Annual report / Arizona Department of Revenue

              ARIZONA DEPARTMENT OF REVENUE
1600 WEST MONROE - PHOENIX, ARIZONA 85007-2650
JANE DEE HULL MARK W. KILLIAN
GOVERNOR DIRECTOR
November 15, 2002
Governor Jane Dee Hull
Office of the Governor
1700 W. Washington Street
State Capitol, 9 th Floor
Phoenix, Arizona 85007
The Honorable Governor Hull and the Taxpayers of Arizona:
"…Fair administration, firm enforcement, and prompt and courteous service…."
This brief quote from our mission statement accurately reflects the collective character of the
Arizona Department of Revenue. With this annual report, we hope to illustrate how those simple
tenets are continually exemplified within the Department.
This last year, the Department redoubled its efforts to make our mission a reality. Technological
advancements and reorganization have culminated in a more responsible and satisfied staff. By
supplying personnel with better tools and with a departmental structure more conducive to an
empowered workforce, we have dismantled barriers to communication, efficiency, and speed of
response.
I credit the entire staff of DOR with these enhancements. Most of the substantive progress of the
Department over the last fiscal year has been a result of employee suggestions or direct involvement.
It has been a truly rewarding experience observing a staff so intent on participating in shaping their
agency and in serving the taxpayers.
And the more I see the agency becoming a team of responsible individuals who are truly aware of
their duty to the public trust, the more I'm sure the Department is in good hands.
We hope you enjoy reading our Annual Report. If you have any questions, concerns, or comments,
please feel free to contact me.
Sincerely,
Mark W. Killian
OTHER LOCATIONS: Tucson Government Mall – 400 W. CONGRESS - TUCSON
East Valley – 3191 N. WASHINGTON STREET - CHANDLER
North Valley – 2902 W. AGUA FRIA FREEWAY - PHOENIX
1
DEPARTMENT OF REVENUE
2002 ANNUAL REPORT
TABLE OF CONTENTS
A Message from the Director, Page Two
DEPARTMENT ORGANIZATION
Directory, Page Three
Organization Chart, Page Four
The Year In Review, Page Five
OVERVIEW OF THE DEPARTMENT
Collections, Page Seven
Customer Service, Page Eight
Director's Office, Page Ten
Income Audit, Page Thirteen
Information Technology, Page Fifteen
Process Administration, Page Sixteen
Property Tax, Page Nineteen
Transaction Privilege Tax, Page Twenty One
ARIZONA'S TAXES
Revenue Summary (Table 1), Page Twenty Three
Net Revenue to State General Fund (Table 2), Page Twenty Four
Gross Collections of Audit Assessments and Delinquent Tax
(Table 3), Page Twenty Five
Transaction Privilege, Use and Severance Tax, Page Twenty Six
Income Tax, Page Fifty One
Property Tax, Page Sixty Three
OTHER SOURCES OF REVENUE
Bingo, Page Seventy One
Estate Tax, Page Seventy Three
Luxury tax, Page Seventy Five
Unclaimed Property, Page Seventy Seven
Escheated Estates, Page Seventy Seven
Waste Tire Fee, Page Seventy Nine
Legislative Summary
Bills & Tax Related Resolutions, Page Eighty One
ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT
ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT 3
DIRECTOR
MARK W. KILLIAN
(602) 542-3572
1600 West Monroe, Phoenix
2902 West Agua Fria Freeway, Phoenix
3191 North Washington, Chandler
400 West Congress, Tucson
Internet Address: www.revenue.state.az.us
COLLECTIONS
TEAM LEADERS
JEFF CAVINESS
BOB HOMMEL
RENEE JORDAN
(602) 542-5673
CUSTOMER SERVICE
MARQUETTA WHITE
(602) 542-2076
INCOME AUDIT
TEAM LEADERS
TOM WATERS
DONNA MCCUIN
(602) 542-3345
TRANSACTION PRIVILEGE TAX
VINCENT PEREZ
(602) 542-4656
PROPERTY TAX
TEAM LEADERS
ED LEYBA
CHERYL MURRAY��LEYBA
(602) 542-3529
HEARING OFFICE
JONATHAN HADLEY
(602) 542-4641
INFORMATION TECHNOLOGY
JANE F. HUFF
(602) 542-3141
LEGAL SERVICES
SHARON SEEDALL
STEPHEN SHIFFRIN
(602) 542-3572
LEGISLATIVE SERVICES
JEFF KROS
(602) 542-3572
GEORGANNA MEYER
(602) 542-4641
PROCESS ADMINISTRATION
TEAM LEADERS
WILLIAM M. AVERY
SALLY ESCARCEGA
LORI GASPER
TOM MACCONNEL
BETTY A. MARTZ
MARY K. MCGRADY
TOM E. PINER
TAMMY L. PHELAN
(602) 542-4643 / (602) 542-3141
STRATEGIC MANAGEMENT
LYNETTE STATES
(602) 542-3141
Deputy Director
Cindy Kappler
(520) 628-6359
Deputy Director
Jeffrey Grant
(602) 542-3572
DEPARTMENT ORGANIZATION
ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT 4
DIRECTOR
DIRECTOR’S OFFICE OF TAX
POLICY & LEGAL SUPPORT DEPUTY DIRECTOR ♦Information Technology Function
♦Process Administration Function
♦Budget Office
♦Human Resources
♦Legislative Liaison
♦Economic Research & Analysis
♦Quality Executive
♦Staff & Organizational Development
♦Change Management
♦Hearing Office
DEPUTY DIRECTOR
♦Criminal & Civil
Investigations
♦Office of Tax Policy &
Legal Support
♦Collections Function
♦Customer Service Function
♦Income Audit Function
♦Property Tax Function
♦Transaction Privilege Tax
DIRECTOR’S
EXECUTIVE STAFF
♦Executive Assistant to the
Director
♦General Counsel
♦Internal Auditor
♦Taxpayer Assistance Office/
Problem Resolution Officer
COLLECTIONS PROPERTY
TAXATION
INCOME
AUDIT
TRANSACTION
PRIVILEGE TAX
CUSTOMER
SERVICE
SELF
MANAGED
TEAM
SELF
MANAGED
TEAM
SELF
MANAGED
TEAM
FUNCTION
EXECUTIVE
FUNCTION
EXECUTIVE
DEBT
SETOFF
FIELD
COLLECTIONS
OFFICE
COLLECTIONS
TECHNICAL
COMPLIANCE
SERVICES
BANKRUPTCY
ASSESSMENT
STANDARDS &
EQUALIZATION
CORPORATE
INCOME TAX
AUDIT
TPT AUDIT
TPT CITY
AUDIT
PROGRAM
SUPPORT
SERVICES
COMMUNITY
OUTREACH &
EDUCATION
PROCESSING
ADMINISTRATION
INFORMATION
TECHNOLOGY
SELF MANAGED TEAM
FUNCTION
EXECUTIVE/
CIO
COMPTROLLER’S
OFFICE
PURCHASING
FACILITIES/
WAREHOUSE
ELECTRONIC
FILINGS
BUSINESS
TAX
PROCESSING
APPLICATION
SERVICES
COMPUTER
OPERATIONS
CUSTOMER
SYSTEM
SUPPORT
NEW
TECHNOLOGY
TECHNICAL
SERVICES
INCOME
TAX
PROCESSING
SPECIAL
LICENSE & SERVICES
REGISTRATION
AND
COMPLIANCE
LEGAL
SUPPORT
UNCLAIMED
PROPERTY
SPECIAL
TAXES
BINGO
ESTATE TAX
TOBACCO
TAXPAYER
INFORMATION
& ASSISTANCE
INDIVIDUAL
INCOME TAX
AUDIT
ALTERNATIVE
FUELS
PROPERTY
VALUATION
OFFICE OF THE
CHIEF TAX ADVOCATE
♦Contested Audit
Resolution
♦Corporate Appeals
♦Individual Income
Appeals
♦Legal Support
ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT 5
FY 2002 HIGHLIGHTS
COLLECTIONS SECTION REMAINS PRODUCTIVE
! In spite of continued high vacancy rates, the Collections Function succeeded in collecting a
combined $247,170,014 which was 6% more than they collected in FY 2001.
! 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.
Customer Service Levels Continued to Improve
! The completion of AZ-Taxes for Small Business marked a milestone in electronic services. This is
an interactive program available both on our Web Site and on CD that educates businesses and
guides owners through preparation of a variety of tax returns.
! Participation in Outreach and Taxpayer Education events increased by 39%.
! License Compliance automated the state fair process by using laptops and printers to complete
a fillable TPT-1 form. Revenue collected from the 2001 State Fair increased 22% over the
2000 State Fair.
Millions of Dollars and Returns Processed
! During the 2001 tax-filing season, more than two million (2,276,537) individual income tax
returns were processed, generating in excess of 1.5 million refunds. More than 620,995
documents required the reconciliation of data based on the Department’s computer generated
information.
! The Incoming Mail Unit processed nearly 3.7 million letters and flats during the fiscal year plus
the 4.2 million Personal Income, Withholding, and Transaction Privilege Tax returns produced.
During the peak season, this unit ran two shifts with over 95 temporary and 17 permanent
employees. With the help of three mail-opening machines, they opened approximately 60,000
pieces of mail daily. Teamwork also played an important part during peak time. The Incoming
Mail staff worked with volunteers from other sections of the Department towards a common
goal of opening and processing mail to get refunds to taxpayers quicker and improve the
Department’s overall customer service.
! The Remittance Processing Unit deposited more than $3.8 billion dollars and processed 2.9
million documents. Due to the teamwork of all sections in the function and additional
resources such as updating the J&B Software in our TMSimage program, working overtime and
utilizing temporary employees, the FY 2002 year-end closed smoothly.
! The Data Input Unit keyed over 2.1 million documents this year. The unit kept its primary
emphasis on keying business tax returns this year by outsourcing the bulk of the Individual
Income Tax documents. The implementation of 2D bar code technology on the Arizona Form
140 reduced the burden of keying the balance of the income returns. This technology allows
an average batch of 75 returns to be scanned in 11 minutes, vs. 1.5 hours of keying time. We
were able to scan approximately 110,000 returns this season. This successful program will be
expanded in the coming year.
! The Out Going Mail Team processed over 3.5 million pieces of mail, not including the county
property tax forms. During the last year, postage costs were reduced through elimination of
withholding A1QRT, A1WP and reduction in the number of TPT mail outs.
E-Government Services Expanded
! During FY 2002, 486,514 Arizona Individual Income returns were filed electronically. This
represents an 18.5% increase over the prior year. In FY 2002, more than 205,000 taxpayers
received their refund via direct deposit. This is the second year we offered this convenience.
The number of tax professionals participating in the e-file program exceeded 1,650.
! The Electronic Funds Transfer Unit electronically processed approximately $4.641 billion
during FY 2002. This is an increase of $192.6 million more than in FY 2001 or 4.3 %. The
unit also processed 321,393 payments in FY 2002, an increase of 10.4% from the prior year. In
FY 2002 the unit processed 57.8% of business tax dollars received at the DOR and 13.1 % of
the business tax transactions. The Comptroller's Office returned 10,603 warrants to taxpayers
that had been returned to the Department for a better address.
Transaction Privilege Tax Productivity Improved
! Fiscal year 2002 was a very productive year for the Transaction Privilege Tax section as shown
by the 2,754 audits that were completed for a total of $26,453,913.64.
! The Audit section realized total revenues of $ 14,030,611 The shining accomplishment for the
Section was the fact that 1,888 new taxpayers were licensed. This was a record high for the
Section and constitutes a 100% increase over the prior year.
ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT 6
FY 2001 HIGHLIGHTS CONTINUED
ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT 7
COLLECTIONS FUNCTION
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.
The section operates from 8:00 a.m. to 6:00 p.m.
Monday through Thursday and from 8:00 a.m. to
5:00 p.m. on Fridays.
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. Seizure
actions are only used as a last resort after all
other more reasonable actions have failed.
The Collections Function 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.
OVERVIEW OF THE DEPARTMENT
FUNCTION ACTIVITIES
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
FUNCTION UNITS(FY 2002)
Office Collections………...……..$ 88,820,707
Field Collections…...……………$ 39,704,958
Bankruptcy/Litigation…….….…$ 18,011,195
Debt Setoff......………………….$ 108,664
Unassigned……………………...$100,524,490
(TCS figures are included in Bankruptcy and
Litigation figures. The Unassigned figures are
dollars collected that are not associated with a
Collector ID.)
HIGHLIGHTS IN FY 2002
♦ In spite of continued high vacancy rates, the
Collections Function succeeded in collecting
a combined $247,170,014 which was 6%
more than they collected in FY 2001-2002.
♦ 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 269 Offers were reviewed this year with
78% 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.
CUSTOMER SERVICE FUNCTION
COMMUNITY OUTREACH AND EDUCATION
Community Out Reach and Education (CORE)
provides the Department’s outreach and
educational programs for 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.
LEGAL SUPPORT
This group is responsible for providing
consultation on legal issues for operating units
and technical legal correspondence. They are
also responsible for form design for the
Department, and for creating and maintaining
informational publications on a wide variety of
tax issues, the TaxNews (tax practitioner
newsletter) and the ReveNews (employee
newsletter).
