CHAPTER 4-1: CITY TAX CODE

SECTIONS:

4-1-1:    ADOPTION OF TAX CODE:

4-1-2:    PENALTY:

4-1-1 ADOPTION OF TAX CODE:

That certain document entitled "Tax Code of the City of Prescott" which contains amendments through Ordinance 2000 adopted May 5, 1988, and as the same may be amended from time to time is hereby adopted as the official Tax Code of the City and is made a part of this Chapter the same as though said code with amendments were specifically set forth in full herein. At least three (3) copies shall be filed in the office of the City Clerk and shall be kept available for public use and inspections. (Ord. 2052, 1-10-1989; amd. Ord. 2179, 6-12-1990)

AMENDMENTS:

Ord. 2296, eff. 9-24-1991 - Sections 1, 3, 4, 5 and 6

Re: Tax on jet fuel

Ord. 3110, eff. 9-1-1993 - Section 4-1-300(a)

Re: Privilege Tax License Application Fee $25.00

Ord. 3289, eff. 2-1-1995 - Amending the following sections of the 1995 Amendments to the City Tax Code of the City of Prescott: §§ 1 (with the exception of the deletion of the definition of "manufacturing"), 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, that part of 15 amending section 4-1-465(o) of the Prescott City Tax Code, 16, 17, 18, 19, 23, 24, 25, 26, 27, 28 and 29.

Ord. 3289, eff. 7-1-1995 - Amending the following sections of the 1995 Amendments to the City Tax Code of the City of Prescott: The deletion of the definition of manufacturing from section 1 and section 14, that part of section 15 amending section 4-1-465(u) of the Prescott City Tax Code, 20, 21, 22 and 30.

Ord. 3372, eff. 8-1-1995 - Amend section 4-4-410(b) - add tax on green fees.

Ordinance 3442, eff. 1-1-1996 to 1-1-2006 - The City Tax Code is hereby amended as follows: Any and all references to a tax to be imposed shall read "two percent (2%)" rather than "one percent (1%)".

Ordinance 3558, eff. 12-31-1996 - The City Tax Code is hereby amended as set forth in that certain public record entitled "The 1996 Amendments to the City Tax Code of the City of Prescott, Arizona, including a Taxpayer Bill of Rights", as adopted pursuant to Resolution 2934 on November 26, 1996.

Ordinance 3697, eff. and retroactive April 1, 1987 - The City Tax Code is hereby amended as set forth in that certain public record entitled "Environmental Remediation Amendments to the Tax Code of the City of Prescott, Arizona", as adopted by the Prescott City Council pursuant to Resolution 3016, and as the same may be amended from time to time, is hereby adopted and made a part of the City Tax Code of the City of Prescott, the same as though said amendments were specifically set forth in full herein.

Ordinance 3764, eff. 7-1-1998 - The City Tax Code is hereby amended as set forth in that certain public record entitled "The 1998 Amendments to the Tax Code of the City of Prescott, Arizona", as adopted by the Prescott City Council pursuant to Resolution 3067, and as the same may be amended from time to time, is hereby adopted and made a part of the City Tax Code of the City of Prescott, the same as though said amendments were specifically set forth in full herein.

The following provision of the public record adopted herein is retroactive to April 1, 1987:

Subsection (a), paragraph (16) on "Cleanrooms" as added to Section 2. Section 4-1-110. Definitions: Income-producing capital equipment.

Ordinance 3924, eff. 1-1-2000 - The city tax code is hereby amended as set forth in that certain public record entitled "The 1999 Amendments to the Tax Code of the City of Prescott, Arizona", as adopted by the Prescott city council pursuant to resolution 3210, and as the same may be amended from time to time, is hereby adopted and made a part of the city tax code of the city of Prescott, the same as though said amendments were specifically set forth in full herein.

