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HomeMy WebLinkAboutORD1154ORDINANCE NO.1154 AN ORDINANCE OF THE MAYOR AND CITY COUNCIL OF THE CITY OF APACHE JUNCTION,ARIZONA,ADOPTING "THE 2001 AMENDMENTS TO THE TAX CODE OF THE CITY OF APACHE JUNCTION"BY REFERENCE;ESTABLISHING AN EFFECTIVE DATE;PROVIDING FOR SEVERABILITY;PROVIDING PENALTIES FOR VIOLATIONS;AND DECLARING AN EMERGENCY. BE IT ORDAINED BY THE MAYOR AND CITY COUNCIL OF THE CITY OF APACHE JUNCTION, ARIZONA: SECTION I IN GENERAL That certain document known as "The 2001 Amendments to the Tax Code of the City of Apache Junction,Arizona," three copies of which are on file in the office of the city clerk in the City of Apache Junction,Arizona,which document was made a public record by Resolution No.01-21 of the City of Apache Junction,Arizona, is hereby referred to,adopted and made a part hereof as if fully set out in this ordinance. SECTION I I PROVISIONS EFFECTIVE DECEMBER 31,2001 The provisions of this ordinance and the public record adopted herein are effective from and after December 31,2001. SECTION III PROVIDING FOR SEVERABILITY If any section,subsection,sentence,clause,phrase or portion of this ordinance or any part of these amendments to the tax code adopted herein by reference is for any reason held to be invalid or unconstitutional by the decision of any court of competent jurisdiction,such decision shall not affect the validity of the remaining portions thereof. SECTION IV PROVIDING PENALTIES Any person found guilty of violating any provision of these amendments to the tax code shall be guilty of a class one misdemeanor.Each day that a violation continues shall be a separate offense punishable as herein above described. ORDINANCE NO.1154 PAGE 1 OF 2 SECTION V DECLARING AN EMERGENCY I t is necessary for the preservation of peace,health and safety of the City of Apache Junction,Arizona,that this ordinance become effective immediately.An emergency is hereby declared to exist and this ordinance shall be effective immediately upon passage and adoption. PASSED AND ADOPTED BY THE MAYOR AND CITY COUNCIL OF THE CITY OF APACHE JUNCTION, ARIZONA,THIS 4TH DAY OF DECEMBER ,2001. SIGNED AND ATTESTED TO THIS 4TH DAY OF DFCFMRER ,2001. DOUGLAS OLEMA J + 0 1 6 4 ,-,PA - - N Mayor ATTEST: KATHLEEN CONNELLY City Clerk APPROVED AS TO FORM: -.4 --1126-O/ R.JOEL STERN City Attorney ORDINANCE NO.1154 PAGE 2 OF 2 2001 AMENDMENTS TO THE TAX CODE OF THE CITY OF APACHE JUNCTION Section 1.Section 8A-415 of the Tax Code of the City of Apache Junction is amended to read: Sec. 8A-415.Construction contracting:Construction contractors. (a)The tax rate shall be at an amount equal to two and two -tenths percent (2.2%) of the gross income from the business upon every construction contractor engaging or continuing in the business activity of construction contracting within the City. (1)However, gross income from construction contracting shall not include charges related to groundwater measuring devices required by A.R.S. Section 45-604. (2)(Reserved) (3)Gross income from construction contracting shall not include gross income from the sale of manufactured buildings taxable under Section 8A-427. (b)Deductions and exemptions. (1)Gross income derived from acting as a "subcontractor" shall be exempt from the tax imposed by this Section. (2)All construction contracting gross income subject to the tax and not deductible herein shall be allowed a deduction of thirty-five percent (35%). (3)The gross proceeds of sales or gross income attributable to the purchase of machinery, equipment or other tangible personal property that is exempt from or deductible from privilege or use tax under: (A)Section 8A-465, subsections (g) and (p) (B)(Reserved) shall be exempt or deductible, respectively, from the tax imposed by this Section. (4)The gross proceeds of sales or gross income that is derived from a contract entered into for the installation, assembly, repair or maintenance of income -producing capital equipment, as defined in Section 8A-110,THAT IS DEDUCTED FROM THE RETAIL CLASSIFICATION PURSUANT TO SECTION 8A -465(g)that does not become a •permanent attachment to a building, highway, road, railroad, excavation or manufactured building or other structure,project, development or improvement shall be deducted. EXEMPT from the tax imposed by this Section.If the ownership of the realty is separate from the ownership of the income -producing capital equipment, the determination as to permanent attachment shall be made as if the ownership was the same.The deduction provided in this paragraph does not include gross proceeds of sales or gross income from that portion of any contracting activity which consists of the development of, or modification to, real property in order to facilitate the installation, assembly, repair, maintenance or removal of the income -producing capital equipment.For purposes of this paragraph, "permanent attachment" means at least one of the following: (A)to be incorporated into real property. (B)to become so affixed to real property that it becomes part of the real property. (C)to be so attached to real property that removal would cause substantial damage to the real property from which it is removed. (5)The gross proceeds of sales or gross income received from a contract for the construction of an environmentally controlled facility for the raising of poultry for the production of eggs and the sorting, or cooling and packaging of eggs shall be exempt from the tax imposed under this Section. (6)The gross proceeds of sales or gross income that is derived from the installation, assembly, repair or maintenance of cleanrooms that are deducted from the tax base of the retail classification pursuant to Section 8A-465, subsection (g) shall be exempt from the tax imposed under this Section. (7)The gross proceeds of sales or gross income that is derived from a contract entered into with a person who is engaged in the commercial production of livestock, livestock products or agricultural, horticultural, viticultural or floricultural crops or products in this State for the 1 construction, alteration, repair, improvement, movement, wrecking or demolition or addition to or subtraction from any building, highway, road, excavation, manufactured building or other structure, project, development or improvement used directly and primarily to prevent, monitor, control or reduce air, water or land pollution shall be exempt from the tax imposed under this Section. (8)THE GROSS PROCEEDS OF SALES OR GROSS INCOME RECEIVED FROM A POST- CONSTRUCTION CONTRACT TO PERFORM POST -CONSTRUCTION TREATMENT OF REAL PROPERTY FOR TERMITE AND GENERAL PEST CONTROL, INCLUDING WOOD DESTROYING ORGANISMS, SHALL BE EXEMPT FROM TAX IMPOSED UNDER THIS SECTION. (c)Subcontractor means a construction contractor performing work for either: (1)a construction contractor who has provided the subcontractor with a written declaration that he is liable for the tax for the project and has provided the subcontractor his City Privilege License number. (2)an owner -builder who has provided the subcontractor with a written declaration that: (A)the owner -builder is improving the property for sale; and (B)the owner -builder is liable for the tax for such construction contracting activity; and (C)the owner -builder has provided the contractor his City Privilege License number. (3)A person selling new manufactured buildings who has provided the subcontractor with a written declaration that he is liable for the tax for the site preparation and set-up; and provided the subcontractor his City Privilege License number. Subcontractor also includes a construction contractor performing work for another subcontractor as defined above. Section 2.Section 8A-416 of the Tax Code of the City of Apache Junction is amended to read: Sec. 8A-416.Construction contracting:speculative builders. (a)The tax shall be equal to two and two -tenths percent (2.2%) of the gross income from the business activity upon every person engaging or continuing in business as a speculative