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ARIZONA STATE SENATE
Fifty-Fifth Legislature, Second Regular Session
use tax; service vehicles; inventory
Purpose
Considers a service vehicle to be removed from inventory if the service vehicle is continuously available for sale.
Background
The state use tax is levied at a rate of 5.6 percent on the use, storage or consumption of purchased tangible personal property. Motor vehicles that are removed from inventory are subject to use tax on a monthly basis. A motor vehicle that is removed from inventory must be used directly in the conduct of the motor vehicle dealer's primary business and returned to the dealer's active sales inventory within one year after the date of the initial removal from inventory. The use tax for motor vehicles removed from inventory by a motor vehicle dealer is applied to 1/39th of the value of each new motor vehicle as determined by the manufacturer's suggested retail price and to 1/39th of the value of each used motor vehicle as determined by any industry-wide publication in common use and devoted to listing used car values (A.R.S. §§ 42-5155 and 42-5157 ).
A motor vehicle dealer is a new or used motor vehicle dealer, a public consignment auction dealer, a broker or a wholesale motor vehicle auction dealer and excludes a person who comes into possession of a motor vehicle as an incident to the person's regular business and who sells, auctions or exchanges the motor vehicle (A.R.S. § 28-4301).
If considering service vehicles as removed from inventory results in a change in use tax collections, there may be a fiscal impact to the state General Fund.
Provisions
1. Specifies that a service vehicle that is continuously available for sale is considered to be removed from inventory.
2. Defines motor vehicles that are removed from inventory as a motor vehicle that has been removed from a motor vehicle dealer's inventory and that is not for sale.
3. Applies the consideration of service vehicles as removed from inventory to taxable periods beginning on or after the first day of the month following the general effective date.
4. Makes technical and conforming changes.
5. Becomes effective on the general effective date.
Prepared by Senate Research
February 14, 2022
MG/AN/slp