The following sections of the 1999 amendments to the tax code of the city of Prescott, Arizona are effective retroactive to January 1, 1999:

A. Section 14-415(b)(3).

B. Section 14-416(c)(1)(A).

C. Section 14-417(b)(1)(A).

The following sections of the 1999 amendments to the tax code of the city of Prescott, Arizona are effective retroactive to May 5, 1999:

A. Section 14-450(c)(10).

B. Section 14-465(kk).

C. Section 14-660(kk).

Ordinance 3996, 6-13-2000 - Amending ordinance 3442 as follows: Section 3. Sunset Clause. That, from and after January 1, 2016, this ordinance shall be of no further force and effect, and from and after January 1, 2016, the city tax code shall be amended as follows: Any and all references to a tax to be imposed shall read "one percent (1%)" rather than "two percent (2%)".

Ordinance 4062, eff. 2-1-2001 - The city tax code is hereby amended as follows:

The addition of section 4-1-447.

The proceeds of the additional tax on transient lodging imposed by section 4-1-447 shall be used for the promotion of tourism and development of recreational facilities within the city of Prescott. The new section is to read as follows:

Sec. 4-1-447. Rental, leasing, and licensing for use of real property: Additional tax upon transient lodging.

In addition to the taxes levied as provided in section 4-1-444, there is hereby levied and shall be collected an additional tax in an amount equal to two percent (2%) of the gross income from the business activity of any hotel engaging or continuing within the city in the business of charging for lodging and/or lodging space furnished to any transient. "Transient" means any person who, for any period of less than twenty-eight (28) consecutive days, either at his own expense or at the expense of another, obtains lodging or the use of any lodging space in any hotel for which lodging or use of lodging space a charge is made.

The amendment of section 4-1-100.1 to read as follows:

Reg. 4-1-100.1. Brokers

(a) For the purposes of proper administration of this Chapter and to prevent evasion of taxes imposed, brokers shall be wherever necessary treated as taxpayers for all purposes, and shall file a return and remit the tax imposed on the activity on behalf of the principal. No deduction shall be allowed for any commissions or fees retained by such broker, except as provided in Section 4-1-405, relating to advertising commissions.

(b) Brokers for vendors . A broker acting for a seller, lessor, or other similar person deriving gross income in a category upon which this Chapter imposes a tax shall be liable for such tax, even if his principal would not be subject to the tax if he conducted such activity in his own behalf, by reason of the activity being deemed a "casual" one. For example:

(1) An auctioneer or other sales agent of tangible personal property is subject to the tax imposed upon retail sales, even if such sales would be deemed "casual" if his principal had sold such items himself.

(2) (Reserved)

(c) Brokers for vendees . A broker acting solely for a buyer, lessee, tenant, or other similar person who is a party to a transaction which may be subject to the tax, shall be liable for such tax and for filing a return in connection with such tax only to the extent his principal is subject to the tax.

(d) The liability of a broker does not relieve the principal of liability except upon presentation to the Tax Collector of proof of payment of the tax, and only to the extent of the correct payment. The broker shall be relieved of the responsibility to file and pay taxes upon the filing and correct payment of such taxes by the principal.

(e) (RESERVED)

(f) Location of Business . Retail sales by brokers acting for another person shall be deemed to have occurred at the regular business location of the broker, in a manner similar to that used to determine "out-of-City sales"; provided, however, that an auctioneer is deemed to be engaged in business at the site of each auction.

The addition of 4-1-447.1 to read as follows:

Regulation 4-1-447.1. Gross income from rental, leasing, and licensing for use of real property as lodging or lodging space to transients.

(a) If the charge made by a hotel to a transient includes any charge for services or accommodations in addition to that of lodging and/or the use of lodging space, then such portion of the total charge as represents only the charge for the use of the room and/or lodging space shall be distinctly set out and billed to such transient by such hotel as a separate item, or the entire charge shall be deemed charge for use of lodging space subject to the tax imposed by section 4-1-447.

(b) A separately itemized charge for use of the furnishings contained in lodging or lodging space rented, leased, or licensed to a transient shall be deemed gross income from the business of renting, leasing, and licensing lodging to a transient. Furthermore, in regard to such tangible personal property, such person is deemed not in the business of rental, leasing, and licensing of tangible personal property for all purposes of this chapter.