builder within the City. (1)The gross income of a speculative builder considered taxable shall include the total selling price from the sale of improved real property at the time of closing of escrow or transfer of title. (2)"Improved Real Property"means any real property: (A)upon which a structure has been constructed; or (B)where improvements have been made to land containing no structure (such as paving or landscaping); or (C)which has been reconstructed as provided by Regulation; or (D)where water, power, and streets have been constructed to the property line. (3)"Sale of Improved Real Property"includes any form of transaction, whether characterized as a lease or otherwise, which in substance is a transfer of title of, or equitable ownership in, improved real property and includes any lease of the property for a term of thirty (30) years or more (with all options for renewal being included as a part of the term). In the case of multiple unit projects, "sale" refers to the sale of the entire project or to the sale of any individual parcel or unit. (4)"Partially Improved Residential Real Property,"as used in this Section,means any improved real property, as defined in subsection (a)(2) above, being developed for sale to individual homeowners, where the construction of the residence upon such property is not substantially complete at the time of the sale. 2 (b)Exclusions. (1)In cases involving reconstruction contracting, the speculative builder may exclude from gross income the prior value allowed for reconstruction contracting in determining his taxable gross income, as provided by Regulation. (2)Neither the cost nor the fair market value of the land which constitutes part of the improved real property sold may be excluded or deducted from gross income subject to the tax imposed by this Section. (3)(Reserved) (4)A speculative builder may exclude gross income from the sale of partially improved residential real property as defined in (a)(4) above to another speculative builder only if all of the following conditions are satisfied: (A)The speculative builder purchasing the partially improved residential real property has a valid City privilege license for construction contracting as a speculative builder; and (B)At the time of the transaction,the purchaser provides the seller with a properly completed written declaration that the purchaser assumes liability for and will pay all privilege taxes which would otherwise be due the City at the time of sale of the partially improved residential real property; and (C)The seller also: (i)maintains proper records of such transactions in a manner similar to the requirements provided in this chapter relating to sales for resale; and (ii)retains a copy of the written declaration provided by the buyer for the transaction; and (iii)is properly licensed with the City as a speculative builder and provides the City with the written declaration attached to the City privilege tax return where he claims the exclusion. (c)Tax liability for speculative builders occurs at close of escrow or transfer of title, whichever occurs earlier, and is subject to the following provisions, relating to exemptions, deductions and tax credits: (1)Exemptions. .(A)The gross proceeds of sales or gross income attributable to the purchase of machinery, equipment or other tangible personal property that is exempt from or deductible from privilege or use tax under: (i)Section 8A-465, subsections (g) and (p) (ii)(Reserved) shall be exempt or deductible, respectively, from the tax imposed by this Section. (B)The gross proceeds of sales or gross income received from a contract for the construction of an environmentally controlled facility for the raising of poultry for the production of eggs and the sorting, or cooling and packaging of eggs shall be exempt from the tax imposed under this Section. (C)The gross proceeds of sales or gross income that is derived from the installation, assembly, repair or maintenance of cleanrooms that are deducted from the tax base of the retail classification pursuant to Section 8A-465, subsection (g) shall be exempt from the tax imposed under this section. (D)The gross proceeds of sales or gross income that is derived from a contract entered into with a person who is engaged in the commercial production of livestock, livestock products or agricultural, horticultural, viticultural or floricultural crops or products in this state for the construction, alteration, repair, improvement, movement, wrecking or demolition or addition to or subtraction from any building, highway,road,excavation, manufactured building or other structure,project, development or improvement used directly and primarily to prevent, monitor, control or reduce air, water or land pollution shall be exempt from the tax imposed under this Section. 3 (2)Deductions. (A)All amounts subject to the tax shall be allowed a deduction in the amount of thirty-five percent (35%). (B)The gross proceeds of sales or gross income that is derived from A CONTRACT ENTERED INTO FOR the installation, assembly, repair or maintenance of income- producing capital equipment, as defined in Section 8A-110, THAT IS DEDUCTED FROM THE RETAIL CLASSIFICATION PURSUANT TO SECTION 8A -465(g), that does not become a permanent attachment to a building, highway, road, railroad, excavation or manufactured building or other structure, project, development or improvement shall be deducted EXEMPT from the tax imposed by this Section.If the ownership of the realty is separate from the ownership of the income -producing capital equipment, the determination as to permanent attachment shall be made as if the ownership was the same. The deduction provided in this paragraph does not include gross proceeds of sales or gross income from that portion of any contracting activity which consists of the development of, or modification to, real property in order to facilitate the installation, assembly, repair, maintenance or removal of the income -producing capital equipment.For purposes of this paragraph, "permanent attachment" means at least one of the following: to be incorporated into real property. (ii)to become so affixed to real property that it becomes part of the real property. (iii)to be so attached to real property that removal would cause substantial damage to the real property from which it is removed. (3)Tax credits. The following tax credits are available to owner -builders or speculative builders, not to exceed the tax liability against which such credits apply,provided such credits are documented to the satisfaction of the tax collector: (A)A tax credit equal to the amount of city privilege or use tax, or the equivalent excise tax, paid directly to a taxing jurisdiction or as a separately itemized charge paid directly to the vendor with respect to the tangible personal property incorporated into the said structure or improvement to real property undertaken by the owner- builder or speculative builder. (B)A tax credit equal to the amount of privilege taxes paid to this City, or charged separately to the speculative builder, by a construction contractor, on the gross income derived by said person from the construction of any improvement to the real property. (C)No credits provided herein may be claimed until such time that the gross income against which said credits apply is reported. Section 3.Section 8A-417 of the Tax Code of the City of Apache Junction is amended to read: Sec. 8A-417. Construction contracting:owner -builders who are not speculative builders. (a)At the expiration of twenty-four (24) months after improvement to the property is substantially complete, the tax liability for an owner -builder who is not a speculative builder shall be at an amount equal to two and two -tenths percent (2.2%) of: (1)the gross income from the activity of construction contracting upon the real property in question which was realized by those construction contractors to whom the owner -builder provided written declaration that they were not responsible for the taxes as prescribed in Subsection 8A -415(c)(2); and (2)the purchase of tangible personal property for incorporation into any improvement to real property, computed on the sales price. 