ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT Please click on the blue text to access the areas described _____________________________________________________________________________________________ TABLE OF CONTENTS Letter to the Governor DEPARTMENT ORGANIZATION Organization & Organization Chart Administrative Services Audit Collections External Services & Special Projects Information Technology Process Administration Property Tax Taxpayer Services Tax Policy & Research ARIZONA’S TAXES Revenue Summary (Table 1) Net Revenue to State General Fund (Table 2) Gross Collections of Audit Assessments and Delinquent Tax (Table 3) Transaction Privilege, Use and Severance Tax Income Tax Property Tax OTHER SOURCES OF REVENUE Bingo Estate Tax Luxury Tax Unclaimed Property & Escheated Estates Waste Tire Fee LEGISLATIVE SUMMARY Bills & Tax Related Resolutions STATE OF ARIZONA Department of Revenue November 15, 2003 Janet Napolitano Governor The Honorable Janet Napolitano Governor State of Arizona 1700 West Washington Street Phoenix, Arizona 85007 J. Elliott Hibbs Director The Honorable Governor Napolitano and the Taxpayers of Arizona: The Arizona Department of Revenue is proud of its progress to effectively and efficiently administer and collect taxes due the state. For example, total costs were reduced in processing, while enforcement revenues exceeded our expected results. Every effort is made to ensure taxes are collected in a fair and equitable manner so that all taxpayers are treated the same and pay their fair share. Total taxes collected by the Department during fiscal year 2003 exceeded $9 billion, including more than $5 billion that was deposited directly into the state General Fund. Included in this total is nearly $401 million that was collected through the Department’s tax enforcement efforts. Our Business Reengineering/Integrated Tax System (BRITS) project moved forward on schedule this year. Contracted as a "revenue gain sharing" project, our vendor will be paid based upon additional revenue generated by the Department resulting from automation of various enforcement activities and adding new enforcement tools. At the end of the project's four year schedule, the Department will be the national leader in tax administration, with all tax systems fully integrated. Taxpayers will be able to access the Department's automated information twenty-four hours a day, seven days a week, and file and pay taxes electronically. Further, the department’s ability to manage tax information, respond to taxpayer contacts and to be more effective and efficient in most aspects of administration will increase significantly, to the benefit of Arizona citizens. As we go forward, we will continue to focus on our three core goals as outlined in our strategic plan: To increase our return on investment. Issues of increased productivity and cost effectiveness are addressed throughout the agency. To increase customer and stakeholder satisfaction. We focus on customer feedback to learn what we are doing well and where we need improvement so we can target our process improvement efforts appropriately. To increase employee satisfaction. Employees are our most important assets. We focus on their satisfaction and job performance. We hope you enjoy reading our Annual Report. If you have any questions or comments, please feel free to contact me. Sincerely, J. Elliott Hibbs Director 1600 West Monroe Street, Phoenix AZ 85007-2650 Return to Table of Contents www.revenue.state.az.us DEPARTMENT ORGANIZATION Organization & Organization Chart Administrative Services Audit Collections External Services & Special Projects Information Technology Process Administration Property Tax Taxpayer Services Tax Policy & Research ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 2 ORGANIZATION The mission of the Arizona Department of Revenue is to administer the tax laws fairly and efficiently for the people of Arizona. It is our Vision that we set the standard for effective and efficient tax administration and employee satisfaction. Tax laws that fall under the department’s purview are primarily in the areas of income, Transaction Privilege (sales), use, luxury, withholding, property, estate, fiduciary, bingo, and severance. The director is responsible for the direction, operation, and control of the department to ensure that the administration and collection of taxes are cost effective and performed with high quality to meet taxpayers’ needs. Reporting to the director is the deputy director, who assists the director in the day-to-day operations of the department and who serves as acting director when the director is absent, and the problem resolution officer, who acts as the taxpayer advocate within the department. Also reporting to the director is the Business Reengineering and Integrated Tax Systems (BRITS) Change Management team. This unit is responsible for coordinating the Department's efforts to totally reengineer agency tax systems and processes, plus provide numerous enforcement tools to improve the effectiveness of enforcement programs. Its members are subject matter experts from across the Department. From late 2002 until 2006, the unit will continue to involve employees of the Department in working with Accenture, the selected vendor, in the implementation of BRITS. New transaction privilege tax and withholding systems will be completed in 2004, with other systems to follow. The department is organized into nine divisions, each managed by an assistant director or a selfmanaged team. Divisions include: administrative services, audit, collections, external services and special projects, information technology, process administration, property tax, taxpayer services, and tax policy and research. Each division performs specific functions which are integrated to achieve the department’s major external objectives of efficient tax collection and processing, timely enforcement of tax laws, and accurate valuation of property. HIGHLIGHTS IN FISCAL YEAR 2003 • The Department began implementation of BRITS in September 2002. Release 1 includes an integration of our Transaction Privilege Tax and Withholding Tax into one system. The rollout of Release 1 is on schedule for January 2, 2004. In the meantime, tools have been introduced to increase the productivity of collectors and income tax auditors. ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 3 ARIZONA DEPARTMENT OF REVENUE J. Elliott Hibbs DIRECTOR Donna Linkous Exec. Asst. to Director Gale Garriott DEPUTY DIRECTOR COLLECTIONS PROPERTY TAX AUDIT DIVISION TAX POLICY & RESEARCH TAXPAYER SERVICES MEL LITZENBERGER ASSISTANT DIRECTOR SELF MANAGED TEAM VINCE PEREZ ASSISTANT DIRECTOR FRANK MIGRAY MARQUETTA WHITE ASSISTANT DIRECTOR ASSISTANT DIRECTOR DEBT SET-OFF OFFICE COLLECTIONS BANKRUPTCY ASSESSMENT STANDARDS & EQUALIZATION CORPORATE INCOME TAX AUDIT Tax Policy Office VALUATION SECTION INDIVIDUAL INCOME TAX AUDIT Transaction Privilege Tax Appeals SPECIAL TAXES - Estate - Luxury - Bingo TPT AUDIT Corporate Income Appeals Individual Income Tax Appeals BRITS Change Management Rosie Estrada Receptionist Nelda Coppi Exec. Asst. to Dep. Dir. FIELD COLLECTIONS TAXPAYER ASSIST. OFC/ PROBLEM RESOLUTION OFFICER PROCESSING ADMINISTRATION ADMINISTRATIVE SERVICES INFORMATION TECHNOLOGY SELF MANAGED TEAM VACANT ASSISTANT DIRECTOR JANE HUFF ASSISTANT DIRECTOR / CIO COMMUNITY OUTREACH & EDUCATION COMPTROLLER'S OFFICE TAXPAYER INFORMATION & ASSISTANCE BUSINESS TAX PROCESSING LICENSE & REGISTRATION AND LICENSE COMPLIANCE INCOME TAX PROCESSING MICROFILMING/ WAREHOUSE UNCLAIMED PROPERTY FINANCIAL SERVICES . Budget Office . Quality Executive . Accounting . Purchasing . Payroll EMPLOYEE SERVICES . Human Resources . Employee Develop . Facilities HEARING OFFICE INVESTIGATIONS . Criminal & Civil . Tobacco Enforcement APPLICATION DEVELOPMENT ENTERPRISE NETWORK SUPPORT EXTERNAL SERVICES & SPECIAL PROJECTS LEIGH CHEATHAM ASSISTANT DIRECTOR Public Information Officer Legislative Affairs Forms & Publications DATA CENTER SUPPORT TAXATION SYSTEM SUPPORT ELECTRONIC FILING SUPPORT OERA Disclosure & Federal Relations . . . . SPECIAL PROJECTS Ladewig Amnesty Alternative Fuel Business Continuity INTERNAL AUDIT Return to Table of Contents November 1-30, 2003 4 ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT ADMINISTRATIVE SERVICES Organization The mission of the Administrative Services Division is to provide efficient and courteous service to our customers, both inside and outside the department. The Administrative Services Division is responsible for the oversight of the department’s financial and employee services as well as taxpayer services including problem resolution assistance, audit due process, and criminal/civil investigations. The Division consists of the following sections: Accounting The Accounting Section processes accounts payable invoices, provides travel services including employee reimbursements, and oversees the fixed assets inventory. Budget Office The Budget Office is responsible for monitoring current year expenditures against the approved budget, coordinating preparation of the department’s budget, and providing staff and operating budget information and analysis to the Director and the department’s Leadership Team. Criminal and Civil Investigations The Criminal and Civil Investigations Section is comprised of the Tobacco Enforcement Unit and the Criminal Investigations Unit. The Tobacco Enforcement Unit enforces the tobacco luxury taxes by educating retailers and wholesale suppliers, inspecting tobacco products for compliance with tax stamp requirements and seizing products that are not being sold legally in Arizona. The unit also investigates criminal activity, such as the importation and sale of counterfeit tobacco products. The Criminal Investigations Unit investigates tax evasion, improper or fraudulent tax activity by both taxpayers and preparers, and other related issues. Both units work with other law enforcement organizations to prosecute tax-related crimes. Employee Development The Employee Development Section provides centralized training for the department. The section has a team of trainers whose role is to develop and deliver in-house training for key activities such as using various PC software and tax systems, supervision, applying confidentiality guidelines, and customer service. The section offers both self-study classes and classroom training and coordinates with the Arizona Government University training program. Facilities Management The Facilities Management Section coordinates department facility maintenance and remodeling at the department’s five locations; receives all goods and supplies purchased by the department; repairs and maintains the department's security system; manages building security access, the parking garage and security guards. Hearing Office The Hearing Office holds hearings and issues written decisions on protests of department assessments and refund denials relating to income tax, withholding tax and estate tax. Human Resources The Human Resources Section is responsible for administering personnel activities for the department. This includes consultations with management concerning employee relations and discipline, classification of positions and reorganizations, recruitment, and staffing. The Human Resources section is also responsible for processing personnel actions, new employee orientation, employee benefits program, and interpreting the Department of Administration Personnel rules and implementing policies. The section also oversees the Affirmative Action/Equal Employment Opportunity responsibilities as well as Americans with Disabilities issues. Programs administered by the section include the Employee Recognition Program, Travel Reduction Program, and Employee Suggestion Program. Internal Audit The Internal Auditor assists the department to find more efficient ways to conduct business. Payroll The Payroll Section is responsible for oversight of the employee payroll, which includes accurate tracking of hours worked, leave taken and payroll deductions. ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 5 Purchasing The Purchasing Section is responsible for contracting and purchasing all goods and services required by the department. This includes furniture and supplies along with the printing of tax booklets and forms for the department. The section also oversees all contract and maintenance agreements. Quality Office The Quality Office coordinates the strategic planning efforts of the department with programs focusing on agency-wide quality initiatives. Included in these initiatives are customer satisfaction survey improvements, feedback and analysis, and benchmarking studies. Return to Table of Contents ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 6 AUDIT The Individual Income Audit Section along with the Corporate Audit Section began the year as the two areas comprising the Income Tax Audit Function. Individual Audit had four Deputy Administrators who also filled the role of Individual Audit Administrator. This Deputy Administrator team was responsible for the decision making on all issues affecting Individual Audit from personnel matters to resource management to audit selection programs. They also took turns being the lead contact person and representing the Section on the department's Leadership Team. The decisions the team had to make during the year were made more challenging by hiring freezes and budget cuts. More than ever, the Section truly had to learn to do more with less and find new, more efficient ways of doing things. By the end of the fiscal year, the Income Tax Audit Function evolved into the Audit Division, which now includes the Individual Income Audit Section, Corporate Audit Section, Transaction Privilege Tax Audit Section, and the Special Taxes Audit Section. Throughout the year, BRITS, the department's reengineering program, continued to be the main focus of the department. Individual Income provided subject matter experts for BRITS whenever needed. Customer service was once again a primary objective of the Individual Income Audit Section. The effectiveness of the Section's auditors performing their duties in a professional and courteous manner while still ensuring taxpayers were paying the correct amount of tax was evidenced by the customer survey results. The Section sent out 22,510 Customer Satisfaction Surveys during the year. Most of these went to taxpayers that owed additional tax as a result of an audit, yet on a scale of 1 to 5 (5 being excellent), the average score was 4.68, a 5% improvement from fiscal year 2002. Transaction Privilege and Use Tax Audit Field Audit Without losing emphasis on customer service, the Field Audit Section exceeded their goals and objectives. Audit survey reports continue to improve and show that our auditors strive for professionalism and clarity. Compliance Unit This unit, which grew from 8 to 18 last fiscal year, continued to excel in its efforts to locate, identify, and bring entities doing business in Arizona into compliance. Although more than half of the staff were recent hires and had minimum experience, the fiscal year-end results were very positive. The Cities Program is now contained within the Compliance Unit and is responsible for coordinating the administration, collection and auditing for those cities and towns that have contracted with the department. The City Program has continued to work diligently to service these cities. In addition, the Cities Program continues to represent the department in working with the cities and towns that are not in the administration program through the Unified Audit Committee. This committee works to ensure that all cities and towns handle audit issues uniformly. Refund The Refund Section is responsible for analyzing and processing taxpayer refund requests. Program Information Group The Program Information Group had many accomplishments this year and continues to excel by ensuring minimal downtime in the various operations and programs of TPT Audit. Specifically the Group continued to maintain and upgrade the ATC (Automatic Tax Calculator) program used by the Field Auditors, continually creating databases for the Compliance Unit, and maintaining the various programs used in the audit environment. The group continues to provide support to the TPT staff in maintaining critical programs necessary to continue with existing projects. Administrative Support Fiscal year 2003 was another banner year for the Administrative Support Unit. With few employees, the Unit timely and accurately processed the 2,282 audits conducted. This is a manual and laborintensive process. The Unit is also responsible for retrieving and delivering incoming mail and reports to the section’s employees. When asked or needed, the staff also assists others to ensure all daily duties are completed. ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 7 Special Taxes This group is made up of Estate Tax, Luxury Taxes, and the Bingo section. The Bingo section issues licenses and conducts audit examinations of Bingo operators. The staff investigates complaints and violations of Bingo laws, as well as conducting workshops and consultations with licensees. The Estate Tax unit conducts audits and processes all estate tax returns. The Luxury Tax staff administers tax for liquor and tobacco, including licensing for tobacco wholesalers and processing of associated tax returns. The unit also supports the Office of the Attorney General in administration of the Tobacco Master Settlement Agreement. • • were a success and the Section will continue to pursue these types of audit leads in the future. • The Individual Audit pass-through entity audit program continued to be successful. This program requires field auditors to review Partnership and Sub-S Corporation returns to identify areas of noncompliance at both the entity and the individual levels. When necessary, audit trips are taken to perform audits on out of state entities. The Section issued assessments of approximately $600,000 during the fiscal year as the result of audits of passthrough entities. This continues to be the Section's most productive audit program from a cost/benefit analysis standpoint. • Individual Audit auditor productivity once again increased during the fiscal year. Total dollars assessed by the Section increased by 27%. Total dollars assessed per auditor increased by 29% to $594,838. A primary reason for these increases was the continued refinement in the process of providing audit leads by the Section's Development Team. The percentage of audit leads that led to an assessment being issued increased by 32% for the fiscal year. The continued hard work of the administrative support staff along with the audit staff was also key in increasing the auditor productivity. • The Computer Audit Operations Unit (IT) developed an auto-update program that automatically uploads any new statutes and rules, court cases, tax rulings, tax procedures, as well as audit program changes when the auditor logs on to their computers. Our auditor preparedness has been greatly enhanced with this auto-update of key tools the auditors need while conducting the fieldwork phase of their corporate income tax field audits. • Partnering with both the Internal Revenue Service and other state revenue departments, the Corporate Audit Section is developing a program to seek out abusive tax schemes. As this program expands, we anticipate bringing in millions of dollars from uncovering abusive schemes. HIGHLIGHTS IN FISCAL YEAR 2003 The computer generated assessment program that was started in fiscal year 2002 became a reality this fiscal year. In the last quarter of the fiscal year, the Individual Income Section issued 3,748 computer-generated assessments (CGA). CGA's are issued programmatically by the Section's computer staff in conjunction with programmers from BRITS. The Section established a set of criteria for which federal CP2000 audits could be issued automatically without the intervention of an auditor. If a given audit meets the established criteria, an assessment will be programmatically issued to the taxpayer; if it fails to meet the established criteria, the audit will be reviewed to determine if it should be assigned to an auditor. In the future, more of the Section's audits will be issued as CGA's as criteria are established for each of the different audit types and adjustments. During the year, the Individual Income Audit Section began performing more audits on Schedule A's and Schedule C's. Desk auditors performed the Schedule A Itemized Deductions audits. Field auditors performed the Schedule C audits on in-state taxpayers. Both of