LICENSE AND REGISTRATION
The License and Registration section processes
applications for transaction privilege tax, use tax,
severance tax, and withholding tax. 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 a 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 performs research to identify non-complying
businesses and brings them into
8 ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT
compliance. They provide education on licensing
statutes and regulations to assist taxpayers in
complying with the tax laws.
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.
UNCLAIMED PROPERTY
The Unclaimed Property program is
administered for the purpose of returning to
rightful owners 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. The staff attempts to locate
the property owner and processes claims in order
to return the property to owners. They also
facilitate the submission of property from
businesses that hold the property.
HIGHLIGHTS IN FY 2002
♦ The completion of AZ-Taxes for Small Business
marked a milestone in electronic services.
This is an interactive program available both
on our Web Site and on CD that educates
businesses and guides owners through
preparation of a variety of tax returns.
♦ Participation in Outreach and Taxpayer
Education events was increased by 39%.
♦ Partnered with a wide range of entities
including the Internal Revenue Service,
Maricopa County, Cities of Phoenix,
Surprise, Avondale, Flagstaff, Tucson, Mesa
and Yuma. CORE expanded outreach
services for the public and educational
opportunities for businesses.
♦ Answered over 900 technical tax letters
with 90% answered within 30 calendar days.
♦ Created a new brochure, The Law and Your
Taxes, to address misconceptions regarding
the tax system in AZ.
♦ Redesigned the Informational Publications &
TaxNews homepages on the Internet.
♦ Worked with twenty-nine software vendors
to provide AZ forms to their customers with
over 90 forms offered.
♦ Upgrading our cashiering system resulted in
faster processing time of payments made at
satellite offices and has eliminated hundreds
of staff hours previously required. For the
year, cashiering over 92,000 documents and
$190 million in payments were handled in
our walk-in offices.
♦ License Compliance automated the state fair
process by using laptops and printers to
complete a fillable TPT-1 form. Revenue
collected from the 2001 State Fair increased
22% over the 2000 State Fair.
♦ As a result of visiting the local bonding
authorities, the monthly average of taxpayer
bonds increased from 308 for FY01 to 335
for FY02.
♦ The Bingo group visited 94% of all Class B &
C licensees, well over their goal of 90%.
Increased oversight has provided support to
ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT 9
bingo operations and assists the non-profit
organizations that are funded by bingo games
and has improved the accuracy of filing.
♦ The Bingo section pursued investigations
that have resulted in two successful criminal
prosecutions.
♦ The number of Luxury Tax audits doubled
over the previous year with six completed in
FY02. Assessments during this period
decreased from $318,820 in FY01 to
$123,283 in FY02.
♦ The estate tax unit improved operations by
reducing the processing days from a high of
102 days to 20 days during the year.
♦ By using the DOR website to notify the
public about the elimination of the Form 74
(Report of Personal Representative of
Decedent) we increased awareness and
reduced the number of telephone calls
regarding the form.
��� Staff training was advanced with the
establishment of regular consultation from
Tax Analysts in our Legal Support team.
This has been successful in keeping phone
agents up to date on matters of taxability and
legislative issues.
♦ Cross training of staff was initiated to expand
knowledge and productivity among phone
agents and those employees who handle
taxpayer correspondence.
♦ FAQ’s (Frequently Asked Questions)
database was developed for fiduciary tax
issues. More FAQ’s are in development.
♦ New on-line forms were developed to
improve the transmission of information
between phone agents and others within the
agency.
♦ Service on Unclaimed Property claims
improved with an average turnaround of 49
days, compared to 51 days in FY01.
♦ Unclaimed property collections increased by
$10.7 million to a total of $48.7 million.
♦ The number of audits completed increased
by 16% over FY01.
DIRECTOR'S FUNCTION
DIRECTOR’S OFFICE
The Director, responsible for the operation and
control of the entire Department, ensures that
the administration and collection of taxes are
performed effectively, efficiently and in a fair
manner. Additionally, the Director ensures that
the Department provides the best possible
customer service.
The Director has several direct reports including
two Deputy Directors who assist in the day-to-day
operations of the agency and serve as Acting
Director when the Director is absent. The
responsibilities of the Deputy Directors are
divided into the Tax Administration Team and
the Planning and Support Team.
The Tax Administration Team is responsible for
the day-to-day operations of the basic tax
administration functions of Customer Service,
Collections, Property Tax Administration,
Income Audit and Transaction Privilege Tax.
The Planning and Support Team is responsible
for support services such as Information
Technology and Process Administration
functions, Change Management, Human
Resources, Hearing Office, Staff Organization
and Development, Budget, Legislative Services
and Office of Economic Research and Analysis.
The Deputy Directors also serve on the
Leadership Team with the function executives
and administrators to oversee resource allocation
and policy determination and planning.
Other direct-reports to the Director include:
10 ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT
Other direct-reports to the Director include:
! the Problem Resolution Officer who acts
as an advocate for taxpayers and
expedites resolution of complex
problems and situations;
! the Internal Auditor who reviews internal
processes and procedures used by the
Department to ensure that they are
secure and effective;
! the Chief Tax Policy Officer who
oversees the legal support of the
Department;
! the Chief Tax Advocate who provides
legal support to the Director and
representation to audit and property tax
functions, and
! General Counsel who provides the
Director with legal advice on tax and
administrative matters, reviews appeals to
the Director from Hearing Office
decisions and writes Final Orders of the
Director regarding appeals, and drafts
and reviews proposed legislation,
contracts and intergovernmental
agreements.
TAX POLICY AND LEGAL SUPPORT
The Chief Tax Policy Officer oversees the
Director's Office of Tax Policy & Legal Support,
consisting of Criminal & Civil Investigations and
the Office of Tax Policy, and provides
coordinated policy and legal support for the
Department.
Criminal & Civil Investigations is comprised of
the Tobacco Enforcement, Criminal
Investigations & Internal Investigations units of
the Department. The Tobacco Enforcement unit
enforces the tobacco luxury taxes by educating
retailers and wholesale operations, inspecting
premises for compliance with stamping
requirements and monitoring compliance with
tax laws. It also seizes luxury tax contraband and
auctions seized products to properly licensed
businesses to recover tax revenues.
The Criminal Investigations unit handles criminal
investigations of tax evasion, improper or
fraudulent tax activity and other related issues.
Internal Investigations investigates allegations of
misconduct by Department employees and
vendors.
The Office of Tax Policy reviews, analyzes,
develops and disseminates information regarding
the Department’s interpretation of state tax laws.
The unit responds to technical and complex tax
inquiries, issues private taxpayer rulings, reviews
and analyzes legislation, develops and
promulgates administrative rules, and assists the
Department in tax law administration.
OFFICE OF TAX ADVOCACY
The Chief Tax Advocate oversees the Office of
Tax Advocacy, which provides legal and
interpretative support, and case resolution and
advocacy for the audit and property tax functions
in the Department. The office also acts as liaison
to the Attorney General’s Tax Section and
coordinates the defense of tax litigation with the
Attorney General. The Office of Tax Advocacy
provides additional support to the Director on an
as-needed basis, including services in the area of
protecting taxpayer confidentiality and privacy.
The Office consists of Contested Audit
Resolution, the Corporate Income Tax Appeals,
the Individual Income Tax Appeals and the Legal
and Interpretative Support Team.
The Contested Audit Resolution unit is headed
by the Deputy Chief Tax Advocate and assists
the Transaction Privilege Tax Audit Function
with case refinement and resolution services as
well as advocating the TPT Function positions in
cases before the State Office of Administrative
Hearings, the Department’s Hearing Office and
the Director. The unit, primarily through the
Chief Transaction Privilege Tax Counsel, also
provides interpretative advice to the TPT
Function. The Deputy Chief Tax Advocate also
acts as the Disclosure Officer for the
Department.
ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT 11
Department.
The Corporate and Individual Income Tax
Appeals unit’s review cases from the income
audit sections and provide case refinement,
resolution and advocacy services for those cases
including representation before the Department’s
Hearing Office and the Director. The unit also
provides interpretive advice to the income audit
staff.
The Legal and Interpretative Support Team is
headed by the Chief Income Tax Counsel and
provides legal and interpretative advice to both
the Corporate and Individual Income Tax Audit
units. The team also provides advocacy support
and services to the Income Tax audit units. The
Chief Income Tax Counsel also acts as the leader
of the privacy team and as e-commerce counsel.
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.
CHANGE MANAGEMENT
This unit is responsible for coordinating the
Department's efforts for change management. It
includes staff that functions as the Department's
project managers for the Business Reengineering
and Integrated Tax System (BRITS) project. For
the BRITS project, the Change Management unit
has drafted subject matter experts from across
the Department to implement the BRITS
project. The unit will continue to draft expert
employees to work with the selected vendor in
the implementation phase over the next five
years.
The Budget Resource & Planning unit is
responsible for monitoring current year
expenditures against the approved budget,
coordinating preparation of the Department's
biennial budget and providing staff and operating
budget information and analysis to the
Leadership Team.
The Office for Quality unit coordinates the
strategic planning efforts of the Department and
an agency-wide quality program patterned after
the Malcomb Baldrige self-assessment process.
The Staff & Organizational Development unit
(SODS) provides the centralized training for the
Department. It is supplemented by specialized
training within functional areas and on-the-job-training
(OJT). The unit has a self-managed team
of trainers whose role is to develop in-house
training for key activities such as using tax
systems, ethics, supervisory training and
confidentiality. The unit offers both self-study
classes and classroom training and coordinates
with the Department of Administration training
program.
HIGHLIGHTS IN FY 2002
♦ The biggest single activity of the Director’s
Function was the on-going effort to select a
vendor for our BRITS project.
♦ The Director’s Office for Quality oversaw
our continued efforts to coordinate the
objectives, goals and performance measures.
The Quality Office provided training to 60
facilitators who then worked with their
colleagues in all the sections and units to
develop annual goals and performance
measures.
♦ In late August of 2001, the Arizona Supreme
12 ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT
Court established a new precedent when it
authorized a class action lawsuit against the
State for refund of taxes paid under a statute
that violated the U.S. Constitution. This
decision authorized the creation of a class of
potential refund recipients estimated to
amount to 600,000 to 700,000 persons who
may be entitled to refunds for up to four
years each. The Chief Tax Advocate has
been designated to lead the Department’s
efforts to develop a program to respond to
this decision. Since that time considerable
effort has been devoted, to
designing a refund program that would be
consistent with the Court’s decision and to
working with the Attorney General’s Chief
Tax Counsel and the attorneys for the class
in trying to structure a settlement of this
complex lawsuit. As of the end of the fiscal
year, those negotiations had brought the
parties close to a settlement.
INCOME AUDIT FUNCTION
The Income Tax Audit Function continues to be
managed by 2 Administrators, one each from
Individual Audit and Corporate Audit. This
team is responsible for management of personnel
and other resources in the function as well as
participation on the Leadership Team. In order
that scarce resources are wisely used, a team was
established to determine what efficiencies could
be found by consolidating some activities and
eliminating redundancies. These endeavors
became even more important because of the
effect that the Ladewig case and budget cuts had
on staffing levels.
The Function continued to support BRITS, the
Department’s reengineering project, during the
latest fiscal year. The function provided any
needed personnel or material to assist the
Change Management Team with preparations for
the implementation of the project. As required
by the project, IA stands ready to provide subject
matter experts to the BRITS process to insure
that our business partner has the best available
talent for this important work.
This fiscal year saw increasing involvement of
employees in the Strategic Planning process.
Using Department wide objectives, employee
groups developed strategies that supported these
objectives. In-house trained facilitators assisted
these employee groups in developing the
strategies and keeping the groups focused on
what needed to be measured and metrics for
evaluating performance. Monthly meetings were
held to discuss progress and evaluate the
effectiveness of the strategies in support of the
objectives. Because agency management views
the Strategic Plan as a living document needing
continuous improvement, plans are already under
way to make next years Plan even better, with
more employee involvement and more precise
metrics.
Customer service continues to be an essential
component of the Function’s goals and customer
surveys are a vital source of customer
information. Service delivery is so important that
it is one of the things measured by both
Individual and Corporate Audit as indicators of
effectiveness. Ratings and comments by our
taxpayers are also used in the employee
evaluation process. During the Fiscal Year, both
Sections sent out a total of 20,224 surveys. On a
scale of 1 to 5 (5 being excellent), scores
averaged 4.47 (weighted), a 2% improvement
over FY01.
Improved survey scores is one indicator of the
effectiveness of decentralizing the management
structure of Individual Audit. Pushing decision
making down to the lowest level possible has
improved the speed and effectiveness of service.
Empowering employees in this way increases
staff productivity and employee
During this year of serious budget constraints we
were required to look for ways to streamline
ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT 13
satisfaction.
processes and eliminate duplication of efforts.
We took the opportunity to centralize the
process whereby data was accumulated and input
into the strategic plan document. We worked
together to develop a PowerPoint presentation
so that we could fulfill our goal of presenting to
our employees monthly updates of the goal.
HIGHLIGHTS IN FY 2002
CORPORATE AUDIT
♦ CITA experienced a ripple effect from the
September 11 terrorist attacks. Management
and auditors were extremely cognizant of the
need to insure the safety of our travelers and
a number of trips were postponed until the
second half of the fiscal year or the next
fiscal year. We worked delicately and
compassionately with those taxpayers
affected by the attacks until such a time that
we were all ready to resume business as usual.