4 (b)The tax liability of this Section is subject to the following provisions, relating to exemptions, deductions and tax credits: (1)Exemptions. (A)The gross proceeds of sales or gross income attributable to the purchase of machinery, equipment or other tangible personal property that is exempt from or deductible from privilege or use tax under: (i)Section 8A-465, subsections (g) and (p) (ii)(Reserved) shall be exempt or deductible, respectively, from the tax imposed by this Section. (B)The gross proceeds of sales or gross income received from a contract for the construction of an environmentally controlled facility for the raising of poultry for the production of eggs and the sorting, or cooling and packaging of eggs shall be exempt from the tax imposed under this Section. (C)The gross proceeds of sales or gross income that is derived from the installation, assembly, repair or maintenance of cleanrooms that are deducted from the tax base of the retail classification pursuant to Section 8A-465, subsection (g) shall be exempt from the tax imposed under this Section. (D)The gross proceeds of sales or gross income that is derived from a contract entered into with a person who is engaged in the commercial production of livestock, livestock products or agricultural, horticultural, viticultural or floricultural crops or products in this state for the construction, alteration, repair, improvement, movement, wrecking or demolition or addition to or subtraction from any building, highway,road, excavation,manufactured building or other structure,project, development or improvement used directly and primarily to prevent, monitor, •control or reduce air, water or land pollution shall be exempt from the tax imposed under this Section. (2)Deductions. (A)All amounts subject to the tax shall be allowed a deduction in the amount of thirty-five percent (35%). (B)The gross proceeds of sales or gross income that is derived from A CONTRACT ENTERED INTO FOR the installation, assembly, repair or maintenance of income- producing capital equipment, as defined in Section 8A-110, THAT IS DEDUCTED FROM THE RETAIL CLASSIFICATION PURSUANT TO SECTION 8A -465(g), that does not become a permanent attachment to a building, highway, road, railroad, excavation or manufactured building or other structure, project, development or improvement shall be deducted EXEMPT from the tax imposed by this Section. If the ownership of the realty is separate from the ownership of the income -producing capital equipment, the determination as to permanent attachment shall be made as if the ownership was the same. The deduction provided in this paragraph does not include gross proceeds of sales or gross income from that portion of any contracting activity which consists of the development of, or modification to, real property in order to facilitate the installation, assembly, repair, maintenance or removal of the income -producing capital equipment.For purposes of this paragraph, "permanent attachment" means at least one of the following: (i)to be incorporated into real property. (ii)to become so affixed to real property that it becomes part of the real property. (iii)to be so attached to real property that removal would cause substantial damage to the real property from which it is removed. (3 )Tax credits. The following tax credits are available to owner -builders and speculative builders, not to exceed the tax liability against which such credits apply,provided such credits are documented to the satisfaction of the tax collector: (A)A tax credit equal to the amount of city privilege or use tax, or the equivalent excise tax, paid directly to a taxing jurisdiction or as a separately itemized charge paid 5 directly to the vendor with respect to the tangible personal property incorporated into the said structure or improvement to real property undertaken by the owner -builder or speculative builder. (6)A tax credit equal to the amount of privilege taxes paid to this City, or charged separately to the speculative builder, by a construction contractor, on the gross income derived by said person from the construction of any improvement to the real property. (C)No credits provided herein may be claimed until such time that the gross income against which said credits apply is reported. (c)The limitation period for the assessment of taxes imposed by this Section is measured based upon when such liability is reportable, that is, in the reporting period that encompasses the twenty-fifth (25th) month after said unit or project was substantially complete.Interest and penalties, as provided in Section 8A-540, will be based on reportable date. (d)(Reserved) Section 4.Section 8A-445 of the Tax Code of the City of Apache Junction is amended to read: Sec. 8A-445.Rental, leasing, and licensing for use of real property. (a)The tax rate shall be at an amount equal to two and two -tenths percent (2.2%) of the gross income from the business activity upon every person engaging or continuing in the business of leasing or renting real property located within the City for a consideration, to the tenant in actual possession, or the licensing for use of real property to the final licensee located within the City for a consideration including any improvements, rights, or interest in such property; provided further that: (1)Payments made by the lessee to, or on behalf of, the lessor for property taxes, repairs, or improvements are considered to be part of the taxable gross income. (2)Charges for such items as telecommunications, utilities, pet fees, or maintenance are •considered to be part of the taxable gross income. (3)However, if the lessor engages in telecommunication activity, as evidenced by installing individual metering equipment and by billing each tenant based upon actual usage, such activity is taxable under Section 8A-470. (b)If individual utility meters have been installed for each tenant and the lessor separately charges each single tenant for the exact billing from the utility company, such charges are exempt. (c)Charges by a qualifying hospital, qualifying community health center or a qualifying health care organization to patients of such facilities for use of rooms or other real property during the course of their treatment by such facilities are exempt. (d)Charges for joint pole usage by a person engaged in the business of providing or furnishing utility or telecommunication services to another person engaged in the business of providing or furnishing utility or telecommunication services are exempt from the tax imposed by this Section. (e)(Reserved) (f)(Reserved) (g)(Reserved) (h)(Reserved) (i)(Reserved) 6 (i)Exempt from the tax imposed by this Section is gross income derived from the activities taxable under Section 8A-444 of this code. (k)(Reserved) (I)(Reserved) (m)(Reserved) (n)Notwithstanding the provisions of Section 8A -200(b), the fair market value of one (1) apartment, in an apartment complex provided rent free to an employee of the apartment complex is not subject to the tax imposed by this Section.For an apartment complex with more than fifty (50) units, an additional apartment provided rent free to an employee for every additional fifty (50) units is not subject to the tax imposed by this Section. (o)Income derived from incarcerating or detaining prisoners who are under the jurisdiction of the United States, this State or any other state or a political subdivision of this State or of any other state in a privately operated prison, jail or detention facility is exempt from the tax imposed by this Section. (p)CHARGES BY ANY HOSPITAL, ANY LICENSED NURSING CARE INSTITUTION, OR ANY KIDNEY DIALYSIS FACILITY TO PATIENTS OF SUCH FACILITIES FOR THE USE OF ROOMS OR OTHER REAL PROPERTY DURING THE COURSE OF THEIR TREATMENT BY SUCH FACILITIES ARE EXEMPT. (q)CHARGES TO PATIENTS RECEIVING "PERSONAL CARE" OR "DIRECTED CARE", BY ANY LICENSED ASSISTED LIVING FACILITY, LICENSED ASSISTED LIVING CENTER OR LICENSED ASSISTED LIVING HOME AS DEFINED AND LICENSED PURSUANT TO CHAPTER 4 TITLE 36 ARIZONA REVISED STATUTES AND TITLE 9 OF THE ARIZONA ADMINISTRATIVE CODE ARE EXEMPT. Section 5..Section 8A-450 of the Tax Code of the City of Apache Junction is amended to read: Sec. 8A-450.Rental, leasing, and licensing for use of tangible personal property. (a)The tax rate shall be at an amount equal to two and two -tenths percent (2.2%) of the gross income from the business activity upon every person engaging or continuing in the business of leasing, licensing for use, or renting tangible personal property for a consideration, including that which is semi -permanently or permanently installed within the City as provided by Regulation. (b)Special provisions relating to long-term motor vehicle leases.A lease transaction involving a motor vehicle for a minimum period of twenty-four (24) months shall be considered to have occurred at the location of the motor vehicle dealership, rather than the location of the place of business of the lessor, even if the lessors interest in the lease and its proceeds are sold, transferred, or otherwise assigned to a lease financing institution; provided further that the city or town where such motor vehicle dealership is located levies a Privilege Tax or an equivalent excise tax upon the transaction. (c)Gross income derived from the following transactions shall be exempt from Privilege Taxes imposed by this Section: (1)rental, leasing, or licensing for use of tangible personal property to persons engaged or continuing in the business of leasing, licensing for use, or rental of such property. (2)rental, leasing, or licensing for use of tangible personal property that is semi -permanently or permanently installed within another city or town that levies an equivalent excise tax on the transaction. (3)rental, leasing, or licensing for use of film, tape, or slides to a theater or other person taxed under Section 8A-410, or to a radio station, television station, or subscription television system. 7 (4)rental, leasing, or licensing for use of the following: (A)prosthetics. (B)income -producing capital equipment. (C)mining and metallurgical supplies. These exemptions include the rental, leasing, or licensing for use of tangible personal property which, if it had been purchased instead of leased, rented, or licensed by the lessee or licensee,would qualify as income -producing capital equipment or mining and metallurgical supplies. (5 )rental, leasing, or licensing for use of tangible personal property to a qualifying hospital, qualifying community health center or a qualifying health care organization, except when the property so rented, leased, or licensed is for use in activities resulting in gross income from unrelated business income as that term is defined in 26 U.S.C. Section 512 or rental, leasing, or licensing for use of tangible personal property in this State by a nonprofit charitable organization that has qualified under Section 501(c)(3) of the United States Internal Revenue Code and that engages in and uses such property exclusively for training, job placement or rehabilitation programs or testing for mentally or physically handicapped persons. (6)separately billed charges for delivery, installation, repair, and/or maintenance as provided by Regulation. (7 )charges for joint pole usage by a person engaged in the business of providing or furnishing utility or telecommunication services to another person engaged in the business of providing or furnishing utility or telecommunication services. (8)(Reserved) (9 )rental, leasing, or licensing of aircraft that would qualify as aircraft acquired for use outside the State, as prescribed by Regulation, if such rental, leasing, or licensing had been a sale. (10)rental, leasing and licensing for use of matef-vehieles-AN ALTERNATIVE FUEL VEHICLE that-ttse-alteritative-fttel-as defined in A.R.S. Section 43-1086 on or after May 5,-1-9994F SUCH VEHICLE WAS MANUFACTURED AS A DIESEL FUEL VEHICLE AND CONVERTED TO OPERATE ON ALTERNATIVE FUEL AND EQUIPMENT THAT IS INSTALLED IN A CONVENTIONAL DIESEL FUEL MOTOR VEHICLE TO CONVERT THE .VEHICLE TO OPERATE ON AN ALTERNATIVE FUEL, AS DEFINED IN A.R.S. SECTION 1-215. Section 6.Section 8A-465 of the Tax Code of the City of Apache Junction is amended to read: Sec. 8A-465.Retail sales: exemptions Income derived from the following sources is exempt from the tax imposed by Section 8A-460: (a)sales of tangible personal property to a person regularly engaged in the business of selling such property. (b)out -of -City sales or out -of -State sales. (c)charges for delivery, installation, or other direct customer services as prescribed by Regulation. (d)charges for repair services as prescribed by Regulation, when separately charged and separately maintained in the books and records of the taxpayer. (e)sales of warranty, maintenance, and service contracts, when separately charged and separately maintained in the books and records of the taxpayer. (f)sales of prosthetics. 8 (9) (h) (j) sales of income -producing capital equipment. sales of rental equipment and rental supplies. sales of mining and metallurgical supplies. sales of motor vehicle fuel and use fuel which are subject to a tax imposed under the provisions of Article I or II, Chapter 16, Title 28, Arizona Revised Statutes; or sales of use fuel to a holder of a valid single trip use fuel tax permit issued under A.R.S. Section 28-5739, or sales of natural gas or liquefied petroleum gas used to propel a motor vehicle. (k)sales of tangible personal property to a construction contractor who holds a valid Privilege Tax License for engaging or continuing in the business of construction contracting where the tangible personal property sold is incorporated into any structure or improvement to real property as part of construction contracting activity. (I)sales of motor vehicles to nonresidents of this State for use outside this State if the vendor ships or delivers the motor vehicle to a destination outside this State. (m)sales of tangible personal property which directly enters into and becomes an ingredient or component part of a product sold in the regular course of the business of job printing, manufacturing, or publication of newspapers, magazines, or other periodicals.Tangible personal property which is consumed or used up in a manufacturing, job printing, publishing, or production process is not an ingredient nor component part of a product. (n)sales made directly to the Federal government to the extent.of (1)one hundred percent (100%) of the gross income derived from retail sales made by a manufacturer, modifier, assembler, or repairer. (2)fifty percent (50%) of the gross income derived from retail sales made by any other person. (o)sales to hotels,bars,restaurants,dining cars,lunchrooms,boarding houses,or similar establishments of articles consumed as food, drink, or condiment, whether simple, mixed, or compounded, where such articles are customarily prepared or served to patrons for consumption on or off the premises, where the purchaser is properly licensed and paying a tax under Section 8A-455 or the equivalent excise tax upon such income. (p) (q) sales of tangible personal property to a qualifying hospital, qualifying community health center or a qualifying health care organization, except when the property sold is for use in activities resulting in gross income from unrelated business income as that term is defined in 26 U.S.C. Section 512 or sales of tangible personal property purchased in this State by a nonprofit charitable organization that has qualified under Section 501(c)(3) of the United States Internal Revenue Code and that engages in and uses such property exclusively for training, job placement or rehabilitation programs or testing for mentally or physically handicapped persons. food purchased with food stamps provided through the food stamp program established by the Food Stamp Act of 1977 (P.L. 95-113; 91 Stat. 958.7 U.S.C. Section 2011 et seq.)or purchased with food instruments issued under Section 17 of the Child Nutrition Act (P.L. 95-627; 92 Stat. 3603; and P.L. 99-669; Section 4302; 42 United States Code Section 1786) but only to the extent that food stamps or food instruments were actually used to purchase such food. (r)(Reserved) (1)(Reserved) (2)(Reserved) (3)(Reserved) (4)(Reserved) (s)sales of groundwater measuring devices required by AR. S. Section 45-604. 