these new audit programs were found to be very productive even though they did take additional auditor time. The Section feels both the Schedule A and Schedule C audit programs ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 8 • • • • The Corporate Audit Section has supported BRITS, the department’s reengineering project, by providing experts to assist in the system design. Auditors were enlisted to be the “Change Agents” to spread the message of BRITS and how it will impact the day-to-day operations of the section and the audit programs. The performance goals and objectives as established by the units within the Corporate Audit Section for the department’s Strategic Plan were met or exceeded for the second straight year! By creating a sense of pride and identifying where they fit into the overall organization, the auditors and support staff were given the opportunity to make decisions regarding their particular tasks that allowed them to met or exceed their goals. A Revenue Enhancement Package was approved and funded by the legislature that allowed the Corporate Audit Section to add twenty-three (23) personnel to the unit to increase audit coverage as well as collections of both under-reported as well as unreported corporate taxes. Some features of the package included: 1. Adding a new team of corporate field auditors 2. Expanding the Nexus Unit 3. Opening a Corporate Audit service center in the East Valley Office 4. Increasing the number of auditors per team Fiscal year 2003 was a productive year for the Field Audit section of Transaction Privilege and Use Tax Audit as shown by the 2,282 audits that were completed for a total of $38.3 million. • The Compliance Unit of Transaction Privilege and Use Tax Audit realized total revenues just over $18.5 million while licensing more than 3,100 new taxpayers. This was a record high for the Section and constitutes a 166% increase over the prior year. • The Refund Section of Transaction Privilege and Use Tax Audit continued to excel in good customer service while processing more than 2,400 refund claims totaling just under $20 million. • Under the Cities Program of Transaction Privilege and Use Tax Audit, the staff has responded to nearly 2,200 telephone calls and distributed just under 1,000 city payment journals. • The Bingo group visited 94% of all Class B & C licensees, well over their goal of 90%. Increased oversight has provided support to bingo operations and assists the non-profit organizations that are funded by bingo games and has improved the accuracy of filing. • The number of Luxury Tax audits decreased by one over the previous year with five completed in fiscal year 2003. Assessments during this period increased from $146,859 in fiscal year 2002 to $282,718 in fiscal year 2003. • The estate tax unit improved operations by reducing the processing days from a high of 102 days to 20 days during the year. Return to Table of Contents ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 9 COLLECTIONS Office Collections After the Accounts Receivable system has completed the prescribed billing cycle, cases are referred to Office Collections. Delinquents (business accounts with returns that have not been filed) are also worked in this section. Here, collectors attempt to reach account resolution via the telephone and with targeted mailings. The section uses a Predictive Dialer System (PDS) to dial the phone on accounts prioritized for work. This system automatically brings up computer screens of the account on calls made and routes them to the first available collector. Office Collections also uses an Automatic Call Distribution (ACD) system to process and handle incoming calls. This system has an Interactive Voice Response (IVR) module that provides automated responses for some basic collections questions such as account balances. Office Collectors can request liens and levies be filed and can negotiate installment payment plans. If they are not able to resolve a case, it is referred to Field Collections or Bankruptcy / Litigation for further action. Field Collections If an Office Collector determines that a case cannot be resolved by phone and that a field (on-site) approach is warranted, the case is referred to the Field Collections section. Field collectors are assigned a territory (by ZIP code) and are responsible for all types of tax cases (income, business, withholding, etc.) in their territory. Field collectors use a combination of telephone and field visits to effect closure. In addition to recommending lien and levy action, Field collectors may subpoena records, work Offers in Compromise, recommend seizures and write off cases if they are determined to be uncollectible. The objective in Field Collections is to reach closure in the least intrusive manner and seizure actions are only used as a last resort after all other more reasonable actions have failed. The Collections Division Liaison section is responsible for all other non-mainstream collection activities. These include cases referred to an outside collection agency in addition to handling disputed audit accounts, insufficient funds check collections, lien processing, case adjustments, Letters of Good Standing, levies on Department of Administration vendors, levies on contractor and insurance bonds and internal systems training. The department uses an outside collection agency to work the smaller dollar accounts in state and to work out-of-state accounts that cannot be resolved in the other collections sections. Bankruptcy and Litigation Bankruptcy and Litigation services a growing population of individual and business tax accounts that have filed for protection under the bankruptcy code. Cases are routed here at any time during the collection process when a case is identified as having filed bankruptcy. This section is responsible for identifying all cases which involve bankruptcy filings, seeing that appropriate claims are filed and following up on actions being taken by the bankruptcy court relative to these accounts. In addition to processing bankruptcies, the section refers cases to the Attorney General’s Office that may require legal action to effect closure as well as processing Offers in Compromise. Debt Set-Off Debt Set-Off serves other state agencies by offsetting tax refunds to reduce debts to other state agencies and the courts. This program includes: qualifying agencies and courts for program participation, notifying agency participants and taxpayers when matches are made, monitoring status of and validating claims, finalizing matches, resolving discrepancies and generating payments to agencies and/or releases to taxpayers. Revenues For The Three Collections Division Units (fiscal year 2003) Office Collections .............................$ 94,605,346 Field Collections ...............................$ 58,098,717 Bankruptcy/Litigation .......................$ 13,382,869 DSO....................................................................$ 0 Unassigned.........................................$ 74,696,328 (TCS and Debt Set-Off figures are included in the Field Collections figures. The Unassigned figures are dollars collected that are not associated with a Collector ID.) ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 10 HIGHLIGHTS IN FISCAL YEAR 2003 • In spite of continued high vacancy rates, the Collections Division succeeded in collecting a combined $240,783,260 which was 2.58% less than they collected in fiscal year 2002. • At the same time, they worked to reduce the turn around time for processing Offers in Compromise to at or below 60 days. A total of 253 Offers were reviewed this year with 76% of them completed within 60 days of receipt. • In addition, the call center in Office Collections maintained excellent customer service levels for all incoming calls by answering 98% of them within 30 seconds. Return to Table of Contents ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 11 EXTERNAL SERVICES & SPECIAL PROJECTS Forms and Publications This unit is responsible for design and printing of all official department forms except Property Tax related forms, review and approval of all substitute forms used by software vendors in preparing Arizona tax returns. This unit is also responsible for the production of all informational publications, the Arizona TaxNews (tax practitioner newsletter) and the department's Online News (electronic employee newsletter). Ladewig This unit designs, implements and effectuates the refund program resulting from the Ladewig class action lawsuit. Legislative Services This Legislative Liaison represents the department before the Legislature. This position coordinates the analysis, research and testimony of tax legislation, reads, analyzes, and tracks bills through the legislative process; coordinates implementation of legislation after passage. Also, this position acts as the liaison between legislators and the department including handling constituent issues for legislators and the Governor’s office, and monitors federal law changes. Office of Economic Research and Analysis The Office of Economic Research & Analysis provides technical services to the department, the Legislature and the executive offices, evaluating proposals regarding changes to any of the taxes administered by the department. The unit provides staff support to the Economic Estimates Commission, Debt Oversight Commission and Property Tax Oversight Commission. It maintains the income tax simulation models and prepares annual and ad hoc reports on tax revenue expenditures, bonding capacities and other tax revenue issues. Public Information Officer This position is responsible for all department communication with members of the media. This position is also the official spokesperson for the department, and facilitates the flow of information to the public and responds to all media contacts and inquires. Return to Table of Contents ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 12 INFORMATION TECHNOLOGY Application Services Application Services provides support for all existing mainframe and client server applications. Support includes problem-resolution (24/7 on-call support), responding to user inquiries, installing mandated regulatory changes and installing changes to enhance application functionality and efficiency. Applications Services maintains a close relationship with the users to ensure satisfaction of their needs. Current direction includes the conversion from our legacy systems to BRITS – our new integrated tax system. The focus of Applications Services is to support the conversion to the new integrated tax system while at the same time support the day-today processing. Data Center Support Data Center Support is comprised of Production Control, Technical Support, and Data Base Management. This team functions as the liaison to ADOA for all mainframe processing and project coordination between the two agencies. Production Control staff schedules and monitors all work done on the ADOA mainframe for the Department of Revenue. The Technical Support staff provides the first line of technical support for all mainframe-related issues for the application programming staff. The Data Base Management staff supports and maintains the mainframe database management system. Enterprise Network Support Enterprise Network Support (ENS) is responsible for research, analysis, implementation, and support of new technologies as they apply to AZDOR business needs. This includes 24 / 7 support for Voice, Data, LAN, WAN, Internet Connectivity, and customer support for five locations across the State of Arizona. The focus of Enterprise Network Support is to ensure maximum network uptime. Additionally, we strive to place a high level of emphasis on responding to our customers in a timely manner. HIGHLIGHTS IN FISCAL YEAR 2003 Application Services: • Implemented changes required for real and personal property 2002 tax year billings; • Provided client counties the ability to update property information in real time online; • Implemented Proposition 104 – the elderly taxpayer property value freeze; • Completed system changes to the TPT (sales tax) system to establish new health service district tax for La Paz County; • Updated TPT to accommodate for the new Rio Nuevo district in Tucson; • Enhanced the auto levy program to utilize information from the federal 1099 file. Also automated the issuance of levies; • Implemented electronic filing of 1099G information to the IRS; • Implemented year-end income and corporate tax changes; • Reengineered the estate tax application to enhance functionality and to convert from an Access to a visual basic environment; • Automated the E-File process to identify software vendor errors and prevent invalid data from processing. Provided an online interface to view E-File tax data that was previously not available online. This allows easier access to tax return information and enhances our ability to service the taxpayers; • Automated the Electronic Return Originator (ERO) Update process to reduce time and errors in updating ERO information; • Worked closely with Accenture, the vendor chosen to implement BRITS – our new integrated tax system. Assigned staff to actively support the implementation of the new system. Have begun to position ourselves to provide ongoing system support. ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 13 Data Center Support: • Implemented FTP process improvements to transfer data to the Auditor General’s Office; • Implemented changes in the mainframe systems to reduce costs for mainframe processing. Examples are: • Control D project made reports available online to reduce printing and paper costs; • Separation of private and non-private files for reduced data storage costs at ADOA; • Implementation of TPX to reduce overall state software license costs; • Created and published a project management methodology for the IT division. Enterprise Network Support: • Upgraded the AZDOR Network Infrastructure to enhance network throughput as well as position the agency for an IP telephony system. • Implemented BRITS server farm to provide the infrastructure necessary to support the BRITS applications. • Implemented Microsoft Operations Manager to automate alerts for server performance and monitoring. • Researched and selected vendor to provide PCs for the agency desktop refresh. • Conducted and passed Security Posture Assessment for AZDOR network. • Deployed Image Viewer application to support BRITS program implementation. • Improved Help Desk policies and procedures to ensure better customer service to the agency. • Installed hardware and software to provide support for annual VITA Site that assists taxpayers. Return to Table of Contents ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 14 PROCESSING ADMINISTRATION Organization The mission of the Process Administration Division is to provide quality service and perform timely and accurate processing of taxes for Arizona taxpayers. The division consists of the following sections: Comptroller The Comptroller is responsible for providing revenue accounting services. This includes the reconciliation and reporting of tax dollars deposited to the State’s financial institution, revenue and taxpayer accounting services, and refund warrant management. The Accounts Receivable Unit is responsible for processing new receivable and adjustment transactions, timely reconciliation and reporting, NSF check processing, and credit balance management. The Remittance Processing unit is responsible for the timely and accurate preparation of tax remittances for deposit. The Data Entry Unit is responsible for the timely and accurate entry of tax forms to the tax systems. The Electronic Funds Transfer Unit is responsible for the management of the program for receiving electronic business tax payments. Mail Services Mail services is divided into two units: Incoming Mail is responsible for the receipt, sorting, and delivery of all tax documents, payments and correspondence received by the agency. Outgoing Mail is responsible for mailing all tax documents, billing, correspondence and tax changes notices, audit and collection notices to all taxpayers. Individual Income Tax Processing Individual Income Tax Processing is divided into three units: Refund/Research, Document Processing and Error Resolution. These units are responsible for issuing income tax refunds, preparing documents and revenue to be keyed and resolving discrepancies between the taxpayer’s calculations and the department’s computerized calculations. Business Tax Processing Business Tax Processing is divided into three units: Transaction Privilege Tax, Withholding Tax and Corporate Income Tax. Each of these units is responsible for the preparation of documents and revenue, issuing credits/refunds as appropriate and resolving discrepancies between the taxpayer’s calculations and the department’s calculations. Records Management Records management maintains and provides access to tax returns and license applications within the department. Micrographics Section microfilms all individual and corporate tax returns. They duplicate all microfilm for distribution within the department. The department’s warehouse stores bulk items such as: copy paper, a wide variety of envelopes and bulk tax forms. The staff also provide a wide variety of duties such as assisting the Facilities group with moving modular product, moving office equipment and department records between sections and/or locations and courier services between the department office sites as well as vendor and other State agencies. ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 15 • • HIGHLIGHTS IN FISCAL YEAR 2003 During the 2003 tax-filing season, 1,596,196 paper documents were processed. The total number of income tax refunds processed was 1,021,770. The Comptroller's Office returned 12,423 warrants to taxpayers that had been returned to the department because the taxpayer's address was incorrect. This was 92% of all warrants returned. • Refund turn-around time averaged 12 days. • • The total number of Corporate Income Tax documents processed was 216,849 of which 104,782 were returns. The Corporate Income Tax refunds issued exceeded $194 million. The Remittance Processing Unit processed almost 2.9 million checks totaling over $3.4 billion dollars. • The Data Entry Unit keyed over 2 million documents in fiscal year 2003. The unit kept its primary focus on keying business tax returns. Individual Income tax returns were outsourced to our keying partners because of the volume received and the statutory requirements for turning refunds around. The decrease in the number of documents keyed by the Unit is attributable to the increased number of returns that were e-filed. This enabled the department to decrease the amount of money spent in the preparation and keying of income tax returns. • The Accounts Receivable Unit continued its high level of service in processing maintenance items in less than 24 hours of receipt with a .07% error rate. • The Incoming Mail Unit processed approximately 5 million letters and flats during the fiscal year. This included income, transaction privilege tax, withholding and corporate tax mail. • The Outgoing Mail Team processed over 2.7 million pieces of mail, not including the county property tax forms. • The total number of Transaction Privilege, Use and Severance Tax documents processed was 1,322,423, of which 1,190,600 were returns. The Electronic Funds Transfer (EFT) system for Transaction Privilege Tax (started in early 1998) has exceeded our expectations. The $2.9 billion received is 60% of all TPT revenues collected. • The total number of Withholding Tax Documents processed was 2,011,952, of which 431,701 were returns. This year 5,373 employers filed Withholding returns annually and we expect this number to grow as the tax practitioners and small businesses take advantage of this annual program. • • The Records Management unit has worked to improve quality. The Records Maintenance Section has received approximately 45,017 new license applications and has completed 49,850 requests for taxpayer documents. The Micrographics Section microfilmed 2.7 million individual documents. The Electronic Funds Transfer Unit electronically processed approximately $4.71 billion during fiscal year 2003. This is an increase of $7.7 million more than fiscal year 2002. The unit also processed 366,994 payments, an increase of 45,601 payments from the prior year. In fiscal year 2003 the unit electronically processed 61.2% of the business tax payments received and 14.9% of the business tax transactions. Return to Table of Contents ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 