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ARIZONA STATE SENATE
Fifty-Fifth Legislature, Second Regular Session
REVISED
AMENDED
use tax; service vehicles; inventory
Purpose
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 and specifies that a service vehicle is not considered to be removed from inventory for use tax purposes 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 motor vehicle dealer may resell a new motor vehicle if: 1) a certificate of title is not transferred from the person who first acquired the new motor vehicle from the manufacturer or importer; 2) the new motor vehicle is returned to the selling motor vehicle dealer; 3) the motor vehicle dealer gives written notice to the retail consumer that the vehicle was delivered to a previous purchaser; and 4) the retail consumer signs an acknowledgment of receipt of the written notice and the motor vehicle dealer maintains a copy of the acknowledgment in the dealer's records (A.R.S. §§ 28-4301 and 28-4422).
The Joint Legislative Budget Committee fiscal note estimates an undetermined revenue loss to the state General Fund based on the exemption from use tax for service vehicles that are removed from a motor vehicle dealer's inventory. Due to a lack of data, the magnitude of the loss cannot be determined (JLBC fiscal note).
Provisions
1. Specifies that a service vehicle is not considered to be removed from inventory for use tax purposes if the service vehicle is continuously available for sale.
2. Requires the Arizona Department of Revenue (ADOR) to consider any service vehicle that remains a new motor vehicle as statutorily outlined to be continuously available for sale.
3. 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.
4. Applies the modification of motor vehicles that are removed from inventory to taxable periods beginning on or after the first day of the month following the general effective date.
5. Contains a purpose statement.
6. Makes technical and conforming changes.
7. Becomes effective on the general effective date.
Amendments Adopted by Committee
· Clarifies that a service vehicle is not considered removed from inventory if the service vehicle is continuously for sale.
Amendments Adopted by Committee of the Whole
1. Requires ADOR to consider any service vehicle that remains a new motor vehicle or that is treated as a new motor vehicle as statutorily outlined to be continuously available for sale.
2. Adds a purpose statement.
Revisions
· Updates the fiscal impact statement.
Senate Action
FIN 2/16/22 DPA 7-2-1
Prepared by Senate Research
March 2, 2022
MG/AN/slp