9 (t)(Reserved) (u)sales of aircraft acquired for use outside the State, as prescribed by regulation. (v)sales of food products by producers as provided for by A.R.S. Sections 3-561, 3-562 and 3-563. (w)(Reserved) (x)(Reserved) (y)(Reserved) (z)(Reserved) (aa)the sale of tangible personal property used in remediation contracting as defined in Section 8A-100 and Regulation 8A-100.5. (bb)sales of materials that are purchased by or for publicly funded libraries including school district libraries, charter school libraries, community college libraries, state university libraries or federal, state, county or municipal libraries for use by the public as follows: (1)printed or photographic materials. (2)electronic or digital media materials. (cc)sales of food, beverages, condiments and accessories used for serving food and beverages to a commercial airline, as defined in A.R.S. § 42-5061(A)(50), that serves the food and beverages to its passengers, without additional charge, for consumption in flight.For the purposes of this subsection, "accessories" means paper plates, plastic eating utensils, napkins, paper cups, drinking straws, paper sacks or other disposable containers, or other items which facilitate the consumption of the food. (dd)in computing the tax base in the case of the sale or transfer of wireless telecommunication equipment as an inducement to a customer to enter into or continue a contract for telecommunication services that are taxable under Section 8A-470, gross proceeds of sales or gross income does not include any sales commissions or other compensation received by the retailer as a result of the customer entering into or continuing a contract for the telecommunications services. (ee)for the purposes of this Section, a sale of wireless telecommunication equipment to a person who holds the equipment for sale or transfer to a customer as an inducement to enter into or continue a contract for telecommunication services that are taxable under Section 8A-470 is considered to be a sale for resale in the regular course of business. (n) (gg) sales of alternative fuel as defined in A.R.S. § 1-215, to a used oil fuel burner who has received a Department of Environmental Quality permit to bum used oil or used oil fuel under A.R.S. § 49-426 or § 49-480. sales of food, beverages, condiments and accessories to a public educational entity,pursuant to any of the provisions of Title 15, Arizona Revised Statutes; to the extent such items are to be prepared or served to individuals for consumption on the premises of a public educational entity during school hours. For the purposes of this subsection, "accessories" means paper plates, plastic eating utensils, napkins, paper cups, drinking straws, paper sacks or other disposable containers, or other items which facilitate the consumption of the food. (hh)sales of personal hygiene items to a person engaged in the business of and subject to tax under Section 8A-444 of this code if the tangible personal property is furnished without additional charge to and intended to be consumed by the person during his occupancy. 10 (ii)For the purposes of this Section, the diversion of gas from a pipeline by a person engaged in the business of operating a natural or artificial gas pipeline, for the sole purpose of fueling compressor equipment to pressurize the pipeline, is not a sale of the gas to the operator of the pipeline. (kk)(Reserved) (II)sales of motor vehicles that use alternative fuel as defined in A.R.S. Section 43-1086 on or aftcr May 5,IF SUCH VEHICLE WAS MANUFACTURED AS A DIESEL FUEL VEHICLE AND CONVERTED TO OPERATE ON ALTERNATIVE FUEL AND SALES OF EQUIPMENT THAT IS INSTALLED IN A CONVENTIONAL DIESEL FUEL MOTOR VEHICLE TO CONVERT THE VEHICLE TO OPERATE ON AN ALTERNATIVE FUEL, AS DEFINED IN A.R.S. SECTION 1-215. Section 7.Section 8A-470 of the Tax Code of the City of Apache Junction is amended to read: Sec. 8A-470. Telecommunication services. (a)The tax rate shall be at an amount equal to three and two -tenths percent (3.2%) of the gross income from the business activity upon every person engaging or continuing in the business of providing telecommunication services to consumers within this City. (1)Telecommunication services shall include: (A)two-way voice,sound,and/or video communication over a communications channel. (6)one-way voice, sound, and/or video transmission or relay over a communications channel. (C)facsimile transmissions. (D)providing relay or repeater service. (E)providing computer interface services over a communications channel. (F)time-sharing activities with a computer accomplished through the use of a communications channel. (2)Gross income from the business activity of providing telecommunication services to .consumers within this City shall include: (A)all fees for connection to a telecommunication system. (6)toll charges, charges for transmissions, and charges for other telecommunications services; provided that such charges relate to transmissions originating in the City and terminating in this State. (C)fees charged for access to or subscription to or membership in a telecommunication system or network. (D)charges for monitoring services relating to a security or burglar alarm system located within the City where such system transmits or receives signals or data over a communications channel. (b)Resale telecommunication services.Gross income from sales of telecommunication services to another provider of telecommunication services for the purpose of providing the purchaser's customers with such service shall be exempt from the tax imposed by this Section; provided, however, that such purchaser is properly licensed by the City to engage in such business. (c)Interstate transmissions.Charges by a provider of telecommunication services for transmissions originating in the City and terminating outside the State are exempt from the tax imposed by this Section. (d)Tax credit offset for franchise fees.There shall be allowed as an offset, up to the amount of tax due, any amounts paid to the City for license fees or franchise fees, but such offset shall not be allowed against taxes imposed by any other Section of this Chapter.Such offset shall not be deemed in conflict with or violation of subsection 8A -400(b). 11 (e) (f) (9) However, gross income from the providing of telecommunication services by a cable television system, as such system is defined in A.R.S. Section 9-505, shall be exempt from the tax imposed by this Section. Prepaid calling cards.Telecommunications services purchased with a prepaid calling card that are taxable under Section 8A-460 are exempt from the tax imposed under this Section. INTERNET ACCESS SERVICES — THE GROSS INCOME SUBJECT TO TAX UNDER THIS SECTION SHALL NOT INCLUDE SALES OF INTERNET ACCESS SERVICES TO THE PERSON'S SUBSCRIBERS AND CUSTOMERS. FOR THE PURPOSES OF THIS SUBSECTION: (1)"INTERNET' MEANS THE COMPUTER AND TELECOMMUNICATIONS FACILITIES THAT COMPRISE THE INTERCONNECTED WORLDWIDE NETWORK OF NETWORKS THAT EMPLOY THE TRANSMISSION CONTROL PROTOCOL OR INTERNET PROTOCOL, OR ANY PREDECESSOR OR SUCCESSOR PROTOCOL,TO COMMUNICATE INFORMATION OF ALL KINDS BY WIRE OR RADIO. (2)"INTERNET ACCESS" MEANS A SERVICE THAT ENABLES USERS TO ACCESS CONTENT, INFORMATION, ELECTRONIC MAIL OR OTHER SERVICES OVER THE INTERNET.INTERNET ACCESS DOES NOT INCLUDE TELECOMMUNICATION SERVICES PROVIDED BY A COMMON CARRIER. Section 8.Section 8A-500 of the Tax Code of the City of Apache Junction is amended to read: Sec. 8A-500. Administration of this Chapter; rule making. (State