16 PROPERTY TAX Valuation Section The Valuation Section consists of four units: the Centrally Valued Properties Unit, the Locally Assessed Properties Unit, the Personal Property Group and the Construction Cost Group. The Centrally Valued Properties Unit annually determines the full cash value of all utilities, railroads, mines and other complex or geographically-dispersed properties (see page 63 for a list of the industries valued by the department). Values determined by this unit for such properties are transmitted to the appropriate county assessors for the county tax roll. The Locally Assessed Properties Unit oversees and ensures the application of uniform appraisal methods and techniques used by the county assessors to determine the value of property. The unit also presents technical workshops to county assessors and provides an appraiser/assessor certification program for appraisal staff. The Personal Property Group oversees the development and application of personal property procedures and manuals and provides technical workshops to county personnel. The Construction Cost Group maintains existing component costs for the computerized construction cost system and annually reviews market and location adjustments in each county. The group also provides training for county appraisers on the use of the construction cost system. Assessment Standards & Equalization (AS&E) Section The AS&E Section consists of four units: the Central Information Services (CIS) Unit, the CAMA/GIS Unit, the Manuals and Forms Unit and the Equalization Review Unit. tax rolls, the preparation of valuation abstracts, property tax notices of value and statements of taxes due. The group is also responsible for the statewide administration of the additional state aid to education homeowner rebate program for Arizona school districts and levy limit calculations for client counties, cities/towns and community college districts. The CAMA/GIS unit assists the county assessors with maintaining and updating a standardized cadastral mapping system (CAD). The unit prepares tax area code maps that depict boundaries of taxing jurisdictions authorized to levy property taxes. In addition, they develop sales-based models for residential properties and maintain and assist County Assessors with the Land Valuation System and the Sales Tracking System. The Manuals and Forms group responsibilities include the annual compilation and updating of manuals and guidelines; annual review of forms prescribed for use in the administration of the property tax system; annual review of legislative enactments and changes to existing property tax statutes; and annual preparation of the "Title 42 Extract of Property Tax Statutes". This extract includes all property tax statutes and related statutes from other titles affecting the property tax system. The Valuation Review group is responsible for annually measuring county assessors' performance for compliance with established full cash/market value standards. The group conducts sales ratio studies throughout the yearly valuation cycle to assist counties in complying with valuation standards. The CIS group develops and coordinates the information processing services necessary to support property tax administration for 13 Arizona Counties. The support services provided to the client counties include management of automated systems used in the maintenance of assessment and ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 17 HIGHLIGHTS IN FISCAL YEAR 2003 • The Centrally Valued Property Unit completed the tax year 2004 valuations for approximately 840 centrally valued taxpayers for a total of $23 billion full cash value. • The PT50+ Real Time Update Project was completed. This will allow many of the secured property system updates to be put on-line in real time. • The County Services Unit produced the 2003 Commercial Property Tax Market Study. The study provides the county assessors with commercial and multi-family property sales, income/expense and capitalization rate data for the 13 non-metro counties in Arizona. Copies of the study were provided to assessors in electronic format via e-mail for the first time. • The Training and Certification Unit taught 15 appraisal courses with an average attendance of 21 students per course. Thirty Level One and 43 Level Two students were certified. • The Construction Cost Unit inaugurated the Square Foot Enhancement to the Construction Cost Mainframe Computer System. This enhancement will allow the County Assessors' Staff to list improvements on the Cost System with less appraiser training time, less field time and with fewer input errors. Return to Table of Contents ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 18 TAXPAYER SERVICES Community OutReach and Education (CORE) This section provides the Department’s outreach and educational programs for both taxpayers and practitioners. CORE’s primary goal is to promote voluntary compliance with tax laws through taxpayer education. The staff develops and presents workshops and seminars as well as participating in trade shows throughout the state. The programs focus on support for the small business community but services and assistance are also directed toward personal income tax. Many projects are developed in partnership with the IRS, other federal, state and local agencies and organizations as well as the Small Business Administration and related associations. E-File This program was established to coordinate services between other agencies, the practitioner community and software industry. They approve software for use by practitioners and the public and market the benefits of E-Filing to the taxpayer. Tax returns that are submitted through this program are processed virtually error free and refunds are issued in days rather than weeks. License and Registration (L&R) This section processes applications for transaction privilege, use, severance and withholding taxes. The unit issues transaction privilege tax licenses for contract cities that participate in the state tax collection program. They also administer the contractor bonding program, which affects some new contracting businesses and delinquent taxpayers. The section oversees the database of licenses and continually collects and updates taxpayer records. They provide assistance to the public through dissemination of general license information. The section handles distribution of tax forms, the sale of tobacco stamps and cashiering services for customers at each of the agency’s offices. The License Compliance group within the section conducts research to identify unlicensed businesses and brings them into compliance. They provide education on licensing statutes and regulations to assist taxpayers in complying with the tax laws. Taxpayer Information and Assistance (TIA) This section provides information concerning business and income taxes administered by the Department. This is accomplished through various avenues, including telephone contact, email, recorded tax information, correspondence and walkin services at each of the agency’s offices. The section researches and resolves account problems and responds to billing inquiries and disputes. Another important function of Taxpayer Information and Assistance is the Penalty Review Unit, which is responsible for reviewing and making a determination on all taxpayer requests for penalty abatements (except those relating to an audit). If the unit determines that reasonable cause exists and abatement is warranted, the staff handles the necessary paperwork. If abatement is not warranted, the staff represents the Department in any subsequent hearings. Unclaimed Property This program is administered for the purpose of returning to the rightful owner abandoned property in the form of goods and money such as the contents of safe deposit boxes, insurance policy premiums, deposits in banks and security deposits, unclaimed gift certificates or layaways and uncashed checks. Through a variety of methods, staff attempts to locate property owners and processes claims in order to return the asset to the owner and also facilitates the submission of property from businesses and entities that hold the property. In addition, the unit is responsible for promoting compliance from businesses that hold abandoned property through outreach and audit efforts. ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 19 • HIGHLIGHTS IN FISCAL YEAR 2003 • • • • • • • Participation in Taxpayer Education events increased by 36% (to almost 24,000) while improving efficiency with 6% fewer presentations. CORE provided showcase events for Tax Practitioners and Small Businesses in the form of Tax Talk and Employers Potpourri. The section partnered with a wide range of entities, including the Internal Revenue Service, Social Security Administration, Immigration and Naturalization, Department of Labor, Department of Economic Security, Maricopa County, Arizona Small Business Association, Chicanos Por La Causa, Chambers of Commerce, Small Business Development Centers statewide, AARP, SCORE, Arizona Forum for Improvement of Taxation and cities of Phoenix, Surprise, Avondale, Flagstaff, Tucson, Mesa, Chandler and Yuma. This partnering enabled us to provide businesses with a wide variety of resources and assistance to meet the challenges of dealing with the regulatory environment and taxation. Coordinated the Volunteer Income Tax Assistance program providing efile services to taxpayers. Over 3,200 taxpayers were assisted at the department’s Supersite. E-filed tax returns increased by 50% for a total of 723,743 returns. Of which, 316,100 taxpayers received their refunds via direct deposit. The number of tax professionals participating in the e-file program increased to 2,800, a 69% increase. The number of license applications processed was up 5% over last fiscal year to total 51,244 with a turnaround average of 4.6 days. This was a considerable improvement over fiscal year 2002, when the average turnaround for license applications averaged 8.3 days. The License Compliance unit performed researches on 116,076 businesses or a 40% increase over last year and issued 3,007 licenses, a 53% increase. This resulted in a 5.8% increase in revenues (a total of $24,024,384) for the fiscal year. • • • • The recorded instructions for Forms 140, 140A and 140EZ were completely revised and rerecorded for the DOR call center. An electronic version of the recorded instructions has also been produced for the first time and is available on the internet. Staff established a new walk-up station in the lobby to assist with crowd control on payment days. This has resulted in shorter lines at the cashiering windows and faster service to taxpayers that chose to use this service. As a result over 7,300 taxpayers avoided waiting in lines at DOR offices. TIA staff reduced the inventory of open cases from 3,478 cases to 2,428 cases. The Unclaimed Property Holder Compliance Unit completed input of annual holder reports. A total of 18,397 reports were keyed, an increase of 15% over last year. From these reports, 164,737 new properties were added to the system. This is an increase of more than 30,000 properties from the prior year’s reports. Audit collections totaled $5.9 million, a $700,000 increase over last fiscal year. Unclaimed Property completed the first phase of imaging holder reports. The imaged documents are much easier to use by the staff resulting in a reduction of research time of about 50%. The easy access to original documents (via images) is also expected to decrease the chance for errors in processing of claims. Return to Table of Contents ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 20 TAX POLICY & RESEARCH The Division provides administrative tax policy for the department, legal and interpretative support, case resolution and advocacy for the various divisions within the department. The Division also acts as liaison to the Attorney General's Tax Section and coordinates the defense of litigation with the Tax Section attorneys. The Division provides additional support to the Director on an as-needed basis, including services in the area of protecting taxpayer confidentiality and privacy. The Division consists of Corporate Audit Appeals, Individual Income Audit Appeals, Transaction Privilege Tax Audit Appeals, and the Tax Research & Analysis Section. Tax Research & Analysis Tax Research & Analysis Section reviews, analyzes, develops and disseminates administrative tax policy for the department in numerous ways. The Section is responsible for drafting formal taxpayer rulings and procedures as well as private taxpayer rulings. The Section also responds to technical and complex inquiries by telephone and information letters. The Section is responsible for maintaining consistency in interpretation of policy and interpretation within the department. The Section is also responsible for reviewing and analyzing legislation, assisting the department in setting tax policy, and developing and promulgating administrative rules. Additionally, the Section provides policy support for the Audit Division and provides guidance and interpretative advice to the audit sections on audit issues and protested cases. Tax Appeals The office consists of three appeals sections: Transaction Privilege & Use Tax, Corporate Income Tax and Individual Income Tax. The Transaction Privilege & Use Tax (TPT) Appeals Section is headed by the TPT Appeals Administrator and assists the Transaction Privilege and Use Tax Audit Section with case refinement and resolution services at the informal hearing as well as advocating the audit section’s position in cases before the State Office of Administrative Hearings, the department's Hearing Office, and the Director. The Section also assists the Tax Section of the Attorney General's Office with preparation and research of cases being heard before the Board of Tax Appeals, Tax Court and the appellate courts. The Administrator of the Section also acts as the Disclosure Officer for the department. The Corporate Income Tax Appeals Section reviews cases from the Corporate Income Audit Section and provides case refinement, resolution and advocacy services for those cases. The Section works handin-hand with the Corporate Audit Section, represents the Corporate Audit Section at the informal hearing, before the Hearing Office, and the Director. The Section also assists the Tax Section of the Attorney General's Office with preparation and research of cases being heard before the Board of Tax Appeals, Tax Court and the appellate courts. In addition, the staff will testify at various levels of the appeals process. The Section may also provide interpretative advice to the Corporate Income Audit staff. The Individual Income Tax Appeals Section reviews cases from the Individual Income Audit Section and provides case refinement, resolution and advocacy services for those cases. The Section also provides interpretative advice to the Individual Income Audit Staff. The Section also assists the Tax Section of the Attorney General's Office with preparation and research of cases being heard before the Board of Tax Appeals, Tax Court and the appellate courts. In addition, the staff will testify at various levels of the appeals process. Return to Table of Contents ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 21 ARIZONA'S TAXES Revenue Summary (Table 1) Net Revenue to State General Fund (Table 2) Gross Collections of Audit Assessments and Delinquent Tax (Table 3) Transaction Privilege, Use and Severance Tax Income Tax Property Tax ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 22 TABLE 1 REVENUE SUMMARY GROSS REVENUE COLLECTED FISCAL YEAR 1998-99 THOUGH FISCAL YEAR 2002-03 SOURCE FY1998-99 TRANSACTION PRIVILEGE USE AND SEVERANCE TAX Distribution Base $1,089,625,165 Nonshared Portion 2,042,232,511 Use Tax 148,043,174 Education Tax (1) ----Undistributed Estimated Transaction Privilege Tax 11,668,636 Other State Revenue 18,352,045 County and City Collections 541,562,578 FY1999-00 $1,195,140,016 2,230,332,220 176,566,264 ----- FY2000-01 FY2001-02 FY2002-03 $1,248,485,639 2,356,788,664 196,887,927 100,682 $1,246,773,262 2,379,509,616 162,751,987 439,004,543 $1,265,625,175 2,400,432,714 190,186,057 447,841,034 12,392,607 18,254,373 654,131,327 1,894,841 21,123,487 721,459,433 28,766,081 32,971,582 766,018,836 9,156,917 34,401,816 797,522,090 Subtotal $3,851,484,109 $4,286,816,807 $4,546,740,674 $5,055,795,907 $5,145,165,803 INCOME TAX Withholding Individual Corporate 2,072,018,474 765,853,606 643,230,321 2,259,201,907 826,789,215 637,765,231 2,363,693,852 858,775,963 678,002,658 2,309,340,885 705,843,394 512,257,476 2,310,302,093 656,586,317 518,246,330 Subtotal $3,481,102,401 $3,723,756,353 $3,900,472,473 $3,527,441,755 $3,485,134,740 19,648,670 7,969,428 20,534,013 166,288,764 7,175 20,587,605 9,026,326 21,309,231 162,896,049 7,175 21,327,540 8,477,493 21,602,321 160,694,260 8,600 21,574,744 9,035,156 22,031,467 161,754,302 5,250 $214,448,050 $213,826,386 $212,110,214 $214,400,920 $272,027,802 89,087,575 21,315,542 85,238,335 31,415,063 76,921,666 38,020,547 81,892,657 48,681,438 96,859,390 46,219,555 309,305 201,612 654,400 252,786 269,557 $110,712,421 $116,855,010 $115,596,613 $130,826,881 $143,348,502 717,830 14,856,910 1,441,440 926,814 5,476,881 677,036 13,418,771 1,476,728 945,935 5,674,452 634,384 13,387,179 1,349,685 924,778 6,346,629 629,680 13,056,694 1,509,625 940,611 6,392,637 626,770 12,741,749 1,485,996 1,012,992 7,007,444 $23,419,875 $22,192,921 $22,642,655 $22,529,247 $22,874,950 $7,681,166,856 $8,363,447,477 $8,797,562,629 $8,950,994,710 $9,068,551,797 10,069,191 24,686,866 22,552,932 18,454,625 9,493,897 $7,691,236,047 $8,388,134,343 $8,820,115,561 $8,969,449,335 $9,078,045,694 LUXURY TAX Spirituous Liquor Vinous Liquor Malt Liquor Tobacco - All Types (2) Licensing Subtotal ESTATE TAX Estate Unclaimed Property Escheated Estates and Unclaimed Dividends Subtotal OTHER REVENUES Bingo Flight Property Tax Private Car Tax Nuclear Plan Assessment Waste Tire Subtotal DEPARTMENT TOTAL State Property Tax (3) TOTAL (4) 22,004,331 9,924,749 22,137,764 217,955,008 (5) 5,950 (1) Education tax became effective on June 1, 2001. (2) Figures represent gross tobacco revenue less administrative expenses. (3) Property Tax is collected and deposited in the state general fund by counties. This figure includes deposits to the General Fund derived from the minimum Qualifying Tax Rate and taxes collected within Unorganized School Districts. (4) All revenues collected by the Department of Revenue, including those which are refunded or distributed, and State Property Tax. (5) Growth due to increases in tobacco tax rates effective November 2002. For additional detail on the current year revenue, please refer to the appropriate section within this Annual Report. Figures may not add to total due to rounding. Return to Table 23 of Contents TABLE 2 NET REVENUE TO STATE GENERAL FUND FISCAL YEAR 1998-99 THROUGH FISCAL YEAR 2002-03 FY1998-99 FY1999-00 FY2000-01 FY2001-02 FY2002-03 SOURCE Transaction Privilege, Use, and Severance Tax $2,566,087,404 $2,817,525,828 $2,982,824,755 $2,972,274,262 $3,027,135,359 11,668,636 12,392,607 1,894,841 28,766,081 9,156,917 Income Tax 2,302,706,944 2,434,799,495 2,445,472,944 2,011,052,550 2,056,591,466 Luxury Tax 64,770,498 65,436,145 65,568,793 66,069,587 64,586,950 Estate Tax/ Unclaimed Property 89,334,610 84,725,503 78,961,539 88,298,138 100,963,571 717,830 677,036 634,384 629,680 626,770 1,441,440 1,476,728 1,349,685 1,509,625 1,485,996 926,814 945,935 924,778 940,611 1,012,992 7,367,078 6,709,385 6,693,590 6,528,347 Department Total $5,045,021,253 $5,424,688,662 $5,584,325,308 $5,176,068,883 $5,267,816,008 State Property Tax (1) 10,069,191 24,686,866 22,552,932 18,454,625 9,493,897 $5,055,090,444 $5,449,375,528 $5,606,878,240 $5,194,523,508 $5,277,309,905 Undistributed Estimated Transaction Privilege Tax Bingo Private Car Tax Nuclear Plan Assessment Flight Property Tax TOTAL 6,255,987 (2) (1) Property Tax is not collected by the Department of Revenue. It is deposited in the State General Fund by counties. This figure includes deposits to the General Fund derived from the minimum Qualifying Tax Rate and taxes collected within Unorganized School Districts. (2) A refund issued during FY 03 reduced the General Fund distribution by $114,887. Figures may not add to total due to rounding. Return to Table of Contents 24 TABLE 3 GROSS COLLECTIONS OF AUDIT ASSESSMENTS AND DELINQUENT TAX FISCAL YEAR 2001-02 AND FISCAL YEAR 2002-03 AUDIT COLLECTIONS FY2001-02 Assessment Collections (Gross) Miscellaneous Taxes (Net of Credit) FY2002-03 % CHANGE $51,058,784 $1,360,262 $64,860,554 $6,172,998 27.0% 353.8% $52,419,045 $71,033,552 35.5% TOTAL BILLINGS $150,299,818 $138,229,448 -8.0% TOTAL DELINQUENT TAX COLLECTIONS $272,698,314 $265,393,464 -2.7% TOTAL UNADJUSTED ENFORCEMENT COLLECTIONS $475,417,177 $474,656,464 -0.2% ($58,416,043) ($73,785,528) 26.3% $417,001,135 $400,870,936 -3.9% $18,991,988 $12,132,145 -36.1% TOTAL AUDIT UNIT COLLECTIONS ADJUSTMENTS (1) Duplication, Credit Audits and Other Adjustments As Reported TOTAL ADJUSTED ENFORCEMENT COLLECTIONS (2) REFUND DENIALS (1) Audits resulting in credit adjustments are subtracted to produce an actual figure representing the net gain to the state from the Taxation and Transaction Privilege Tax Divisions' efforts. (2) Actual amounts resulting from the Department's enforcement effort. Return to Table of Contents 25 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX MAJOR FEATURES Arizona’s transaction privilege, use and severance taxes are imposed on the privilege of transacting business in the state. The rates range from 1% (cities) to 5.6% depending on the type of business, with most rates at 5.6% (Refer to Table 5). Approximately 172,000 accounts collectively remitted gross revenues exceeding $4.3 billion during the 2003 fiscal year for transaction privilege, use and severance tax revenues (Refer to Table 4). SEVERANCE TAX A severance tax is imposed in lieu of a transaction privilege tax on the businesses of mining metalliferous mineral and severing timber. The severance rates are 2.5% on mining metalliferous minerals, $2.13 per thousand board feet (Ponderosa) and $1.51 per thousand board feet (other) on timbering, effective January 1995 (Refer to Table 5). DISTRIBUTION The total of transaction privilege and rental occupancy taxes creates a tax base that is divided into two parts, distribution base and non-shared. The distribution base portion is divided among municipalities (25%), counties (40.51%), and the state general fund (34.49%). The non-shared portion is deposited directly to the state general fund (Refer to Tables 7 and 8). Use tax is deposited only to the state general fund. USE TAX A 5% use tax is imposed on the purchase price of tangible personal property when a transaction privilege or sales tax equal to or greater than the Arizona rate was not paid. A use tax collection responsibility is imposed on retailers whose activities in the state are insufficient to require them to pay transaction privilege tax but are nonetheless substantial enough to fall outside the protective umbrella of the United States Constitutional provision governing interstate commerce. Firms without nexus may also voluntarily collect use tax for the benefit of their customers. MUNICIPAL PRIVILEGE AND USE TAX The department collects transaction privilege and use tax for 75 Arizona cities and towns at no charge to the municipalities. This is a service to the cities and to the taxpaying community who are therefore able to combine their reporting requirements on a single form and payment to a single governmental entity. Weekly distribution checks are processed after the department collects the local taxes (Refer to Tables 26 and 27). Effective with the enactment of Laws 2000, Chapter 297, the department also conducts multi-jurisdictional audits with and for all other cities in Arizona. COUNTY TAX AND SURCHARGE COLLECTION Of the 15 counties in Arizona, 14 levy some type of county tax or surcharge (Refer to Table 4). The department collects these taxes or surcharges. The rental car surcharge is imposed only in Maricopa and Pima Counties. A tax on hotels located in unincorporated areas of the county is levied in Pima County. Of the 14 counties with statutory authority to impose an excise tax, 13 do so. By statute, Maricopa County may not impose an excise tax. Although subject to voter approval, any county may levy a transportation excise tax or road tax. Only three counties, Gila, Maricopa, and Pinal, do so. The other types of county excise tax options are a hospital tax, a jail tax, capital projects, and health services district. ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 26 TABLE 4 GROSS TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS FISCAL YEAR 1998-99 THROUGH FISCAL YEAR 2002-03 SOURCE FY1998-99 Distribution Base Nonshared Use Tax SUBTOTAL Education Tax (8) Undistributed Estimated 911 Wireline/Excise Tax Telecommunications Devices Poison Control Fund 911 Wireless Service Municipal Water Environmentally Hazardous Products (2) Waste Tire Accounts Receivable Collections Less Collection Fees GROSS STATE COLLECTIONS FY1999-00 FY2000-01 FY2001-02 FY2002-03 $1,089,625,165 2,042,232,511 148,043,174 $1,195,140,016 2,230,332,220 176,566,264 $1,248,485,639 2,356,788,664 196,887,927 $1,246,773,262 2,379,509,616 162,751,987 $1,265,625,175 2,400,432,714 190,186,057 $3,279,900,850 $3,602,038,500 $3,802,162,230 $3,789,034,865 $3,856,243,946 100,682 1,894,841 9,201,049 5,514,542 2,039,625 2,136,015 2,120,483 5,909 439,004,543 28,766,081 14,998,348 6,395,057 2,365,295 6,928,990 2,213,435 14 447,841,034 9,156,917 13,914,520 6,328,095 2,340,528 9,596,186 2,150,995 42 ----11,668,636 8,084,729 5,158,289 1,907,860 1,181,481 1,957,725 536 ----12,392,607 7,846,057 4,960,224 1,834,603 1,507,573 2,081,879 980 62,946 (1,521) 25,739 (2,682) $3,309,921,530 $3,632,685,479 109,948 (4,084) $3,825,281,241 71,330 (888) $4,289,777,071 72,824 (1,375) $4,347,643,714 Municipal Privilege Tax Pima County Hotel Tax Maricopa County Rental Car Surcharge Pima County Rental Car Surcharge Pima County R.V. Surcharge Apache County Excise Tax Cochise County Excise Tax Coconino County Excise Tax Coconino County Jail Tax Coconino County Capitol Projects (9) Gila County Excise Tax Gila County Hospital Tax (3) Gila County Transportation Graham County Excise Tax Greenlee County Excise Tax La Paz County Excise Tax La Paz County Jail Tax La Paz County Health Services District (10) Maricopa County Road Tax Maricopa County Stadium Tax (4) Maricopa County Jail Tax Mohave County Excise Tax Navajo County Excise Tax Pinal County Excise Tax Pinal County Road Tax Santa Cruz County Excise Tax Yavapai County Excise Tax Yavapai County Jail Tax (5) Yuma County Excise Tax Yuma County Jail Tax Yuma County Capitol Projects Tax (6) Tourism/Sports Authority (7) 202,218,016 2,437,787 5,405,493 1,388,744 218,359 638,649 4,311,066 8,085,596 4,793,744 ----2,350,334 7,003 2,423,201 1,172,236 546,749 777,423 776,444 ----229,470,201 437,677 34,290,683 (1) ----4,372,839 5,698,428 6,072,244 1,847,305 8,565,735 ----6,638,969 6,617,655 --------- 230,976,587 2,625,508 5,734,678 1,476,750 212,849 1,862,479 4,853,891 8,876,866 5,261,397 ----2,311,624 92 2,377,944 1,188,238 563,020 806,441 807,563 ----248,595,990 150,336 91,054,451 1,608,620 (1) 4,655,169 6,149,485 6,575,202 1,918,653 9,571,900 ----6,965,025 6,950,571 --------- 257,706,985 2,823,410 5,636,907 1,557,354 197,598 1,130,977 5,123,754 9,054,404 5,358,317 ----2,596,028 38,499 2,612,288 1,206,320 645,168 820,780 821,969 ----264,722,440 280,370 97,603,200 4,114,594 4,831,327 6,492,013 6,750,294 2,092,940 10,054,989 3,627,698 7,417,302 7,412,145 3,150,273 (1) 5,579,087 (1) 280,950,442 2,495,830 5,396,445 1,377,083 189,838 903,381 5,698,660 8,793,909 5,486,442 ----2,617,971 509 2,718,050 1,192,075 562,389 885,465 885,694 ----267,563,343 145,148 98,372,053 4,446,472 4,993,912 6,763,454 6,965,671 2,114,505 10,799,358 4,294,368 7,665,873 7,653,390 7,582,374 16,504,732 302,626,095 2,556,951 5,267,273 1,435,901 194,949 960,194 5,673,861 9,467,920 5,692,968 864,263 2,519,790 2 2,606,712 1,174,735 700,206 862,595 862,282 143,928 268,720,901 98,185 98,462,479 4,874,083 5,295,310 8,062,544 8,280,451 2,186,284 11,279,837 4,489,617 8,084,880 8,113,092 8,041,984 17,921,823 COUNTY AND CITY COLLECTIONS 541,562,578 654,131,327 721,459,433 766,018,836 797,522,090 $3,851,484,108 $4,286,816,806 $4,546,740,674 $5,055,795,907 $5,145,165,803 TOTAL DEPARTMENT OF REVENUE RECEIPTS (1) The tax was in place for only a portion of the first fiscal year. This figure does not represent a full year's collection. (2) Environmentally Hazardous Products was repealed September 1, 1992. All amounts received are for prior tax periods. (3) Gila County Hospital Tax ended effective March 31, 1993. (4) Maricopa County Stadium Tax ended effective December 1, 1997. (5) Yavapai County Jail Tax began on July 1, 2000 (6) Yuma County Capitol Projects Tax Began on January 1, 2001 (7) Tourism/Sports Authority Tax became effective March 1, 2001. (8) Education Tax became effective on June 1, 2001. (9) Coconino County Capital Projects Tax became effective on January 1, 2003. (10) La Paz County Health Services District Tax became effective on September 1, 2002. 27 TABLE 5 STATE TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX RATES FISCAL YEAR 2002-03 TAXABLE ACTIVITIES 1. Transporting and Towing 2. Nonmetalliferous Mining, Oil and Gas Production 4. Utilities 5. Communications 6. Railroads and Aircraft 7/8. Private Car/Pipelines 9. Publishing 10. Printing 11. Restaurants and Bars 12. Amusements 14. Personal Property Rentals 15. Contracting (1) 17. Retail 19. Mining Severance 21. Timbering Severance - Ponderosa (per thousand board feet) 22. Timbering Severance - Other (per thousand board feet) 25. Hotel/Motel Tax 28. Rental Occupancy Tax 29/30. Use and Use Inventory Tax 47. Membership Camping 49. Jet Fuel (per gallon) 51. Jet Fuel Use ( per gallon) DISTRIBUTION BASE NONSHARED EDUCATION TOTAL TAX 1.0% 4.0% 0.6% 5.6% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 2.0% 2.0% 2.0% 1.0% 2.0% 2.0% $1.704 2.125% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 3.0% 3.0% 3.0% 4.0% 3.0% 0.5% $0.426 0.0% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.0% $0 3.125% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% 2.5% $2.13 $1.208 $0.302 2.75% 2.0% 0.0% 2.0% $0.0122 $0 2.75% 1.0% 5.0% 3.0% $0.0183 $0.0305 (1) Most Contracting activity is covered under class 15, at a 5.6% total tax rate. Other classes at lower rates exist. 28 $0 0.0% 0.0% 0.6% 0.6% $0 $0 $1.51 5.5% 3.0% 5.6% 5.6% $0.0305 $0.0305 TABLE 6 NET TAXABLE SALES BY TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX CLASSIFICATIONS (1) FISCAL YEAR 1998-99 THROUGH FISCAL YEAR 2002-03 CLASSIFICATION Transportation and Towing Mining, Oil & Gas Mining Severance Timber Severance (4) Utilities Communications Railroads and Aircraft Private Car and Pipelines Publishing Job Printing Local Advertising (2) Restaurants and Bars Amusements Commercial Lease (5) Personal Property Rentals Contracting Feed Wholesale (3) Retail Hotel/Motel Rental Occupancy Tax Use Tax Membership Camping Agriculture Equipment (7) TOTAL FY1998-99 $58,302,201 204,730,724 749,256,686 (439) 5,066,644,493 2,153,027,806 36,057,579 % OF TOTAL 0.09 0.31 1.14 (0.00) (6) 7.72 3.28 0.05 15,556,192 119,042,396 418,739,698 (1,614) 5,476,712,938 680,140,832 (133,063,779) 0.02 0.18 0.64 (0.00) (6) 8.34 1.04 (0.20) 3,170,337,708 10,021,561,060 269,821 32,964,475,378 1,679,514,834 3,930,929 2,951,224,001 1,682,321 ----$65,638,141,764 4.83 15.27 0.00 (6) 50.22 2.56 0.01 4.50 0.00 (6) 100.00 FY1999-00 $56,620,330 193,933,697 481,582,634 0 5,268,207,981 2,453,093,781 32,885,789 5,612,007 112,357,871 418,677,603 27,476 5,976,371,272 758,823,163 659,198,999 3,412,995,935 10,847,157,383 382,271 36,403,861,655 1,818,473,902 3,733,808 3,514,612,988 1,411,253 ----$72,420,021,798 % OF TOTAL FY2000-01 0.08 0.27 0.66 0.00 (6) 7.27 3.39 $85,910,143 224,834,096 168,695,209 0 5,814,282,521 2,870,088,870 0.05 52,745,618 0.01 0.16 0.58 0.00 (6) 8.25 1.05 0.91 4.71 14.98 0.00 (6) 50.27 2.51 0.01 4.85 0.00 (6) 100.00 15,485,669 124,462,488 402,933,841 0 6,300,820,165 760,837,607 182,691,438 3,658,549,237 11,250,537,683 (41,648) 38,282,337,115 1,871,008,576 4,896,781 3,922,952,933 2,420,361 1,212,738 $75,997,661,442 % OF TOTAL 0.11 0.30 0.22 0.00 (6) 7.65 3.78 0.07 0.02 0.16 0.53 0.00 (6) 8.29 1.00 0.24 4.81 14.80 (0.00) (6) 50.37 2.46 0.01 5.16 0.00 (6) 0.00 (6) 100.00 FY2001-02 $57,567,191 208,310,010 (4,263,622) 766,360 5,919,273,137 2,945,681,407 38,788,894 7,134,188 82,843,214 351,141,961 0 6,428,712,331 743,800,365 36,912,605 3,607,518,815 11,820,596,498 (1,806,235) 38,432,859,974 1,659,760,985 5,967,630 3,240,459,960 2,741,146 2,106,425 $75,586,873,240 % OF TOTAL 0.08 0.28 (0.01) 0.00 (6) 7.83 3.90 0.05 0.01 0.11 0.46 0.00 (6) 8.51 0.98 0.05 $63,088,526 268,072,442 45,049,321 0 5,940,826,217 2,869,499,256 (36,982,331) 12,492,721 133,229,181 427,730,090 0 6,655,027,562 782,669,793 (7,578,796) 4.77 3,319,777,937 15.64 11,563,726,354 (0.00) (6) (67,256) 50.85 39,408,769,331 2.20 1,698,499,187 0.01 1,427,458 4.29 3,793,690,395 0.00 (6) 2,406,275 0.00 (6) 0 100.00 $76,941,353,662 (1) Net taxable sales are based upon tax receipts. (2) Local advertising was phased out on January 1, 1986. (3) Feed Wholesale dropped to 0% effective July 17, 1994 and was repealed effective October 1, 1994. (4) Effective July 13, 1995 the tax rate on Timber Severance was changed to a dollar amount per 1,000 board feet. Timber Severance includes only sales subject to the repealed rate. (5) Commercial Lease rate dropped to 0% effective July 1, 1997. (6) Percent of total is less than 0.01%. (7) Agriculture Equipment was phased out July 1, 1988 and is not a current business classification. Figures may not add to total due to rounding. 29 FY2002-03 % OF TOTAL 0.08 0.35 0.06 0.00 (6) 7.72 3.73 (0.05) 0.02 0.17 0.56 0.00 (6) 8.65 1.02 (0.01) 4.31 15.03 (0.00) 51.22 2.21 0.00 4.93 0.00 0.00 100.00 (6) (6) (6) (6) TABLE 7 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS BY CLASS (1) FISCAL YEAR 2002-03 CLASSIFICATION Transporting and Towing Nonmetal Mining, Oil and Gas Mining Severance Timbering Severance Timbering Severance - Ponderosa Timbering Severance - Other Utilities Communications Railroads and Aircraft Private Car and Pipelines Publishing Printing Restaurants and Bars Amusements Commercial Lease (3) Rentals of Personal Property Contracting Feed Wholesale (2) Retail Hotel/Motel Rental Occupancy Tax Use Tax License Fees Membership Camping Jet Fuel Tax Jet Fuel Use Tax Non Sufficient Funds Telecommunications Service Assistance Miscellaneous Fees TOTAL DISTRIBUTION BASE NONSHARED TOTAL COLLECTIONS $630,885 2,680,724 899,557 0 3,979 148 59,408,263 28,694,992 (369,823) 124,927 1,332,292 4,277,301 133,100,550 15,653,395 (60,586) 66,395,555 115,637,260 (168) 788,153,157 46,708,788 28,550 0 0 48,126 2,335,405 0 0 (58,101) 0 $1,265,625,175 $2,523,541 5,696,540 226,676 0 995 37 237,633,048 114,779,971 (1,479,293) 499,709 5,329,167 17,109,203 199,650,828 23,480,094 (53,554) 99,593,342 462,549,058 (147) 1,182,285,310 46,708,668 14,273 189,684,520 499,636 72,188 3,503,107 501,537 42,649 (232,406) 75 $2,590,618,770 $3,154,426 8,377,264 1,126,233 0 4,974 185 297,041,311 143,474,963 (1,849,117) 624,636 6,661,459 21,386,505 332,751,378 39,133,490 (114,140) 165,988,897 578,186,318 (315) 1,970,438,467 93,417,455 42,824 189,684,520 499,636 120,314 5,838,512 501,537 42,649 (290,507) 75 $3,856,243,946 (1) Does not reflect the balance of undistributed estimated payments at the end of FY 02. (2) Feed Wholesale dropped to 0% effective July 17, 1994 and was repealed effective October 1, 1994. (3) Commercial Lease rate dropped to 0% effective July 1, 1997. Figures may not add to total due to rounding. 30 TABLE 8 DISTRIBUTION OF TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS FISCAL YEAR 2002-03 Net Regular to State General Fund Net Estimated Payments to General Fund Net to Cities Net to Counties Net to Education Fund 911 Wireline/Excise, 911 Wireless, Telecommunications Devices, Poison Control Fund, Municipal Water and Environmentally Hazardous Products, and Waste Tire Accounts Receivable Collections Less Collection Fees $3,027,135,359 9,156,917 316,405,353 512,703,234 447,841,034 34,403,191 TOTAL GROSS COLLECTIONS $4,347,643,714 (1,375) ADDITIONAL DISTRIBUTION FROM TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS FISCAL YEAR 2002-03 Office of Tourism Phoenix International Raceway School Facilities Board Tourism and Sports Authority Tribal Community Colleges $11,098,643 $416,667 $38,274,100 $687,411 $1,750,000 Figures may not add total due to rounding. 31 TABLE 9 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN APACHE COUNTY FOR THE PERIOD BEGINNING JULY 1, 2002 AND ENDING JUNE 30, 2003 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2001-02 COLLECTIONS $9,729,694 15,287,455 508,308 8,833,391 262,918 1.1% 25.8% 12.2% -0.4% -33.8% $486,485 764,373 25,415 441,670 13,146 2,438,344 82,563,174 58,189,085 10,230,709 31,001,983 -25.4% 13.0% 0.8% -0.7% -13.5% 121,917 4,128,159 2,909,454 562,689 1,492,665 $219,045,062 3.5% $10,945,972 NUMBER OF ACCOUNTS FISCAL YEAR 2000-01 THROUGH FISCAL YEAR 2002-03 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL FY2000-01 FY2001-02 FY2002-03 27 94 15 67 10 25 111 14 63 12 19 107 13 58 13 195 307 1,010 57 530 182 321 987 63 488 178 263 988 61 539 2,312 2,266 2,239 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance Ponderosa/Other, NSF, Seizure/Sales Fees, Telecommunications Service Assistance, Subpoena Fees and Utilities Credit are not included. Figures may not add to total due to rounding. 32 TABLE 10 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN COCHISE COUNTY FOR THE PERIOD BEGINNING JULY 1, 2002 AND ENDING JUNE 30, 2003 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2001-02 $118,273,644 49,288,282 2,037,906 1,895,785 86,549,292 10,269,589 0.8% -2.3% 8.2% 0.6% -3.1% 71.4% $5,913,682 2,464,414 101,895 94,789 4,327,465 513,479 21,515,037 172,513,390 621,696,028 24,875,357 67,289,603 1.2% 16.8% 4.1% 1.1% -1.5% 1,075,752 8,625,670 31,084,801 1,368,145 3,361,548 $1,176,203,912 4.4% $58,931,640 Utilities Communications Publishing Printing/Advertising Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL COLLECTIONS NUMBER OF ACCOUNTS FISCAL YEAR 2000-01 THROUGH FISCAL YEAR 2002-03 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Printing/Advertising Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL FY2000-01 FY2001-02 FY2002-03 49 166 18 27 347 69 48 181 19 25 346 70 47 181 24 26 339 64 439 804 3,193 141 862 421 796 3,107 140 886 446 838 3,158 136 1,015 6,115 6,039 6,274 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance Ponderosa/Other, NSF, Seizure/Sales Fees, Telecommunications Service Assistance, Subpoena Fees and Utilities Credit are not included. Figures may not add to total due to rounding. 33 TABLE 11 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN COCONINO COUNTY FOR THE PERIOD BEGINNING JULY 1, 2002 AND ENDING JUNE 30, 2003 TAXABLE ACTIVITIES AND CALCULATED NET % CHANGE BUSINESS CLASSIFICATIONS TAXABLE INCOME FROM FY 2001-02 Non Metal Mining/Mining Severance Utilities Communications $8,380,380 COLLECTIONS 119.6% (2) $261,216 121,625,649 0.8% 6,081,282 74,686,302 14.0% 3,734,315 117,685 Publishing 2,353,697 -29.9% Printing/Advertising 2,969,145 0.1% 148,457 Restaurants and Bars 243,697,303 0.6% 12,184,865 28,460,119 N/A 1,423,006 Amusements Rentals of Personal 53,389,590 -1.7% 2,669,480 Contracting (All) Property 283,450,308 10.7% 14,172,515 Retail 886,550,606 3.9% 44,327,530 Hotel/Motel 162,004,543 -1.3% 8,910,250 55,303,498 -27.3% 2,767,942 $1,922,871,140 5.0% $96,798,543 Other Taxable Activities TOTAL NUMBER OF ACCOUNTS FISCAL YEAR 2000-01 THROUGH FISCAL YEAR 2002-03 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS FY2000-01 Non Metal Mining/Mining Severance 16 Utilities Communications FY2001-02 17 FY2002-03 21 47 40 38 184 215 207 30 Publishing 32 32 Printing/Advertising 36 33 31 Restaurants and Bars 423 426 435 93 98 87 Amusements Rentals of Personal 531 542 539 Contracting (All) Property 1,354 1,459 1,531 Retail 3,828 3,771 3,921 Hotel/Motel Other Taxable Activities TOTAL 248 251 254 1,152 1,172 1,310 7,944 8,056 8,404 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance Ponderosa/Other, NSF, Seizure/Sales Fees, Telecommunications, Service Assistance, Subpoena Fees and Utilities Credit are not included. (2) Increase due to unusual activity. Figures may not add to total due to rounding. 