The end of the fiscal year was filled with
some of those rescheduled field
appointments with business activities
returning to some degree of normalcy.
♦ Working in partnership with Transaction
Privilege Tax, we added to the Department’s
Internet site the ability for entities to come
forward in our voluntary disclosure program.
The voluntary disclosure program allows
companies to come forward by providing a
detailed written description of their past
activities. The site provides all the
information necessary to make it easier for
taxpayers to come forward.
INDIVIDUAL INCOME AUDIT
♦ The computer generated audit (CGA) project
was completed during the fiscal year and
testing is underway. This project scans
taxpayer returns, looking for errors using
algorithms designed by the audit
development team. The program then
initiates the assessment process. Our
taxpayer surveys indicated a desire for
timelier and more accurate assessments and
this program improves audits in both of
these areas. A related project called
computer-assisted audits (CAA) is on the
drawing board. This program assists the
auditor in decision making by using pre-programmed
coding to automatically enter
data into the assessment system. This saves
auditor time and allows increased analysis
time by audit staff. It also insures that the
correct codes and amounts are keyed into the
system. A new audit program, started in the
East Valley Office, involves the review of
Schedule C’s from the federal return.
Preliminary work shows that this could be a
very productive program as well. ITA also
asked for and received training from the IRS
on auditing Schedule A’s. This training not
only improved auditor expertise in this area
but also improved the development team’s
ability to program for audit select. ITA is
also moving forward with the on-line audit
procedure manual that allows auditors to
quickly access reference and procedural
material. This on-line manual is very popular
with staff and we are continuing to put
material into it.
♦ The ITA pass-through entity program passed
the $1 million mark during the Fiscal
Year in assessments. With nearly $725,000
collected, this is by far the most efficient
audit program in ITA. This audit program
looks at Partnership, Sub-S, and LLC returns
to identify areas of non-compliance both at
the entity level and at the individual level. To
further increase the success of this program,
ITA recently requested an enhancement to
the information we get from IRS to include
K-1 data for payers and payees with Arizona
addresses. In cooperation with the
Information Technology function, ITA will
process downloads that will identify those
not filing on pass-through income that is
attributable to Arizona. This program has
been very successful in other states in
14 ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT
identifying income not being reported or
paid. ITA expects a similar result in Arizona.
♦ ITA auditor productivity continued to
increase during the fiscal year. Despite
hardships associated with hiring freezes and
productive personnel going to the Alt Fuel
and Ladewig projects, audit assessment
dollars remained at the same level as FY01.
Because of the fewer number of auditors
though, assessments dollars per auditor
increased nearly 40% to $460,438. The
number of audits per auditor increased by
8% to nearly 2,000 per auditor. Both of
these increases can be attributed to better
audit select, improved inventory
management, and just plain hard work.
Overall, the audit production goal was exceed
by 239 units.
INFORMATION TECHNOLOGY
FUNCTION
STRATEGIC MANAGEMENT SERVICES
Strategic Management Services (SMS), working
with the Government Information Technology
Agency (GITA), conducts research to create/
update policies, procedures, and standards, which
will improve services to the individual Functions
of DOR. In the past year the unit has
participated in preparing Governor’s Shared
Technology White Paper. SMS has completed
the mapping of the core business processes of
the function, Disaster Recovery/Business
Continuity Plans, and the 3-Year IT Strategic
Plan. At the senior management level, the unit
tracks and reports on all major projects
throughout the agency. SMS is assisting in the
development of Enterprise Architecture Projects
as well as preparing for the BRITS Project.
APPLICATION DEVELOPMENT TEAM (ADT)
Traditionally, application development was
staffed and operated out of Information Technology
(IT). As projects were developed, appropriate
additional staff was added to project teams out of
the user areas. But the focal point was IT. This
focus occurred because the technical application
development skills were within IT. Today, the
technical application skills are not only in IT, but
also in our user areas. To take advantage of these
expanded skill sets, the Application Development
Team (ADT) was created. The Application
Development Team (ADT) is a virtual team
utilizing resources from both the Information
Technology and user areas to make modifications
and enhancements to our applications.
CUSTOMER SUPPORT
Customer Support is part of the Applications
Development Team (ADT). The Customer
Support section reviews and monitors all
Information Technology Requests (ITR) related
to mainframe operations, tests changes and
performs quality control functions on selected
system output.
Customer Support interacts with users to
perform system and business function analysis
related to changes in DOR's systems. Customer
Support also coordinates between various user
groups in the DOR and Information Technology
support staff to maintain the mainframe security
access system for all users.
APPLICATION SERVICES
Applications Services is part of the Applications
Development Team (ADT). Application Services
plans, designs, develops, implements, maintains,
supports and enhances mainframe and client
server applications. The section also provides
24/7 on call support. Future Department
direction includes the re-engineering of legacy tax
systems to support new technologies.
DATA CENTER SUPPORT
Data Center Support is comprised of Computer
Operations, Production Control, Technical
Support and Data Base Management. This team
functions as the liaison to ADOA for mainframe
processing. All processing relating to ADOR is
scheduled and monitored by the Computer
ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT 15
Operations staff. The Production Control
group is responsible for tape management and
offsite storage of disaster recovery data.
The Technical Support section provides the first
line of support for all mainframe related issues.
This group also leads projects that require joint
communications between ADOA and ADOR
and the mainframe security systems.
The Data Base management group supports and
maintains the client server data bases and the
mainframe data bases. This section is
responsible for all data base system software on
the mainframe. They provide the first line of
support for all data base issues.
ENTERPRISE NETWORK SUPPORT
Enterprise Network Support is responsible for
the research, analysis and implementations of
new technologies as they apply to business needs.
The goal of this section is to include the support
and management of the LAN/Wan to ensure
99.80% of system availability to internal and
external customers. The Server, Communication,
and Customer Support groups are responsible
for supporting four remote sites, and 1200 LAN
customers. In addition, this staff is responsible
for implementing all new hardware and
software.
HIGHLIGHTS IN FY 2002
♦ Implemented significant portions of our
Ready The Organization projects. These
projects are intended to enhance our internal
practices as well as our external customer
relationships so that we will be in a strong
position to support future efforts to
reengineer our legacy systems.
♦ Updated Cashier System to scan technology.
♦ Implemented SAN (Storage Area Network)
♦ Expanded help desk staff hours to improve
customer service
♦ Reorganized process Administration Division
♦ Implemented the IT Ambassador Program to
enhance our customer service. IT Staff
members regularly visit user areas to provide
in person customer support.
♦ Completed 201 ITRs (Information
Technology Requests) to implement
enhancements to our applications.
♦ Implemented a Strategic Plan Database
Application.
♦ Developed and implemented a new Debt
Setoff application (with the Courts coming
online).
♦ Developed and implemented 2D Bar Code
application.
♦ Implemented Year-end Income and
corporate tax changes.
♦ Report Elimination of unnecessary
reports
♦ Mapped the core business processes of the
function
♦ Disaster Recovery/Business Continuity Plan
♦ Completed the 3-Year IT Strategic Plan
♦ Implemented UPS system on LAN
♦ Implemented Virtual Private Network
♦ Redesigned the Intranet to GITA standards
16 ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT
PROCESS ADMINISTRATION
FUNCTION
ORGANIZATION
The mission of the Process Administration
Function is to provide quality service and
perform timely and accurate processing of taxes
for Arizona taxpayers. The function consists of
the following sections:
COMPTROLLER
The Comptroller is responsible for providing
financial services for the Department. This
includes the reconciliation and reporting of tax
dollars deposited to the State’s financial
institution, the processing of accounts payable
invoices, travel services including employee
reimbursement, fixed asset inventory services
and refund warrant management.
The Accounts Receivable Unit is responsible for
processing new receivable and adjustment
transactions for the four major tax types, the
timely reconciliation of the system, NSF check
processing, and credit balance management.
The Remittance Processing Unit is responsible
for recording and depositing tax payments that
are not processed through the Cashier system.
ELECTRONIC FUNDS TRANSFER UNIT
The Electronic Funds Transfer Unit is
responsible for the management of the program
for receiving taxpayer payments electronically for
the business tax types (TPT, Withholding and
Corporate).
FACILITIES/RECORDS MANAGEMENT
Facilities Management is responsible for
coordinating DOR facility maintenance and
remodeling at the Department's five locations;
receiving all goods and supplies purchased by
DOR; security system maintenance and repairs;
and issuance of DOR identification cards and
building access. Central Supply is also part of the
Facilities Management section with distribution
of office supplies and internal forms. Records
Management maintains and provides access to
tax returns and License applications with the
Department. The Micro-graphics section
microfilms income tax, corporate tax and other
miscellaneous documents. They also duplicate
the information for distribution to different
Department sites.
PURCHASING
Purchasing is responsible for contracting and
purchasing all goods and services required by
DOR. This includes furniture and supplies, and
printing of tax forms, tax booklets, business
cards and envelopes. Purchasing is also
responsible for contract management, vendor
performance and compliance.
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
change notices, audit and collection notices to
taxpayers.
INDIVIDUAL INCOME TAX PROCESSING
Individual Income Tax Processing is divided into
four units: Refund/Research, Document
Processing, Data Entry 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. Data Input is
responsible for keying all tax returns and
documents into the agency’s various computer
systems.
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.
ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT 17
Highlights In FY 2002
♦ During the 2001 tax-filing season, more than
two million (2,276,537) individual income tax
returns were processed, generating in excess
of 1.5 million refunds. More than 620,995
documents required the reconciliation of data
based on the Department’s computer
generated information.
♦ Refund turn-around time averaged 18.01
days.
♦ The total number of Corporate Income Tax
documents processed was 216,739 of which
109,196 were returns. The Corporate Income
Tax refunds issued exceeded $165 million.
♦ The total number of Transaction Privilege,
Use and Severance Tax documents processed
exceeded 1.39 million, of which 1.26 million
were returns. The Electronic Funds Transfer
(EFT) system for Transaction Privilege Tax
(started in early 1998) has exceeded our
expectations. The $2.7 billion received is 55%
of all TPT revenues collected.
♦ The total number of Withholding Tax
Documents processed exceeded 1.9 million,
of which 370,884 were returns. This year
3,416 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 Accounts Receivable Unit continued its
high level of service in processing
maintenance items in less than 24 hours of
receipt on items of maintenance with only a
3/10 of 1% error rate.
♦ The Records Management unit continues to
improved production while maintaining
quality. The Records Maintenance Section
has received approximately 25,000 new
license applications and has had 42,000
requests for taxpayer documents. The Micro-graphics
Section received 4.0 million
individual documents for microfilming.
♦ The Incoming Mail Unit processed nearly 3.7
million letters and flats during the fiscal year
plus the 4.2 million Personal Income,
Withholding, and Transaction Privilege Tax
returns this mail produced. During the peak
season, this unit ran two shifts with over 95
temporary and 17 permanent employees.
With the help of three mail-opening
machines, they opened approx. 60,000 pieces
of mail daily. Teamwork also plays an
important part during peak time. Incoming
Mail staff worked with volunteers from other
sections of the Department towards a
common goal of opening and processing
mail to get refunds to taxpayers quicker and
improve the Department’s overall customer
service.
♦ The Remittance Processing Unit deposited
more than $3.8 billion and processed 2.9
million documents. Due to the teamwork of
all sections in the function and additional
resources such as updating the J&B Software
in our TMSimage program, working overtime
and utilizing temporary employees, the FY02
year-end closed smoothly.
♦ The Data Input unit keyed over 2.1 million
documents this year. The unit kept its
primary emphasis on keying business tax
returns this year by outsourcing the bulk of
the Individual Income Tax documents. The
burden of keying the balance of the Income
returns was reduced by the implementation
of 2D bar code technology on the Arizona
Form 140. This technology allows an
average batch of 75 returns to be scanned in
11 minutes, vs. 1.5 hours of keying time. We
were able to scan approximately 110,000
returns this season. This successful program
will be expanded in the coming year.
♦ The Out Going Mail Team processed over
3.5 million pieces of mail, not including the
18 ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT
county property tax forms. During the last
year, postage costs were reduced through
elimination of withholding A1QRT, A1WP
and reduction in the number of TPT mail
outs.
♦ Fiscal year 2000 – 2001, we purchased a
CAD program that would assist the facilities
staff in updating building floor plans as well
as allowing us to develop new floor plans.
Before the CAD program, the staff members
would draw each new modular office then
forward the drawing to a vendor to have the
existing floor plans modified. Since the CAD
program has been purchased and installed
the Facilities staff have saved over 1000 work
hours and $45,000 in design fees. In fiscal year
2001 – 2002 the Facilities staff purchased a
printer that would accommodate the printing
of building floor plans. This printer has
saved over 100 work hours of going from
one area to another to print a floor plan that
was not easily read. Now we can print floor
plans to 1/8 scale that allow ease of
readability. We will have 1 additional staff
member trained on the operation of the
CAD system by the end of fiscal year 2003.
With the additional staff trained, we will be
able to work more efficiently.
♦ 486,514 Arizona Individual Income returns
were filed electronically in FY02. This
represents an 18.5% increase over the prior
year. More than 205,923 taxpayers received
their refund via direct deposit. This is the
second year we offered this convenience. The
number of tax professionals participating in
the e-file program exceeded 1,650.