Administration and Audits) (a)The administration of this Chapter is vested in and exercised by the City of Apache Junction, and except as otherwise provided, and all payments shall be made to the City of Apache Junction. The City may,pursuant to an intergovernmental agreement,contract with the State of Arizona Department of Revenue for the administration of the tax. In such cases, "Tax Collector' shall also mean the Arizona Department of Revenue, when acting as agent in administering this tax. (b)The Tax Collector shall prescribe the forms and procedures necessary for the administration of the taxes imposed by this Chapter. (c)Except where such Regulations would conflict with administrative regulations adopted by the City Council or with provisions of this Chapter, all regulations on the Transaction Privilege Tax adopted by the Arizona Department of Revenue under the authority of A.R.S. Section 42-1005 shall be considered Regulations of this Chapter and enforceable as such. (d)Taxpayers shall be subject to the state taxpayer bill of rights (A.R.S. § 42-2051 et. seq). (e)THE UNIFIED AUDIT COMMITTEE SHALL PUBLISH UNIFORM GUIDELINES THAT INTERPRET THE MODEL CITY TAX CODE AND THAT APPLY TO ALL CITIES AND TOWNS THAT HAVE ADOPTED THE MODEL CITY TAX CODE AS PROVIDED BY A.R.S. SECTION 42-6005. (1)PRIOR TO FINALIZATION OF UNIFORM GUIDELINES THAT INTERPRET THE MODEL CITY TAX CODE,THE UNIFIED AUDIT COMMITTEE SHALL DISSEMINATE DRAFT GUIDELINES FOR PUBLIC COMMENT. (2)PURSUANT TO A.R.S. SECTION 42-6005(D), WHEN THE STATE STATUTES AND THE MODEL CITY TAX CODE ARE THE SAME AND WHERE THE ARIZONA DEPARTMENT OF REVENUE HAS ISSUED WRITTEN GUIDANCE,THE DEPARTMENTS INTERPRETATION IS BINDING ON CITIES AND TOWNS. 12 Sec.8A-500. Administration of this Chapter; rule making.(Local Audits) (a)The administration of this Chapter is vested in and exercised by the City of Apache Junction, and except as otherwise provided, and all payments shall be made to the City of Apache Junction. The City may,pursuant to an intergovernmental agreement,contract with the State of Arizona Department of Revenue for the administration of the tax.In such cases, "Tax Collector" shall also mean the Arizona Department of Revenue, when acting as agent in administering this tax. (b)The Tax Collector shall prescribe the forms and procedures necessary for the administration of the taxes imposed by this Chapter. (c)Except where such Regulations would conflict with administrative regulations adopted by the City Council or with provisions of this Chapter, all regulations on the Transaction Privilege Tax adopted by the Arizona Department of Revenue under the authority of A.R.S. Section 42-1005 shall be considered Regulations of this Chapter and enforceable as such. (d)(Reserved) (e)THE UNIFIED AUDIT COMMITTEE SHALL PUBLISH UNIFORM GUIDELINES THAT INTERPRET THE MODEL CITY TAX CODE AND THAT APPLY TO ALL CITIES AND TOWNS THAT HAVE ADOPTED THE MODEL CITY TAX CODE AS PROVIDED BY A.R.S. SECTION 42-6005. (1)PRIOR TO FINALIZATION OF UNIFORM GUIDELINES THAT INTERPRET THE MODEL CITY TAX CODE, THE UNIFIED AUDIT COMMITTEE SHALL DISSEMINATE DRAFT GUIDELINES FOR PUBLIC COMMENT. (2)PURSUANT TO A.R.S. SECTION 42-6005(D), WHEN THE STATE STATUTES AND THE MODEL CITY TAX CODE ARE THE SAME AND WHERE THE ARIZONA DEPARTMENT OF REVENUE HAS ISSUED WRITTEN GUIDANCE,THE DEPARTMENT'S INTERPRETATION IS BINDING ON CITIES AND TOWNS. Section 9.Section 8A-510 of the Tax Code of the City of Apache Junction is amended to read: Sec. 8A-510.Divulging of information prohibited; exceptions allowing disclosure. (a)Except as specifically provided, it shall be unlawful for any official or employee of the City to make known information obtained pursuant to this Chapter concerning the business financial affairs or operations of any person. (b)The City Council may authorize an examination of any return or audit of a specific taxpayer made pursuant to this Chapter by authorized agents of the Federal Government, the State of Arizona, or any political subdivisions. (c)The Tax Collector may provide to an Arizona county, city, or town any information concerning any taxes imposed in this Chapter relative to the taxing ordinances of that county, city, or town. (d)Successors, receivers, trustees, personal representatives, executors, guardians, administrators, and assignees, if directly interested, may be given information by the Tax Collector as to the items included in the measure and amounts of any unpaid tax, interest, and penalties required to be paid. (e)Upon a written direction by the City Attorney or other legal advisor to the City designated by the City Council, officials or employees of the City may divulge the amount and source of income, profits, leases, or expenditures disclosed in any return or report, and the amount of such delinquent and unpaid tax, penalty, or interest, to a private collection agency having a written collection agreement with the City. 13 (f)The Tax Collector may -SHALL provide information to appropriate representatives of any Arizona city or town to comply with the provisions of A.R.S. Section 42-6003, re+atifig-ter thaassesameftt-artd— ealfeetien-efintemitiftieital-taxes . R S. SECTION 42-6005, AND A. R S. SECTION 42-6056. (g)The Tax Collector may provide information to authorized agents of any other Arizona governmental agency involving the allocation of taxes imposed by Section 8A-435 upon publishing and distribution of periodicals. (h)The Tax Collector may provide information regarding the enforcement and collection of taxes imposed by this Chapter to any governmental agency with which the City has an agreement. Section 10.Article V of the Tax Code of the City of Apache Junction is amended by adding Section 8A-542 to read: Sec. 8A-542. PROSPECTIVE APPLICATION OF NEW LAW OR INTERPRETATION OR APPLICATION OF LAW. (a)UNLESS EXPRESSLY AUTHORIZED BY LAW, THE TAX COLLECTOR SHALL NOT APPLY ANY NEWLY ENACTED LEGISLATION RETROACTIVELY OR IN A MANNER THAT WILL PENALIZE A TAXPAYER FOR COMPLYING WITH PRIOR LAW. (b)IF THE TAX COLLECTOR ADOPTS A NEW INTERPRETATION OR APPLICATION OF ANY PROVISION OF THIS CHAPTER OR DETERMINES THAT ANY PROVISION APPLIES TO A NEW OR ADDITIONAL CATEGORY OR TYPE OF BUSINESS AND THE CHANGE IN INTERPRETATION OR APPLICATION IS NOT DUE TO A CHANGE IN THE LAW: (1)THE CHANGE IN INTERPRETATION OR APPLICATION APPLIES PROSPECTIVELY ONLY UNLESS IT IS FAVORABLE TO TAXPAYERS. (2)THE TAX COLLECTOR SHALL NOT ASSESS ANY TAX, PENALTY OR INTEREST RETROACTIVELY BASED ON THE CHANGE IN INTERPRETATION OR APPLICATION. (c)FOR PURPOSES OF SUBSECTION (b),"NEW INTERPRETATION OR APPLICATION" INCLUDES POLICIES AND PROCEDURES WHICH DIFFER FROM ESTABLISHED INTERPRETATIONS OF THIS CHAPTER. (d)TAX LIABILITIES, PENALTIES AND INTEREST PAID BEFORE A NEW INTERPRETATION OR APPLICATION OF A PROVISION OF THIS CHAPTER SHALL NOT BE REFUNDED UNLESS THE TAXPAYER REQUESTING THE REFUND PROVIDES EVIDENCE SATISFACTORY TO THE TAX COLLECTOR THAT ALL SUCH AMOUNTS WILL BE REFUNDED TO THE PERSON WHO PAID AN ADDED CHARGE TO COVER THE TAX. Section 11.Article V of the Tax Code of the City of Apache Junction is amended by adding Section 8A-553 to read: Sec. 8A--553.EXAMINATION OF TAXPAYER RECORDS; JOINT AUDITS. (a)WAIVER OF JOINT AUDIT.A TAXPAYER THAT DOES NOT AUTHORIZE A JOINT AUDIT TO BE CONDUCTED FOR A TAX JURISDICTION IS SUBJECT TO AUDIT BY THAT TAX JURISDICTION AT ANY TIME SUBJECT TO THE LIMITATION PROVISIONS PROVIDED IN SECTION 8A-550. (b)TAX JURISDICTION ACCEPTANCE OF JOINT AUDIT.IF THE ARIZONA DEPARTMENT OF REVENUE INTENDS TO CONDUCT AN AUDIT OF A TAXPAYER, THE CITIES OR TOWNS FOR WHOM A JOINT AUDIT IS BEING CONDUCTED MAY ACCEPT THE AUDIT BY THE ARIZONA DEPARTMENT OF REVENUE OR MAY ELECT TO HAVE A REPRESENTATIVE PARTICIPATE, 14 PROVIDED THAT NO MORE THAN TWO CITY OR TOWN REPRESENTATIVES IN TOTAL MAY PARTICIPATE. (1)IF A CITY OR TOWN DOES NOT ACCEPT THE AUDIT AS A JOINT AUDIT, THE CITY OR TOWN MAY NOT CONDUCT AN AUDIT OF THE TAXPAYER FOR FORTY-TWO MONTHS FROM THE CLOSE OF THE LAST TAX PERIOD COVERED BY THE AUDIT UNLESS AN EXCEPTION