STATE OF ARIZONA 2020 Tax Handbook JLBC Prepared by the Staff of the Joint Legislative Budget Committee CONTENTS Page No. Foreword .................................................................................................................................................................. i Overview of Arizona Taxes ........................................................................................................................................ ii GENERAL FUND SALES AND USE TAXES A. Transaction Privilege Tax ................................................................................................................................... 1 B. Use Tax .............................................................................................................................................................. 31 C. Severance Tax on Metalliferous Minerals ......................................................................................................... 34 D. Jet Fuel Excise and Use Tax ................................................................................................................................ 36 INCOME TAXES A. Individual Income Tax ........................................................................................................................................ 39 B. Corporate Income Tax ....................................................................................................................................... 75 APPENDIX A – Renewable Energy Tax Incentives ..................................................................................................... 95 APPENDIX B – Public and Private School Tax Credits ................................................................................................ 99 APPENDIX C – Statutory Ending Dates of Tax Credits ............................................................................................... 101 PROPERTY TAXES ...................................................................................................................................................... 103 PAYMENTS IN LIEU OF PROPERTY TAXES A. In Lieu Tax on Private Railroad Car Companies ................................................................................................. 119 B. Voluntary Contributions by Districts ................................................................................................................. 121 LUXURY TAXES AND LICENSES A. Luxury Tax on Cigarettes and Tobacco .............................................................................................................. 123 B. Luxury Tax on Liquor ......................................................................................................................................... 130 C. Alcoholic Beverage License Fees ........................................................................................................................ 133 INSURANCE PREMIUM TAX....................................................................................................................................... 141 OTHER GENERAL FUND REVENUE SOURCES A. Bingo License and Lieu Tax ................................................................................................................................ 149 B. Boulder Canyon Projects - In Lieu Payments ..................................................................................................... 151 C. Commercial Nuclear Generating Station Assessment ....................................................................................... 152 D. Unclaimed Property Collections ........................................................................................................................ 154 Contents OTHER FUNDS PAYMENTS IN LIEU OF PROPERTY TAXES A. Aircraft License Tax ............................................................................................................................................ 161 B. Flight Property Tax ............................................................................................................................................ 164 C. Voluntary Contributions by the Game and Fish Commission ............................................................................ 167 D. Watercraft Registration Fee .............................................................................................................................. 169 E. Government Property Lease Excise Tax ............................................................................................................. 172 HIGHWAY USER TAXES/FEES A. Highway User Revenue Fund Overview ............................................................................................................. 179 B. Motor Vehicle Fuel Tax ...................................................................................................................................... 186 C. Use Fuel Tax ....................................................................................................................................................... 189 D. Vehicle License Tax ............................................................................................................................................ 191 E. Motor Carrier Fee .............................................................................................................................................. 198 F. Highway Safety Fee ........................................................................................................................................... 201 OTHER FUND REVENUE SOURCES A. Aviation Fuel Tax ............................................................................................................................................... 203 B. Hospital Assessment .......................................................................................................................................... 205 C. Insurance Guarantee Fund Assessments ........................................................................................................... 209 D. Pari-Mutuel Tax ................................................................................................................................................. 213 E. Telecommunications Services Excise Tax........................................................................................................... 218 F. Underground Storage Tank Tax ......................................................................................................................... 220 G. Unemployment Insurance Tax ........................................................................................................................... 225 H. Utility Corporation Assessments ....................................................................................................................... 233 I. Water Use Tax ................................................................................................................................................... 236 J. Workers' Compensation Insurance Premium Tax ............................................................................................. 238 APPENDIX D - Fiscal Impact of Statutory Tax Changes ............................................................................................. 241 Joint Legislative Budget Committee 1716 West Adams Phoenix, Arizona 85007 Phone: (602) 926-5491 Email: [email protected] JLBC Website: http://www.azleg.gov/jlbc.htm October 2020 FOREWORD The 2020 Tax Handbook provides a description of each state tax and certain other revenue categories. The Handbook also includes a 20-year history of the collections and distributions for each revenue category, as well as summaries of all statutory revisions between the 2014 and 2020 legislative sessions. A listing of statutory changes prior to the 2014 legislative session is available on the Joint Legislative Budget Committee (JLBC) website located at http://www.azleg.gov/jlbc/20taxbook/20taxbk.pdf. Appendix D provides the estimated dollar value of individual tax law changes enacted by the Legislature since FY 1989. The Tax Handbook includes tables that provide the estimated impact of tax credits and exemptions to the Sales Tax, Individual Income Tax, Corporate Income Tax, and Insurance Premium Tax sections. These tables were prepared by the Office of Economic Research and Analysis at the Arizona Department of Revenue. Each entry in the Tax Handbook includes the following sections (where applicable): • Description – a comprehensive narrative description of the tax or revenue source. • Distribution – a 20-year history of collections and a description of how the tax is distributed by fund or shared with other jurisdictions such as cities and towns. • Who Pays – a description of who is legally responsible for the payment of the tax or fee. • Revenue Base and Rate – a definition of the tax base, a discussion of exemptions, if any, and a description of the tax rate(s). • Tax Refunds and/or Credits – a description of circumstances under which tax refunds are made, and/or credits are allowed. • Payment Schedule – due dates, delinquency dates, and payment schedules, as well as an explanation of how the tax or fee is remitted to the state. • Impact of Statutory Changes – includes statutory changes from 2014 through 2020. As noted above, statutory changes prior to 2014 are available on the JLBC website. i OVERVIEW OF ARIZONA TAXES The revenues from Arizona’s different taxes