♦ The Electronic Funds Transfer Unit
electronically processed approximately $4.641
billion during FY02. This is an increase of
$192.6 million more than in FY01 or 4.3 %.
The unit also processed 321,393 payments in
FY02 an increase of 10.4% from the prior
year. In FY02 the unit electronicly processed
57.8% of business tax dollars received and
13.1% of the business tax transactions. The
Comptroller's Office returned 10,603
warrants to taxpayers that had been returned
to the Department for a better address.
♦ The Purchasing Unit issued 2,256 purchase
orders with an average order time of 1.54
days.
PROPERTY TAX FUNCTION
VALUATION SECTION
The Valuation Section consists of four teams:
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 65
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.
ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT 19
20 ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT
TECHNICAL SYSTEMS AND SUPPORT
SECTION
The Technical Systems and Support Section
consists of three teams: the CIS and Valuation
Review Unit, the CAMA/GIS Unit and the
Manuals and Forms Group.
The CIS & Valuation Review unit consists of two
groups: the Central Information Services group
(CIS) and the Valuation Review group.
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 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 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.
COMPUTER ASSISSTED MASS APPRAISAL/
GEOGRAPHIC INFORMATION SYSTEMS
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.
HIGHLIGHTS IN FY 2002
♦ The CAMA Unit assisted the Navajo County
Assessor’s office with a valuation review of
properties affected by the Rodeo-Chediski
fire.
♦ The CIS Unit in conjunction with the
Information Technology Function completed
the communication portion of the Client
County Virtual Private Network. The VPN
system has increased response time and laid
the foundation for the implementation of the
Client County Information System.
Significant progress was also made towards
completion of the PT50+ Real Time Update
Project which will take many of the secured
property system updates currently done at
night and put them on-line, in real-time.
♦ The Valuation Review Unit automated the
method of incorporating property sales
affidavit information into the sales database
eliminating the need to key over 100,000
documents a year.
♦ The Construction Cost Unit developed a new
Shopping Center Economic Obsolescence
and Depreciation Table for qualifying
shopping centers valued under ARV 42-
13201-06.
♦ The Locally Assessed Property Unit is
conducting research in preparation for
issuing two new guidelines for use by the
County Assessors. The guidelines pertain to
timeshare properties and commercial
industrial properties located in enterprise
zones.
♦ The Training and Certification Team taught
24 appraisal courses with an average
attendance of 18 students per course. The
Team also administered five certification
examinations. Forty-one Level One and 10
Level Two students were certified.
TRANSACTION PRIVILEGE TAX
FUNCTION
FIELD AUDIT SECTION
Without losing emphasis on customer service, the
Field Audit Section exceeded their goals and
objectives. Based on audit surveys, over 97% of
the audits were completed in a fair, accurate,
timely and expeditious manner. Furthermore, the
surveys indicated that the Field Auditors were
thorough in explaining their audit approach and
theory, in part due to the use of opening and
closing interviews. Very importantly the survey
responses also showed that more than 96% of the
time the Field Auditors were courteous and
professional.
REFUND SECTION
The Refund Section is responsible for analyzing
and processing taxpayer refund requests. While
responding to a changing environment, and law
changes, the refund section re-engineered its
processes by developing better monitoring and
tracking systems and streamlined procedures.
The Section continued to excel in good customer
service while processing twice as many claims this
year than in any previous year.
DESK AUDIT SECTION
This past fiscal year was a year of rebuilding for
the Desk Audit crew. Half of the staff were
recent hires and had minimum experience.
Despite this lack of experience, and with on-the-job
training emphasized, the results were very
positive. There is still additional training to be
accomplished, but the Section looks forward to
having a seasoned crew for the upcoming fiscal
year.
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 the TPT Function.
The Group has also continued to maintain and
upgrade the ATC program used by the Field
Auditors. The main upgrades include faster
program processing and the ability to
automatically import reporting histories. The
group continues to provide support to the TPT
staff in maintaining critical programs necessary to
continue with existing projects.
AUDIT SELECT SECTION
The Audit Select Section’s primary focus is audit
research and selection. The Section continues
towards this through the staff’s hard work and
dedication to the job. The Audit Select Section
has also been working with the Program
Information Group on a data warehouse project.
The Section also assists in the conversion of SIC
codes to NAICS codes and continues to provide
assistance to the 12 non-program cities in
coordinating joint audits with the Department of
Revenue.
ADMINISTRATIVE SUPPORT UNIT
Fiscal year 2002 was a banner year for the
Administrative Support Unit. With fewer
employees than the preceding fiscal year, the
Unit is also responsible for retrieving and
delivering incoming mail and reports to the
Function’s employees. When asked or needed the
staff also assists others to ensure all daily duties
are completed.
ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT 21
22 ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT
HIGHLIGHTS IN FY2002
♦ In fiscal year 2002, 2,754 audits that were
completed for a total of $26,453,913.64.
♦ The Refund Section processed 2,254 refund
claims granting $33 million and denying over
$9 million
♦ The Desk Audit section realized total
revenues of $14,030,611. The shining
accomplishment for the Section was the fact
that 1,888 new taxpayers were licensed. This
was a record high for the Section and
constitutes a 100% increase over the prior
year.
♦ The Program Information Group developed:
a new audit protest database and successfully
converted all existing records; new letter
templates for both the Field and Desk
Auditors that are more readily accessible; a
database to handle the volumes of
information for Audit Select; and, a new SQL
database consisting of approximately 60
million historical records.
♦ The Administrative Support Unit timely and
accurately processed the 2,754 audits, which
includes manually writing the necessary
maintenance reports to put the information
into DOR’s system. The Unit also manually
wrote up approximately 572 pieces of
amended maintenance to correct billings.
ARIZONA'S TAXES
The Department collected
$8.9 billion in revenue
For fiscal year 2002
96% of collections
Were attributable to the Income Tax and
Transaction Privilege Tax.
TABLE 1
REVENUE SUMMARY
GROSS REVENUE COLLECTED
FISCAL YEAR 1997-98 THOUGH FISCAL YEAR 2001-02
SOURCE FY1997-98 FY1998-99 FY1999-00 FY2000-01 FY2001-02
TRANSACTION PRIVILEGE
USE AND SEVERANCE TAX
Distribution Base $1,015,306,840 $1,089,625,165 (4) $1,195,140,016 $1,248,485,639 $1,246,773,262
Nonshared Portion 1,875,579,736 2,042,232,511 (4) 2,230,332,220 2,356,788,664 2,379,509,616
Use Tax 136,868,591 148,043,174 (4) 176,566,264 196,887,927 162,751,987
Education Tax ----- ----- ----- 100,682 (5) 439,004,543
Undistributed Estimated
Transaction Privilege Tax 5,262,078 11,668,636 12,392,607 1,894,841 28,766,081
Other State Revenue 17,094,298 18,352,045 18,254,373 21,123,487 32,971,582
County and City Collections 510,665,036 541,562,578 654,131,327 721,459,433 766,018,836
Subtotal $3,560,776,579 $3,851,484,109 $4,286,816,807 $4,546,740,674 $5,055,795,907
INCOME TAX
Withholding 1,863,292,013 2,072,018,474 2,259,201,907 2,363,693,852 2,309,340,885
Individual 669,323,279 765,853,606 826,789,215 858,775,963 705,843,394
Corporate 630,836,596 643,230,321 637,765,231 678,002,658 512,257,476
Subtotal $3,163,451,888 $3,481,102,401 $3,723,756,353 $3,900,472,473 $3,527,441,755
LUXURY TAX
Spirituous Liquor 18,787,775 19,648,670 20,587,605 21,327,540 21,574,744
Vinous Liquor 7,893,100 7,969,428 9,026,326 8,477,493 9,035,156
Malt Liquor 19,463,378 20,534,013 21,309,231 21,602,321 22,031,467
Tobacco - All Types (1) 169,316,629 166,288,764 162,896,049 160,694,260 161,754,302
Licensing 7,100 7,175 7,175 8,600 5,250
Subtotal $215,467,982 $214,448,050 $213,826,386 $212,110,214 $214,400,920
ESTATE TAX
Estate 64,490,574 89,087,575 85,238,335 76,921,666 81,892,657
Unclaimed Property 20,770,144 21,315,542 31,415,063 38,020,547 48,681,438
Escheated Estate and
Unclaimed Dividends 124,335 309,305 201,612 654,400 252,786
Subtotal $85,385,053 $110,712,421 $116,855,010 $115,596,613 $130,826,881
OTHER REVENUES
Bingo 750,970 717,830 677,036 634,384 629,680
Flight Property Tax 15,165,878 14,856,910 13,418,771 13,387,179 13,056,694
Private Car Tax 1,494,821 1,441,440 1,476,728 1,349,685 1,509,625
Nuclear Plan Assessment 880,824 926,814 945,935 924,778 940,611
Waste Tire 5,125,561 5,476,881 5,674,452 6,346,629 6,392,637
Subtotal $23,418,054 $23,419,875 $22,192,921 $22,642,655 $22,529,247
DEPARTMENT TOTAL $7,048,499,556 $7,681,166,856 $8,363,447,477 $8,797,562,629 $8,950,994,710
State Property Tax (2) 37,957,273 10,069,191 24,686,866 22,552,932 18,454,625
TOTAL (3) $7,086,456,829 $7,691,236,047 $8,388,134,343 $8,820,115,561 $8,969,449,335
(1) Figures represent gross tobacco revenue less administrative expenses.
(2) 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.
(3) All revenues collected by the Department of Revenue, including those which are refunded or distributed, and State Property Tax.
(4) Corrected figures.
(5) Education tax became effective on June 1, 2001.
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.
TABLE 2
NET REVENUE TO STATE GENERAL FUND
FISCAL YEAR 1997-98 THROUGH FISCAL YEAR 2001-02
FY1997-98 FY1998-99 FY1999-00 FY2000-01 FY2001-02
SOURCE
Transaction Privilege, $2,362,627,656 $2,566,087,404 (3) $2,817,525,828 $2,982,824,755 $2,972,274,262
Use, and Severance Tax
Undistributed Estimated 5,262,078 11,668,636 12,392,607 1,894,841 28,766,081
Transaction Privilege Tax
Income Tax 2,099,332,295 2,302,706,944 2,434,799,495 2,445,472,944 2,011,052,550
Luxury Tax 64,429,625 64,770,498 65,436,145 65,568,793 66,069,587
Estate Tax/ 65,269,787 89,334,610 84,725,503 78,961,539 88,298,138
Unclaimed Property
Bingo 750,970 717,830 677,036 634,384 629,680
Private Car Tax 1,494,821 1,441,440 1,476,728 1,349,685 1,509,625
Nuclear Plan 880,824 926,814 945,935 924,778 940,611
Assessment
Flight Property Tax (2) 7,582,939 7,367,078 6,709,385 6,693,590 6,528,347
Department Total $4,607,630,996 $5,045,021,253 $5,424,688,662 $5,584,325,308 $5,176,068,883
State Property Tax (1) 37,957,273 10,069,191 24,686,866 22,552,932 18,454,625
TOTAL $4,645,588,269 $5,055,090,444 $5,449,375,528 $5,606,878,240 $5,194,523,508
(1) Property Tax is not collected by the Department of Revenue and, therefore, is not reflected in this chart. It is collected by the Counties
for distribution to local taxing authories. The "state property tax" referenced above is the only portion of the property tax that is
deposited in the state general fund. It is derived from the minimum qualifying tax rate.
(2) Beginning with FY98, 50% of all Flight Property Tax revenues were deposited into the General Fund.
(3) Corrected figure.
Figures may not add to total due to rounding.
TABLE 3
GROSS COLLECTIONS OF AUDIT ASSESSMENTS AND DELINQUENT TAX
FISCAL YEAR 2000-01 AND FISCAL YEAR 2001-02
%
AUDIT COLLECTIONS FY2000-01 FY2001-02 CHANGE
Assessment Collections (Gross) $90,281,036 $59,929,966 -33.6%
Miscellaneous Taxes (Net of Credit) $6,176,200 $1,360,262 -78.0%
TOTAL AUDIT UNIT COLLECTIONS $96,457,236 (3) $61,290,228 -36.5%
TOTAL BILLINGS $181,828,894 (3) $147,046,075 -19.1%
TOTAL DELINQUENT TAX COLLECTIONS $169,126,938 $272,698,314 61.2%
TOTAL UNADJUSTED ENFORCEMENT COLLECTIONS $447,413,068 (3) $481,034,617 7.5%
ADJUSTMENTS (1)
Duplication, Credit Audits and Other Adjustments As Reported ($88,491,768) ($67,733,729) 23.5%
TOTAL ADJUSTED ENFORCEMENT COLLECTIONS (2) $358,921,300 $413,300,888 15.2%
REFUND DENIALS $19,271,321 $18,991,988 -1.4%
(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.
(3) Corrected figures
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 178,000 accounts
collectively remitted gross revenues exceeding $4.5
billion during the 2002 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,
(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).
Beginning with November 1999 returns, mining
severance collections are fully distributed to
municipalities (38.16%) and counties (61.84%). Mining
severance returns for prior periods are distributed in
the same manner as transaction privilege tax. 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
DOR 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, DOR 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). These taxes
or surcharges are collected by the DOR. 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, all 14 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 three other types of county excise tax options are
a hospital tax, a jail tax, and a stadium tax. Currently,
no county imposes a hospital tax, although Gila
County had one in the past. La Paz, Yuma,
Coconino, and Maricopa counties have a jail tax.
ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT
TABLE 4
GROSS TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS
FISCAL YEAR 1997-98 THROUGH FISCAL YEAR 2001-02
SOURCE FY1997-98 FY1998-99 FY1999-00 FY2000-01 FY2001-02
Distribution Base $1,015,306,840 $1,089,625,165 (5) $1,195,140,016 $1,248,485,639 $1,246,773,262
Nonshared 1,875,579,736 2,042,232,511 (5) 2,230,332,220 2,356,788,664 2,379,509,616
Use Tax 136,868,591 148,043,174 (5) 176,566,264 196,887,927 162,751,987
SUBTOTAL $3,027,755,167 $3,279,900,850 $3,602,038,500 $3,802,162,230 $3,789,034,865
Education Tax (9) ----- ----- ----- 100,682 (1) 439,004,543
Undistributed Estimated 5,262,078 11,668,636 12,392,607 1,894,841 28,766,081
911 Wireline/Excise Tax 7,652,326 8,084,729 7,846,057 9,201,049 14,998,348
Telecommunications Devices 4,908,914 5,158,289 4,960,224 5,514,542 6,395,057
Poison Control Fund 1,815,626 1,907,860 1,834,603 2,039,625 2,365,295
911 Wireless Service 722,736 (1) 1,181,481 1,507,573 2,136,015 6,928,990
Municipal Water 1,891,072 1,957,725 2,081,879 2,120,483 2,213,435
Environmentally Hazardous Products (2) 784 536 980 5,909 14
Waste Tire Accounts
Receivable Collections 105,094 62,946 25,739 109,948 71,330
Less Collection Fees (2,255) (1,521) (2,682) (4,084) (888)
GROSS STATE COLLECTIONS $3,050,111,543 $3,309,921,530 $3,632,685,479 $3,825,281,241 $4,289,777,071
Municipal Privilege Tax 180,932,433 202,218,016 230,976,587 257,706,985 280,950,442
Pima County Hotel Tax 2,378,163 2,437,787 2,625,508 2,823,410 2,495,830
Maricopa County Rental Car Surcharge 5,376,877 5,405,493 5,734,678 5,636,907 5,396,445
Pima County Rental Car Surcharge 1,384,659 1,388,744 1,476,750 1,557,354 1,377,083
Pima County R.V. Surcharge 182,205 (1) 218,359 212,849 197,598 189,838
Apache County Excise Tax 582,718 638,649 1,862,479 1,130,977 903,381
Cochise County Excise Tax 4,058,429 4,311,066 4,853,891 5,123,754 5,698,660
Coconino County Excise Tax 7,742,012 8,085,596 8,876,866 9,054,404 8,793,909
Coconino County Jail Tax 4,121,136 4,793,744 5,261,397 5,358,317 5,486,442
Gila County Excise Tax 2,357,618 2,350,334 2,311,624 2,596,028 2,617,971
Gila County Hospital Tax (3) 3,054 7,003 92 38,499 509
Gila County Transportation 2,396,123 2,423,201 2,377,944 2,612,288 2,718,050
Graham County Excise Tax 1,128,771 1,172,236 1,188,238 1,206,320 1,192,075
Greenlee County Excise Tax 632,440 546,749 563,020 645,168 562,389
La Paz County Excise Tax 691,178 777,423 806,441 820,780 885,465
La Paz County Jail Tax 692,383 776,444 807,563 821,969 885,694
Maricopa County Road Tax 209,263,453 229,470,201 248,595,990 264,722,440 267,563,343
Maricopa County Stadium Tax (4) 50,550,929 437,677 150,336 280,370 145,148
Maricopa County Jail Tax ----- 34,290,683 (1) 91,054,451 97,603,200 98,372,053
Mohave County Excise Tax ----- ----- 1,608,620 (1) 4,114,594 4,446,472
Navajo County Excise Tax 3,964,486 4,372,839 4,655,169 4,831,327 4,993,912
Pinal County Excise Tax 5,076,787 5,698,428 6,149,485 6,492,013 6,763,454
Pinal County Road Tax 5,232,966 6,072,244 6,575,202 6,750,294 6,965,671
Santa Cruz County Excise Tax 1,725,137 1,847,305 1,918,653 2,092,940 2,114,505
Yavapai County Excise Tax 7,696,746 8,565,735 9,571,900 10,054,989 10,799,358
Yavapai County Jail Tax (6) ----- ----- ----- 3,627,698 4,294,368
Yuma County Excise Tax 6,252,408 6,638,969 6,965,025 7,417,302 7,665,873
Yuma County Jail Tax 6,241,927 6,617,655 6,950,571 7,412,145 7,653,390
Yuma County Capitol Projects Tax (7) ----- ----- ----- 3,150,273 (1) 7,582,374
Tourism/Sports Authority (8) ----- ----- ----- 5,579,087 (1) 16,504,732
COUNTY AND CITY COLLECTIONS 510,665,036 541,562,578 654,131,327 721,459,433 766,018,836
TOTAL DEPARTMENT OF
REVENUE RECEIPTS $3,560,776,579 $3,851,484,108 $4,286,816,806 $4,546,740,674 $5,055,795,907
(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) Corrected Figure.
(6) Yavapai County Jail Tax began on July 1, 2000
(7) Yuma County Capitol Projects Tax Began on January 1, 2001
(8) Tourism/Sports Authority Tax became effective March 1, 2001.
(9) Education Tax became effective on June, 1, 2001.
TABLE 5
STATE TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX RATES
FISCAL YEAR 2001-02
DISTRIBUTION TOTAL
TAXABLE ACTIVITIES BASE NONSHARED EDUCATION TAX
1. Transporting and Towing 1.0% 4.0% 0.6% 5.6%
2. Nonmetalliferous Mining,
Oil and Gas Production 1.0% 2.125% 0.0% 3.125%
4. Utilities 1.0% 4.0% 0.6% 5.6%
5. Communications 1.0% 4.0% 0.6% 5.6%
6. Railroads and Aircraft 1.0% 4.0% 0.6% 5.6%
7/8. Private Car/Pipelines 1.0% 4.0% 0.6% 5.6%
9. Publishing 1.0% 4.0% 0.6% 5.6%
10. Printing 1.0% 4.0% 0.6% 5.6%
11. Restaurants and Bars 2.0% 3.0% 0.6% 5.6%
12. Amusements 2.0% 3.0% 0.6% 5.6%
14. Personal Property Rentals 2.0% 3.0% 0.6% 5.6%
15. Contracting (1) 1.0% 4.0% 0.6% 5.6%
17. Retail 2.0% 3.0% 0.6% 5.6%
19. Mining Severance 2.5% 0.0% 0.0% 2.5%
21. Timbering Severance - Ponderosa $1.704 $0.426 $0 $2.13
(per thousand board feet)
22. Timbering Severance - Other $1.208 $0.302 $0 $1.51
(per thousand board feet)
25. Hotel/Motel Tax 2.75% 2.75% 0.0% 5.5%
28. Rental Occupancy Tax 2.0% 1.0% 0.0% 3.0%
29/30. Use and Use Inventory Tax 0.0% 5.0% 0.6% 5.6%
47. Membership Camping 2.0% 3.0% 0.6% 5.6%
49. Jet Fuel (per gallon) $0.0122 $0.0183 $0 $0.0305
51. Jet Fuel Use ( per gallon) $0 $0.0305 $0 $0.0305
(1) Most Contracting activity is covered under class 15, at a 5.6% total tax rate. Other classes at lower
rates exist.
TABLE 6
NET TAXABLE SALES
BY TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX CLASSIFICATIONS (1)
FISCAL YEAR 1997-98 THROUGH FISCAL YEAR 2001-02
% OF % OF % OF % OF % OF
CLASSIFICATION FY1997-98 TOTAL FY1998-99 TOTAL FY1999-00 TOTAL FY2000-01 TOTAL FY2001-02 TOTAL
Transportation
and Towing $64,281,736 0.11 $58,302,201 0.09 $56,620,330 0.08 $85,910,143 0.11 $57,567,191 0.08
Mining, Oil & Gas 190,472,916 0.31 204,730,724 0.31 193,933,697 0.27 224,834,096 0.30 208,310,010 0.28
Mining Severance 1,082,898,418 1.77 749,256,686 1.14 481,582,634 0.66 168,695,209 0.22 (4,263,622) (0.01)
Timber Severance (4) (781) (0.00) (6) (439) (0.00) (6) 0 0.00 (6) 0 0.00 (6) 766,360 0.00 (6)
Utilities 4,923,557,931 8.05 5,066,644,493 7.72 5,268,207,981 7.27 5,814,282,521 7.65 5,919,273,137 7.83
Communications 1,919,236,806 3.14 2,153,027,806 3.28 2,453,093,781 3.39 2,870,088,870 3.78 2,945,681,407 3.90
Railroads and
Aircraft 36,688,382 0.06 36,057,579 0.05 32,885,789 0.05 52,745,618 0.07 38,788,894 0.05
Private Car and
Pipelines 12,773,763 0.02 15,556,192 0.02 5,612,007 0.01 15,485,669 0.02 7,134,188 0.01
Publishing 110,592,575 0.18 119,042,396 0.18 112,357,871 0.16 124,462,488 0.16 82,843,214 0.11
Job Printing 405,093,470 0.66 418,739,698 0.64 418,677,603 0.58 402,933,841 0.53 351,141,961 0.46
Local Advertising (2) 0 0.00 (1,614) (0.00) (6) 27,476 0.00 (6) 0 0.00 (6) 0 0.00 (6)
Restaurants and Bars 5,095,503,749 8.33 5,476,712,938 8.34 5,976,371,272 8.25 6,300,820,165 8.29 6,428,712,331 8.51
Amusements 672,756,982 1.10 680,140,832 1.04 758,823,163 1.05 760,837,607 1.00 743,800,365 0.98
Commercial Lease (5) 386,199,867 0.63 (133,063,779) (0.20) 659,198,999 0.91 182,691,438 0.24 36,912,605 0.05
Personal Property
Rentals 2,909,345,629 4.76 3,170,337,708 4.83 3,412,995,935 4.71 3,658,549,237 4.81 3,607,518,815 4.77
Contracting 8,568,022,267 14.00 10,021,561,060 15.27 10,847,157,383 14.98 11,250,537,683 14.80 11,820,596,498 15.64
Feed Wholesale (3) (6,707,034) (0.01) 269,821 0.00 (6) 382,271 0.00 (6) (41,648) (0.00) (6) (1,806,235) (0.00) (6)
Retail 30,469,141,007 49.80 32,964,475,378 50.22 36,403,861,655 50.27 38,282,337,115 50.37 38,432,859,974 50.85
Hotel/Motel 1,609,506,373 2.63 1,679,514,834 2.56 1,818,473,902 2.51 1,871,008,576 2.46 1,659,760,985 2.20
Rental Occupancy Tax 4,211,147 0.01 3,930,929 0.01 3,733,808 0.01 4,896,781 0.01 5,967,630 0.01
Use Tax 2,729,476,046 4.46 2,951,224,001 4.50 3,514,612,988 4.85 3,922,952,933 5.16 3,240,459,960 4.29
Membership Camping 1,621,718 0.00 (6) 1,682,321 0.00 (6) 1,411,253 0.00 (6) 2,420,361 0.00 (6) 2,741,146 0.00 (6)
Agriculture Equipment (7) ----- ----- ----- 1,212,738 0.00 (6) 2,106,425 0.00 (6)
TOTAL $61,184,672,966 100.00 $65,638,141,764 100.00 $72,420,021,798 100.00 $75,997,661,442 100.00 $75,586,873,240 100.00
(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.
TABLE 7
TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS BY CLASS (1)
FISCAL YEAR 2001-02
DISTRIBUTION TOTAL
CLASSIFICATION BASE NONSHARED COLLECTIONS
Transporting and Towing $575,672 $2,302,688 $2,878,360
Nonmetal Mining, Oil and Gas 2,083,100 4,426,588 6,509,688
Mining Severance (85,598) (20,993) (106,591)
Timbering Severance 9,196 2,299 11,495
Timbering Severance - Ponderosa 718 180 897
Timbering Severance - Other 1,114 278 1,392
Utilities 59,192,731 236,770,926 295,963,657
Communications 29,456,814 117,827,256 147,284,070
Railroads and Aircraft 387,889 1,551,556 1,939,445
Private Car and Pipelines 71,342 285,368 356,709
Publishing 828,432 3,313,728 4,142,161
Printing 3,511,419 14,045,679 17,557,098
Restaurants and Bars 128,574,246 192,861,370 321,435,616
Amusements 14,876,008 22,314,011 37,190,018
Commercial Lease (3) 303,101 271,413 574,514
Rentals of Personal Property 72,150,374 108,225,567 180,375,941
Contracting 118,205,962 472,823,862 591,029,823
Feed Wholesale (2) (4,518) (3,954) (8,471)
Retail 768,614,485 1,153,028,514 1,921,642,999
Hotel/Motel 45,643,489 45,643,365 91,286,854
Rental Occupancy Tax 119,358 59,670 179,029
Use Tax 0 162,022,998 162,022,998
License Fees 0 475,424 475,424
Membership Camping 54,823 82,234 137,057
Jet Fuel Tax 2,259,054 3,388,581 5,647,634
Jet Fuel Use Tax 0 728,989 728,989
Non Sufficient Funds 0 36,558 36,558
Telecommunications Service Assistance (55,948) (223,793) (279,742)
Miscellaneous Fees 0 20 20
Agriculture Equipment (4) 0 21,064 21,064
Utility Credit/Reimbursement 0 157 157
TOTAL $1,246,773,262 $2,542,261,603 $3,789,034,865
(1) Does not reflect the balance of undistributed estimated payments at the end of FY02.
