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HomeMy WebLinkAboutORD1420ORDINANCE NO. 1420 AN ORDINANCE OF THE MAYOR AND CITY COUNCIL OF THE CITY OF APACHE JUNCTION, ARIZONA, RELATING TO THE TAX CODE OF THE CITY OF APACHE JUNCTION; ADOPTING A NEW ARTICLE VI USE TAX AS SET FORTH IN THE MODEL CITY TAX CODE; DESIGNATING AN EFFECTIVE DATE; PROVIDING FOR PENALTIES, REPEALING ANY CONFLICTING PROVISIONS;PROVIDING FOR SEVERABILITY; AND PROVIDING FOR NOTICE. WHEREAS, Arizona Revised Statutes § 9-240(B)(26) conveys upon the Mayor and City Council the power to levy taxes including a use tax; and WHEREAS,the Model City Tax Code as set forth in State law provides for adoption of a use tax for Arizona municipal governments; and WHEREAS, in adopting the City Tax Code for the City of Apache Junction in August 1987, the then Mayor and Council did so without including Article VI Use Tax;and WHEREAS, of the 91 Arizona cities and towns, only 15 have not implemented a use tax; and WHEREAS,the City of Apache Junction experiences sales leakage to the adjacent unincorporated areas of Pinal County and Maricopa County; and WHEREAS,implementation of a use tax would be a critical economic development tool for the City of Apache Junction as it would remove the incentive to shop outside of the City for large ticket items in order to avoid paying city sales tax; and WHEREAS,implementation of a use tax would equalize the playing field and afford local businesses a more competitive position in the market place; and WHEREAS,the Mayor and City Council have determined that implementation of a two and five tenths percent (2.5%) use tax is necessary to sustain the quality of life for community residents and enhance the public health, safety and welfare; and WHEREAS, at their regular meetings of September 1, 2015 and September 15,2015 a majority of the Mayor and City Council ORDINANCE NO. 1420 PAGE 1 OF 13 directed staff to prepare an ordinance for implementing a two and five tenths percent (2.5%)use tax in compliance with State law and the Model City Tax Code; and WHEREAS, implementation of a use tax is affected by amending the Tax Code of the City of Apache Junction,and by appropriate notification to city taxpayers and to the Arizona Department of Revenue and the Municipal Tax Code Commission; and WHEREAS, pursuant to Arizona Revised Statutes § 9-499.15, the City provided sixty-day written notice of the proposed adoption of a use tax on the City's website (www.ajcity.net)before the date of the public hearing when this ordinance is to be considered; and WHEREAS,on September 15,2015,the mayor and council unanimously directed staff prepare a final proposed Ordinance No. 1420 based on the draft dated September 14, 2015 and include any changes deemed necessary by the city attorney and possible beginning of the collection of city sales tax and use tax by the Arizona Department of Revenue; and WHEREAS, on Thursday, November 5, 2015, •city staff received correspondence from the League of Arizona Cities and Towns which was based on an opinion from the Arizona Department of Revenue that the city use tax under Tax Code of the City of Apache Junction, Arizona, Section 610 must match the terms provided for a similar transaction subject to the retail tax imposed under Tax Code of the City of Apache Junction, Arizona,Section 460 and that the tiered city use tax rate under Tax Code of the City of Apache Junction, Arizona, Section 610(e) must have the same terms as the related retail rate under Tax Code of the City of Apache Junction, Arizona, subsection 460(d). NOW THEREFORE, BE IT ORDAINED BY THE MAYOR AND CITY COUNCIL OF APACHE JUNCTION, ARIZONA, AS FOLLOWS: SECTION I IN GENERAL That the Tax Code of the City of Apache Junction,Arizona is amended by adding a new Article VI Use Tax to read as follows: Article VI - Use Tax Sec. 8A-600. Use tax:definitions. ORDINANCE NO. 1420 PAGE 2 OF 13 For the purposes of this Article only, the following definitions shall apply, in addition to the definitions provided in Article I: "Acquire (for Storage or Use)"means purchase,rent,lease or license for storage or use. "Retailer"also means any person selling, renting, licensing for use,or leasing tangible personal property under circumstances which would render such transactions subject to the taxes imposed in Article IV, if such transactions have occurred within this City. "Storage (within the City)"means the keeping or retaining of tangible personal property at a place within the City for any purpose, except for those items acquired specifically and solely for the purpose of sale, rental, lease, or license for use in the regular course of business or for the purpose of subsequent use solely outside the City. "Use (of Tangible Personal Property)"means consumption or exercise of any other right or power over tangible personal property incident to the ownership thereof except the holding for