APPLIES TO THAT TAXPAYER PURSUANT TO A.R.S. SECTION 42-2059. (2)IF A JOINT AUDIT IS PERFORMED BY A CITY OR TOWN, THE ARIZONA DEPARTMENT OF REVENUE IS NOT PROHIBITED FROM CONDUCTING AN AUDIT THAT DOES NOT VIOLATE THE PROVISIONS OF A.R.S. SECTION 42-2059. Section 12.Section 8A-570 of the Tax Code of the City of Apache Junction is amended to read: Sec. 8A-570.Administrative review; petition for hearing or for redetermination; finality of order. (Local Audits) FOR THE PURPOSES OF THIS SECTION,"MUNICIPAL TAX HEARING OFFICE"MEANS THE ADMINISTRATIVE OFFICES OF THE MUNICIPAL TAX HEARING OFFICER. (a)Informal Conference.A taxpayer shall have the right to discuss any proposed assessment with the auditor prior to the issuance of any assessment, but any such informal conference is not required for the taxpayer to file a petition for administrative review. (b)Administrative Review. (1)Filing a Petition.Other than in the case of a jeopardy assessment, a taxpayer may contest the applicability or amount of any tax, penalty, or interest imposed upon or paid by him pursuant to this Chapter by filing a petition for a hearing or for redetermination with the Tax Collector as set forth below: (A)within forty-five (45) days of receipt by the taxpayer of notice of a determination by the Tax Collector that a tax, penalty, or interest amount is due, or that a request for •refund or credit has been denied; or (B)by voluntary payment of any contested amount when accompanied by a timely filed return and a petition requesting a refund of the protested portion of said payment; Or (C)by petition accompanying a timely filed return contesting an amount reported but not paid; or (D)by petition requesting review of denial of waiver of penalty as provided in subsection 8A -540(g). (2)Extension to file a petition.In all cases, the taxpayer may request only one (1) extension from the Tax Collector. Such request must be in writing, state the reasons for the requested delay and time of delay requested, and must be filed with the Tax Collector within the period allowed above for originally filing a petition. The Tax Collector shall allow such extension to file a petition, when such written request has been properly and timely made by the taxpayer, but such extension shall not exceed forty-five (45) days beyond the time provided for originally filing a petition. (3)Requirements for petition. (A)The petition shall be in writing and shall set forth the reasons why any correction, abatement, or refund should be granted, and the amount of reduction or refund requested. The petition may be amended at any time prior to the time the taxpayer rests his case at the hearing or such time as the Hearing Officer allows for submitting of amendments in cases of redeterminations without hearings.The Hearing Officer may require that amendments be in writing, and in that case, he shall provide a reasonable period of time to file the amendment.The Hearing Officer shall provide a reasonable period of time for the Tax Collector to review and respond to the petition and to any written amendments. 15 (c) (B)The taxpayer, as part of the petition, may request a hearing which shall be granted by the Hearing Officer.If no request for hearing is made the petition shall be considered to be submitted for decision by the Hearing Officer on the matters contained in the petition and in any reply made by the Tax Collector. (C)The provisions of this Section are exclusive, and no petition seeking any correction, abatement, or refund shall be considered unless the petition is timely and properly filed under this Section. (4)Transmittal to Hearing Officer.The aly-of-Apeetle-dtmetiett CITY shall designate a Hearing Officer, who may be other than an employee of the City. The Tax Collector, if designated to receive petitions, shall forward any petition to the I learim-efftccr MUNICIPAL TAX HEARING OFFICE (MTHO) within ten (10) .TWENTY (20) days after receipt, accompanied by documentation as to timeliness. In cases where the Hearing Officer determines that the petition is not timely or not in proper form,he shall notify both the taxpayer and the Tax Collector; and in cases of petitions not in proper form only, the Hearing Officer shall provide the taxpayer with an extension up to forty-five (45) days to correct the petition. (5)Hearings shall be conducted by a Hearing Officer and shall be continuous until the Hearing Officer closes the record.The taxpayer may be heard in person or by his authorized representative at such hearing.Hearings shall be conducted informally as to the order of proceeding and presentation of evidence.The Hearing Officer shall admit evidence over hearsay objections where the offered evidence has substantial probative value and reliability.Further, copies of records and documents prepared in the ordinary course of business may be admitted, without objection as to foundation, but subject to argument as to weight, admissibility, and authenticity.Summary accounting records may be admitted subject to satisfactory proof of the reliability of the summaries.In all cases, the decision of the Hearing Officer shall be made solely upon substantial and reliable evidence.All expenses incurred in the hearing shall be paid by the party incurring the same. (6)Redeterminations upon a "petition for redetermination" shall follow the same conditions, except that no oral hearing shall be held. (7 )Hearing Ruling.In either case, the Hearing Officer shall issue his ruling not later than forty-five (45) days after the close of the record by the Hearing Officer. (8)Notice of Refund or Adjusted Assessment.Within sixty (60) days of the issuance of the .Hearing Officer's decision, the Tax Collector shall issue to the taxpayer either a notice of refund or an adjusted assessment recalculated to conform to the Hearing Officer's decision. Stipulations that future tax is also protested.A taxpayer may enter into a stipulation with the Tax Collector that future taxes of similar nature are also at issue in any protest or appeal.However, unless such stipulation is made, it is presumed that the protest or appeal deals solely and exclusively with the tax specifically protested and no other. When a taxpayer enters into such a stipulation with the Tax Collector that future taxes of similar nature will be included in any redetermination, hearing, or court case, it is the burden of that taxpayer to identify, segregate, and keep record of such income or protested taxable amount in his books and records in the same manner as the taxpayer is required to segregate exempt income. (d)When an assessment is final. (1)If a request for administrative review and petition for hearing or redetermination of an assessment made by the Tax Collector is not filed within the period required by subsection (b) above, such person shall be deemed to have waived and abandoned the right to question the amount determined to be due and any tax, interest, or penalty determined to be due shall be final as provided in subsections 8A -545(a) and 8A -555(f). (2)The decision made by the Hearing Officer upon administrative review by hearing or redetermination shall become final thirty (30) days after the taxpayer receives the notice of refund or adjusted assessment required by subsection (b)(8) above, unless the taxpayer appeals the order or decision in the manner provided in Section 8A-575. (e)The provisions of the state taxpayer bill of rights (A.R.S. Section 42-2051 et. seq.) shall not apply. 