(c) Complimentary food and drink . Persons engaged in the business of rental, leasing, and licensing of lodging to transients shall include charges for complimentary food and drink as gross income from the business of rental, leasing, and licensing of lodging to transients, and shall not be deemed in the restaurant business for all purposes of this chapter, unless such charges:

(1) Are made only at the request of the transient, or as a separate, optional charge for consuming specific food or drink (for example, "room service" charges); and

(2) Are commensurate with charges for like quantity and type of food consumed by patrons of persons engaged in the restaurant business.

The rescinding in its entirety of Article VIII entitled "Imposition of privilege tax upon transient lodging".

Ordinance 4220, eff. retroactive to 1-1-2002 - The City Tax Code is hereby amended as set forth in that certain public record entitled "The 2001 Amendments to the City Tax Code of the City of Prescott, Arizona", as adopted pursuant to Resolution Number 3455.

Ordinance 4398, 5-25-2004 - The city tax code is hereby amended as follows:

The amendments of section 4-1-100 to read as follows:

Sec. 4-1-100. General definitions.

"Qualifying Community Health Center "

(a) means an entity that is recognized as nonprofit under Section 501(c)(3) of the United States Internal Revenue Code, that is a community-based, primary care clinic that has a community-based board of directors and that is either:

(1) the sole provider of primary care in the community.

(2) a nonhospital affiliated clinic that is located in a federally designated medically underserved area in this State.

(b) Includes clinics that are being constructed as Qualifying Community Health Centers.

"Qualifying Health Care Organization " means an entity that is recognized as nonprofit under Section 501(c) of the United States Internal Revenue Code and that uses, saves or invests at least eighty percent (80%) of all monies that it receives from all sources each year only for health and medical related educational and charitable services, as documented by annual financial audits prepared by an independent certified public accountant, performed according to generally accepted accounting standards and filed annually with the Arizona Department of Revenue. Monies that are used, saved or invested to lease, purchase or construct a facility for health and medical related education and charitable services are included in the eighty percent (80%) requirement.

"Qualifying Hospital " means any of the following:

(4) facility that is under construction and that on completion will be a facility under subdivision (1), (2) or (3) of this paragraph.

The amendment of section 4-1-260(c)(6) to read as follows:

Sec. 4-1-260. Exclusion of fees and taxes from gross income; limitations.

(c)

(6) waste tire disposal fees, imposed pursuant to ARS Section 44-1302.

The addition of 4-1-415.3 to read as follows:

Reg. 4-1-415.3. Construction contracting; tax rate effective date.

(a) In the event of a tax rate change, the rate imposed on gross income from construction contracting shall be computed based upon the rate in effect when the contract was executed, subject to the "enactment date" as defined in this section. gross income from a contract executed prior to the enactment date shall not be subject to the tax rate change, provided the contract contains no provision that entitles the construction contractor to recover the amount of the tax.

(b) In the event of a rate increase, in order to qualify for the lower rate, the construction contractor shall, upon request, provide sufficient documentation, in a manner and form prescribed by the tax collector, to verify that a contract was entered into before the enactment date.

(c) For purposes of this section, "enactment date" shall be:

(1) in the event an election is held, the date of election.

(2) in the event no election is held, the date of final adoption by the mayor and council.

(3) notwithstanding the above, nothing in this section shall be construed to prevent the city from establishing a later enactment date.

The addition to 4-1-520.1 to read as follows:

Reg. 4-1-520.1. Reports made to the City.

(a)

(11) The Tax Collector may prescribe and will notify taxpayers of alternative methods for signing, subscribing or verifying any report or statement required to be filed, including but not limited to electronic signatures and/or security codes, and such methods shall have the same validity and consequences as the actual signature or written declaration of the taxpayer or other person required to sign, subscribe or verify the return, statement or other document.

Ordinance 4564, 11-14-2006, eff. 12-14-2006 - That certain document known as "The 2006 Amendments to the Tax Code of the City of Prescott, Arizona" which document amends the Tax Code of the City of Prescott, three copies of which are on file in the office of the City Clerk of the City of Prescott, Arizona, and which document was made a public record by Resolution No. 3785 of the City of Prescott, Arizona, is hereby referred to, adopted and made a part hereof as if fully set out in this ordinance.

