ARIZONA
HOUSE OF REPRESENTATIVES
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HB2702: TPT; marketplace facilitators; nexus |
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PRIME SPONSOR: Representative Toma, LD 22 BILL STATUS: Caucus & COW |
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Creates a marketplace facilitators
classification under the transaction privilege tax statutes and allows a city, town
or other taxing jurisdiction to levy the same tax subject to requirements. This
bill also creates an economic presence test for nexus purposes.
History
On June 21, 2018, the United States Supreme Court, in the Wayfair v. South Dakota case, reversed the long-standing Quill case (1992) that required a physical presence test for a state to impose a sales tax on a remote seller. The Wayfair decision said that South Dakota's tax system appears designed to prevent undue burdens upon interstate commerce. This decision resulted from three main findings. First, South Dakota applies a safe harbor to sellers that have limited business in the state. Second, South Dakota is not applying their tax retroactively. Third, South Dakota has adopted the Streamlined Sales and Use Tax Agreement, which standardizes taxes to reduce administrative and compliance costs.
Current Arizona law taxes the sale of tangible personal property under the retail classification, A.R.S. §42-5016, retail classification while cities and towns tax retail sales under the Model City Tax Code. Nexus is established by a physical presence test. Arizona does not have specific statutes that allow the taxation of remote sellers making sales into the state.
Provisions
1. Defines marketplace facilitator. (Sec. 1)
2. Defines marketplace seller. (Sec. 1)
3. States that persons whose only business in a municipality is by exceeding the economic presence test is not required to obtain a municipal privilege tax license. (Sec. 2)
4. Creates a rate and distribution base for the Marketplace Facilitator classification. (Sec. 3)
5. Sources sales of a marketplace facilitator to the purchaser's location. (Sec. 4)
6. Specifies that a marketplace facilitator is not liable for paying an incorrect amount of transaction privilege tax when demonstrated to the Department of Revenue. (Sec. 5)
7. Specifies that a marketplace seller is relieved of liability if the marketplace facilitator is. (Sec. 5)
8. Provides that the liability relief may not exceed:
a. 7% of the total tax due for calendar year 2019;
b. 5% of the total tax due for calendar years 2020, 2021, 2022, 2023 and 2024;
c. 3% of the total tax due for calendar year 2025; and
d. 0% of the total tax due for calendar year 2026 and thereafter. (Sec. 5)
9. Prohibits class action lawsuits against a marketplace facilitator on behalf of purchasers from or related to overpayment of taxes collected. (Sec. 5)
10. Allows DOR to waive penalties and interest if reasonable cause exists. (Sec. 5)
11. States that purchasers remain liable for use tax if the marketplace facilitator or marketplace seller do not pay transaction privilege tax. (Sec. 5)
12. Creates an economic presence if a person or a marketplace facilitator:
a. Derives gross proceeds of sales or gross income of more than $100,000 from transactions in Arizona; or
b. Engages in at least 200 separate transactions in Arizona. (Sec. 5)
13. Excludes sales of tangible personal property by a marketplace seller from the retail classification. (Sec. 6)
14. Defines the marketplace facilitator classification. (Sec. 8)
15. Establishes the marketplace facilitator classification tax base as the gross proceeds of sales or gross income from all Arizona sourced sales facilitated by a marketplace facilitator. (Sec. 8)
16. States that a marketplace facilitator shall report the tax due from sales on its own behalf and transactions conducted on behalf of marketplace sellers on a separate return. (Sec. 8)
17. States that DOR shall audit a marketplace facilitator for sales on its own behalf and on sales they facilitate for marketplace sellers. (Sec. 8)
18. Allows a city, town or other taxing jurisdiction to levy a transaction privilege, sales, use, franchise or other similar tax or fee on a marketplace facilitator or a person that reaches the economic presence test subject to the following:
a. Any tax on retail sales of tangible personal property must be taxed as prescribed under the retail classification;
b. Any tax on retail sales of food for home consumption is the same as provided under the exemption for sales of food;
c. An economic presence nexus test, as provided in Sec. 5, is adopted for out-of-state businesses; and
d. Any definitions relating to sales of tangible personal property and retail sales of food for home consumption must be amended or adopted to follow the Arizona Revised Statutes definitions. (Sec. 9)
19. Applies prospectively to taxable periods beginning on or after the first day of the month following the effective date of this act. (Sec. 10)
Amendments
Ways & Means Committee
1. Maximizes the Department of Revenue's subpoena enforcement ability.
2. Clarifies that a marketplace facilitator does not include a platform that exclusively provides internet advertising services or payment processor businesses.
3. Removes the requirement that marketplace facilitators file separate returns.
4. Makes technical changes.
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Fifty-fourth Legislature HB 2702
First Regular Session Version 1: CaucusCOW
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