt from use fuel taxes at the time of sale. END_STATUTE

Sec. 5. Section 28-5614, Arizona Revised Statutes, is amended to read:

START_STATUTE28-5614. Refunds; use fuel

A. If a vendor pays the use fuel tax rate for use class motor vehicles on use fuel that is actually used in the propulsion of a light class motor vehicle on a highway in this state or that is actually used in the propulsion of a use class motor vehicle that is exempt pursuant to section 28‑5432 from the weight fee prescribed in section 28‑5433 on a highway in this state and for the purpose of convenience and facility only, the vendor may apply to the department for a refund of the difference between the amount of the use class motor vehicle use fuel tax paid and the amount of the light class motor vehicle use fuel tax on the same number of gallons purchased.

B. A. If a person who transports forest products on a highway in this state in compliance with the requirements of section 41‑1516 pays the use fuel tax rate prescribed in section 28‑5606, subsection B, paragraph 2 1 for a use class motor vehicle that is eligible for the use fuel tax rate prescribed in section 28‑5606, subsection B, paragraph 3 2, the person may apply to the department for a refund of the difference between the amount of the use fuel tax paid and the use fuel tax rate prescribed for a motor vehicle transporting forest products.

C. B. The director may prescribe any forms the director deems necessary to implement this section.

D. A vendor may file an application for a refund pursuant to this section either:

1. On a monthly basis subject to the limitations prescribed in section 28‑5612.

2. If the amount of the requested refund is at least seven hundred fifty dollars, except that a vendor shall not file an application for a refund pursuant to this paragraph more frequently than once each week.

E. C. The director shall:

1. Pay the refund from current use fuel tax receipts.

2. Deduct the refund from the monthly use fuel tax receipts before the deposit pursuant to section 28‑5730 is made. END_STATUTE

Sec. 6. Repeal

Sections 28-5616 and 28-5623, Arizona Revised Statutes, are repealed.

Sec. 7. Requirements for enactment; two-thirds vote

Pursuant to article IX, section 22, Constitution of Arizona, this act is effective only on the affirmative vote of at least two-thirds of the members of each house of the legislature and is effective immediately on the signature of the governor or, if the governor vetoes this act, on the subsequent affirmative vote of at least three-fourths of the members of each house of the legislature.