Ordinance 4690-0933, 11-27-2008, eff. 7-01-2008 - That certain document known as "The 2008 Amendments to the Tax Code of the City of Prescott, Arizona" which document amends the Tax Code of the City of Prescott, three copies of which are on file in the office of the City Clerk of the City of Prescott, Arizona, and which document was made a public record by Resolution No. 3933-0939 of the City of Prescott, Arizona, is hereby referred to, adopted and made a part hereof as if fully set out in this ordinance.

Ordinance 4804-1204, 08-09-2011, eff. 09-08-2011 - That certain document known as "The 2010-2011 Amendments to the Tax Code of the City of Prescott, Arizona" which document amends the Tax Code of the City of Prescott, three copies of which are on file in the office of the City Clerk of the City of Prescott, Arizona, and which document was made a public record by Resolution No. 4094-1204 of the City of Prescott, Arizona, is hereby referred to, adopted and made a part hereof as if fully set out in this ordinance.

The current Model City Tax Code, as adopted by this section, is hereby amended by deleting the current Article III ("Licensing and Recordkeeping") in its entirety.

The current Model City Tax Code, as adopted by this section, is additionally amended by adding a new Article III ("Licensing and Recordkeeping") as follows:

Article III - Licensing and Recordkeeping

Sec. 4-1-300. Licensing requirements.

(a) The following persons shall make application to the Tax Collector for a Transaction Privilege and Use Tax License and no person shall engage or continue in business or engage in such activities until he shall have such a license:

(1) Every person engaging or continuing in business activities within the city or town upon which a Transaction Privilege Tax is imposed by this Chapter.

(2) Every person engaging or continuing in business within the city or town and storing or using tangible personal property in this municipality upon which a Use Tax is imposed by this Chapter.

(3) (Reserved)

(b) For the purpose of determining whether a Transaction Privilege and Use Tax License is required, a person shall be deemed to be "engaging or continuing in business" within the city or town if:

(1) engaging in any activity as a principal or broker, the gross receipts of which may be subject to Transaction Privilege Tax under Article IV of this Chapter, or

(2) maintaining within the city or town directly, or if a corporation by a subsidiary, an office, distribution house, sales house, warehouse or other place of business; maintaining within the city or town directly, or if a corporation by a subsidiary, any real or tangible personal property; or having any agent or other representative operating within the city or town under the authority of such person, or if a corporation by a subsidiary, irrespective of whether such place of business, property, or agent or other representative is located here permanently or temporarily, or

(3) soliciting sales, orders, contracts, leases, and other similar forms of business relationships, within the city or town from customers, consumers, or users located within the city or town, by means of salesmen, solicitors, agents, representatives, brokers, and other similar agents or by means of catalogs or other advertising, whether such orders are received or accepted within or without this city or town.

(4) A person shall also be deemed to be "engaging or continuing in business" if engaging in any activity subject to Use Tax under Article VI of this Chapter for business purposes. Individuals who acquire items subject to Use Tax for their own personal use or their family’s personal use are not required to obtain a license.

(5) (Reserved)

(c) A person engaging in more than one activity subject to Transaction Privilege Tax at any one business location is not required to obtain a separate license for each activity, provided that, at the time such person makes application for a license, he shall list on such application each category of activity in which he is engaged.

(d) The licensee shall inform the Tax Collector of any changes in his business activities, location, or mailing address within thirty (30) days.

(e) Limitation. The issuance of a Transaction Privilege and Use Tax License by the Tax Collector shall in no way be construed as permission to operate a business activity in violation of any other law or regulation to which such activity may be subject.

(f) Casual activity. For the purposes of this Chapter, individuals engaging in a "casual activity or sale" are not subject to the license requirements imposed under this Article provided that they are only engaged in private sales activities, such as the sale of a personal automobile or garage sale, on no more than three separate occasions during any calendar year.

Sec. 4-1-310. Licensing: special requirements.

