Use tax: exemptions
*This information is for Model City Tax Code purposes only.
Model City Tax Code Section 660 is amended effective October 1, 2019.
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 not exceeding two hundred dollars in any one month purchased by an individual at retail outside the continental limits of the United States for the individual's own personal use and enjoyment.
(c) charges for delivery, installation, or other customer services, as prescribed by in Section ___-100.2.
(d) charges for repair services, as prescribed by Regulation.
(e) separately itemized charges for warranty, maintenance, and service contracts.
(g) income-producing capital equipment.
(h) tangible personal property acquired by a person engaged in the business of renting, leasing or licensing for use such property under the rental, leasing, and licensing for use of tangible personal property classification if such property is to be rented, leased or licensed for use by such person.
(i) mining and metallurgical supplies.
(j) purchases of:
(1) 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;
(2) use fuel to a holder of a valid single trip use fuel tax permit issued under A.R.S. Section 28-5739;
(3) natural gas or liquefied petroleum gas used to propel a motor vehicle;
(4) motor vehicle fuel and use fuel to a qualified business under A.R.S. Section 41-1516 for off-road use in harvesting, processing or transporting qualifying forest products removed from qualifying projects as defined in A.R.S. Section 41-1516;
(5) repair parts installed in equipment used directly by a qualified business under A.R.S. Section 41-1516 in harvesting, processing or transporting qualifying forest products removed from qualifying projects as defined in A.R.S. Section 41-1516.
(k) tangible personal property purchased by:
(1) 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.
(2) a person that is not subject to tax under Section 415(b)(12) and that has been provided a copy of a certificate under A.R.S. Section 42-5009, Subsection L, if the property so sold is incorporated or fabricated by the person into the real property, structure, project, development or improvement described in the certificate.
(l) 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 ___-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 ___-455, but not food consumed by owners, agents, or employees of such business.
(p) tangible personal property purchased by:
(1) a qualifying hospital;
(2) a qualifying health care organization if the tangible personal property is used by the organization solely to provide health and medical related educational and charitable services;
(3) a qualifying health care organization if the organization is dedicated to providing educational, therapeutic, rehabilitative and family medical education training for blind and visually impaired children and children with multiple disabilities from the time of birth to age twenty-one;
(4) a qualifying community health center;
(5) a nonprofit charitable organization that has qualified under Section 501(c)(3) of the internal revenue code and that regularly serves meals to the needy and indigent on a continuing basis at no cost;
(6) for taxable periods beginning from and after June 30, 2001, a nonprofit charitable organization that has qualified under Section 501(c)(3) of the internal revenue code and that provides residential apartment housing for low income persons over sixty-two years of age in a facility that qualifies for a federal housing subsidy, if the tangible personal property is used by the organization solely to provide residential apartment housing for low income persons over sixty-two years of age in a facility that qualifies for a federal housing subsidy;
(7) a qualifying health sciences educational institution;
(8) any person representing or working on behalf of another person described in subdivisions (1) through (7) of this paragraph if the tangible personal property is incorporated or fabricated into a project described in A.R.S. Section 42-5075, Subsection O.
(q) (Reserved) (See Mesa City Page).
(r) purchases of:
(a) livestock and poultry to persons engaging in the businesses of farming, ranching or producing livestock or poultry.
(b) livestock and poultry feed, salts, vitamins and other additives sold to persons for use or consumption in the businesses of farming, ranching and producing or feeding livestock or poultry or for use or consumption in noncommercial boarding of livestock. For the purposes of this paragraph, "poultry" includes ratites.
(c) implants used as growth promotants and injectable medicines, not already exempt under the definition of “prosthetic”, for livestock and poultry owned by, or in possession of, persons who are engaged in producing livestock, poultry, or livestock or poultry products, or who are engaged in feeding livestock or poultry commercially. For the purposes of this paragraph, "poultry" includes ratites.
(d) neat animals, horses, asses, sheep, ratites, swine or goats used or to be used as breeding or production stock, including sales of breedings or ownership shares in such animals used for breeding or production.
(s) groundwater measuring devices required by A.R.S. Section 45-604.
++(Local Option #X:
(t) paintings, sculptures, or similar works of fine art, provided that such works of fine art are purchased from the original artist; and provided further that "art creations", such as jewelry, macramé, glasswork, pottery, woodwork, metalwork, furniture, and clothing, when such "art creations" have a dual purpose, both aesthetic and utilitarian, are not exempt, whether purchased from the artist or from another.)++
(u) seeds, seedlings, roots, bulbs, cuttings and other propagative material for use in commercially producing agricultural, horticultural, viticultural or floricultural crops in this state.
(v) food products sold by food producers as provided for by A.R.S. Section 3-561, 3-562 and 3-563.
++(Local Option #Z:
(w) textbooks, sold by a bookstore, that are required by any State university or community college.)++
(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.
++(Local Option #HH:
(y) tangible personal property donated to an organization or entity qualifying as an exempt organization under 26 U.S.C. Section 501(c)(3); if and only if:
(1) the donor is engaged or continuing in a business activity subject to a tax imposed by Article IV; and
(2) the donor originally purchased the donated property for resale in the ordinary course of the donor's business; and
(3) the donor obtained from the donee a letter or other evidence satisfactory to the Tax Collector of qualification under 26 U.S.C. Section 501(c)(3) from the Internal Revenue Service or other appropriate federal agency; and
(4) the donor maintains, and provides upon demand, such evidence to the Tax Collector, in a manner similar to other documentation required under Article III.)++
++(Local Option #JJ:
(z) tangible personal property used or stored by this City.)++
(aa) tangible personal property used in remediation contracting as defined in Section ___-100 and Section ____-100.5.