(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.
(4) Agriculture Equipment was phased out July 1, 1988 and is not a current business classification.
Figures may not add to total due to rounding.
TABLE 8
DISTRIBUTION OF TRANSACTION PRIVILEGE, USE
AND SEVERANCE TAX COLLECTIONS
FISCAL YEAR 2001-02
Net Regular to State General Fund $2,972,274,262
Net Estimated Payments to General Fund 28,766,081
Net to Cities 311,693,101
Net to Counties 505,067,501
Net to Education Fund 439,004,543
911 Wireline/Excise, 911 Wireless, Telecommunications Devices, Poison Control Fund, Municipal 32,972,469
Water and Environmentally Hazardous Products, and Waste Tire Accounts Receivable Collections
Less Collection Fees (888)
TOTAL GROSS COLLECTIONS $4,289,777,071
ADDITIONAL DISTRIBUTION FROM
TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS
FISCAL YEAR 2001-02
Office of Tourism $10,739,453
Phoenix International Raceway $416,667
School Facilities Board $382,000,000
Tourism and Sports Authority $694,080
Tribal Community Colleges $1,750,000
Urban In-Lieu $645,322
Figures may not add total due to rounding.
TABLE 9
TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1)
IN APACHE COUNTY FOR THE PERIOD BEGINNING
JULY 1, 2001 AND ENDING JUNE 30, 2002
TAXABLE ACTIVITIES AND CALCULATED NET % CHANGE
BUSINESS CLASSIFICATIONS TAXABLE INCOME FROM FY2000-01 COLLECTIONS
Utilities $9,625,070 -20.0% $481,254
Communications 12,147,459 -1.6% 607,373
Publishing 453,177 1.7% 22,659
Restaurants and Bars 8,865,661 -6.6% 443,283
Amusements 397,249 50.6% 19,862
Rentals of Personal
Property 3,269,901 6.1% 163,495
Contracting (All) 73,088,110 28.4% 3,654,406
Retail 57,726,056 -23.1% 2,886,303
Hotel/Motel 10,298,568 -15.1% 566,421
Other Taxable Activities 35,859,777 -79.9% 1,730,942
TOTAL $211,731,029 -41.2% $10,575,998
NUMBER OF ACCOUNTS
FISCAL YEAR 1999-00 THROUGH FISCAL YEAR 2001-02
TAXABLE ACTIVITIES AND
BUSINESS CLASSIFICATIONS FY1999-00 FY2000-01 FY2001-02
Utilities 25 27 25
Communications 85 94 111
Publishing 13 15 14
Restaurants and Bars 70 67 63
Amusements 11 10 12
Rentals of Personal
Property 179 195 182
Contracting (All) 279 307 321
Retail 1,027 1,010 987
Hotel/Motel 54 57 63
Other Taxable Activities 489 530 488
TOTAL 2,232 2,312 2,266
(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.
TABLE 10
TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1)
IN COCHISE COUNTY FOR THE PERIOD BEGINNING
JULY 1, 2001 AND ENDING JUNE 30, 2002
TAXABLE ACTIVITIES AND CALCULATED NET % CHANGE
BUSINESS CLASSIFICATIONS TAXABLE INCOME FROM FY2000-01 COLLECTIONS
Utilities $117,280,077 1.1% $5,864,004
Communications 50,464,932 0.4% 2,523,247
Publishing 1,883,882 12.1% 94,194
Printing/Advertising 1,884,218 16.4% 94,211
Restaurants and Bars 89,315,314 6.7% 4,465,766
Amusements 5,992,093 -2.1% 299,605
Rentals of Personal
Property 21,251,331 1.7% 1,062,567
Contracting (All) 147,696,531 5.1% 7,384,827
Retail 597,497,254 5.3% 29,874,863
Hotel/Motel 24,601,914 -3.1% 1,353,105
Other Taxable Activities 68,342,989 -10.7% 3,387,901
TOTAL $1,126,210,536 3.3% $56,404,288
NUMBER OF ACCOUNTS
FISCAL YEAR 1999-00 THROUGH FISCAL YEAR 2001-02
TAXABLE ACTIVITIES AND
BUSINESS CLASSIFICATIONS FY1999-00 FY2000-01 FY2001-02
Utilities 48 49 48
Communications 133 166 181
Publishing 21 18 19
Printing/Advertising 27 27 25
Restaurants and Bars 341 347 346
Amusements 79 69 70
Rentals of Personal
Property 418 439 421
Contracting (All) 753 804 796
Retail 3,238 3,193 3,107
Hotel/Motel 138 141 140
Other Taxable Activities 845 862 886
TOTAL 6,041 6,115 6,039
(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.
TABLE 11
TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1)
IN COCONINO COUNTY FOR THE PERIOD BEGINNING
JULY 1, 2001 AND ENDING JUNE 30, 2002
TAXABLE ACTIVITIES AND CALCULATED NET % CHANGE
BUSINESS CLASSIFICATIONS TAXABLE INCOME FROM FY2000-01 COLLECTIONS
Non Metal Mining/Mining Severance $3,816,104 51.7% (2) $119,253
Utilities 120,664,563 5.5% 6,033,228
Communications 65,516,782 -0.2% 3,275,839
Publishing 3,356,620 5.0% 167,831
Printing/Advertising 2,967,240 -13.3% 148,362
Restaurants and Bars 242,195,096 -0.2% 12,109,755
Amusements (11,511,220) N/A (575,561)
Rentals of Personal
Property 54,290,507 0.3% 2,714,525
Contracting (All) 256,042,190 1.6% 12,802,109
Retail 853,357,687 3.1% 42,667,884
Hotel/Motel 164,159,208 -6.8% 9,028,756
Other Taxable Activities 76,075,862 -7.2% 3,793,982
TOTAL $1,830,930,638 -1.3% $92,285,964
NUMBER OF ACCOUNTS
FISCAL YEAR 1999-00 THROUGH FISCAL YEAR 2001-02
TAXABLE ACTIVITIES AND
BUSINESS CLASSIFICATIONS FY1999-00 FY2000-01 FY2001-02
Non Metal Mining/Mining Severance 15 16 17
Utilities 39 47 40
Communications 169 184 215
Publishing 39 32 32
Printing/Advertising 41 36 33
Restaurants and Bars 426 423 426
Amusements 95 93 98
Rentals of Personal
Property 550 531 542
Contracting (All) 1,350 1,354 1,459
Retail 3,810 3,828 3,771
Hotel/Motel 239 248 251
Other Taxable Activities 1,128 1,152 1,172
TOTAL 7,901 7,944 8,056
(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.
TABLE 12
TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1)
IN GILA COUNTY FOR THE PERIOD BEGINNING
JULY 1, 2001 AND ENDING JUNE 30, 2002
TAXABLE ACTIVITIES AND CALCULATED NET % CHANGE
BUSINESS CLASSIFICATIONS TAXABLE INCOME FROM FY2000-01 COLLECTIONS
Utilities $83,601,380 -4.0% $4,180,069
Communications 34,324,266 34.6% 1,716,213
Publishing 1,051,605 3.3% 52,580
Printing/Advertising 707,358 20.5% 35,368
Restaurants and Bars 46,500,034 4.1% 2,325,002
Amusements 1,897,577 16.0% 94,879
Rentals of Personal
Property 12,560,184 -5.1% 628,009
Contracting (All) 90,717,870 2.3% 4,535,894
Retail 236,377,403 3.4% 11,818,870
Hotel/Motel 10,459,151 -11.7% 575,253
Other Taxable Activities 23,637,793 13.7% 1,054,901
TOTAL $541,834,622 3.4% $27,017,038
NUMBER OF ACCOUNTS
FISCAL YEAR 1999-00 THROUGH FISCAL YEAR 2001-02
TAXABLE ACTIVITIES AND
BUSINESS CLASSIFICATIONS FY1999-00 FY2000-01 FY2001-02
Utilities 33 36 36
Communications 124 135 164
Publishing 15 19 14
Printing/Advertising 16 15 14
Restaurants and Bars 165 164 167
Amusements 43 40 37
Rentals of Personal
Property 289 286 280
Contracting (All) 711 696 710
Retail 1,809 1,818 1,812
Hotel/Motel 68 66 67
Other Taxable Activities 576 572 598
TOTAL 3,849 3,847 3,899
(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.
TABLE 13
TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1)
IN GRAHAM COUNTY FOR THE PERIOD BEGINNING
JULY 1, 2001 AND ENDING JUNE 30, 2002
TAXABLE ACTIVITIES AND CALCULATED NET % CHANGE
BUSINESS CLASSIFICATIONS TAXABLE INCOME FROM FY2000-01 COLLECTIONS
Communications $10,964,074 -7.5% $548,204
Restaurants and Bars 16,214,002 -4.2% 810,700
Rentals of Personal
Property 6,941,527 1.2% 347,076
Contracting (All) 40,468,223 46.6% 2,023,411
Retail 132,562,336 -5.7% 6,628,117
Other Taxable Activities 37,808,767 -23.9% 1,904,159
TOTAL $244,958,929 -3.4% $12,261,667
NUMBER OF ACCOUNTS
FISCAL YEAR 1999-00 THROUGH FISCAL YEAR 2001-02
TAXABLE ACTIVITIES AND
BUSINESS CLASSIFICATIONS FY1999-00 FY2000-01 FY2002-03
Communications 87 103 110
Restaurants and Bars 71 74 67
Rentals of Personal
Property 182 177 170
Contracting (All) 228 215 197
Retail 996 999 974
Other Taxable Activities 443 453 491
TOTAL 2,007 2,021 2,009
(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.
TABLE 14
TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1)
IN GREENLEE COUNTY FOR THE PERIOD BEGINNING
JULY 1, 2001 AND ENDING JUNE 30, 2002
TAXABLE ACTIVITIES AND CALCULATED NET % CHANGE
BUSINESS CLASSIFICATIONS TAXABLE INCOME FROM FY2000-01 COLLECTIONS
Communications $3,427,170 -14.0% $171,358
Restaurants and Bars 2,735,862 -18.8% 136,793
Rentals of Personal
Property 663,721 -29.0% 33,186
Contracting (All) 12,074,225 29.8% 603,711
Retail 54,854,616 -8.4% 2,742,731
Other Taxable Activities 62,154,515 -62.9% 2,659,585
TOTAL $135,910,108 -44.6% $6,347,365
NUMBER OF ACCOUNTS
FISCAL YEAR 1999-00 THROUGH FISCAL YEAR 2001-02
TAXABLE ACTIVITIES AND
BUSINESS CLASSIFICATIONS FY1999-00 FY2000-01 FY2001-02
Communications 52 69 69
Restaurants and Bars 23 22 23
Rentals of Personal
Property 82 88 79
Contracting (All) 68 82 78
Retail 373 375 363
Other Taxable Activities 193 230 203
TOTAL 791 866 815
(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.
TABLE 15
TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1)
IN LA PAZ COUNTY FOR THE PERIOD BEGINNING
JULY 1, 2001 AND ENDING JUNE 30, 2002
TAXABLE ACTIVITIES AND CALCULATED NET % CHANGE
BUSINESS CLASSIFICATIONS TAXABLE INCOME FROM FY2000-01 COLLECTIONS
Utilities $17,576,249 13.8% $878,812
Communications 5,462,360 31.1% 273,118
Publishing 485,309 7.2% 24,265
Restaurants and Bars 22,035,866 -6.2% 1,101,793
Amusements 316,772 -41.4% 15,839
Rentals of Personal
Property 4,978,099 22.5% 248,905
Contracting (All) 21,111,760 1.6% 1,055,588
Retail 95,076,962 8.4% 4,753,848
Hotel/Motel 5,310,296 5.8% 292,066
Other Taxable Activities 17,708,790 358.1% (2) 883,093
TOTAL $190,062,464 14.8% $9,527,328
NUMBER OF ACCOUNTS
FISCAL YEAR 1999-00 THROUGH FISCAL YEAR 2001-02
TAXABLE ACTIVITIES AND
BUSINESS CLASSIFICATIONS FY1999-00 FY2000-01 FY2001-02
Utilities 18 21 22
Communications 91 94 100
Publishing 13 12 11
Restaurants and Bars 102 91 97
Amusements 15 17 13
Rentals of Personal
Property 200 191 174
Contracting (All) 212 217 225
Retail 1,865 1,806 1,787
Hotel/Motel 55 59 58
Other Taxable Activities 447 394 387
TOTAL 3,018 2,902 2,874
(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 in FY 02.
Figures may not add to total due to rounding.