(a) Partnerships. Application for a Transaction Privilege and Use Tax License for a partnership engaging or continuing in business shall provide, as a minimum, the names and addresses of all general partners. Licenses issued to persons engaging in business as partners, limited or general, shall be in the name of the partnership.

(b) Limited Liability Companies. Application for a Transaction Privilege and Use Tax License for a Limited Liability Company (LLC) engaging or continuing in business shall provide, as a minimum, the names and addresses of all members and the manager. Licenses issued to persons engaging in business as Limited Liability Companies, shall be in the name of the LLC.

(c) Corporations. Application for a Transaction Privilege and Use Tax License for a corporation engaging or continuing in business shall provide, as a minimum, the names and addresses of both the Chief Executive Officer and Chief Financial Officer of the corporation. Licenses issued to persons engaging in business as corporations shall be in the name of the corporation.

(d) Multiple Locations or Multiple Business Names. A person engaging or continuing in one or more businesses at two (2) or more locations or under two (2) or more business names shall procure a license for each such location or business name. A "location" is a place of a separate business establishment.

(e) Real Property Rental, Leasing, and Licensing for Use. In all cases the Transaction Privilege and Use Tax License shall be issued only to the owner of the real property regardless of the owner engaging a property manager or other broker to oversee the owner’s business activity including filing tax returns on behalf of the owner. Each rental property that can be independently sold or transferred is deemed to be a separate business establishment. Each platted parcel of real property subject to the tax imposed by this Chapter is deemed to be a separate business establishment and requires a separate license, regardless of the number of rental units located on that platted parcel. If one structure is located on multiple parcels in a manner such that ownership of an individual parcel cannot be sold or transferred without requiring alteration to divide the structure, one license shall be required for all affected parcels.

Sec. 4-1-320. License fees; annual renewal; renewal fees.

(a) The Transaction Privilege and Use Tax License shall be valid upon receipt of a non-refundable license fee of five dollars ($5.00), except for a license to engage in the business activity of residential or commercial real property rental, leasing, and licensing for use as separately identified in this Section. The Transaction Privilege and Use Tax License shall be valid only for the calendar year in which it is issued unless renewed each year by filing the appropriate application for license renewal and paying an annual license renewal fee of zero dollars ($0.00) for each license, subject to the limitations in A.R.S. 42-5005. Such annual renewal fee shall be due and payable on January 1 of each year and shall be considered delinquent if not paid and received on or before the last business day of January.

(b) The Transaction Privilege and Use Tax License to engage in the business activity of residential real property rental, leasing, and licensing for use shall be valid only upon receipt of a non-refundable license fee of five dollars ($5.00). The Transaction Privilege and Use Tax License shall be valid only for the calendar year in which it is issued unless renewed each year by filing the appropriate application for license renewal and paying an annual license renewal fee of zero dollars ($0.00) for each license, subject to the limitations in A.R.S. 42-5005. Such fee shall be due and payable on January 1 of each year and shall be considered delinquent if not paid and received on or before the last business day of January.

(c) The Transaction Privilege and Use Tax License to engage in the business activity of commercial real property rental, leasing, and licensing for use shall be valid only upon receipt of a non-refundable license fee of five dollars ($5.00). The Transaction Privilege and Use Tax License shall be valid only for the calendar year in which it is issued unless renewed each year by filing the appropriate application for license renewal and paying an annual license renewal fee of zero dollars ($0.00) for each license, subject to the limitations in A.R.S. 42-5005. Such fee shall be due and payable on January 1 of each year and shall be considered delinquent if not paid and received on or before the last business day of January.

Sec. 4-1-330. Licensing: duration; transferability; display; penalties; penalty waiver; relicensing; fees collectible as if taxes.

(a) The Transaction Privilege and Use Tax License shall be valid only for the calendar year in which it is issued unless renewed each year by filing the appropriate application for license renewal and paying the applicable license renewal fee for each license, subject to the limitations in A.R.S. 42-5005. Such fee shall be due and payable on January 1 of each year and shall be considered delinquent if not paid and received on or before the last business day of January. Application and payment of the annual fee must be received in the Tax Collector’s office to be deemed paid and received.