(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, 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 ____-470.
(ee) tangible personal property sold by a nonprofit organization that is exempt from taxation under Section 501(c)(3), 501(c)(4) or 501(c)(6) of the Internal Revenue Code if the organization is associated with a major league baseball team or a national touring professional golfing association and no part of the organization's net earnings inures to the benefit of any private shareholder or individual. This paragraph does not apply to an organization that is owned, managed or controlled, in whole or in part, by a major league baseball team, or its owners, officers, employees or agents, or by a major league baseball association or professional golfing association, or its owners, officers, employees or agents, unless the organization conducted or operated exhibition events in this state before January 1, 2018 that were exempt from transaction privilege tax under A.R.S. Section 42-5073.
(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 A.R.S. 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 (12) or under which may be attended in substitution for a public school pursuant to A.R.S. Section 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.
(hh) personal hygiene items purchased by a person engaged in the business of and subject to tax under Section ___-444 of this code if the tangible personal property is furnished without additional charge to and intended to be consumed by the 13 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.
(jj) 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.
(ll) 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.
(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.
++(Local Option #PP
(ss) the purchase price of electricity, natural gas or liquefied petroleum gas by:
(1) a qualified manufacturing or smelting business. This paragraph applies to gas transportation services. For the purposes of this paragraph:
(A) "gas transportation services" means the services of transporting natural gas to a natural gas customer or to a natural gas distribution facility if the natural gas was purchased from a supplier other than the utility.
(B) "manufacturing" means the performance as a business of an integrated series of operations that places tangible personal property in a form, composition or character different from that in which it was acquired and transforms it into a different product with a distinctive name, character or use. Manufacturing does not include job printing, publishing, packaging, mining, generating electricity or operating a restaurant.
(C) "qualified manufacturing or smelting business" means one of the following:
(i) a business that manufactures or smelts tangible products in this state, of which at least fifty-one percent (51%) of the manufactured or smelted products will be exported out-of-state for incorporation into another product or sold out-of-state for a final sale.
(ii) a business that derives at least fifty-one percent (51%) of its gross income from the sale of manufactured or smelted products manufactured or smelted by the business.
(iii) a business that uses at least fifty-one percent of its square footage in this state for manufacturing or smelting and business activities directly related to manufacturing or smelting.
(iv) a business that employs at least fifty-one percent (51%) of its workforce in this state in manufacturing or smelting and business activities directly related to manufacturing or smelting.
(v) a business that uses at least fifty-one percent (51%) of the value of its capitalized assets in this state, as reflected on the business's books and records, for manufacturing or smelting and business activities directly related to manufacturing or smelting.
(D) "smelting" means to melt or fuse a metalliferous mineral, often with an accompanying chemical change, usually to separate the metal.
(2) a business that operates an international operations center in this state and that is certified by the Arizona Commerce Authority pursuant to A.R.S. Section 41-1520.)++
(tt) the transfer of title or possession of coal back and forth between an owner or operator of a power plant and a person who is responsible for refining coal if both of the following apply:
(1) the transfer of title or possession of the coal is for the purpose of refining the coal; and
(2) the title or possession of the coal is transferred back to the owner or operator of the power plant after completion of the coal refining process. For the purposes of this subdivision, "coal refining process" means the application of a coal additive system that aids the reduction of power plant emissions during the combustion of coal and the treatment of flue gas.
(uu) computer data center equipment purchased by the owner, operator or qualified colocation tenant of a computer data center that is certified by the Arizona Commerce Authority under A.R.S. Section 41-1519 or an authorized agent of the owner, operator or qualified colocation tenant during the qualification period for use in the qualified computer data center. For the purposes of this paragraph, "computer data center", "computer data center equipment", "qualification period" and "qualified colocation tenant" have the same meanings prescribed in A.R.S. Section 41-1519.
++(Local Option #LL
(vv) jet fuel use tax imposed under Section ___-610 on the storage, use or consumption in this city of jet fuel purchased from a retailer in any case in which the tax imposed under Section ___-422 has not been paid is limited to amounts of not more than ten million gallons of jet fuel purchased in each calendar year. Purchases in excess of ten million gallons per year are deemed exempt.)++
(ww) the purchase manufacture, wholesale or distribution to or among any wholesalers, distributors or retailers, of food items intended for human consumption as defined by rule adopted pursuant to A.R.S. Section 42-5106 or items prescribed by A.R.S. Section 42-5106, subsection D for home consumption or for consumption on the premises.
(xx) any container or packaging used exclusively for transporting, protecting or consuming food items intended for human consumption as defined by rule adopted pursuant to A.R.S. Section 42-5106 or items prescribed by A.R.S. Section 42-5106, subsection D for home consumption or for consumption on the premises.
(yy) machinery, equipment, technology or related supplies that are only useful to assist a person with a physical disability as defined in A.R.S. Section 46-191 or a person who has a developmental disability as defined in A.R.S. Section 36-551 or has a head injury as defined in A.R.S. Section 41-3201 to be more independent and functional.
(zz) application services that are designed to assess or test student learning or to promote curriculum design or enhancement purchased by or for any school district, charter school, community college or state university. For the purposes of this paragraph:
(1) "application services" means software applications provided remotely using hypertext transfer protocol or another network protocol.
(2) "curriculum design or enhancement" means planning, implementing or reporting on courses of study, lessons, assignments or other learning activities.