TABLE 16
TRANSACTION PRIVILEGE,USE AND SEVERANCE TAX COLLECTIONS (1)
IN MARICOPA COUNTY FOR THE PERIOD BEGINNING
JULY 1, 2001 AND ENDING JUNE 30, 2002
TAXABLE ACTIVITIES AND CALCULATED NET % CHANGE
BUSINESS CLASSIFICATIONS TAXABLE INCOME FROM FY2000-01 COLLECTIONS
Non Metal Mining/Mining Severance $40,423,852 -18.8% $1,262,663
Utilities 3,684,640,251 3.2% 184,232,013
Communications 1,979,154,446 -0.5% 98,957,722
Publishing 45,136,947 -47.5% 2,256,847
Printing/Advertising 280,788,123 -14.4% 14,039,406
Restaurants and Bars 4,327,397,867 1.5% 216,369,893
Amusements 594,851,658 4.6% 29,742,583
Rentals of Personal
Property 2,819,301,684 -2.3% 140,965,084
Contracting (All) 8,163,380,357 5.5% 408,169,018
Retail 26,168,729,464 -0.5% 1,308,436,473
Hotel/Motel 986,195,425 -13.5% 54,240,748
Other Taxable Activities 2,526,220,932 -22.6% 125,126,682
TOTAL $51,616,221,006 -1.1% $2,583,799,133
NUMBER OF ACCOUNTS
FISCAL YEAR 1999-00 THROUGH FISCAL YEAR 2001-02
TAXABLE ACTIVITIES AND
BUSINESS CLASSIFICATIONS FY1999-00 FY2000-01 FY2001-02
Non Metal Mining/Mining Severance 57 55 52
Utilities 146 136 157
Communications 589 624 640
Publishing 360 322 295
Printing/Advertising 1,022 956 970
Restaurants and Bars 5,213 5,239 5,443
Amusements 740 706 695
Rentals of Personal
Property 2,950 2,925 2,913
Contracting (All) 11,576 11,773 12,177
Retail 43,693 43,250 43,087
Hotel/Motel 606 619 625
Other Taxable Activities 10,910 10,938 10,713
TOTAL 77,862 77,543 77,767
(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.
TABLE 17
TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1)
IN MOHAVE COUNTY FOR THE PERIOD BEGINNING
JULY 1, 2001 AND ENDING JUNE 30, 2002
TAXABLE ACTIVITIES AND CALCULATED NET % CHANGE
BUSINESS CLASSIFICATIONS TAXABLE INCOME FROM FY2000-01 COLLECTIONS
Utilities $175,433,261 10.3% $8,771,663
Communications 59,353,778 13.8% 2,967,689
Publishing 2,367,141 2.6% 118,357
Printing/Advertising 4,289,293 1.2% 214,465
Restaurants and Bars 148,589,696 10.0% 7,429,485
Amusements 14,189,288 -1.0% 709,464
Rentals of Personal
Property 58,606,400 7.0% 2,930,320
Contracting (All) 319,798,891 5.2% 15,989,945
Retail 974,535,306 8.1% 48,726,765
Hotel/Motel 35,340,194 1.4% 1,943,711
Other Taxable Activities 114,768,948 94.8% (2) 5,687,072
TOTAL $1,907,272,197 10.8% $95,488,935
NUMBER OF ACCOUNTS
FISCAL YEAR 1999-00 THROUGH FISCAL YEAR 2001-02
TAXABLE ACTIVITIES AND
BUSINESS CLASSIFICATIONS FY1999-00 FY2000-01 FY2001-02
Utilities 49 51 53
Communications 112 136 159
Publishing 29 27 26
Printing/Advertising 42 36 36
Restaurants and Bars 403 404 407
Amusements 64 64 68
Rentals of Personal
Property 535 549 541
Contracting (All) 1,259 1,277 1,286
Retail 4,203 4,151 4,225
Hotel/Motel 145 148 145
Other Taxable Activities 1,140 1,140 1,144
TOTAL 7,981 7,983 8,090
(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 in FY 02.
Figures may not add to total due to rounding.
TABLE 18
TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1)
IN NAVAJO COUNTY FOR THE PERIOD BEGINNING
JULY 1, 2001 AND ENDING JUNE 30, 2002
TAXABLE ACTIVITIES AND CALCULATED NET % CHANGE
BUSINESS CLASSIFICATIONS TAXABLE INCOME FROM FY2000-01 COLLECTIONS
Utilities $58,996,112 0.6% $2,949,806
Communications 41,317,358 -9.8% 2,065,868
Publishing 1,341,433 0.9% 67,072
Restaurants and Bars 64,135,553 3.5% 3,206,778
Amusements 4,363,746 29.8% 218,187
Rentals of Personal
Property 17,468,897 -6.7% 873,445
Contracting (All) 138,607,290 15.9% 6,930,364
Retail 578,071,060 3.6% 28,903,553
Hotel/Motel 28,465,826 -10.9% 1,565,620
Other Taxable Activities 119,192,858 -5.4% 4,307,347
TOTAL $1,051,960,132 2.6% $51,088,040
NUMBER OF ACCOUNTS
FISCAL YEAR 1999-00 THROUGH FISCAL YEAR 2001-02
TAXABLE ACTIVITIES AND
BUSINESS CLASSIFICATIONS FY1999-00 FY2000-01 FY2001-02
Utilities 39 40 46
Communications 131 134 154
Publishing 20 18 17
Restaurants and Bars 201 199 198
Amusements 44 38 37
Rentals of Personal
Property 342 337 340
Contracting (All) 770 802 850
Retail 2,243 2,272 2,205
Hotel/Motel 144 136 149
Other Taxable Activities 689 732 769
TOTAL 4,623 4,708 4,765
(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.
TABLE 19
TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1)
IN PIMA COUNTY FOR THE PERIOD BEGINNING
JULY 1, 2001 AND ENDING JUNE 30, 2002
TAXABLE ACTIVITIES AND CALCULATED NET % CHANGE
BUSINESS CLASSIFICATIONS TAXABLE INCOME FROM FY2000-01 COLLECTIONS
Non Metal Mining/Mining Severance $12,287,098 -70.3% (2) $378,523
Utilities 1,029,276,491 -2.2% 51,463,825
Communications 443,208,480 15.8% 22,160,424
Publishing 15,724,754 -6.3% 786,238
Printing/Advertising 47,473,259 -9.3% 2,373,663
Restaurants and Bars 1,015,497,369 2.9% 50,774,868
Amusements 83,031,941 -3.0% 4,151,597
Rentals of Personal
Property 445,587,851 4.0% 22,279,393
Contracting (All) 1,519,119,188 -0.2% 75,955,958
Retail 5,952,745,532 0.5% 297,637,277
Hotel/Motel 265,848,719 -11.3% 14,621,680
Other Taxable Activities 331,327,201 -4.5% 16,460,532
TOTAL $11,161,127,882 0.2% $559,043,976
NUMBER OF ACCOUNTS
FISCAL YEAR 1999-00 THROUGH FISCAL YEAR 2001-02
TAXABLE ACTIVITIES AND
BUSINESS CLASSIFICATIONS FY1999-00 FY2000-01 FY2001-02
Non Metal Mining/Mining Severance 24 20 21
Utilities 68 75 76
Communications 196 250 319
Publishing 98 94 113
Printing/Advertising 201 187 178
Restaurants and Bars 1,574 1,535 1,527
Amusements 223 224 222
Rentals of Personal
Property 1,257 1,227 1,210
Contracting (All) 4,232 4,330 4,371
Retail 14,567 14,179 13,982
Hotel/Motel 266 258 252
Other Taxable Activities 2,513 2,575 2,569
TOTAL 25,219 24,954 24,840
(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.
TABLE 20
TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1)
IN PINAL COUNTY FOR THE PERIOD BEGINNING
JULY 1, 2001 AND ENDING JUNE 30, 2002
TAXABLE ACTIVITIES AND CALCULATED NET % CHANGE
BUSINESS CLASSIFICATIONS TAXABLE INCOME FROM FY2000-01 COLLECTIONS
Non Metal Mining/Mining Severance ($3,693,511) -105.3% (2) $56,889
Utilities 184,739,118 3.1% 9,236,956
Communications 87,023,969 9.3% 4,351,198
Publishing 3,326,901 4.3% 166,345
Printing/Advertising 1,473,306 -31.3% 73,665
Restaurants and Bars 98,961,584 2.6% 4,948,079
Amusements 16,979,606 -13.3% 848,980
Rentals of Personal
Property 38,037,442 8.5% 1,901,872
Contracting (All) 333,959,177 2.9% 16,697,959
Retail 540,035,225 6.4% 27,001,761
Hotel/Motel 15,875,133 -7.3% 873,132
Other Taxable Activities 61,516,560 10.3% 3,053,170
TOTAL $1,378,234,509 -0.8% $69,210,007
NUMBER OF ACCOUNTS
FISCAL YEAR 1999-00 THROUGH FISCAL YEAR 2001-02
TAXABLE ACTIVITIES AND
BUSINESS CLASSIFICATIONS FY1999-00 FY2000-01 FY2001-02
Non Metal Mining/Mining Severance 34 28 26
Utilities 48 50 60
Communications 157 171 218
Publishing 26 23 23
Printing/Advertising 25 21 22
Restaurants and Bars 328 294 314
Amusements 80 87 83
Rentals of Personal
Property 426 423 433
Contracting (All) 1,452 1,546 1,645
Retail 3,398 3,288 3,265
Hotel/Motel 94 98 102
Other Taxable Activities 912 954 990
TOTAL 6,980 6,983 7,181
(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 unusual activity.
Figures may not add to total due to rounding.
TABLE 21
TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1)
IN SANTA CRUZ COUNTY FOR THE PERIOD BEGINNING
JULY 1, 2001 AND ENDING JUNE 30, 2002
TAXABLE ACTIVITIES AND CALCULATED NET % CHANGE
BUSINESS CLASSIFICATIONS TAXABLE INCOME FROM FY2000-01 COLLECTIONS
Utilities $27,563,837 3.7% $1,378,192
Communications 19,986,205 -9.3% 999,310
Publishing 181,274 -16.5% 9,064
Restaurants and Bars 32,842,522 -2.8% 1,642,126
Amusements 1,396,098 -2.9% 69,805
Rentals of Personal
Property 12,995,882 -16.8% 649,794
Contracting (All) 46,785,030 2.4% 2,339,251
Retail 266,013,176 3.6% 13,300,659
Hotel/Motel 9,416,481 -7.1% 517,906
Other Taxable Activities 10,341,956 -20.6% 516,863
TOTAL $427,522,460 0.5% $21,422,971
NUMBER OF ACCOUNTS
FISCAL YEAR 1999-00 THROUGH FISCAL YEAR 2001-02
TAXABLE ACTIVITIES AND
BUSINESS CLASSIFICATIONS FY1999-00 FY2000-01 FY2001-02
Utilities 18 19 19
Communications 110 124 133
Publishing 12 14 11
Restaurants and Bars 124 121 131
Amusements 24 24 16
Rentals of Personal
Property 284 271 264
Contracting (All) 410 416 392
Retail 1,528 1,535 1,518
Hotel/Motel 28 26 29
Other Taxable Activities 529 516 506
TOTAL 3,067 3,066 3,019
(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.
TABLE 22
TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1)
IN YAVAPAI COUNTY FOR THE PERIOD BEGINNING
JULY 1, 2001 AND ENDING JUNE 30, 2002
TAXABLE ACTIVITIES AND CALCULATED NET % CHANGE
BUSINESS CLASSIFICATIONS TAXABLE INCOME FROM FY2000-01 COLLECTIONS
Non Metal Mining/Mining Severance $34,036,656 -32.9% (2) $1,063,567
Utilities 195,530,843 7.7% 9,776,542
Communications 81,954,766 11.1% 4,097,738
Publishing 4,470,033 -2.6% 223,502
Printing/Advertising 5,406,515 13.6% 270,326
Restaurants and Bars 191,730,204 4.6% 9,586,510
Amusements 19,769,057 9.2% 988,453
Rentals of Personal
Property 54,005,954 3.8% 2,700,298
Contracting (All) 436,873,952 9.8% 21,843,698
Retail 1,058,305,666 7.5% 52,915,283
Hotel/Motel 72,717,900 -2.1% 3,999,485
Other Taxable Activities 47,880,134 -3.4% 2,371,240
TOTAL $2,202,681,680 6.2% $109,836,641
NUMBER OF ACCOUNTS
FISCAL YEAR 1999-00 THROUGH FISCAL YEAR 2001-02
TAXABLE ACTIVITIES AND
BUSINESS CLASSIFICATIONS FY1999-00 FY2000-01 FY2001-02
Non Metal Mining/Mining Severance 28 24 31
Utilities 63 72 73
Communications 166 200 222
Publishing 53 54 52
Printing/Advertising 70 65 61
Restaurants and Bars 553 536 545
Amusements 86 85 94
Rentals of Personal
Property 541 560 529
Contracting (All) 2,046 2,092 2,235
Retail 5,373 5,309 5,333
Hotel/Motel 185 189 174
Other Taxable Activities 1,103 1,179 1,218
TOTAL 10,267 10,365 10,567
(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 unuaual activity.
Figures may not add to total due to rounding.