(b) The Transaction Privilege and Use Tax License shall be nontransferable between owners or locations, and shall be on display to the public in the licensee’s place of business.

(c) Any person required to be licensed under this Chapter who fails to obtain a license on or before conducting any business activity requiring such license shall be subject to the license fees due for each year in business plus a penalty in the amount of fifty percent (50%) of the applicable fee for each period of time for which such fee would have been imposed, from and after the date on which such activity commenced until paid. This penalty shall be in addition to any other penalty imposed under this Chapter and must be paid prior to the issuance of any license. License fee penalties may be waived by the Tax Collector subject to the same terms as the waiver of tax penalties as provided for in Section 4-1-540.

(d) Any licensee who fails to renew his license on or before the due date shall be deemed to be operating without a license following such due date, and shall be subject to all penalties imposed under this Chapter against persons required to be licensed and operating without a license. The non-licensed status may be removed by payment of the annual license fee for each year or portion of a year he operated without a license, plus a license fee penalty of 50% of the license fee due for each year. License fee penalties may be waived by the Tax Collector subject to the same terms as the waiver of tax penalties as provided for in Section 4-1-540.

(e) Any licensee who permits his license to expire through cancellation as provided in Section 4-1-340, by his request for cancellation, by surrender of the license, or by the cessation of the business activity for which the license was issued, and who thereafter applies for a license, shall be granted a new license as a new applicant and shall pay the current license fee imposed under Section 4-1-320.

(f) Any licensee who needs a copy of his Transaction Privilege and Use Tax License which is still in effect shall be charged the current license fee for each reissuance of a license.

(g) Any person conducting a business activity subject to licensing without obtaining a Transaction Privilege and Use Tax License shall be liable to the city for all applicable fees and penalties and shall be subject to the provisions of Sections 4-1-580 and 4-1-590, to the same extent as if such fees and penalties were taxes and penalties under such Sections.

Sec. 4-1-340. Licensing: cancellation; revocation.

(a) Cancellation. The Tax Collector may cancel the Transaction Privilege and Use Tax License of any licensee as "inactive" if the taxpayer, required to report monthly, has neither filed any return nor remitted any taxes imposed by this Chapter for a period of six (6) consecutive months; or, if required to report quarterly, has neither filed any return nor remitted any taxes imposed by this Chapter for two (2) consecutive quarters; or, if required to report annually, has neither filed any return nor remitted any taxes imposed by this Chapter when such annual report and tax are due to be filed with and remitted to the Tax Collector.

(b) Revocation. If any licensee fails to pay any tax, interest, penalty, fee, or sum required to be paid under this Chapter, or if such licensee fails to comply with any other provisions of this Chapter, the Tax Collector may revoke the Transaction Privilege and Use Tax License of said licensee.

(c) Notice and Hearing. The Tax Collector shall deliver notice to such licensee of cancellation or revocation of the Transaction Privilege and Use Tax License. If the licensee requests a hearing within twenty (20) days of receipt of such notice, he shall be granted a hearing before the Tax Collector.

(d) After cancellation or revocation of a taxpayer’s license, the taxpayer shall not be issued a new license until all reports have been filed; all fees, taxes, interest, and penalties due have been paid; and he is in compliance with all provisions of this Chapter.

Sec. 4-1-350. Operating without a license.

It shall be unlawful for any person who is required by this Chapter to obtain a Transaction Privilege and Use Tax License to engage in or continue in business without a license. The Tax Collector shall assess any delinquencies in tax, interest, and penalties which may apply against such person upon any transactions subject to the taxes imposed by this Chapter.

Sec. 4-1-360. Recordkeeping requirements.

(a) It shall be the duty of every person subject to the tax imposed by this Chapter to keep and preserve suitable records and such other books and accounts as may be necessary to determine the amount of tax for which he is liable under this Chapter. The books and records must contain, at a minimum, such detail and summary information as may be required by this Article; or when records are maintained within an electronic data processing (EDP) system, the requirements established by the Arizona Department of Revenue for privilege tax filings will be accepted. It shall be the duty of every person to keep and preserve such books and records for a period equal to the applicable limitation period for assessment of tax, and all such books and records shall be open for inspection by the Tax Collector during any business day.