34 TABLE 12 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN GILA COUNTY FOR THE PERIOD BEGINNING JULY 1, 2002 AND ENDING JUNE 30, 2003 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS CALCULATED NET TAXABLE INCOME Utilities Communications Publishing Printing/Advertising Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL % CHANGE FROM FY 2001-02 COLLECTIONS $81,003,492 25,050,901 1,033,121 649,687 45,044,854 221,081 -3.1% -27.0% -1.8% -8.2% -3.1% -88.3% (2) $4,050,175 1,252,545 51,656 32,484 2,252,243 11,054 12,963,540 93,656,179 229,649,935 9,263,814 29,577,674 3.2% 3.2% -2.8% -11.4% 25.1% 648,177 4,682,809 11,482,497 509,510 1,309,660 $528,114,278 -2.5% $26,282,809 NUMBER OF ACCOUNTS FISCAL YEAR 2000-01 THROUGH FISCAL YEAR 2002-03 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Printing/Advertising Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL FY2000-01 FY2001-02 FY2002-03 36 135 19 15 164 40 36 164 14 14 167 37 32 151 15 14 178 33 286 696 1,818 66 572 280 710 1,812 67 598 259 738 1,864 69 627 3,847 3,899 3,980 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance Ponderosa/Other, NSF, Seizure/Sales Fees, Telecommunications Service Assistance, Subpoena Fees and Utilities Credit are not included. (2) Decrease due to unusual activity. Figures may not add to total due to rounding. 35 TABLE 13 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN GRAHAM COUNTY FOR THE PERIOD BEGINNING JULY 1, 2002 AND ENDING JUNE 30, 2003 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS CALCULATED NET TAXABLE INCOME Communications Restaurants and Bars Rentals of Personal Property Contracting (All) Retail Other Taxable Activities TOTAL % CHANGE FROM FY 2001-02 COLLECTIONS $9,464,896 16,512,692 -13.7% 1.8% $473,245 825,635 5,052,962 35,455,675 134,775,246 28,979,739 -27.2% -12.4% 1.7% -23.4% 252,648 1,772,784 6,738,762 1,467,719 $230,241,210 -6.0% $11,530,792 NUMBER OF ACCOUNTS FISCAL YEAR 2000-01 THROUGH FISCAL YEAR 2002-03 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS FY2000-01 Communications Restaurants and Bars Rentals of Personal Property Contracting (All) Retail Other Taxable Activities TOTAL FY2001-02 103 74 110 67 104 64 177 215 999 453 170 197 974 491 164 251 953 521 2,021 2,009 2,057 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance Ponderosa/Other, NSF, Seizure/Sales Fees, Telecommunications Service Assistance, Subpoena Fees and Utilities Credit are not included. Figures may not add to total due to rounding. 36 FY2002-03 TABLE 14 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN GREENLEE COUNTY FOR THE PERIOD BEGINNING JULY 1, 2002 AND ENDING JUNE 30, 2003 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Communications Restaurants and Bars Rentals of Personal Property Contracting (All) Retail Other Taxable Activities TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2001-02 $3,156,887 2,472,559 -7.9% -9.6% $157,844 123,628 1,109,998 18,134,131 63,788,779 82,724,177 67.2% 50.2% 16.3% 33.1% 55,500 906,707 3,189,439 3,545,710 $171,386,531 26.1% $7,978,828 COLLECTIONS NUMBER OF ACCOUNTS FISCAL YEAR 2000-01 THROUGH FISCAL YEAR 2002-03 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS FY2000-01 Communications Restaurants and Bars Rentals of Personal Property Contracting (All) Retail Other Taxable Activities TOTAL FY2001-02 69 22 69 23 65 22 88 82 375 230 79 78 363 203 61 72 356 235 866 815 811 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance Ponderosa/Other, NSF, Seizure/Sales Fees, Telecommunications Service Assistance, Subpoena Fees and Utilities Credit are not included. Figures may not add to total due to rounding. 37 FY2002-03 TABLE 15 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN LA PAZ COUNTY FOR THE PERIOD BEGINNING JULY 1, 2002 AND ENDING JUNE 30, 2003 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities CALCULATED NET TAXABLE INCOME $16,520,677 5,119,173 475,023 21,624,369 199,837 3,704,532 20,182,036 94,185,714 5,200,263 (6,826,683) TOTAL $160,384,941 % CHANGE FROM FY 2001-02 COLLECTIONS -6.0% -6.3% -2.1% -1.9% -36.9% $826,034 255,959 23,751 1,081,218 9,992 -25.6% -4.4% -0.9% -2.1% N/A (2) 185,227 1,009,102 4,709,286 286,014 (345,286) -15.6% $8,041,296 NUMBER OF ACCOUNTS FISCAL YEAR 2000-01 THROUGH FISCAL YEAR 2002-03 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS FY2000-01 Utilities Communications Publishing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL FY2001-02 21 94 12 91 17 22 100 11 97 13 25 95 12 96 14 191 217 1,806 59 394 174 225 1,787 58 387 167 235 1,805 53 540 2,902 2,874 3,042 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance Ponderosa/Other, NSF, Seizure/Sales Fees, Telecommunications Service Assistance, Subpoena Fees and Utilities Credit are not included. (2) Decrease due to unusual activity. Figures may not add to total due to rounding. 38 FY2002-03 TABLE 16 TRANSACTION PRIVILEGE,USE AND SEVERANCE TAX COLLECTIONS (1) IN MARICOPA COUNTY FOR THE PERIOD BEGINNING JULY 1, 2002 AND ENDING JUNE 30, 2003 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Non Metal Mining/Mining Severance Utilities Communications Publishing Printing/Advertising Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2001-02 COLLECTIONS $46,361,542 3,692,412,945 1,857,816,276 94,405,042 350,891,563 4,518,271,416 593,253,116 14.7% 0.2% -6.1% 109.2% 25.0% 4.4% -0.3% $1,450,097 184,620,647 92,890,814 4,720,252 17,544,578 225,913,571 29,662,656 2,550,691,169 7,658,535,624 26,584,187,078 1,023,055,734 2,893,278,840 -9.5% -6.2% 1.6% 3.7% 14.5% 127,534,558 382,926,781 1,329,209,354 56,268,065 144,999,465 $51,863,160,345 0.5% $2,597,740,839 NUMBER OF ACCOUNTS FISCAL YEAR 2000-01 THROUGH FISCAL YEAR 2002-03 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Non Metal Mining/Mining Severance Utilities Communications Publishing Printing/Advertising Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL FY2000-01 FY2001-02 FY2002-03 55 136 624 322 956 5,239 706 52 157 640 295 970 5,443 695 58 166 633 297 953 5,768 711 2,925 11,773 43,250 619 10,938 2,913 12,177 43,087 625 10,713 2,926 13,022 44,565 622 10,860 77,543 77,767 80,581 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance Ponderosa/Other, NSF, Seizure/Sales Fees, Telecommunications Service Assistance, Subpoena Fees and Utilities Credit are not included. Figures may not add to total due to rounding. 39 TABLE 17 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN MOHAVE COUNTY FOR THE PERIOD BEGINNING JULY 1, 2002 AND ENDING JUNE 30, 2003 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Printing/Advertising Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2001-02 COLLECTIONS $189,134,368 58,250,478 2,827,022 3,968,118 154,382,732 15,586,517 7.8% -1.9% 19.4% -7.5% 3.9% 9.8% $9,456,718 2,912,524 141,351 198,406 7,719,137 779,326 56,587,904 324,986,886 1,072,241,559 35,765,970 158,675,581 -3.4% 1.6% 10.0% 1.2% 38.3% 2,829,395 16,249,344 53,612,078 1,967,128 7,851,375 $2,072,407,135 8.7% $103,716,783 NUMBER OF ACCOUNTS FISCAL YEAR 2000-01 THROUGH FISCAL YEAR 2002-03 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS FY2000-01 Utilities Communications Publishing Printing/Advertising Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL FY2001-02 51 136 27 36 404 64 53 159 26 36 407 68 50 165 26 35 410 67 549 1,277 4,151 148 1,140 541 1,286 4,225 145 1,144 576 1,404 4,314 142 1,148 7,983 8,090 8,337 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance Ponderosa/Other, NSF, Seizure/Sales Fees, Telecommunications Service Assistance, Subpoena Fees and Utilities Credit are not included. Figures may not add to total due to rounding. 40 FY2002-03 TABLE 18 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN NAVAJO COUNTY FOR THE PERIOD BEGINNING JULY 1, 2002 AND ENDING JUNE 30, 2003 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2001-02 COLLECTIONS $62,448,812 38,022,288 1,253,134 67,376,131 3,941,560 5.9% -8.0% -6.6% 5.1% -9.7% $3,122,441 1,901,114 62,657 3,368,807 197,078 18,433,188 136,378,343 609,720,330 27,933,779 168,020,849 5.5% -1.6% 5.5% -1.9% 41.0% 921,659 6,818,917 30,486,017 1,536,358 5,842,407 $1,133,528,414 7.8% $54,257,454 NUMBER OF ACCOUNTS FISCAL YEAR 2000-01 THROUGH FISCAL YEAR 2002-03 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL FY2000-01 FY2001-02 FY2002-03 40 134 18 199 38 46 154 17 198 37 45 162 20 209 38 337 802 2,272 136 732 340 850 2,205 149 769 328 953 2,218 142 809 4,708 4,765 4,924 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance Ponderosa/Other, NSF, Seizure/Sales Fees, Telecommunications Service Assistance, Subpoena Fees and Utilities Credit are not included. Figures may not add to total due to rounding. 41 TABLE 19 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN PIMA COUNTY FOR THE PERIOD BEGINNING JULY 1, 2002 AND ENDING JUNE 30, 2003 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Non Metal Mining/Mining Severance Utilities Communications Publishing Printing/Advertising Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2001-02 COLLECTIONS $21,420,008 1,006,989,727 476,149,190 17,711,933 53,407,377 1,023,676,833 79,916,618 74.3% (2) -2.2% 7.4% 12.6% 12.5% 0.8% -3.8% $606,200 50,349,486 23,807,459 885,597 2,670,369 51,183,842 3,995,831 430,279,614 1,562,446,655 6,081,458,205 268,612,157 350,667,300 -3.4% 2.9% 2.2% 1.0% 5.8% 21,513,981 78,122,333 304,072,910 14,773,669 17,581,765 $11,372,735,615 1.9% $569,563,442 NUMBER OF ACCOUNTS FISCAL YEAR 2000-01 THROUGH FISCAL YEAR 2002-03 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Non Metal Mining/Mining Severance Utilities Communications Publishing Printing/Advertising Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL FY2000-01 FY2001-02 FY2002-03 20 75 250 94 187 1,535 224 21 76 319 113 178 1,527 222 28 75 284 122 187 1,637 231 1,227 4,330 14,179 258 2,575 1,210 4,371 13,982 252 2,569 1,210 4,531 14,532 258 2,812 24,954 24,840 25,907 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance Ponderosa/Other, NSF, Seizure/Sales Fees, Telecommunications Service Assistance, Subpoena Fees and Utilities Credit are not included. (2) Increase due to unusual activity. Figures may not add to total due to rounding. 42 TABLE 20 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN PINAL COUNTY FOR THE PERIOD BEGINNING JULY 1, 2002 AND ENDING JUNE 30, 2003 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Non Metal Mining/Mining Severance Utilities Communications Publishing Printing/Advertising Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL CALCULATED NET TAXABLE INCOME $27,055,585 185,487,590 92,552,255 3,135,490 1,828,934 106,987,728 17,184,462 38,597,893 421,051,904 650,612,208 16,081,818 127,734,501 $1,688,310,369 % CHANGE FROM FY 2001-02 N/A 0.4% 6.4% -5.8% 24.1% 8.1% 1.2% 1.5% 26.1% 20.5% 1.3% 107.6% (2) 22.5% COLLECTIONS $835,572 9,274,379 4,627,613 156,775 91,447 5,349,386 859,223 1,929,895 21,052,595 32,530,610 884,500 6,357,962 $83,949,958 NUMBER OF ACCOUNTS FISCAL YEAR 2000-01 THROUGH FISCAL YEAR 2002-03 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS FY2000-01 Non Metal Mining/Mining Severance Utilities Communications Publishing Printing/Advertising Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL FY2001-02 28 50 171 23 21 294 87 26 60 218 23 22 314 83 26 63 203 23 24 314 93 423 1,546 3,288 98 954 433 1,645 3,265 102 990 441 1,804 3,384 116 1,109 6,983 7,181 7,600 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance Ponderosa/Other, NSF, Seizure/Sales Fees, Telecommunications Service Assistance, Subpoena Fees and Utilities Credit are not included. (2) Increase due unusual activity. Figures may not add to total due to rounding. 43 FY2002-03 TABLE 21 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN SANTA CRUZ COUNTY FOR THE PERIOD BEGINNING JULY 1, 2002 AND ENDING JUNE 30, 2003 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2001-02 COLLECTIONS $26,904,334 18,565,128 565,769 34,162,511 1,330,180 -2.4% -7.1% 212.1% 4.0% -4.7% $1,345,217 928,256 28,288 1,708,126 66,509 12,290,955 50,579,781 277,372,392 10,010,664 14,274,330 -5.4% 8.1% 4.3% 6.3% 38.0% 614,548 2,528,989 13,868,620 550,587 698,294 $446,056,046 4.3% $22,337,433 NUMBER OF ACCOUNTS FISCAL YEAR 2000-01 THROUGH FISCAL YEAR 2002-03 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS FY2000-01 Utilities Communications Publishing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL FY2001-02 19 124 14 121 24 19 133 11 131 16 16 124 10 119 19 271 416 1,535 26 516 264 392 1,518 29 506 253 413 1,533 30 581 3,066 3,019 3,098 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance Ponderosa/Other, NSF, Seizure/Sales Fees, Telecommunications Service Assistance, Subpoena Fees and Utilities Credit are not included. Figures may not add to total due to rounding. 44 FY2002-03 TABLE 22 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN YAVAPAI COUNTY FOR THE PERIOD BEGINNING JULY 1, 2002 AND ENDING JUNE 30, 2003 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Non Metal Mining/Mining Severance Utilities Communications Publishing Printing/Advertising Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2001-02 COLLECTIONS $36,358,788 196,027,037 92,474,997 4,236,106 6,787,691 197,689,964 20,292,524 6.8% 0.3% 12.8% -5.2% 25.5% 3.1% 2.6% $1,118,756 9,801,352 4,623,750 211,805 339,385 9,884,498 1,014,626 54,277,624 461,668,842 1,114,009,393 71,933,854 49,722,494 0.5% 5.7% 5.3% -1.1% 3.8% 2,713,881 23,083,442 55,700,470 3,956,362 2,423,820 $2,305,479,314 4.7% $114,872,147 NUMBER OF ACCOUNTS FISCAL YEAR 2000-01 THROUGH FISCAL YEAR 2002-03 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Non Metal Mining/Mining Severance Utilities Communications Publishing Printing/Advertising Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL FY2000-01 FY2001-02 FY2002-03 24 72 200 54 65 536 85 31 73 222 52 61 545 94 34 74 218 45 56 555 86 560 2,092 5,309 189 1,179 529 2,235 5,333 174 1,218 541 2,371 5,553 182 1,359 10,365 10,567 11,074 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance Ponderosa/Other, NSF, Seizure/Sales Fees, Telecommunications Service Assistance, Subpoena Fees and Utilities Credit are not included. Figures may not add to total due to rounding. 45 TABLE 23 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN YUMA COUNTY FOR THE PERIOD BEGINNING JULY 1, 2002 AND ENDING JUNE 30, 2003 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2001-02 COLLECTIONS $154,010,362 53,614,750 2,320,097 127,745,785 9,828,758 0.5% 4.4% -14.1% 5.0% 4.2% $7,700,518 2,680,737 116,005 6,387,289 491,438 58,445,585 242,123,425 930,332,775 28,889,696 44,118,115 1.5% 9.6% 7.3% 7.5% -11.0% 2,922,279 12,106,171 46,516,639 1,588,933 2,188,940 $1,651,429,348 5.8% $82,698,950 NUMBER OF ACCOUNTS FISCAL YEAR 2000-01 THROUGH FISCAL YEAR 2002-03 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL FY2000-01 FY2001-02 FY2002-03 40 144 15 277 46 44 187 13 292 41 37 171 14 317 38 491 672 3,229 109 963 462 693 3,246 92 925 486 719 3,279 103 1,081 5,986 5,995 6,245 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance Ponderosa/Other, NSF, Seizure/Sales Fees, Telecommunications Service Assistance, Subpoena Fees and Utilities Credit are not included. Figures may not add to total due to rounding. 46 TABLE 24 STATE TRANSACTION PRIVILEGE AND SEVERANCE TAX DISTRIBUTION TO COUNTIES FISCAL YEAR 1998-99 THROUGH FISCAL YEAR 2002-03 COUNTY Apache Cochise Coconino Gila Graham Greenlee La Paz Maricopa Mohave Navajo Pima Pinal Santa Cruz Yavapai Yuma FY1998-99 $3,565,934 8,390,958 12,695,530 4,067,599 2,247,541 3,226,878 1,421,105 277,695,556 12,194,408 7,136,959 70,057,426 11,018,980 2,968,377 14,218,059 10,495,286 $441,400,596 FY1999-00 $5,473,442 9,229,981 13,841,588 3,882,098 2,412,735 3,098,540 1,486,269 306,464,900 12,938,817 7,748,173 76,273,737 11,582,587 3,180,054 16,154,370 11,358,869 FY2000-01 FY2001-02 % CHANGE FY2002-03 FROM FY2001-02 $4,445,431 9,594,853 13,978,278 4,443,907 2,462,318 3,003,365 1,495,379 322,426,596 13,012,998 7,932,049 79,516,015 12,511,593 3,346,986 16,629,440 11,861,866 $3,808,535 9,111,850 13,695,680 4,087,916 2,366,529 1,794,359 1,525,956 325,710,325 13,293,460 7,990,618 76,759,008 12,467,448 3,275,822 16,504,368 12,675,627 $3,878,392 9,344,323 13,903,149 4,058,750 2,381,979 1,750,473 1,523,806 329,197,352 13,839,979 8,287,880 77,729,083 13,328,798 3,357,505 17,000,259 13,121,508 1.8% 2.6% 1.5% -0.7% 0.7% -2.4% -0.1% 1.1% 4.1% 3.7% 1.3% 6.9% 2.5% 3.0% 3.5% $485,126,158 $506,661,075 $505,067,501 $512,703,234 1.5% Figures may not add to totals due to rounding. 47 TABLE 26 MUNICIPAL PRIVILEGE TAX COLLECTION PROGRAM COLLECTIONS BY CITY FISCAL YEAR 2002-03 CITY Apache Junction Avondale Benson Bisbee Buckeye Bullhead City Camp Verde Carefree Casa Grande Cave Creek Chandler Chino Valley Clarkdale Clifton Colorado City Coolidge Cottonwood Douglas Duncan Eagar El Mirage Eloy Florence Fountain Hills Fredonia Gila Bend Gilbert Glendale Globe Goodyear Guadalupe Hayden Holbrook Huachuca City Jerome Kearny Kingman Lake Havasu City Litchfield Park Mammoth RATE (1) (PERCENT) COLLECTIONS 2.2* N/A 2.5* 2.5* 2.0* 2.0* 2.0* 2.0* 1.8* 2.5* N/A 2.0* 2.25* 2.0 2.0* 2.0* 2.2* 2.5* 2.0 3.0* 3.0* 3.0* 2.0* 1.6* 2.0 3.0* 1.5* N/A 1.5* 2.0* 2.0* 1.0* 3.0* 1.5* 3.0 2.0* 2.0* 2.0* 2.0* 2.0* CITY $9,390,565 2,354 (2) 1,832,243 1,240,406 2,486,828 8,306,835 1,458,211 1,652,461 11,223,379 2,654,827 248 (2) 2,351,416 429,519 264,786 252,563 2,061,120 6,341,593 4,098,523 122,188 523,805 6,761,112 2,587,881 1,033,416 4,850,820 83,225 2,377,507 29,369,020 3,038 (2) 1,691,713 14,531,875 727,079 332,450 2,109,309 140,173 348,594 210,493 9,016,740 16,573,095 1,679,544 65,507 Marana Miami Oro Valley Page Paradise Valley Parker Patagonia Payson Pima Pinetop-Lakeside Prescott Valley Quartzsite Queen Creek Safford Sahuarita St. Johns San Luis Sedona Show Low Sierra Vista Snowflake Somerton South Tucson Springerville Superior Surprise Taylor Thatcher Tolleson Tombstone Wellton Wickenburg Willcox Williams Winkelman Winslow Youngtown Yuma TOTAL RATE (1) (PERCENT) COLLECTIONS 2.0* 1.5 2.0* 2.0* 1.4* 2.0* 3.0* 2.0* 2.0* 2.5* 2.33* 2.5* 1.0* 2.0* 2.0* 2.0* 2.5* 3.0* 2.0 1.5* 2.0* 2.5* 2.5* 3.0* 2.0* 2.0* 2.0* 2.0* 2.0* 2.5* 2.5 1.0 3.0* 3.0* 3.5* 3.0* 2.0* 1.7 $17,086,578 139,083 5,950,842 3,298,469 7,002,741 1,030,745 136,313 5,212,287 204,121 2,491,660 7,296,025 771,527 1,828,305 2,427,468 3,867,613 510,108 2,159,798 11,000,954 6,882,454 10,474,439 906,043 612,328 2,355,149 1,191,458 175,230 18,625,533 564,130 1,979,529 3,061,317 587,559 317,346 1,154,154 1,649,431 2,680,976 141,235 3,223,892 480,588 22,500,497 $303,164,388 * Jurisdiction levied at more than one rate during the fiscal year. Rate shown is the rate charged on most transactions. (1) Rate shown is effective January 1, 2003 and may have changed during the remainder of FY 03. (2) Does not participate in the Department's Collection program. These figures do not represent a full years collections. 48 TABLE 27 MUNICIPAL PRIVILEGE TAX COLLECTION PROGRAM FISCAL YEAR 1998-99 THROUGH FISCAL YEAR 2002-03 FISCAL YEAR TOTAL COLLECTIONS NUMBER OF CITIES IN PROGRAM 1998-99 $202,218,016 75 1999-00 $230,976,587 75 2000-01 $257,706,985 75 2001-02 $280,950,442 75 2002-03 $303,164,388 75 Return to Table of Contents 49 INCOME TAX The State of Arizona imposes two types of income tax: corporate, which applies to incorporated businesses and certain other entities operating in this state; and individual, which is levied upon those persons who reside in or earn income in the state (Refer to Table 28). CORPORATE INCOME TAX MAJOR FEATURES Every corporation doing business in Arizona is required to file a corporate income tax return. Corporations filed returns with the state and made payments of $518 million during fiscal year 2002 (Refer to Table 28). INDIVIDUAL INCOME TAX MAJOR FEATURES For tax year 2000 filed in 2001, approximately two million individual filers reported Arizona gross income (defined as federal adjusted gross income) totaling more than $ 96.9 billion. Individuals with Arizona gross income of more than $75,000, in the preceding or current year, are required to file Arizona estimated tax payments. An individual can apply any portion of an income tax refund toward the following year's income tax as an estimated payment. DISTRIBUTION State income tax collections are shared with Arizona municipalities in an Urban Revenue Sharing Program. During fiscal year 2003 an amount equal to 15.8 percent of net income tax collections from two years prior was distributed to cities and towns. In fiscal year 2002 the percentage was also 15.8 percent. The distribution is based on population and is given only to incorporated cities and towns. The remainder is deposited in the state general fund after amounts sufficient to pay refunds are allocated (Refer to Tables 28 and 29 ). Voluntary taxpayer contributions to Aid to Education Fund, Citizens Clean Elections Fund, Domestic Violence Shelter Fund, Child Abuse Prevention Fund, Arizona Wildlife Fund, Special Olympics Fund, Neighbors Helping Neighbors Fund, and political parties are distributed to the appropriate agency, political party or organization (Refer to Table 29). The graduated rate structure for the 2002 tax year ranged from 2.87 percent to a maximum of 5.04 percent on an individual's income over $150,000 (or joint income over $300,000). ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 50 CORPORATE AND INDIVIDUAL INCOME TAX CREDITS In addition to the new (expanded) provisions listed above, the following are non-refundable corporate and individual income tax credits. (Refer to Table 29). CREDIT AVAILABLE TO Agricultural Water Taxpayers that incur expenses to purchase and install a Conservation System agricultural water conservation system in Arizona. This credit was repealed for corporations for taxable years beginning from and after December 1, 1999. Construction Materials Taxpayers that purchase construction materials, in excess of five million dollars, for a building used predominantly for mining, manufacturing, fabricating, refining, metallurgical operations, or research and development as defined in ARS 43-1168. This credit was repealed for corporations for taxable years beginning from and after December 1, 1999. Contributions to Individual taxpayers that make cash contributions to certain charities that provide Charities that Provide help to the working poor. The maximum amount of this credit is $200. Assistance to the Working Poor Contributions to School Tuition Organizations Individual taxpayers that made contributions to a school tuition organization that provides scholarships or grants to qualified schools. Taxpayers filing single or head of household can take a maximum credit of $500. Taxpayers that file married filing joint can take a maximum credit of $625, taxpayers that are married filing separately can each take one-half of the required credit up to the maximum credit of $625. Correctional Industries Corporate taxpayers for the investment in qualified property on the grounds of an Arizona correctional facility, or for the employment of inmates in the Arizona correctional facility, or for the employment of inmates in prison construction (for an Arizona correctional facility). This credit was repealed for taxable years beginning from and after December 1, 1999. Credit for Taxes Paid to Another State or Country (INDIVIDUALS ONLY) Taxpayers that paid a net income tax to Arizona and another qualified state or foreign country, on the same income. Defense Contracting Taxpayers certified by the Arizona Department of Commerce as a qualified defense contractor for qualified increases in employment. Employment of TANF Recipients Taxpayers that employ recipients of Temporary Assistance for Needy Families (TANF). Enterprise Zone Taxpayers whose business is located in an Arizona enterprise zone that have a net increase in qualified employment positions. Environmental Technology Taxpayers that incur expenses in constructing a qualified Facility environmental technology manufacturing, producing, or processing facility as described in ARS 41-1514.02. The qualified environmental technology manufacturer, producer, or processor must have been certified by Commerce before July 1, 1996. ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 51 CREDIT AVAILABLE TO Fees Paid to Public Schools Individual taxpayers that paid certain fees to public schools in Arizona. Taxpayers filing single or head of household can take a maximum credit of $200. Taxpayers that file married filing joint can take a maximum credit of $250, taxpayers that are married filing separately can each take one-half of the required credit up to the maximum credit of $250. Increased Excise Taxes This credit is for Arizona residents whose federal adjusted gross income is beneath a certain threshold ($25,000 or less for Married Filing Joint or Head of Household, or $12,500 for Married Filing Separately or Single) and who cannot be claimed as a dependent by any other taxpayer. Military Reuse Zone Taxpayers with a net increase in employment of full-time employees working in a military reuse zone. Pollution Control Taxpayers that purchase real or personal property that is used within Arizona in the taxpayer's trade or business to control or prevent pollution. Recycling Equipment Taxpayers who acquire and place in service recycling equipment in Arizona. This credit was repealed for corporations not individuals. Research and Development Corporate taxpayers with an increase in qualifying research and Expenses development expenses conducted in Arizona. Individuals must use Form 308-I effective for taxable years beginning January 1, 2002. School Site Donation This tax credit is for the donation of real property and improvements to an Arizona school district or Arizona charter school for use as a school or as a site for the construction of a school. The credit applies to taxable years beginning from and after December 31, 2000. Solar Energy Individual taxpayers who install a solar energy device in his or her residence located in Arizona. Solar Hot Water Heater Plumbing Stub Outs and Electric Vehicle Recharge Outlets Taxpayers for the installation of solar hot water heater plumbing stub outs and electric vehicle recharge outlets in houses or dwelling units constructed by the taxpayer. The houses or dwelling units must be located in Arizona. Taxes Paid for Coal Consumed in Generating Electrical Power Corporate taxpayers, a credit equal to 30 percent of the amount paid by the seller or purchaser as transaction privilege tax or use tax for coal sold to the taxpayer that is consumed in the generation of electrical power in Arizona. Underground Storage Tanks Taxpayers that incurred expenses for corrective actions taken with respect to the release of a regulated substance from an underground storage tank. To qualify for this credit, the taxpayer must not have been liable or responsible for the corrective action as an owner or operator of the underground storage tank. Wheels to Work Donation This tax credit is for the fair market value of any motor vehicle donated by the taxpayer to the Wheels to Work program established by ARS §46-142. The credit applies to taxable years beginning from and after December 31, 1998. ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 52 TABLE 28 INCOME TAX COLLECTIONS FISCAL YEAR 1998-99 THROUGH FISCAL YEAR 2002-03 SOURCE Withheld from Wages Gross Revenue Refunds and Charge-offs NET FY1998-99 FY1999-00 FY2000-01 FY2001-02 $2,072,018,474 (18,463,322) $2,259,201,907 (10,053,362) $2,363,693,852 (7,032,321) $2,309,340,885 (9,047,839) $2,053,555,152 Individuals & Fiduciaries Gross Revenue Refunds and Charge-offs NET Corporations Gross Revenue Refunds and Charge-offs NET Subtotal Net Collections Less distributions for: Urban Revenue Sharing Contracted Collection Agency Wildlife Contributions Child Abuse Prevention Special Olympics Neighbors Helping Neighbors State Aid to Public Schools Domestic Violence Shelter Democratic Party Green Party Libertarian Party Republican Party Reform Party Natural Law Party Clean Elections Subtotal Distributions NET REVENUE TO STATE GENERAL FUND WQARF DISTRIBUTION (1) $2,249,148,545 $2,356,661,531 $2,300,293,045 PERCENT OF NET COLLECTIONS FY2002-03 IN FY2002-03 $2,310,302,093 (8,527,022) $2,301,775,071 92.4% 765,853,606 (721,059,420) 826,789,215 (784,055,322) 858,775,963 (911,549,899) 705,843,394 (915,490,638) 656,586,317 (855,999,525) $44,794,187 $42,733,894 ($52,773,936) ($209,647,244) ($199,413,208) 643,230,321 (97,842,182) 637,765,231 (114,583,545) 678,002,658 (136,828,789) 512,257,476 (165,976,997) 518,246,330 (128,839,937) $545,388,138 $523,181,687 $541,173,869 $346,280,480 $389,406,393 15.6% $2,643,737,477 $2,815,064,125 $2,845,061,464 $2,436,926,281 $2,491,768,256 100.0% 340,310,656 377,710,988 396,452,640 421,876,573 430,559,053 39,610 146,278 210,355 74,471 32,374 58,016 177,079 185,666 83,854 46,610 60,989 194,201 222,325 88,051 38,800 20,922 177,886 210,223 83,873 37,696 18,110 178,190 202,941 84,062 41,330 48,503 137,524 14,401 0 3,077 12,077 869 0 340 7,411 139,208 11,127 0 3,210 13,650 194 0 1,827,616 26,884 152,928 15,130 2,667 2,422 15,474 36 142 2,315,832 33,955 150,954 15,984 2,559 2,090 14,127 92 200 3,246,597 29,420 149,012 18,246 114 2,182 16,557 0 10 3,877,564 $341,030,534 $380,264,630 $399,588,520 $425,873,731 $435,176,789 $2,302,706,944 $2,434,799,495 $2,445,472,944 $2,011,052,550 $2,056,591,466 $15,000,000 $15,000,000 $15,000,000 $10,000,000 *** (1) Beginning July 1, 1999, a transfer is made to the Water Quality Assurance Revolving Fund from corporate income tax collections. Figures may not add to total due to rounding. 53 -8.0% TABLE 29 EXEMPTIONS, DEDUCTIONS AND CREDITS TAX YEAR 1998 THROUGH TAX YEAR 2002 TAX YEAR PERSONAL EXEMPTION (2) BLIND EXEMPTION AGE 65 AND OVER EXEMPTION DEPENDENT EXEMPTION STANDARD DEDUCTION LIMIT (1) MAXIMUM PROPERTY TAX CREDIT MAXIMUM FAMILY TAX CREDIT 1998 1999 2000 2001 2002 2,100 2,100 2,100 2,100 2,100 1,500 1,500 1,500 1,500 1,500 2,100 2,100 2,100 2,100 2,100 2,300 2,300 2,300 2,300 2,300 3,600/7,200 3,600/7,200 3,600/7,200 4,050/8,100 4,050/8,100 502 502 502 502 502 240 240 240 240 240 (1) Amounts shown are for individual and married-filing-jointly returns. (2) Beginning with tax year 1997, married filers claiming at least one dependent are entititled to an additional $2,100 personal exemption. SELECTED INDIVIDUAL INCOME TAX CREDITS TAX YEAR 1999 THROUGH TAX YEAR 2001 CREDIT Agricultural Pollution Control Agricultural Water Conservation Alternative Fuel - Non Refundable --Delivery System --Vehicles --Refuel Apparatus/Infrastructure --Neighborhood Electric Vehicles Alternative Fuel - Refundable --Delivery System --Vehicles --Refuel Apparatus/Infrastructure Clean Elections Donation to Charities for the Working Poor Donation of Motor Vehicles Enterprise Zone Family Tax Credit Income Taxes Paid to Other States Increased Excise Taxes Paid Private School STO (3) Property Tax Public School Extra Curricular (3) Solar Energy Solar Hot Water Heater & Plumbing Stub Outs All Other (1) Total Tax Year 1999 CLAIMANTS CREDITS (1) Tax Year 2000 CLAIMANTS CREDITS Tax Year 2001 CLAIMANTS CREDITS 121 (1) $922,072 9 86 $17,562 $1,289,513 (2) (2) (2) (2) 12 246 73 1,146 $21,864 $736,134 $101,753 $6,770,641 7 176 120 3,258 $41,417 $322,257 $208,315 $17,010,923 (1) (1) (1) (1) 0 1,370 ---8,585 ---$502,151 19 4,891 670 23,717 $2,863,157 $94,111,012 $3,192,104 $537,345 (1) 6,712 92 143 327,974 26,317 -31,892 15,862 109,748 2,757 $1,147,485 $102,327 $1,417,307 $7,925,721 $51,433,659 -$13,716,791 $4,987,796 $14,775,353 $913,984 5,705 461 146 335,253 27,831 -38,084 14,593 149,215 2,532 $1,000,257 $546,758 $1,596,521 $7,799,840 $57,403,404 -$17,620,022 $4,653,837 $17,526,299 $902,637 (2) (2) 35 16 531,731 $7,944 $122,124 $105,605,106 35 12 606,820 $11,566 $16,725 $228,671,471 151 12 26,757 153 402,094 28,156 428,189 46,546 15,213 166,468 (2) (2) 15 1,115,124 (1) Too few claimants to allow release of information without violating confidentiality laws. (2) Credits claimed for tax year 2001 are being reviewed. No data is available at this time. (3) Data reported on these credits is based on donation information provided to the Department of Revenue by the Private School Tuition Organizations and the Public Schools. For the purposes of this report, it is assumed that all credit was used in the tax year. Figures for all credits shown here are subject to change, due to the verification process. 54 $0 $2,850,991 (1) $2,558,844 $33,750 $599,485 (2) (2) $1,619,102 $7,356,939 $57,741,188 $22,612,548 $24,838,082 $5,014,476 $20,004,715 (2) (2) $83,577 $145,313,697 TABLE 30 RESIDENT INDIVIDUAL INCOME TAX LIABILITY BY FEDERAL ADJUSTED GROSS INCOME TAX YEAR 2000(1) FEDERAL ADJUSTED GROSS INCOME # OF FILERS % OF TOTAL LIABILITY % OF TOTAL Negative Income $0.01 to $1,999 $2,000 to $5,999 $6,000 to $9,999 $10,000 to $13,999 $14,000 to $19,999 $20,000 to $24,999 $25,000 to $29,999 $30,000 to $39,999 $40,000 to $49,999 $50,000 to $74,999 $75,000 to $99,999 $100,000 to $199,999 $200,000 to $499,999 $500,000 to $999,999 $1,000,000 to $4,999,999 $5,000,000 and over 16,705 34,070 113,127 135,691 141,559 221,020 161,516 137,931 216,069 160,059 265,215 131,889 118,941 29,538 5,315 2,622 289 0.88% 1.80% 5.98% 7.17% 7.48% 11.68% 8.54% 7.29% 11.42% 8.46% 14.02% 6.97% 6.29% 1.56% 0.28% 0.14% 0.02% $124,449 44,313 136,861 5,068,644 12,567,082 37,493,198 48,171,990 58,778,827 128,406,468 130,672,751 317,488,151 246,741,967 404,067,738 291,965,295 146,537,929 215,356,501 159,886,355 0.01% 0.00% 0.01% 0.23% 0.57% 1.70% 2.19% 2.67% 5.83% 5.93% 14.41% 11.20% 18.34% 13.25% 6.65% 9.77% 7.26% 1,891,556 100.00% $2,203,508,519 100.00% TOTAL (1) This summary combines all liability reported on the Arizona Form 140 and 140A Individual Income tax returns for tax year 2000, filed from January 2001 forward. 55 TABLE 31 NONRESIDENT/ PART YEAR RESIDENT INDIVIDUAL INCOME TAX LIABILITY BY FEDERAL ADJUSTED GROSS INCOME TAX YEAR 2000 (1) ARIZONA PORTION OF FEDERAL ADJUSTED GROSS INCOME Negative Income $0.01 to $1,999 $2,000 to $5,999 $6,000 to $9,999 $10,000 to $13,999 $14,000 to $19,999 $20,000 to $24,999 $25,000 to $29,999 $30,000 to $39,999 $40,000 to $49,999 $50,000 to $74,999 $75,000 to $99,999 $100,000 to $199,999 $200,000 to $499,999 $500,000 to $999,999 $1,000,000 to $4,999,999 $5,000,000 and over TOTAL # OF FILERS % OF TOTAL LIABILITY % OF TOTAL 13,158 16,960 31,425 24,233 18,775 19,860 11,711 8,695 11,827 7,499 9,732 4,259 4,668 1,781 476 271 30 7.10% 9.15% 16.95% 13.07% 10.13% 10.71% 6.32% 4.69% 6.38% 4.05% 5.25% 2.30% 2.52% 0.96% 0.26% 0.15% 0.02% $910,076 19,852 232,106 1,437,679 2,413,861 4,737,465 4,366,582 4,301,424 8,112,827 7,209,791 13,840,520 9,460,288 18,505,713 19,030,838 13,076,686 23,241,181 13,677,095 0.63% 0.01% 0.16% 0.99% 1.67% 3.28% 3.02% 2.98% 5.61% 4.99% 9.57% 6.54% 12.80% 13.16% 9.04% 16.08% 9.46% 185,360 100.00% $144,573,984 100.00% (1) This summary combines all liability reported on the Arizona Form 140NR and 140PY Individual Income tax returns for tax year 2000, filed from January 2001 forward. 56 TABLE 32 CORPORATE INCOME TAX CORPORATE TAXPAYER BY SIZE OF TAX LIABILITY TAX YEAR 2000(1) CORPORATE TAX LIABILITY $50 Minimum $50.01 to $99.99 $100 to $499.99 $500 to $999.99 $1,000 to $4,999.99 $5,000 to $9,999.99 $10,000 to $49,999.99 $50,000 to $99,999.99 $100,000 to $499,999.99 $500,000 to $999,999.99 $1,000,000 to $72,000,000 TOTAL # OF FILERS 36,387 1,253 3,906 1,953 5,008 1,526 1,636 372 425 77 79 52,622 % OF TOTAL 69.1% 2.4% 7.4% 3.7% 9.5% 2.9% 3.1% 0.7% 0.8% 0.1% 0.2% 100.0% LIABILITY $1,806,646 90,735 990,609 1,421,478 12,287,982 10,528,075 35,973,304 25,361,348 85,891,154 47,290,941 324,090,780 $545,733,052 % OF TOTAL 0.3% 0.0% 0.2% 0.3% 2.3% 1.9% 6.6% 4.6% 15.7% 8.7% 59.4% 100.0% CORPORATE INCOME TAX CREDITS TAX YEAR 2000 CREDIT TYPE Agricultural Pollution Control Equipment Agricultural Water Conservation Alternative Fuel - Non Refundable --Fuel Delivery System --Vehicles --Refueling Apparatus & Infrastructure --Neighborhood Electric Vehicles Alternative Fuel - Non Refundable --Fuel Delivery System --Vehicles --Refueling Apparatus & Infrastructure Coal Used for Electric Generation Construction Materials Defense Contracting Donation of Motor Vehicles to Work Program Employment of TANF Recipients Enterprise Zone Environmental Technology Military Reuse Zone Pollution Control Equipment Recycling Equipment Research & Development Solar Hot Water Heater Plumbing Stub-Outs Underground Storage Tanks TOTAL (2) # OF FILERS 0 * CREDIT USED $0 * CARRYFORWARD AVAILABLE $0 * 4 9 4 37 $50 $284,971 $2,180 $1,142,629 $831,369 $368,595 $6,532 $916,426 5 181 12 * 4 3 0 6 71 * 3 32 5 105 * 0 492 $677,992 $15,617,314 $138,940 * $204,184 $2,659,007 $0 $27,598 $4,883,910 * $120,440 $3,806,949 $15,626 $6,624,306 * $0 $36,508,237 $0 $19,391 $0 * $426,792 $15,146,850 $0 $14,398 $7,162,415 * $16,262 $6,665,304 $222,796 $317,668,240 * $0 $374,123,024 (1) This summary combines all liability on the Arizona Form 120 Corporate Income Tax returns for tax year 2000 filed from January 2001 forward. (2) Total is for all credits, including those for which information cannot be divulged individually. * The single asterisk indicates that no information can be released due to confidentiality laws in Arizona. Figures may not add to total due to rounding. 57 TABLE 33 AVERAGE FEDERAL ADJUSTED GROSS INCOME AND AVERAGE TAX LIABILITY PER RETURN BY COUNTY FOR TAX YEAR 2000 APACHE COCONINO Average FAGI $26,696 Average Liability $712 Average FAGI $41,920 Average Liability $1,210 MOHAVE NAVAJO Average FAGI $34,274 Average Liability $838 Average FAGI $33,610 Average Liability $852 GREENLEE YAVAPAI Average FAGI $36,638 Average Liability $830 Average FAGI $42,027 Average Liability $1,151 LA PAZ Average FAGI $29,031 Average Liability $711 GILA Average FAGI $36,280 Average Liability $891 MARICOPA Average FAGI $53,562 Average Liability $1,594 YUMA Average FAGI $31,016 Average Liability $831 STATEWIDE AVERAGES Average FAGI $48,568 Average Liability $1,423 PINAL Average FAGI $34,677 Average Liability $824 PIMA COCHISE Average FAGI $43,426 Average Liability $1,184 Average FAGI is the average federal adjusted gross income reported on the Arizona resident income tax return. Average liability is the average tax liability for all resident Arizona income tax returns filed. GRAHAM Average FAGI $33,610 Average Liability $769 Average FAGI $36,408 Average Liability $938 SANTA CRUZ Average FAGI $33,925 Average Liability $1,022 ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 58 TABLE 34 URBAN REVENUE SHARING FISCAL YEAR 1998-99 THROUGH FISCAL YEAR 2002-03 FISCAL YEAR AMOUNT 1998-99 $340,310,656 1999-00 $377,710,988 2000-01 $396,452,640 2001-02 $421,876,573 2002-03 $430,559,053 59 TABLE 35 DISTRIBUTION OF INCOME TAX AS URBAN REVENUE SHARING TO MUNICIPALITIES IN FISCAL YEAR 2002-03 CITIES BY COUNTY APACHE Eagar St. Johns Springerville COCHISE Benson Bisbee Douglas Huachuca City Sierra Vista Tombstone Willcox COCONINO Flagstaff Fredonia Page Williams GILA Globe Hayden Miami Payson Winkelman GRAHAM Pima Safford Thatcher GREENLEE Clifton Duncan LA PAZ Parker Quartzsite MARICOPA Avondale Buckeye Carefree Cave Creek Chandler El Mirage Fountain Hills Gila Bend Gilbert Glendale Goodyear Guadalupe Litchfield Park Mesa Paradise Valley Peoria Phoenix AMOUNT % OF TOTAL $429,237 341,371 221,381 0.10% 0.08% 0.05% 501,397 648,166 1,582,047 186,361 4,020,437 160,072 397,308 0.12% 0.15% 0.37% 0.04% 0.93% 0.04% 0.09% 5,629,570 110,263 724,690 302,477 1.31% 0.03% 0.17% 0.07% 796,744 94,937 206,051 1,449,592 47,149 0.19% 0.02% 0.05% 0.34% 0.01% 211,692 982,572 428,066 0.05% 0.23% 0.10% 276,295 86,422 0.06% 0.02% 334,194 356,970 0.08% 0.08% 3,819,069 904,346 311,524 396,775 18,793,721 809,835 2,153,635 210,734 11,675,179 23,288,415 2,012,720 556,422 405,503 42,186,651 1,454,175 11,533,306 140,600,351 0.89% 0.21% 0.07% 0.09% 4.36% 0.19% 0.50% 0.05% 2.71% 5.41% 0.47% 0.13% 0.09% 9.80% 0.34% 2.68% 32.66% CITIES BY COUNTY AMOUNT Queen Creek Scottsdale Surprise Tempe Tolleson Wickenburg Youngtown MOHAVE Bullhead City Colorado City Kingman Lake Havasu City NAVAJO Holbrook Pinetop-Lakeside Show Low Snowflake Taylor Winslow PIMA Marana Oro Valley Sahuarita South Tucson Tucson PINAL Apache Junction Casa Grande Coolidge Eloy Florence Kearny Mammoth Superior SANTA CRUZ Nogales Patagonia YAVAPAI Camp Verde Chino Valley Clarkdale Cottonwood Jerome Prescott Prescott Valley Sedona YUMA San Luis Somerton Wellton Yuma $459,357 21,574,128 3,283,188 16,882,535 529,389 540,883 320,358 0.11% 5.01% 0.76% 3.92% 0.12% 0.13% 0.07% 3,594,074 354,841 2,135,967 4,463,510 0.83% 0.08% 0.50% 1.04% 523,322 381,236 818,988 474,683 338,025 1,013,225 0.12% 0.09% 0.19% 0.11% 0.08% 0.24% 1,442,781 3,161,005 345,050 584,307 51,799,939 0.34% 0.73% 0.08% 0.14% 12.03% 3,386,001 2,684,620 828,673 1,104,223 1,541,538 239,364 187,532 346,327 0.79% 0.62% 0.19% 0.26% 0.36% 0.06% 0.04% 0.08% 2,222,070 93,766 0.52% 0.02% 1,005,881 833,888 364,207 976,932 35,016 3,612,061 2,504,857 1,084,746 0.23% 0.19% 0.08% 0.23% 0.01% 0.84% 0.58% 0.25% 1,630,738 773,329 194,663 8,250,011 0.38% 0.18% 0.05% 1.92% $430,559,053 100.00% TOTAL City distributions are based on relative population Figures may not add to total due to rounding 60 % OF TOTAL Return to Table of Contents PROPERTY TAX In Arizona, property taxation is based upon the "ad valorem" value of property (ad valorem, meaning "according to value"). The tax is calculated from two different bases: full cash value (or market value) and limited value (i.e., statutorily-controlled value). The full cash value is used to calculate tax rates to pay for voter-initiated bonds, overrides, and special district levies (Refer to Table 37). Taxes based upon the limited (controlled) value produce funds to maintain the basic operations of state, county and city government, schools, and other public entities (Refer to Table 36). Limited values cannot exceed the full cash value of each property. Taxes calculated on the limited value, called primary taxes, are added to those derived from the full cash value, or secondary taxes, to