the sale, rental, lease, or license for use of such property in the regular course of business. Sec. 8A-610.Use tax:imposition of tax; presumption. (a)There is hereby levied and imposed,subject to all other provisions of this Chapter, an excise tax on the storage or use in the City of tangible personal property, for the purpose of raising revenue to be used in defraying the necessary expenses of the City, such taxes, to be collected by the Tax Collector. (b)The tax rate shall be at an amount equal to two and four tenths percent (2.4%) of the: (1)cost of tangible personal property acquired from a retailer,upon every person storing or using such property in this City. (2)gross income from the business activity upon every person meeting the requirements of subsection 8A -620(b) or (c)who is engaged or continuing in the business activity of sales,rentals,leases,or licenses of tangible personal property to persons within the City ORDINANCE NO. 1420 PAGE 3 OF 13 for storage or use within the City, to the extent that tax has been collected upon such transaction. (3)cost of the tangible personal property provided under the conditions of a warranty, maintenance, or service contract. (4)cost of complimentary items provided to patrons without itemized charge by a restaurant,hotel,or other business. (5)cost of food consumed by the owner or by employees or agents -of the owner of a restaurant or bar subject to the provisions of Section 8A-455 of this Chapter. (c)It shall be presumed that all tangible personal property acquired by any person who at the time of such acquisition resides in the City is acquired for storage or use in the City, until the contrary is established by the taxpayer. (d)For the purposes of this Article,the acquisition of the following shall not be deemed to be the purchase,rental, lease, or license of tangible personal property for storage or use within the City: (1)stocks, bonds, options, or other similar materials. (2)lottery tickets or shares sold pursuant to Article 1, Chapter 5, Title 5, Arizona Revised Statutes. (3)Platinum, bullion, or monetized bullion, except minted or manufactured coins transferred or acquired primarily for their numismatic value as prescribed by Regulation. (e)Notwithstanding the provisions of subsection (a) above, when the dollar amount subject to the tax for any single item of tangible personal property exceeds two thousand dollars ($2,000),the two and four tenths percent (2.4%)tax rate shall apply to the first two thousand dollars ($2,000).Above two thousand dollars ($2,000), the measure of tax shall be at the rate of one and four tenths percent (1.4%). (f)(Reserved) ORDINANCE NO. 1420 PAGE 4 OF 13 Sec. 8A-620, Use tax:liability for tax The following persons shall be deemed liable for the tax imposed by this Article; and such liability shall not be extinguished until the tax has been paid to this City, except that a receipt from a retailer separately charging the tax imposed by this Chapter is sufficient to relieve the person acquiring such property from further liability for the tax to which the receipt refers: (a)Any person who acquires tangible personal property from a retailer, whether or not such retailer is located in this City, when such person stores or uses said property within the City. (b) Any retailer not located within the City, selling, renting, leasing, or licensing tangible personal property for storage or use of such property within the City, may obtain a License from the Tax Collector and collect the Use Tax on such transactions.Such retailer shall be liable for the Use Tax to the extent such Use Tax is collected from the customers. (c) Every agent within the City of any retailer not maintaining an office or place of business in this City, when such person sells, rents, leases, or licenses tangible personal property. for storage or use in this City shall, at the time of such transaction, collect and be liable for the tax imposed by this Article upon the storage or use of the property so transferred, unless such retailer or agent is liable for an equivalent excise tax upon the transaction. (d)Any person who acquires tangible personal property from a retailer located in the City and such person claims to be exempt from the City Privilege or Use tax at the time of the transaction and upon which no City Privilege Tax was charged or paid, when such claim is not sustainable. (e) Every person storing or using tangible personal property under the conditions of a warranty, maintenance, or service contract. Sec. 8A-630.Use tax:recordkeeping requirements. All deductions, exclusions, exemptions, and credits provided in this Article are conditional upon adequate proof of documentation as required by Article III or elsewhere in this Chapter. ORDINANCE NO. 1420 PAGE 5 OF 13 Sec. 8A-640.Use tax:credit for equivalent excise taxes paid another jurisdiction. In the event that an equivalent