(b) The Tax Collector may direct, by letter, a specific taxpayer to keep specific other books, records, and documents. Such letter directive shall apply:

(1) only for future reporting periods, and

(2) only by express determination of the Tax Collector that such specific recordkeeping is necessary due to the inability of the taxing jurisdiction to conduct an adequate examination of the past activities of the taxpayer, which inability resulted from inaccurate or inadequate books, records, or documentation maintained by the taxpayer.

Sec. 4-1-362. Recordkeeping: income.

The minimum records required for persons having gross income subject to, or exempt or excluded from, tax by this Chapter must show:

(a) The gross income of the taxpayer attributable to any activity occurring in whole or in part in the City.

(b) The gross income taxable under this Chapter, divided into categories as stated in the official City tax return.

(c) The gross income subject to Arizona Transaction Privilege Taxes, divided into categories as stated in the official State tax return.

(d) The gross income claimed to be exempt, and with respect to each activity or transaction so claimed:

(1) If the transaction is claimed to be exempt as a sale for resale or as a sale, rental, lease, or license for use of rental equipment:

(A) The City Privilege License number and State Transaction Privilege Tax License number of the customer (or the equivalent city, if applicable, and state tax numbers of the city and state where the customer resides), and

(B) The name, business address, and business activity of the customer, and

(C) Evidence sufficient to persuade a reasonably prudent businessman that the transaction is believed to be in good faith a purchase for resale, or a purchase, rental, lease, or license for use of rental equipment, by the vendee in the ordinary and regular course of his business activity, as provided by Regulation.

(2) If the transaction is claimed to be exempt for any other reason:

(A) The name, business address, and business activity of the customer, and

(B) Evidence which would establish the applicability of the exemption to a reasonably prudent businessman acting in good faith. Ordinary business documentation which would reasonably indicate the applicability of an exemption shall be sufficient to relieve the person on whom the tax would otherwise be imposed from liability therein, if he acts in good faith as provided by Regulation.

(e) With respect to those allowed deductions or exclusions for tax collected or charges for delivery or other direct customer services, where applicable, evidence that the deductible income has been separately stated and shown on the records of the taxpayer and on invoices or receipts provided to the customer. All other deductions, exemptions, and exclusions shall be separately shown and substantiated.

(f) With respect to special classes and activities, such other books, records, and documentation as the Tax Collector, by regulation, shall deem necessary for specific classes of taxpayer by reason of the specialized business activity of any such class.

(g) In all cases, the books and records of the taxpayer shall indicate both individual transaction amounts and totals for each reporting period for each category of taxable, exempt, and excluded income defined by this Chapter.

Sec. 4-1-364. Recordkeeping: expenditures.

The minimum records required for persons having expenditures, costs, purchases and rental or lease or license expenses subject to, or exempt or excluded from, tax by this Chapter are:

(a) The total price of all goods acquired for use or storage in the City.

(b) The date of acquisition and the name and business address of the seller or lessor of all goods acquired for use or storage in the City.

(c) Documentation of taxes, freight, and direct customer service labor separately charged and paid for each purchase, rental, lease, or license.

(d) The gross price of each acquisition claimed as exempt from tax, and with respect to each transaction so claimed, sufficient evidence to satisfy the Tax Collector that the exemption claimed is applicable.

(e) As applicable to each taxpayer, documentation sufficient to the Tax Collector, so that he may ascertain:

(1) All construction expenditures and all Privilege and Use Taxes claimed paid, relating to owner-builders and speculative builders.

(2) Disbursement of collected gratuities and related payroll information required of restaurants.

(3) (Reserved)

(A) (Reserved)

(B) (Reserved)

(4) The validity of any claims of proof of exemption.

(5) A claimed alternative prior value for reconstruction.