produce the total annual tax bill. All taxable property in Arizona is classified according to its actual use. Each classification is assigned a specific assessment ratio prescribed by law which is multiplied by the full cash and limited values to produce an assessed value (See Figure 1). The assessed value is the basis for calculating tax bills. GENERAL PROPERTY TAX ADMINISTRATION The duties of valuing property for tax purposes are divided between the Department of Revenue and the fifteen County Assessors’ Offices. The department values utilities, airlines, railroads, mines, and other geographically-dispersed properties (Centrally Valued Properties). Values determined by the department for those properties are transmitted to the County Boards of Supervisors for entry upon the county tax rolls for levy and collection of property taxes. County Assessors, utilizing appraisal standards and manuals prescribed by the department, are responsible for assessment of other classes of property, including residential, commercial, industrial, and agricultural properties (Locally Assessed Properties). Appeals of valuation or classification determined by the county assessors for locally assessed properties originate with the property owner’s petition for review filed with the county assessor. Such appeals may be continued to either the local County Board of Equalization, or to the State Board of Equalization and the Tax Court, a division of the Maricopa County Superior Court. Appeals may also be filed directly with the Tax Court. TAX COLLECTION AND DISTRIBUTION County Treasurers collect all property taxes (except airline and private car companies) and distribute receipts to all taxing entities. Taxes levied on airline flight properties and private rail car properties are collected by the department and deposited with the Arizona State Treasurer. Taxes on airline flight properties and private car companies are levied at the average state tax rate. This rate is derived by dividing the total of all of the levies in the state by the total net assessed value in the state. This calculation produces the weighted average of all of the levies in the state and is referred to as the "average state tax rate." EQUALIZATION The department’s primary tool in evaluating assessors’ assessment performance is its sales ratio study, which compares values established by the County Assessors with sales prices of recently sold properties. These studies are performed several times each year by county, type of property, and area. Sales ratios are derived by dividing full cash values by sales prices of recently sold properties. The median sales ratio is the middle sales ratio when the ratios are arrayed in order of magnitude; in other words, there are an equal number of properties above and below the median. The sales ratio studies include coefficients of dispersion which are a measure of how equally all taxpayers are treated. Coefficient of dispersion targets are currently 25 % for vacant land and commercial properties, 15 % for residential properties in Maricopa and Pima counties, and 20 % on residential properties in all other counties. Lower coefficients of dispersion indicate greater equity in property assessments. ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 61 Beginning with tax year 1998, the assessment and appeals calendar for centrally valued properties was changed to coincide with the calendar for locally assessed properties. Centrally Valued Properties The Centrally Valued Properties Unit is responsible for the annual valuation of 13 industries for ad valorem property tax purposes (see chart next page). Generally, these are large, complex properties which are often located in more than one county and/or in more than one state. Values are determined for the entire system and then apportioned to Arizona and to the individual taxing jurisdictions. They are referred to as “centrally valued” because they are valued by the department rather than the 15 County Assessors. Figure 1 Class Legal Classification Assessment Ratio 1.1 1.3-1.7, 1.11 1.12 1.13 Mines Utilities Commercial Real Commercial Personal 2R 2P Agricultural Real; Vacant Land Agricultural Personal 3 4 5 6 Residential Rental Residential Railroads, Airlines Historic Property; Foreign Trade Zones; Enterprise Zone; Qualified Environmental Technology Facilities 5% Commercial Historic Combination 1% and 25% Rental Residential Historic Combination 1% and 10% Improvements on government property 1% 7 8 9 25% 25% 25% First $53,266 exempt; 25% on the remainder 16% First $53,266 exempt; 16% on the remainder 10% 10% 21% ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 62 INDUSTRIES VALUED BY THE DEPARTMENT Industry Number of Companies 2001................2002................2003 Airlines (Flight Property)...............................................................34....................32....................30 Electric & Gas* Generation ......................................................................14....................14....................26 Transmission and Distribution........................................37....................37....................35 Mines (non-producing) ....................................................................4......................2......................2 Mines (producing)..........................................................................30....................30....................33 Pipelines (Gas Transmission) ........................................................11....................10......................9 Private Rail Cars ..........................................................................260..................265..................256 Producing Oil & Gas Interests .........................................................3......................2......................2 Railroads ........................................................................................11....................11....................11 Telecommunications .....................................................................73....................78....................81 Waste Water Utilities.....................................................................29....................25....................26 Water Utilities..............................................................................327..................331..................327 Total .............................................................................................833..................837..................838 * Includes Salt River Project ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 63 TABLE 36 STATE OF ARIZONA TAX YEAR 2003 PRIMARY PROPERTY TAX LEVIES TAX AUTHORITY NET ASSESSED VALUATION STATE COUNTY CITIES & TOWNS COMMUNITY COLLEGES SCHOOLS ALL OTHER TOTAL APACHE COCHISE COCONINO GILA GRAHAM GREENLEE LA PAZ MARICOPA MOHAVE NAVAJO PIMA PINAL SANTA CRUZ YAVAPAI YUMA $299,355,283 570,409,342 1,116,668,488 346,905,903 100,580,910 142,275,425 124,251,543 25,447,850,971 1,159,793,042 623,721,601 5,022,474,184 951,824,434 240,075,205 1,516,807,417 631,943,062 $0 289,252 0 0 0 0 0 13,339,439 0 0 0 0 0 0 0 $2,518,476 19,445,315 10,574,850 16,934,905 2,276,045 1,879,316 3,381,755 428,160,093 25,767,122 5,918,642 228,206,160 46,876,402 9,171,833 32,649,944 17,629,316 $0 1,561,717 3,802,598 1,669,552 159,997 9,475 0 123,313,689 2,955,272 313,534 4,940,036 3,178,228 0 1,236,923 5,901,383 $0 10,192,074 4,576,108 2,181,311 2,012,725 0 2,269,703 239,464,278 10,986,212 7,535,000 57,045,262 20,689,808 0 23,771,406 11,543,704 $9,474,502 27,275,750 46,057,014 15,067,482 4,033,469 5,321,698 3,794,684 1,184,565,109 49,794,838 25,529,865 286,252,575 43,806,559 12,304,642 53,162,664 28,747,323 $0 0 0 0 0 0 0 0 0 0 0 61,887 0 0 0 11,992,978 58,764,108 65,010,570 35,853,250 8,482,236 7,210,489 9,446,142 1,988,842,608 89,503,444 39,297,041 576,444,033 114,612,884 21,476,475 110,820,937 63,821,726 TOTAL STATE $38,294,936,810 $13,628,691 $851,390,174 $149,042,404 $392,267,591 $1,795,188,174 $61,887 $3,201,578,921 AVERAGE STATE PRIMARY TAX RATE PER $100 PRIMARY RATE 4.01 10.30 5.82 10.34 8.43 5.07 7.60 7.82 7.72 6.30 11.48 12.04 8.95 7.31 10.10 8.36 8.36 TAX YEAR 2002 PRIMARY PROPERTY TAX LEVIES TAX AUTHORITY NET ASSESSED VALUATION STATE COUNTY CITIES & TOWNS COMMUNITY COLLEGES SCHOOLS ALL OTHER TOTAL APACHE COCHISE COCONINO GILA GRAHAM GREENLEE LA PAZ MARICOPA MOHAVE NAVAJO PIMA PINAL SANTA CRUZ YAVAPAI YUMA $275,868,482 $537,737,089 $1,048,500,739 $331,626,188 $96,969,355 $180,356,400 $120,512,244 $22,955,864,882 $1,044,790,536 $563,168,606 $4,669,335,684 $816,899,699 $228,063,060 $1,388,092,520 $596,500,117 $0 $374,485 $0 $0 $0 $0 $0 $13,427,476 $0 $0 $0 $0 $0 $0 $0 $2,350,675 $18,423,949 $9,480,544 $16,246,035 $2,210,998 $1,921,336 $3,300,709 $390,180,835 $23,391,815 $6,644,166 $212,963,731 $40,372,000 $8,752,148 $29,096,384 $16,743,162 $0 $1,255,710 $3,608,334 $1,705,615 $152,985 $9,290 $0 $106,911,307 $2,831,976 $286,357 $4,643,860 $2,533,042 $0 $1,151,622 $5,569,705 $0 $9,608,286 $4,281,028 $0 $1,916,114 $0 $2,201,397 $221,156,802 $9,818,941 $6,701,706 $53,838,033 $17,756,949 $0 $21,980,482 $10,896,268 $7,932,794 $25,345,798 $46,725,205 $14,701,509 $3,827,076 $5,721,153 $3,698,830 $1,108,239,174 $41,867,948 $25,117,257 $278,704,603 $39,474,444 $10,907,640 $52,714,923 $32,052,882 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $10,283,469 $55,008,228 $64,095,111 $32,653,159 $8,107,173 $7,651,779 $9,200,936 $1,839,915,594 $77,910,680 $38,749,486 $550,150,227 $100,136,435 $19,659,788 $104,943,411 $65,262,017 TOTAL STATE $34,854,285,601 $13,801,961 $782,078,487 $130,659,803 $360,156,006 $1,697,031,236 $0 $2,983,727,493 AVERAGE STATE PRIMARY TAX RATE PER $100 8.56 All figures are current as of September 1, 2003. 64 PRIMARY RATE 3.73 10.23 6.11 9.85 8.36 4.24 7.63 8.02 7.46 6.88 11.78 12.26 8.62 7.56 10.94 8.56 TABLE 37 STATE OF ARIZONA TAX YEAR 2003 SECONDARY PROPERTY TAX LEVIES TAX AUTHORITY NET ASSESSED VALUATION STATE COUNTY CITIES & TOWNS COMMUNITY COLLEGES SCHOOLS ALL OTHER TOTAL APACHE COCHISE COCONINO GILA GRAHAM GREENLEE LA PAZ MARICOPA MOHAVE NAVAJO PIMA PINAL SANTA CRUZ YAVAPAI YUMA $305,072,059 586,985,389 1,151,482,204 363,174,059 101,767,801 142,446,531 129,744,836 27,477,987,528 1,189,713,576 649,315,690 5,221,270,997 1,021,719,398 246,303,386 1,602,480,129 650,434,765 $0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 $3,020,518 1,497,399 3,338,147 1,089,522 48,693 1,709,952 129,745 35,481,860 6,071,109 779,178 55,945,920 1,455,274 1,014,031 3,403,406 3,278,191 $113,401 131,655 4,585,242 100,000 0 0 0 192,625,370 425,605 48,250 23,559,680 0 0 1,674,875 85,855 $1,298,692 0 1,931,005 0 0 0 298,543 37,777,314 0 1,509,425 18,410,202 0 0 4,977,303 1,496,650 $2,717,352 6,986,271 19,449,515 4,207,139 1,844,157 1,325,372 1,362,361 661,088,911 14,145,893 9,245,019 104,827,259 23,727,462 5,444,758 13,345,858 14,034,689 $2,481,296 6,338,753 9,309,037 4,085,478 312,268 36,000 3,155,766 125,967,689 17,769,271 7,779,889 49,072,140 15,072,832 4,079,541 20,613,673 2,209,391 $9,631,259 14,954,078 38,612,946 9,482,139 2,205,118 3,071,324 4,946,415 1,052,941,144 38,411,878 19,361,761 251,815,201 40,255,568 10,538,330 44,015,115 21,104,776 TOTAL STATE $40,839,898,348 $0 $118,262,945 $223,349,933 $67,699,134 $883,752,017 $268,283,024 $1,561,347,053 AVERAGE STATE SECONDARY TAX RATE PER $100 SECONDARY RATE 3.16 2.55 3.35 2.61 2.17 2.16 3.81 3.83 3.23 2.98 4.82 3.94 4.28 2.75 3.24 3.82 3.82 TAX YEAR 2002 SECONDARY PROPERTY TAX LEVIES TAX AUTHORITY NET ASSESSED VALUATION STATE COUNTY CITIES & TOWNS COMMUNITY COLLEGES SCHOOLS ALL OTHER TOTAL APACHE COCHISE COCONINO GILA GRAHAM GREENLEE LA PAZ MARICOPA MOHAVE NAVAJO PIMA PINAL SANTA CRUZ YAVAPAI YUMA $283,294,073 $554,220,855 $1,084,875,819 $357,161,346 $99,614,664 $180,770,442 $122,304,607 $24,457,047,282 $1,072,413,581 $592,604,484 $4,835,561,219 $863,865,161 $235,055,570 $1,450,497,580 $615,920,229 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $3,472,903 $1,413,818 $3,145,055 $1,071,484 $40,106 $1,131,022 $122,305 $31,721,521 $5,472,909 $712,883 $51,895,243 $1,315,235 $967,724 $3,072,096 $3,104,238 $118,653 $131,154 $4,433,011 $100,000 $0 $0 $0 $175,207,012 $534,635 $48,250 $20,674,970 $0 $0 $1,667,615 $74,457 $0 $0 $1,872,405 $2,079,751 $0 $0 $311,877 $36,526,312 $0 $1,565,661 $18,389,025 $0 $0 $5,735,780 $1,570,597 $5,944,208 $7,279,778 $17,927,789 $4,668,305 $1,842,704 $1,633,174 $1,405,585 $603,369,737 $13,587,726 $8,597,221 $102,522,442 $21,957,638 $5,990,469 $12,506,662 $13,483,131 $2,527,266 $5,957,688 $8,449,763 $3,838,702 $268,109 $29,348 $2,183,938 $113,194,334 $16,811,747 $6,831,602 $45,269,882 $12,595,876 $3,672,772 $18,727,476 $2,050,061 $12,063,030 $14,782,438 $35,828,023 $11,758,242 $2,150,919 $2,793,544 $4,023,705 $960,018,916 $36,407,017 $17,755,617 $238,751,562 $35,868,749 $10,630,965 $41,709,629 $20,282,484 TOTAL STATE $36,805,206,912 $0 $108,658,542 $202,989,757 $68,051,408 $822,716,569 $242,408,564 $1,444,824,840 AVERAGE STATE SECONDARY TAX RATE PER $100 3.93 All figures are current as of September 1, 2003. 65 SECONDARY RATE 4.26 2.67 3.30 3.29 2.16 1.55 3.29 3.93 3.39 3.00 4.94 4.15 4.52 2.88 3.29 3.93 TABLE 38 AVERAGE PROPERTY TAX RATES PER $100 OF ASSESSED VALUATION TAX YEAR 2000 THROUGH TAX YEAR 2003 2000 PRIMARY School Districts Counties State Cities Community Colleges Special Districts SECONDARY SECONDARY $2.42 0.33 0.00 0.54 0.18 0.65 $4.88 2.22 0.05 0.37 1.02 0.00 $2.30 0.31 0.00 0.55 0.19 0.66 $8.56 $4.12 $8.54 $4.01 $12.68 $12.55 2002 2003 PRIMARY TOTAL PRIMARY $4.85 2.23 0.07 0.38 1.03 0.00 TOTAL School Districts Counties State Cities Community Colleges Special Districts 2001 SECONDARY PRIMARY SECONDARY $4.87 2.24 0.04 0.38 1.03 0.00 $2.24 0.30 0.00 0.55 0.18 0.66 $4.69 2.22 0.04 0.39 1.02 0.00 $2.16 0.29 0.00 0.55 0.16 0.66 $8.56 $3.93 $8.36 $3.82 $12.49 $12.18 School district rate includes Unorganized School Districts. Figures may not add to total due to rounding. Return to Table of Contents 66 ALL OTHER SOURCES OF REVENUE Bingo Estate Tax Luxury Tax Unclaimed Property & Escheated Estates Waste Tire Fee ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 67 BINGO The tax on state licensed bingo operations is based on a multi-tiered licensing structure. There are three classes of bingo licenses, each of which has a different tax rate. Each licensee’s tax rate is based on bingo receipts. Class A licensees, whose gross receipts do not exceed $15,600 per year, are taxed at 2.5 percent of their adjusted gross receipts. (Adjusted gross receipts are the monies left after paying prizes.) Class B and Class C licensees are taxed on their gross receipts. Class B licensees, whose gross receipts do not exceed $300,000, are taxed at 1.5 percent of their gross receipts. Class C licensees, whose gross receipts exceed $300,000 per year, are taxed at 2 percent of their gross receipts from bingo. All taxes collected are deposited in the state general fund. A total of $626,770 was deposited in fiscal year 2003 (Refer to Table 39). TABLE 39 BINGO COLLECTIONS FISCAL YEAR 1998-99 THROUGH FISCAL YEAR 2002-03 FISCAL YEAR AMOUNT 1998-99 $717,830 1999-00 $677,036 2000-01 $634,384 2001-02 $629,680 2002-03 $626,770 BINGO COLLECTIONS Licenses Proceeds Penalty, Interest and Miscellaneous TOTAL FY1998-99 FY1999-00 FY2000-01 FY2001-02 FY2002-03 $24,193 689,423 $21,534 644,385 $24,549 606,880 $21,322 605,388 $26,110 598,465 4,214 11,116 2,955 2,970 2,194 $717,830 $677,036 $634,384 $629,680 $626,770 Return to Table of Contents ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 68 ESTATE TAX The Arizona estate tax is a tax on the transfer of property or interest in property that takes effect upon the owner’s death. The estate tax is imposed on the net taxable estate before distribution, differing from the inheritance tax, which is imposed on the portion of the estate received by a beneficiary. Arizona does not impose inheritance or gift taxes. Estate taxes are deposited into the state general fund. (Refer to Table 40.) The Estate Tax Unit of the Arizona Department of Revenue is responsible for the collection of estate taxes and the processing of estate tax returns and reports of personal representative of decedent. Only estates that are required to file a federal estate tax return are required to file an Arizona Estate Tax return. However, if an estate requires a tax lien waiver from the department in order to transfer property prior to receiving the Internal Revenue Service Closing Letter, the department may issue a partial waiver upon receipt of an Application for Waiver of Tax. After the Arizona estate tax and any penalties and interest have been paid, the department will issue a receipt for payment of tax and a complete tax lien waiver. The Arizona estate tax for an Arizona resident decedent is an amount equal to the federal credit for state death taxes. If the decedent owned real or tangible personal property located in another state, the Arizona tax is reduced by either the amount of death tax paid to the other state or a prorated share of the federal credit, whichever is less. The Arizona estate tax for a nonresident decedent is a prorated share of the federal credit, based on the value of real property and tangible personal property having actual situs in Arizona this year. TABLE 40 COLLECTIONS OF ESTATE TAXES FISCAL YEAR 1998-99 THROUGH FISCAL YEAR 2002-03 Fiscal Year Collections Refunds Net 1998-99 $89,087,575 $1,837,477 $87,250,098 1999-00 $85,238,335 $4,594,005 $80,644,330 2000-01 $76,921,666 $2,269,883 $74,651,783 2001-02 $81,892,657 $1,340,437 $80,552,220 2002-03 $96,859,390 $2,641,471 $94,217,919 Figures may not add to total due to rounding. Return to Table of Contents ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 69 LUXURY TAX Arizona’s luxury tax applies to cigarettes, other tobacco products, and alcoholic beverages. The department is responsible for issuing tobacco licenses and stamps and collecting taxes on tobacco products and alcoholic beverages. The department also investigates and confiscates contraband alcoholic beverages and tobacco products. During the 2003 fiscal year, over $266 million was received in luxury tax collections. Increased collections of approximately 27% are primarily due to a tobacco tax increase established by Proposition 303 in November 2002. Of the monies collected per the Tobacco Products Referendum (Prop 303), $26.2 million was distributed to the Prop 204 Protection Account, $16.9 million to the Medically Needy Account, $12.5 million for Emergency Health Services, $3.1 million for Health Research, and $1.2 million for Health Education. Due to the passage of the Tobacco Tax and Health Care Initiative in November 1994, $75.1 million was allocated to the Medically Needy Fund, $24.6 million to the Health Education Fund and $5.4 million to the Health Research Fund. The Corrections Fund, established by the Legislature in 1984 to pay for prison construction, received $26.6 million, and the Arizona Wine Promotional Fund received $25,497. The Drug Treatment and Education Fund received $7.3 million, and the Corrections Revolving Fund received $2.9 million due to the passage of Proposition 200 in 1996. The remaining $64.6 million was deposited into the state general fund. (Refer to Table 41) Luxury Tax Rates Cigarettes per cigarette package of 20 package of 25 $ 0.059 $1.18 $ 1.475 Cigars small cigars weighing not more than 3 lbs/1,000 package of 20 or less selling for $0.05 or less (each 3 cigars) selling for more than $0.05 (each cigar) $ 0.2625 $ 0.13 $ 0.13 Smoking Tobacco snuff, fine cut, chewing, etc. (per ounce) Cavendish, plug, or twist (per ounce) $ 0.1325 $ 0.0325 Spirituous Liquors per gallon $ 3.00 Vinous liquors more than 24% alcohol (per gallon) $ 4.00 Vinous liquors less than 24% alcohol (per gallon) $ 0.84 Malt Liquor (Beer) per gallon per barrel (31 gallons) $ 0.16 $ 4.96 ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 70 TABLE 41 LUXURY TAX COLLECTIONS FISCAL YEAR 1998-99 THROUGH FISCAL YEAR 2002-03 SOURCE Spirituous Liquor Vinous Liquor Malt Liquor FY1998-99 FY1999-00 FY2000-01 FY2001-02 PERCENT OF COLLECTIONS FY2002-03 IN FY2002-03 $19,648,670 7,969,428 20,534,013 $20,587,605 9,026,326 21,309,231 $21,327,540 8,477,493 21,602,321 $21,574,744 9,035,156 22,031,467 $22,004,331 9,924,749 22,137,764 Liquor Collections $48,152,111 $50,923,162 $51,407,354 $52,641,368 $54,066,844 Tobacco - All Types Gross Revenue Refunds Licenses Administrative Expenses 166,646,960 (3,457,756) 7,175 (358,196) 163,206,980 (3,474,292) 7,175 (310,931) 161,078,853 (2,662,128) 8,600 (384,593) 162,148,102 (4,169,264) 5,250 (393,800) 218,358,747 (1) (5,614,159) 5,950 (403,739) Net Tobacco