excise tax has been levied and paid upon tangible personal property which is acquired to be stored or used within this City, full credit for any and all such taxes so paid shall be allowed by the Tax Collector but only to the extent Use Tax is imposed upon that transaction by this Article. Sec.8A-650.Use tax:.exclusion when acquisition subject to Use Tax is taxed or taxable elsewhere in this Chapter; limitation. The tax levied by this Article does not apply to the storage or use in this City of tangible personal property acquired in this City, the gross income from the sale, rental, lease, or license of which were included in the measure of the tax imposed by Article IV of this Chapter; provided, however,that any person who has acquired tangible personal property from a vendor in this City without paying the City Privilege Tax because of a representation to the vendor that the property was not subject to such tax, when such claim is not sustainable, may not claim the exclusion from such Use Tax provided by this Section. Sec. 8A-660. Use tax: exemptions. The storage or use in this City of the following tangible personal property is exempt from the Use Tax imposed by this Article: (a)tangible personal property brought into the City by an individual who was not a resident of the City at the time the property was acquired for his own use, if the first actual use of such property was outside •the City,unless such property is used in conducting a business in this City. (b)tangible personal property, the value of which does not exceed the amount of one thousand dollars ($1,000) per item, acquired by an individual outside the limits of the City for his personal use and enjoyment. (c)charges for delivery,installation,or other customer services, as prescribed by Regulation. (d)charges for repair services, as prescribed by Regulation. ORDINANCE NO. 1420 PAGE 6 OF 13 (e)separately itemized charges for warranty, maintenance,and service contracts. (f)prosthetics. (g)income -producing capital equipment. (h)rental equipment and rental supplies. (i)mining and metallurgical supplies. (j)motor vehicle fuel and use fuel which are used upon the highways of this State and upon which a tax has been imposed under the provisions of Article I or II, Chapter 16,Title 28 Arizona Revised Statutes. (k)tangible personal property purchased by a construction contractor, but not an owner -builder, when such person holds a valid Privilege License for engaging or continuing in the business of construction contracting, and where the property acquired is incorporated into any structure or improvement to real property in fulfillment of a construction contract. (1)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)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)rental,leasing,or licensing for use of film,tape,or slides by a theater or other person taxed under Section 8A- 410,or by a radio station,television station,or subscription television system. (o)food served to patrons for a consideration by any person engaged in a business properly licensed and taxed under Section 8A-455,but not food consumed by owners, agents, or employees of such business. ORDINANCE NO. 1420 PAGE 7 OF 13 (p)tangible personal property acquired by a qualifying hospital, qualifying community health center or a qualifying health care organization, except when the property is in fact used in activities resulting in gross income from unrelated business income as that term is defined in 26 U.S.C. Section 512. (q)(Reserved) (r)(Reserved) (1)(Reserved) (2)(Reserved) (3)(Reserved) (4)(Reserved) (s)groundwater measuring devices required by A.R.S. Section 45- 604. (t)(Reserved) (u)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. Section 3-561, 3-562 and 3-563. (w)(Reserved) (x)food and drink provided by a person who is engaged in business that is classified under the restaurant classification without monetary charge to its employees for their own consumption on the premises during such employees' hours of employment. (y)(Reserved) (z)(Reserved) (aa) tangible personal property used in remediation contracting as defined in Section 8A-100 and Regulation 8A-100.5. ORDINANCE NO. 1420 PAGE 8 OF 13 (bb) 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) food,beverages,condiments and accessories used for serving food and beverages by a commercial airline, as defined in A.R.S. Section 42-5061(A)(49), 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) wireless telecommunication equipment that is held 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. (ee)(Reserved) (ff) alternative fuel as defined in A.R.S.Section 1-215 by a used oil fuel burner who has received a Department of Environmental Quality permit to burn used oil or used oil fuel under A.R.S. Section 49-426 or Section 49-480. (gg) food, beverages, condiments and accessories purchased by or for a public educational entity,pursuant