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ARIZONA STATE SENATE
Fifty-Fifth Legislature, First Regular Session
TPT; exemptions; Indian tribes
Purpose
Exempts, from transaction privilege tax (TPT), the sales or income from business or contracting activities and retail sales that take place on an Indian reservation.
Background
TPT is currently levied by the state for the privilege of conducting business in Arizona under 16 separate business classifications. TPT is imposed on the gross receipts of taxable businesses, with the exception of prime contractors, and all gross receipts are subject to tax under one of the TPT business classifications, unless explicitly exempted or excluded by statute. Unless specifically provided for by law, exemptions and deductions under one TPT business classification may not be used under another classification (JLBC 2020 Tax Handbook).
In April 1995, the Arizona Department of Revenue (ADOR) issued Arizona Transaction Privilege Tax Ruling 95-11 (TPR 95-11) relating to the imposition of TPT on business activities performed on Indian reservations in Arizona. TPR 95-11 prohibits an affiliated Indian or an affiliated Indian vendor engaged in business activities on the reservation from being subject to TPT. If a business activity is performed for an affiliated Indian, non-Indian or non-affiliated Indian retailers engaged in business activities located on the reservation are not subject to TPT. Business activity is subject to TPT if it is performed for a non-Indian or non-affiliated Indian and activities performed for an affiliated Indian by retailers located off the reservation are subject to TPT. Sales of tangible personal property to an affiliated Indian are not subject to TPT if the solicitation, delivery and payment of the goods take place on the Indian reservation (TPR 95-11).
The sale of a motor vehicle to an enrolled member of an Indian tribe who resides on the Indian reservation established for that tribe is exempt from TPT (A.R.S. § 42-5061).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Exempts, from TPT and affiliated excise taxes, the gross proceeds of sales or gross income derived from:
a) business activities performed by an Indian tribe, a tribally owned business, a tribal entity or an affiliated Indian, if the business activity takes place on an Indian reservation;
b) business activities performed by nonaffiliated Indians or non-Indian vendors on an Indian reservation for an Indian tribe, a tribal entity or an affiliated Indian;
c) contracting activities performed on an Indian reservation by an Indian tribe, a tribally owned business, a tribal entity or an affiliated Indian;
d) contracting activities performed for an Indian tribe, a tribally owned business, a tribal entity or an affiliated Indian on an Indian reservation by a nonaffiliated Indian or non-Indian contractor; and
e) retail sales of tangible personal property to an Indian tribe, a tribally owned business, a tribal entity or an affiliated Indian, if the sale of tangible personal property takes place on an Indian reservation.
2. Deems a sale as having taken place on an Indian reservation if the tangible personal property is ordered from and delivered on an Indian reservation.
3. Requires nonaffiliated Indians and non-Indian vendors to maintain sufficient documentation of their taxable and nontaxable gross proceeds and gross income, under any method of recording that properly reflects the proceeds or income, to enable ADOR to determine which transactions are subject to TPT.
4. Specifies that any gross proceeds and gross income that cannot be identified as nontaxable using the documentation maintained by nonaffiliated Indians and non-Indian vendors is considered taxable.
5. Defines Indian tribe as any organized nation, tribe, band or community that is recognized as an Indian tribe by the U.S. Department of the Interior and includes any entity formed under the laws of the Indian tribe.
6. Defines Indian reservation as all lands that are within the limits of areas set aside by the United States for the exclusive use and occupancy of an Indian tribe by treaty, law or executive order and that are recognized as Indian reservations by the U.S. Department of the Interior.
7. Defines affiliated Indian as an individual Native American Indian who is duly registered on the tribal rolls of the Indian tribe for whose benefit the Indian reservation was established.
8. Contains a technical conditional enactment.
9. Makes technical and conforming changes.
10. Becomes effective on the general effective date or later.
Prepared by Senate Research
January 22, 2021
MG/gs