Collections TOTAL COLLECTIONS $162,838,183 $159,428,932 $158,040,732 $157,590,288 $212,346,798 $210,990,294 $210,352,094 $209,448,087 $210,231,655 $266,413,642 8.3% 3.7% 8.3% 79.7% DISTRIBUTIONS: State General Fund Wine Promotional Fund Tobacco Tax & Health Care Fund-Prop. 200 (1) Tobacco Products Tax Fund-Prop. 303 (1) Drug Treatment & Education Fund DOC Revolving Fund Department of Corrections Fund DOC Transfer from Prop 200 Funds Prop 200 Transfer from Prop 303 Funds (1) TOTAL DISTRIBUTIONS 64,770,498 14,595 112,735,957 N/A 6,502,823 2,583,453 24,141,360 241,607 N/A 65,436,145 21,197 109,786,025 N/A 6,897,717 2,739,633 25,192,099 279,278 N/A 65,568,793 21,278 108,709,176 N/A 6,903,464 2,743,924 25,154,893 346,559 N/A 66,069,587 23,391 108,177,154 N/A 7,098,014 2,820,269 25,718,685 324,556 N/A 64,586,950 25,497 102,529,785 59,938,321 7,306,966 2,902,721 26,348,946 277,104 2,497,352 $210,990,294 $210,352,094 $209,448,087 $210,231,655 $266,413,642 (1) In November 2002, Proposition 303 increased the Luxury tax on cigaretts from $0.029 to $0.059 per cigarette and created the Tobacco Products Tax Fund. Tax rates on other tobacco products also increased. Distributions of the increased rates are made to the Tobacco Products Tax Fund. Proposition 303 also changed the name of the Health Care Fund to the Tobacco Tax & Health Care Fund and established a hold harmless fund for the Prop 200 accounts. Return to Table of Contents 71 UNCLAIMED PROPERTY Responsibilities of the Unclaimed Property Program include the collection, safekeeping, and disposition of ordinary unclaimed property and escheated estates. The Unclaimed Property staff establishes and maintains records of these types of funds along with other personal property that is presumed to be abandoned. This property is received from regular business associations, banking and financial organizations, insurance companies, utilities, fiduciaries, state courts, and governmental agencies. The largest percentage of unclaimed property is comprised of: • • • • • • • • • • Contents of safe deposit boxes on which rent has not been paid for one year. Checks written to employees not cashed after one year. Government and Court property not claimed in one year. Utility deposits not claimed in two years. Stock or other equity interest in a business association or financial organization with no activity for three years. Checks written to vendors not cashed after five years. Bank or credit union accounts with no activity for five years. Cashier and other official checks not cashed in five years. Money orders not cashed in seven years. Traveler’s checks not cashed in fifteen years. Owners may recover unclaimed property at any time with proper documentation, and there is no statute of limitation on claims. ESCHEATED ESTATES In addition to their Unclaimed Property responsibilities, staff members also establish and maintain records of Escheated Estates. An Escheated Estate is created when a person dies without leaving a will and has no known heirs, or if a known heir cannot be located. When either of these conditions exist, his or her property reverts to the state as the original and ultimate proprietor after seven years. Funds received from escheated estates are deposited into the permanent school fund. (Refer to Table 42.) ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 72 TABLE 42 COLLECTIONS AND DISTRIBUTION OF UNCLAIMED PROPERTY FISCAL YEAR 1998-99 THROUGH FISCAL YEAR 2002-03 SOURCE UNCLAIMED PROPERTY Refunds Expenses Housing Fund Utility Assistance Fund Racing Fund Victim Restitution Fund (1) NET FY1999-00 FY2000-01 $21,315,542 (8,135,383) (1,020,282) (6,791,802) (818,382) (2,465,180) ----- $31,415,063 (9,881,814) (1,110,490) (11,421,658) (639,104) (4,153,330) ----- $38,020,547 (15,764,220) (1,023,813) (11,733,852) (905,023) (4,266,855) (17,027) $2,084,512 $4,208,667 $4,309,756 309,305 (92,000) ESCHEATED ESTATES Refunds NET (3) UNCLAIMED ARIZONA SHARES AND DIVIDENDS TOTAL NET REVENUE FY1998-99 FY2001-02 $48,681,438 (11,903,236) (1,324,594) (19,761,582) (868,416) (7,186,030) 18,426 (2) $7,656,006 201,612 (188,587) 647,074 (576,578) 252,786 (294,542) $217,304 $13,026 $70,496 ($41,755) $0 $0 $7,326 $2,301,816 $4,221,693 $4,387,578 $5,919 (3) $7,620,170 PERCENT OF COLLECTIONS FY2002-03 IN FY2002-03 $46,219,555 (10,333,078) (1,325,764) (17,950,660) (1,118,958) (6,527,513) (2,128,019) $6,835,564 269,557 (55,504) $214,052 3.0% $0 0.0% $7,049,617 100.0% DISTRIBUTION FISCAL YEAR 2002-03 NET TO GENERAL FUND NET TO PERMANENT SCHOOL FUND (3) RETAINED BY UCP(4) $6,745,652 214,052 89,912 TOTAL DISTRIBUTION $7,049,617 (1) Victim Restitution Fund became effective on January 1, 2001 per HB 2061. (2) Claims paid during FY 02 for Victims Restitution exceeded their collections, therefore, no transfer was required. (3) Due to a lack of available funds, FY 01 and FY 02 Escheated Estates was not transferred to the Permanent School Fund until FY 03 along with Unclaimed Shares and Dividends from FY 02. FY 03 Escheated Estates will be transferred in FY 04. (4) This amount was retained by Unclaimed Property due to an overpayment to the General Fund in FY 02. Figures may not add to total due to rounding. Return to Table of Contents 73 97.0% WASTE TIRE The Arizona waste tire fee is a fee applied to the sale of new motor vehicle tires. The fee is to be collected quarterly at a rate of two percent of the purchase price not to exceed two dollars per tire. During fiscal year 2003, the department collected $7,007,444 and distributed 3.1% percent to the Department of Environmental Quality with the remainder being distributed to the counties based on the number of motor vehicles registered in the county (Refer to Tables 43 and 44). The distribution is performed quarterly. TABLE 43 WASTE TIRE FEE COLLECTIONS FISCAL YEAR 2002-03 NUMBER OF TIRES 1 to 50 51 to 100 101 to 250 251 to 500 501 to 1,000 1,001 to 2,500 2,501 to 5,000 5,001 to 10,000 10,001 to 25,000 More Than 25,000 No Information Overpayments Accounts Receivable Adjustment (1) Total NUMBER OF FILERS TOTAL NUMBER OF TIRES 192 90 139 105 111 151 109 90 71 22 6 4,019 6,700 23,059 38,089 77,897 250,493 386,473 618,567 1,022,115 3,285,839 1,086 5,713,251 AMOUNT REMITTED $5,975 $8,884 $35,867 $48,275 $99,159 $300,055 $456,029 $799,124 $1,099,832 $4,094,691 $4,910 ($18,182) $72,824 $7,007,444 (1) This figure represents the Net Balance added to the distribution for Accounts Receivable Collections. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 74 TABLE 44 WASTE TIRE FEE DISTRIBUTION FISCAL YEAR 1998-99 THROUGH FISCAL YEAR 2002-03 FY1998-99 FY1999-00 FY2000-01 FY2001-02 FY2002-03 Apache Cochise Coconino Gila Graham Greenlee La Paz Maricopa Mohave Navajo Pima Pinal Santa Cruz Yavapai Yuma AZ Dept of Environmental Quality $64,352 152,286 150,983 83,559 35,647 13,870 32,583 2,943,115 232,057 111,158 805,024 196,448 52,529 244,698 166,882 191,691 $68,421 156,256 153,159 83,307 36,127 13,394 32,577 3,076,438 238,888 112,636 829,316 197,496 54,110 251,010 172,712 198,606 $76,526 174,766 171,302 93,175 40,407 14,980 36,436 3,440,863 267,186 125,978 927,554 220,890 60,520 280,743 193,171 222,132 $78,693 174,721 161,337 88,035 38,300 14,021 36,329 3,525,885 271,827 127,482 904,818 207,211 65,220 290,584 184,430 223,742 $88,265 188,526 182,060 100,584 42,055 14,267 40,230 3,837,502 305,722 143,348 991,330 231,521 67,292 323,797 205,684 245,261 Total $5,476,881 $5,674,452 $6,346,629 $6,392,637 $7,007,444 Figures may not add to total due to rounding. Return to Table of Contents 75 LEGISLATIVE SUMMARY __________________________________________________________________________________________________________ ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 76 LEGISLATIVE SUMMARY The general effective date is September 18, 2003 INCOME TAX HB 2057 (Internal Revenue Code Conformity) This is the annual bill which conforms the Arizona statutory definition of the Internal Revenue Code (IRC) for the 2003 tax year to the federal IRC as of January 1, 2003, including provisions that became effective in 2002, but excluding any provisions that become effective after January 1, 2003. HB 2058 (income tax credit review schedule) Laws 2002, Chapter 238 established the Committee for a review of various corporate and individual income tax credits that are set forth in an income tax credit review schedule. HB2058: • Requires income tax credits that are recommended by the Committee to be retained or amended to be returned to the Committee’s schedule and be reviewed in five years. • Reassigns income tax credits reviewed in 2002 for review in 2007 as follows: Individual and corporate defense contracting (A.R.S. § 43-1077, 43-1078, 43-1165 & 431166). Individual and corporate military reuse zone (A.R.S. § 43-1079 & 43-1167). Individual and corporate environmental technology facility (A.R.S. § 43-1080 & 431169). • Requires the Committee to provide a copy of its report to the Arizona State Library, Archives and Public Records. A.R.S. § 43-1076 allows an individual income tax credit for placing recycling equipment in service in the amount of ten percent of the cost of installing recycling equipment. The Committee reviewed the recycling equipment income tax credit in its December meeting and discussed the repeal of this credit. A similar credit existed for corporate taxpayers, but this was eliminated in 1999 when the corporate rate was reduced. HB 2058 repeals retroactive to tax years beginning January 1, 2003, the recycling equipment income tax credit but allows a taxpayer to continue to carry forward existing amounts. Makes technical and conforming changes to statutory provisions that refer to the recycling credit. HB 2059 (2003 tax corrections act) HB 2059 is the annual bill that makes technical, conforming and clarifying changes to the Arizona tax statutes. HB 2396 (school tax credit; reporting requirements) The bill amends A.R.S. § 43-1089 (credit for contributions to school tuition organizations) to require a school tuition organization (STO) to file an annual report with the Department of Revenue, if the organization receives a voluntary cash contribution pursuant to subsection A of the statute. It amends A.R.S. § 43-1089.01 (credit for public school fees and contributions) to require a public school to file an annual report with the Department of Revenue, if the school receives a voluntary cash contribution pursuant to subsection A of the statute. HB 2396 requires a STO or public school to submit this report to the department by February 28th of each year. HB 2421 (school tax credit; classroom instruction) HB 2421 amends A.R.S. § 43-1089-01 (credit for public school fees and contributions). The bill adds a subsection that states that a public school site council or a charter school’s principal, director or chief administrator determine how undesignated contributions received through the tax credit are used. It also includes in the definition of “extracurricular activities” in-state or out-of-state competitive event trips, but excludes senior trips or recreational, amusement or tourist activities. HB 2444 (redevelopment area; financing, definition) An emergency measure that expands the definition of designated area by bringing it into conformity with federal law. The definition will include any area that is designated by state statute as an enterprise zone or any area designated by the U.S. __________________________________________________________________________________________________________ ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 77 Department of Housing and Urban Development as an empowerment zone or enterprise zone. This could occur in counties that meet certain population and property valuation levels. SB1019 (wheels to work program; repeal) The Wheels to Work Program through the Department of Economic Security, Jobs Administration ended in fiscal year 2002 (legislative appropriation was line item vetoed). The tax could be in effect for up to five years, and could be renewed. This bill removes the wheels to work program statute (§ 46-142) and removes the individual and corporate tax credit for donating a motor vehicle to the program (§ 43-1090.01 & §43-1177). TRANSACTION PRIVILEGE TAX HB 2322 (sales tax; solar contractor’s exemption) It expands the solar energy device exemption that already exists in the TPT contracting class to include the mark up and installation of the devices which would be included in the contractor’s Gross proceeds or Gross income from the contract. It changes the deduction limit from “$5,000/device” to “$5,000/contract.” The industry has stated that they have always believed that the installation was exempt and have not paid tax on it. Therefore the fiscal impact will be very slight to the state. The change in the “per device” to “per contract” limit could decrease the amount that can be taken if several devices are on a single contract. SB 1066 (sales tax increase; preexisting contracts) Stipulates how an increase in the transaction privilege (sales) tax rate is applied to prime contracting activities. Specifically, the bill requires: • That any contracts or written bids entered into by prime contractors on or before the effective date of legislation or the date of the election be exempt from transaction privilege tax rate increases imposed as a result of these measures. • The prime contractor must maintain records as required by the department. SB 1231 (hospital districts; facilities) A new subsection is added to A.R.S. § 48-1910 providing that the board of directors of a countywide hospital district may request the county’s board of supervisors to place on a county election ballot the question of imposing county transaction privilege tax (TPT) to support the hospital district. The department will collect the approved TPT and remit revenues therefrom to the county treasurer for dispersal to the hospital district. PROPERTY HB 2112 (property tax appeals) Under Title 12 (Courts and Civil Proceedings) and Title 42 (Taxation), provides for increases in the maximum limits on a given property's full cash value, which are used to determine whether or not a valuation or classification appeal qualifies for small claims court and for determining how many State Board of Equalization hearing officers are required to hear an appeal. HB 2348 (electric generation, transmission and distribution facilities valuation) Laws 2000, Ch. 384 created a two-year transition period for a new valuation methodology for electric generation facilities. Because of the complexity of the changeover to the new methodology, in 2002, H.B. 2063 froze the valuations for existing electric generating facilities for one year, and clarified the combined allocation method for distributing valuations among Arizona counties for Tax Year 2003. HB 2063 also; created a timetable for repealing existing sections of 2000's Session Laws; specified the subsequent delayed repeal of certain sections of 2002's Session Laws; and provided for a retroactively effective date of 12-31-2001. For 2003, under Title 42 (Taxation), H.B. 2348 clarifies the framework the department is to utilize to value electric generating facilities; specifies the allocation method for distributing valuations among Arizona counties; amends the Session Laws of 2000 regarding the effective repeal dates of certain provisions; and amends § 42-12001 to include "gas distribution companies, electric transmission companies, electric distribution companies, combination gas and electric transmission and distribution companies, companies engaged in the generation of electricity, and electric cooperatives." This bill has a retroactively effective date of December 31, 2002, making it applicable to Valuation Year 2003. __________________________________________________________________________________________________________ ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 78 HB 2461 (truth in taxation) Under Title 15 (Education), amends the language specified in the Truth in Taxation notice for K-12 public school districts budgeting. Effective: May 12, 2003 as an Emergency Measure. SB 1049 (mobile home landlords and tenants) Amends several statutes under Title 33 regarding various provisions of the Mobile Home Landlord and Tenant Act, and one statute under Title 41 that is related by subject matter. Only the following statute is directly relevant to property tax assessment. SB 1069 (property tax liens; treasurers procedures) Amends or adds statutes under Title 11 (Counties), Title 33 (Property) and under Title 42 (Taxation) relating to the procedures of County Treasurers and to holders of property tax lien certificates of purchase. OTHER HB 2533 (budget reconciliation; public finances) HB2533 is an omnibus reconciliation bill (ORB) that accompanies the general appropriations bill. This bill was lengthy; however, two tax issues were part of this bill. Withholding Tax • As permanent law, requires a minimum $5 per month of state withholding per employee. • As permanent law, alters state income tax withholding rates to offset federal reductions. The 10% rate only applies to those with an income of $15,000 or less. Current rates • New rates 10.0 % 10.0 % 18.0 % 18.2 % 21.0 % 21.3 % 23.0 % 23.3 % 29.0 % 29.4 % 34.0 % 34.4 % Provides session law to direct employers o increase withholding amounts for employees. The increase is based on the current percentage • the employee now has withheld from their paychecks. Non of the changes will preclude employees from changing the percentage of withholding tax if they so choose. Tax Amnesty • As session law, establishes a tax amnesty program, allowing the director of the department to abate or waive all or part of civil penalties and to impose interest at a reduced rate for tax liabilities for all qualifying taxpayers. States that a s a qualification for amnesty, the taxpayer must pay at least one-third of the total amount due by October 31, 2003, with the total balance due by May 1, 2004. This provision is repealed after June 30, 2004. SB 1310 (tobacco; non-participating manufacturers) Makes clarifications to the existing Tobacco Master Settlement Agreement. It establishes a directory of cigarette products that are allowed to be sold in Arizona, gives the Attorney General (AG) the ability to verify information reported by tobacco product manufacturers and requires non-resident or foreign non-participating manufacturers to appoint an agent for service of process. GENERAL SB 1348 (tax return preparers; penalties) Specifies that the civil penalty, imposed on a tax preparer for understating a taxpayer’s liability, can be imposed only if: a) there was not a realistic possibility that the preparer’s position would be sustained. b) The preparer’s position was undisclosed to the department. Clarifies that a tax preparer is required to pay 85 percent of a penalty if the payment is made within 30 days from the receipt of notification. Clarifies that the 30 day time period currently allowed to appeal a department penalty starts with the date of the receipt of notification. Expands the initial date used regarding statutory requirements for the amount of time to keep tax documents filed electronically (or otherwise) to __________________________________________________________________________________________________________ ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 79 include the date the tax documents were presented to the taxpayer for signature. BILLS VETOED BY THE GOVERNOR SB 1314 (department; procedures and appeals) Permitted a taxpayer that has received an assessment in corporate income, sales or use tax to appeal directly to tax court after an informal conference. Added adverse private taxpayer rulings to the list of actions of the department that can be appealed by the taxpayer to the Board of Tax Appeals Required the department to post redacted Director’s decisions on taxpayer appeals as public records on the department’s website. Governor Napolitano felt that all appeals should exhaust administrative remedies before going to the courts. We will be working to place director's decisions on our website and don't need the legislation to do that. SB 1305 (cigarettes; delivery sales) Placed new restrictions on cigarette manufacturers and distributors who sell cigarettes via the Internet or U.S. mail. Governor Napolitano supported the primary goal of the bill but felt some of the provisions were not consistent with this goal. The Governor agrees that legislation is needed and would like to see an improved version of this bill in the future. __________________________________________________________________________________________________________ ARIZONA DEPARTMENT OF REVENUE 2003 ANNUAL REPORT 80