to any of the provisions of Title 15,Arizona Revised Statutes, including a regularly organized private or parochial school that offers an educational program for grade twelve or under which may be attended in substitution for a public school pursuant to A.R.S. 15-802; 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. ORDINANCE NO. 1420 PAGE 9 OF 13 (hh) personal hygiene items purchased by 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. (ii) 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. (ii)food, beverages, condiments and accessories purchased by or for a nonprofit charitable organization that has qualified as an exempt organization under 26 U.S.C. Section 501(c)(3)and regularly serves meals to the needy and indigent on a continuing basis at no cost.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. (kk)sales of motor vehicles that use alternative fuel 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. (11) the storage, use or consumption of tangible personal property in the city or town by a school district or charter school. (mm) renewable energy credits or any other unit created to track energy derived from renewable energy resources.For the purposes of this paragraph, "renewable energy credit" means a unit created administratively by the corporation commission or governing body of a public power utility to track kilowatt hours of electricity derived from a renewable energy resource or the kilowatt hour equivalent of conventional energy resources displaced by distributed renewable energy resources. (nn) magazines or other periodicals or other publications by this state to encourage tourist travel. ORDINANCE NO. 1420 PAGE 10 OF 13 (oo) paper machine clothing,such as forming fabrics and dryer felts,sold to a paper manufacturer and directly used or consumed in paper manufacturing. (pp)overhead materials or other tangible personal property that is used in performing a contract between the United States government and a manufacturer,modifier,assembler or repairer, including property used in performing a subcontract with a government contractor who is a manufacturer, modifier, assembler,or repairer,to which title passes to the government under the terms of the contract or subcontract. (qq) coal,petroleum,coke,natural gas,virgin fuel oil and electricity sold to a qualified environmental technology manufacturer,producer or processor as defined in A.R.S. Section 41-1514.02 and directly used or consumed in the generation or provision of on -site power or energy solely for environmental technology manufacturing,producing or processing or environmental protection.This paragraph shall apply for twenty full consecutive calendar or fiscal years from the date the first paper manufacturing machine is placed in service.In the case of an environmental technology manufacturer, producer or processor who does not manufacture paper, the time period shall begin with the date the first manufacturing, processing or production equipment is placed in service. (rr) machinery, equipment, materials and other tangible personal property used directly and predominantly to construct a qualified environmental technology manufacturing, producing or processing facility as described in A.R.S.Section 41- 1514.02.This subsection applies for ten full consecutive calendar or fiscal years after the start of initial construction. (ss)(Reserved) SECTION II DESIGNATING AN EFFECTIVE DATE The provisions of this ordinance implementing a use tax rate of two and four tenths percent (2.4%)shall become effective on January 1, 2016. ORDINANCE NO. 1420 PAGE 11 OF 13 SECTION III PROVIDING FOR PENALTIES Any person found guilty of violating any provision of these amendments to the tax code shall be guilty of a class one misdemeanor and shall be prosecuted pursuant to Article 1-8 of the Apache Junction City Code and Section 8A-580 of the Tax Code of the City of Apache Junction. SECTION IV REPEALING ANY CONFLICTING PROVISIONS: All ordinances and parts of ordinances in conflict with the provisions of this ordinance or any part of the codes adopted herein by reference are hereby repealed. SECTION V PROVIDING FOR SEVERABILITY: If any section, subsection, sentence, phrase, clause or portion of this ordinance 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 VI PROVIDING FOR NOTICE Pursuant to A.R.S.§42-6052(E),staff shall provide a fully executed copy of this ordinance to the Municipal Tax Code Commission and the Arizona Department of Revenue within ten days after the passage date of this ordinance. PASSED AND ADOPTED BY THE MAYOR AA12/CITY COICIL OF THE CITY OF APACHE JUNCTION, ARIZONA, THIS rrn DAY OF Natell4/51.e4 2015. SIGNED AND ATTESTED TO THIS /-7 4 IDAY OF /41V0A161gX,,2015. ATTEST: KATHLEEN CONNELLY City Clerk ORDINANCE NO. 1420 PAGE 12 OF 13 APPROVED AS TO FORM: ,ii4lie./215' RICHARD JOEL STERN City Attorney ORDINANCE NO. 1420 PAGE 13 OF 13