(6) All claimed exemptions to the Use Tax imposed by Article VI of this Chapter.

(7) (Reserved)

(8) Payments of tax to the Arizona Department of Transportation and computations therefor, when a motor-vehicle transporter claims such the exemption.

(9) (Reserved)

(e) Any additional documentation as the Tax Collector, by Regulation, shall deem necessary for any specific class of taxpayer by reason of the specialized business activity of specific exemptions afforded to that class of taxpayer.

(g) In all cases, the books and records of the taxpayer shall indicate both individual transaction amounts and totals for each reporting period for each category of taxable, exempt, and excluded expenditures as defined by this Chapter.

Sec. 4-1-366. Recordkeeping: out-of-City and out-of-State sales.

(a) Out-of-City Sales. Any person engaging or continuing in a business who claims out-of-City sales shall maintain and keep accounting records or books indicating separately the gross income from the sales of tangible personal property from such out-of-City branches or locations.

(b) Out-of-State sales. Persons engaged in a business claiming out-of-State sales shall maintain accounting records or books indicating for each out-of-State sale the following documentation:

(1) documentation of location of the buyer at the time of order placement; and

(2) shipping, delivery, or freight documents showing where the buyer took delivery; and

(3) documentation of intended location of use or storage of the tangible personal property sold to such buyer.

Sec. 4-1-370. Recordkeeping: claim of exclusion, exemption, deduction, or credit; documentation; liability.

(a) All deductions, exclusions, exemptions, and credits provided in this Chapter are conditional upon adequate proof and documentation of such as may be required either by this Chapter or Regulation.

(b) Any person who claims and receives an exemption, deduction, exclusion, or credit to which he is not entitled under this Chapter, shall be subject to, liable for, and pay the tax on the transaction as if the vendor subject to the tax had passed the burden of the payment of the tax to the person wrongfully claiming the exemption. A person who wrongfully claimed such exemption shall be treated as if he is delinquent in the payment of the tax and shall be subject to interest and penalties upon such delinquency. However, if the tax is collected from the vendor on such transaction it shall not again be collected from the person claiming the exemption, or if collected from the person claiming the exemption it shall not also be collected from the vendor.

Sec. 4-1-372. Proof of exemption: sale for resale; sale, rental, lease, or license of rental equipment.

A claim of purchase for resale or of purchase, rental, lease, or license for rent, lease, or license is valid only if the evidence is sufficient to persuade a reasonably prudent businessman that the particular item is being acquired for resale or for rental, lease, or license in the ordinary course of business. The fact that the acquiring person possesses a Privilege License number, and makes a verbal claim of "sale for resale or lease" or "lease for re-lease" does not meet this burden and is insufficient to justify an exemption. The "reasonable evidence" must be evidence which exists objectively, and not merely in the mind of the vendor, that the property being acquired is normally sold, rented, leased, or licensed by the acquiring person in the ordinary course of business. Failure to obtain such reasonable evidence at the time of the transaction will be a basis for disallowance of any claimed deduction on returns filed for such transactions.

Sec. 4-1-380. Inadequate or unsuitable records.

In the event the records provided by the taxpayer are considered by the Tax Collector to be inadequate or unsuitable to determine the amount of the tax for which such taxpayer is liable under the provisions of this Chapter, it is the responsibility of the taxpayer either:

(a) to provide such other records required by this Chapter or Regulation; or

(b) to correct or to reconstruct his records, to the satisfaction of the Tax Collector.

The following existing Regulations to the Model City Tax Code are deleted in their entirety: 300.1, 300.2, 310.1, 310.2, 310.3, 350.1, 350.2, 350.3, 360.1 and 360.2.

(Ord. 4914-1452, 11-18-2014; Ord. 4979-1517, 5-3-2016, eff. 1-1-2017)

4-1-2 PENALTY:

Any person who violates section 4-1-580 of the tax code of the city shall be guilty of a misdemeanor, and upon conviction thereof shall be punished as provided in section 1-3-1 of this code. (Ord. 3116, eff. 8-10-1993; Ord. 4690, 11-27-2009, eff. 7-01-2008)