16 Section 13.Regulation 8A-115.1 of the Tax Code of the City of Apache Junction is amended to read: Reg. 8A-115.1.Computer hardware, software, and data services. (a)Definitions. (1)"Computer Hardware"(also called "computer equipment"or "peripherals")is the components and accessories which constitute the physical computer assembly, including but not limited to: central processing unit, keyboard, console, monitor, memory unit, disk drive, tape drive or reader, terminal, printer, plotter, modem, document sorter, optical reader and/or digitizer, network. (2)"Computer Software"(also called "computer program") is tangible personal property, and includes: (A)"Operating Program (Software)"(also called "executive program (software)"), which is the programming system or technical language upon which or by means of which the basic operating procedures of the computer are recorded. The operating program serves as an interface with user applied programs and allows the user to access the computer's processing capabilities. (B)"Applied Program (Software)",which is the programming system or technical language (including the tape, disk, cards, or other medium upon which such language or program is recorded) designed either for application in a specialized use, or upon which or by means of which a plan for the solution of a particular problem is based.Typically, applied programs can be transferred from one computer to another via storage media.Examples of applied programs include: payroll processing, general ledger, sales data, spread (3)"Storage Medium"is any hard disk, compact disk, floppy disk, diskette, diskpack, magnetic tape, cards, or other medium used for storage of information in a form readable by a computer, but not including the memory of the computer itself. (4)A "Terminal Arrangement"(also called "on-line' arrangement") is any agreement allowing access to a remote central processing unit through telecommunications via hardware. (5)•A "Computer Services Agreement"(also called "data services agreement") is an agreement allowing access to a computer through a third -party operator. (b)For the purposes of this Chapter, transfer of title and possession of the following are deemed sales of tangible personal property and any other transfer of title, possession, or right to use for a consideration of the following is deemed rental, leasing, or licensing of tangible personal property: (1)Computer hardware or storage media.Rental, leasing, or licensing for use of computer hardware or storage media includes the lessee's use of such hardware or storage media on the lessor's premises. (2)Computer software which is not custom computer programming. Such prewritten ("canned") programs may be transferred to a customer in the form of punched cards, magnetic tape, or other storage medium, or by listing the program instructions on coding sheets. Transfer is deemed to have occurred whether title to the storage medium upon which the program is recorded, coded, or punched passes to the customer or the program is recorded, coded, or punched on storage medium furnished by the customer. Gross income from the transfer of such prewritten programs includes: (A)the entire amount charged to the customer for the sale, rental, lease, or license for use of the storage medium or coding sheets on which or into which the prewritten program has been recorded, coded, or punched. (B)the entire amount charged for the temporary transfer or possession of a prewritten program to be directly used or to be recorded, coded, or punched by the customer on the customer's premises. (C)license fees, royalty fees, or program design fees; any fee present or future, whether for a period of minimum use or of use for extended periods, relating to the use of a prewritten program. 17 (D)the entire amount charged for transfer of a prewritten ("canned") program by remote telecommunications from the transferors place of business to or through the customers computer. (E)any charge for the purchase of a maintenance contract which entitles the customer to receive storage media on which prewritten program improvements or error corrections have been recorded or to receive telephone or on -site consultation services, provided that: (i)if such maintenance contract is not optional with the customer, then the charges for the maintenance contract, including the consultation services, are deemed gross income from the transfer of the prewritten program. (ii)if such maintenance contract is optional with the customer but the customer does not have the option to purchase the consultation services separately from the storage media containing the improvements or error corrections, then the charges for the maintenance contract, including the consultation services, are deemed gross income from the transfer of the prewritten program. (iii)if such maintenance contract is optional with the customer and the customer may purchase the consultation services separately from the storage media containing the improvements or error corrections, then only the charges for such improvements or error corrections are deemed gross income from the transfer of a prewritten program and charges for consultation are deemed to be charges for professional services. (c)Producing the following by means of computer hardware is deemed to be the activity of job printing for the purposes of this Chapter: (1)statistical reports, graphs, diagrams, microfilm, microfiche, photorecordings, or any other information produced or compiled by a computer; except as provided in subsection (e) below. (2)additional copies of records, reports, manuals, tabulations, etc."Additional Copies"are any copies in excess to those produced simultaneously with the production of the original and .on the same printer, whether such copies are prepared by running the same program, by using multiple printers, by looping the program, by using different programs to produce the same output, or by other means. (d)Charges for the use of communications channel in conjunction with a terminal arrangement or data services agreement are deemed gross income from the activity of providing telecommunication services. (e)The following transactions are deemed direct customer services, provided that charges for such services are separately stated and maintained as provided by Regulation 8A -100.2(e): (1)"Custom (Computer) Programming",which is any computer software which is written or prepared for a single customer, including those services represented by separately stated charges for the modification of existing prewritten programs. (A)Gtratemef CUSTOM computer programming is deemed a professional service regardless of the form in which the programming is transferred. (B)Custom programming includes such programming performed in connection with the sale, rental, lease, or license for use of computer hardware, provided that the charges for such are separately stated from the charges for the hardware. (C)Custom computer programming includes a program prepared to the special order of a customer who will use the program to produce copies of the program for sale, rental, lease, or license.The subsequent sale, rental, lease, or license of such a program is deemed the sale, rental, lease, or license of a prewritten program. (2)Training services related to computer hardware or software, provided further that: 18 (A)the provider of such training services is deemed the ultimate consumer of all tangible personal property used in training others or provided to such trainees without separately itemized charge for the materials provided. (B)training deemed a direct customer service does not include: (i)training materials, books,manuals, etc. furnished to customers for a charge separate from the charge for training services. (ii)training provided to customers without separate charge as part of the sale, rental, lease, or license of computer hardware or software, or as part of a terminal arrangement or data services agreement. (3 )The use of computer time through the use .of a terminal arrangement or a data service agreement, but not charges for computer hardware located at the customer's place of business (for example, the terminal, a printer. attached to the terminal, a modem used to communicate with the remote central processing unit over a telephone line). (4)Compiling and producing,as part of a terminal arrangement or computer services agreement, original copies of statistical reports, graphs, diagrams, microfilm, microfiche, photorecordings, or other information for the same person who supplied the raw data used to create such reports. (f)(Reserved) 19