TABLE 23
TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1)
IN YUMA COUNTY FOR THE PERIOD BEGINNING
JULY 1, 2001 AND ENDING JUNE 30, 2002
TAXABLE ACTIVITIES AND CALCULATED NET % CHANGE
BUSINESS CLASSIFICATIONS TAXABLE INCOME FROM FY2000-01 COLLECTIONS
Utilities $153,178,418 -3.9% $7,658,921
Communications 51,375,362 1.0% 2,568,768
Publishing 2,699,789 -7.5% 134,989
Restaurants and Bars 121,695,701 7.2% 6,084,785
Amusements 9,431,947 1.4% 471,597
Rentals of Personal
Property 57,559,434 -10.4% 2,877,972
Contracting (All) 220,873,703 9.0% 11,043,685
Retail 866,972,231 1.3% 43,348,612
Hotel/Motel 26,871,573 -3.6% 1,477,937
Other Taxable Activities 49,556,892 -1.6% 2,446,918
TOTAL $1,560,215,050 1.5% $78,114,184
NUMBER OF ACCOUNTS
FISCAL YEAR 1999-00 THROUGH FISCAL YEAR 2001-02
TAXABLE ACTIVITIES AND
BUSINESS CLASSIFICATIONS FY1999-00 FY2000-01 FY2001-02
Utilities 34 40 44
Communications 122 144 187
Publishing 15 15 13
Restaurants and Bars 278 277 292
Amusements 49 46 41
Rentals of Personal
Property 487 491 462
Contracting (All) 618 672 693
Retail 3,265 3,229 3,246
Hotel/Motel 91 109 92
Other Taxable Activities 900 963 925
TOTAL 5,859 5,986 5,995
(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.
TABLE 24
STATE TRANSACTION PRIVILEGE AND SEVERANCE TAX
DISTRIBUTION TO COUNTIES
FISCAL YEAR 1997-98 THROUGH FISCAL YEAR 2001-02
% CHANGE
COUNTY FY1997-98 FY1998-99 FY1999-00 FY2000-01 FY2001-02 FROM FY2000/01
Apache $3,384,940 $3,565,934 $5,473,442 $4,445,431 $3,808,535 -14.3%
Cochise 7,886,873 8,390,958 9,229,981 9,594,853 9,111,850 -5.0%
Coconino 12,183,683 12,695,530 13,841,588 13,978,278 13,695,680 -2.0%
Gila 4,156,713 4,067,599 3,882,098 4,443,907 4,087,916 -8.0%
Graham 2,139,621 2,247,541 2,412,735 2,462,318 2,366,529 -3.9%
Greenlee 3,813,256 3,226,878 3,098,540 3,003,365 1,794,359 -40.3%
La Paz 1,316,162 1,421,105 1,486,269 1,495,379 1,525,956 2.0%
Maricopa 256,008,018 277,695,556 306,464,900 322,426,596 325,710,325 1.0%
Mohave 11,639,836 12,194,408 12,938,817 13,012,998 13,293,460 2.2%
Navajo 6,690,773 7,136,959 7,748,173 7,932,049 7,990,618 0.7%
Pima 65,670,660 70,057,426 76,273,737 79,516,015 76,759,008 -3.5%
Pinal 10,457,557 11,018,980 11,582,587 12,511,593 12,467,448 -0.4%
Santa Cruz 2,793,965 2,968,377 3,180,054 3,346,986 3,275,822 -2.1%
Yavapai 13,324,088 14,218,059 16,154,370 16,629,440 16,504,368 -0.8%
Yuma 9,834,655 10,495,286 11,358,869 11,861,866 12,675,627 6.9%
$411,300,801 $441,400,596 $485,126,158 $506,661,075 $505,067,501 -0.3%
Figures may not add to totals due to rounding.
TABLE 25
STATE TRANSACTION PRIVILEGE AND SEVERANCE TAX
DISTRIBUTION TO MUNICIPALITIES
FISCAL YEAR 2001-02
CITIES AMOUNT COUNTY TOTAL CITIES AMOUNT COUNTY TOTAL
APACHE Queen Creek $332,593
Eagar $310,785 Scottsdale 15,620,534
St. Johns 243,343 Surprise 2,377,160
Springerville 160,531 $714,658 Tempe 12,223,711
COCHISE Tolleson 383,299
Benson 363,032 Wickenburg 391,621
Bisbee 469,298 Youngtown 231,952 $220,616,766
Douglas 1,102,889 MOHAVE
Huachuca City 134,933 Bullhead City 2,602,254
Sierra Vista 2,910,958 Colorado City 256,919
Tombstone 115,899 Kingman 1,546,526
Willcox 287,667 5,384,675 Lake Havasu City 3,231,760 7,637,459
COCONINO NAVAJO
Flagstaff 4,076,034 Holbrook 378,906
Fredonia 79,835 Pinetop-Lakeside 276,030
Page 524,704 Show Low 592,980
Williams 219,006 4,899,579 Snowflake 343,690
GILA Taylor 244,744
Globe 576,874 Winslow 733,615 2,569,965
Hayden 68,738 PIMA
Miami 149,189 Marana 1,044,631
Payson 1,049,563 Oro Valley 2,288,695
Winkelman 34,138 1,878,502 Sahuarita 249,830
GRAHAM South Tucson 423,062
Pima 153,273 Tucson 37,505,234 41,511,452
Safford 711,422 PINAL
Thatcher 309,937 1,174,632 Apache Junction 2,451,601
GREENLEE Casa Grande 1,943,772
Clifton 200,049 Coolidge 599,993
Duncan 62,573 262,622 Eloy 799,502
LA PAZ Florence 1,113,215
Parker 241,970 Kearny 173,309
Quartzsite 258,461 500,430 Mammoth 135,780
MARICOPA Superior 250,755 7,467,926
Avondale 2,765,159 SANTA CRUZ
Buckeye 654,782 Nogales 1,608,868
Carefree 225,556 Patagonia 67,890 1,676,758
Cave Creek 287,281 YAVAPAI
Chandler 13,607,407 Camp Verde 728,298
El Mirage 586,353 Chino Valley 603,768
Fountain Hills 1,559,318 Clarkdale 263,701
Gila Bend 152,580 Cottonwood 707,338
Gilbert 8,453,298 Jerome 25,353
Glendale 16,861,747 Prescott 2,615,277
Goodyear 1,457,290 Prescott Valley 1,813,617
Guadalupe 402,872 Sedona 785,400 7,542,752
Litchfield Park 293,600 YUMA
Mesa 30,544,828 San Luis 1,180,720
Paradise Valley 1,052,954 Somerton 559,921
Peoria 8,350,576 Wellton 140,944
Phoenix 101,800,295 Yuma 5,973,339 7,854,924
TOTAL $311,693,101 $311,693,101
City Distributions are based on relative population.
Figures may not add to total due to rounding.
TABLE 26
MUNICIPAL PRIVILEGE TAX COLLECTION PROGRAM
COLLECTIONS BY CITY
FISCAL YEAR 2001-02
RATE (1) RATE (1)
CITY (PERCENT) COLLECTIONS CITY (PERCENT) COLLECTIONS
Apache Junction 2.2* $7,976,373 Marana 2.0* $14,842,812
Benson 2.5* 1,729,091 Miami 1.5 116,348
Bisbee 2.5* 1,210,933 Oro Valley 2.0* 6,333,076
Buckeye 2.0* 1,676,502 Page 2.0* 3,371,939
Bullhead City 2.0* 7,750,817 Paradise Valley 1.4* 7,297,814
Camp Verde 2.0* 1,367,995 Parker 2.0* 977,970
Carefree 2.0* 1,833,020 Patagonia 3.0* 161,750
Casa Grande 1.8* 9,887,404 Payson 2.0* 5,166,169
Cave Creek 2.5* 2,370,960 Pima 2.0* 141,215
Chino Valley 2.0* 2,055,626 Pinetop-Lakeside 2.5* 2,428,102
Clarkdale 2.25* 399,591 Prescott Valley 2.0* 5,828,323
Clifton 2.0 301,558 Quartzsite 2.5* 941,117
Colorado City 2.0* 216,132 Queen Creek 1.0* 1,100,691
Coolidge 2.0* 2,205,133 Safford 2.0* 2,623,302
Cottonwood 2.2 6,603,951 Sahuarita 2.0* 2,723,008
Douglas 2.5* 4,090,781 St. Johns 2.0* 460,509
Duncan 2.0 117,115 San Luis 2.5* 2,068,532
Eagar 3.0* 372,379 Sedona 3.0* 10,651,562
El Mirage 3.0* 6,649,544 Show Low 2.0 6,617,258
Eloy 3.0* 2,437,413 Sierra Vista 1.5* 9,741,663
Florence 2.0* 902,407 Snowflake 2.0* 1,010,994
Fountain Hills 1.6* 4,268,848 Somerton 2.5* 528,863
Fredonia 2.0 81,536 South Tucson 2.5* 2,217,163
Gila Bend 3.0* 868,966 Springerville 3.0* 1,215,617
Gilbert 1.5* 29,194,285 Superior 2.0* 172,045
Glendale N/A 101 (2) Surprise 2.0* 16,090,834
Globe 1.5* 1,770,347 Taylor 2.0 490,662
Goodyear 2.0* 12,305,079 Thatcher 2.0* 1,844,013
Guadalupe 2.0 660,014 Tolleson 2.0* 3,276,405
Hayden 1.0* 359,654 Tombstone 2.5* 505,351
Holbrook 3.0* 2,105,617 Wellton 2.5 350,130
Huachuca City 1.0 120,004 Wickenburg 1.0 1,149,538
Jerome 3.0 338,647 Willcox 2.0 1,226,634
Kearny 2.0* 245,706 Williams 3.0* 2,660,117
Kingman 2.0* 8,458,447 Winkelman 3.5* 79,960
Lake Havasu City 2.0* 14,705,906 Winslow 3.0* 2,973,359
Litchfield Park 2.0* 1,342,656 Youngtown 2.0* 463,644
Mammoth 2.0* 79,620 Yuma 1.7 22,041,801
TOTAL $280,950,442
* 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, 2002 and may have changed during the remainder of FY02.
(2) Glendale is not part of the Department's Collection program. These figures do not represent a full years
collections.
Figures may not add to total due to rounding.
TABLE 27
MUNICIPAL PRIVILEGE TAX COLLECTION PROGRAM
FISCAL YEAR 1997-98 THROUGH FISCAL YEAR 2001-02
FISCAL TOTAL NUMBER OF CITIES
YEAR COLLECTIONS IN PROGRAM
1997-98 $180,932,433 74
1998-99 $202,218,016 75
1999-00 $230,976,587 75
2000-01 $257,706,985 75
2001-02 $280,950,442 75
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 $512 million during FY02 (Refer to
Table 28).
Tax Rate Reduction. Laws 1999, Ch. 318
amended ARS § 43-1111 to reduced the corporate
tax rate from 8 percent on taxable income or $50,
whichever is greater, to 7.968 percent of taxable
income or $50, whichever is greater. The tax
reduction is effective for taxable years beginning
from and after December 31, 1999. Corporations
that expect an Arizona income tax liability of at least
$1,000 for the taxable year are required to make
estimated tax payments. Any corporate taxpayer
whose Arizona income tax liability for the preceding
taxable year was $20,000 or more is required to make
estimated tax payments via the electronic funds
transfer program.
Repeal of Several Corporate Tax Credits. Laws
1999, Ch. 318 repealed ARS § 43-1162 (correction
industries tax credit); § 43-1164 (recycling
equipment tax credit); § 43-1171 (construction
materials tax credit); and § 43-1172 (agricultural
water conservation system tax credit). The tax
credits are repealed effective for taxable years
beginning from and after December 31,1999.
Taxpayers may claim carryovers of unused tax
credits from taxable years beginning prior to January
1, 2000, for taxable years beginning on or before
December 31, 2005, consistent with the provisions
of the repealed credits.
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 $ 95.6 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.
The graduated rate structure for the 2001 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).
New Subtraction for World War II Victims:
Starting with 2000 taxable year, taxpayers may
subtract distributions made to them for their
persecution or their ancestors by Nazi Germany or
any other Axis regime for racial, religious or political
reasons. Taxpayers may also subtract items of
income that are attributable to, derived from or
related to assets that were stolen or hidden from or
lost to them if they were persecuted by Nazi
Germany or any other Axis regime for racial,
religious or political reasons before, during or
immediately after World War II.
DISTRIBUTION
State income tax collections are shared with Arizona
municipalities in an Urban Revenue Sharing
Program. During FY 2002 an amount equal to 15
percent of net income tax collections from two years
prior was distributed to cities and towns. In FY
2001 the percentage was 15 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).
ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT 51
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 an Conservation System
agricultural water conservation system in Arizona. This credit was repealed
for corporations for taxable years beginning from and after December 1,
1999.
Taxes paid for Coal Corporate taxpayers, a credit equal to 30 percent of the amount
Consumed in Generating paid by the seller or purchaser as transaction privilege tax or use
Electrical Power tax for coal sold to the taxpayer that is consumed in the generation
of electrical power in Arizona.
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
Assistance to the amount of this credit is $200.
Working Poor
Contributions to Individual taxpayers that made contributions to a school tuition
School Tuition organization that provides scholarships or grants to qualified
Organizations 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.
Defense Contracting Taxpayers certified by the Arizona Department of Commerce as a qualified
defense contractor for qualified increases in employment.
Employment of Taxpayers that employ recipients of Temporary Assistance for
TANF Recipients Needy Families (TANF).
52 ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT
CREDIT AVAILABLE TO
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.
Fees Paid to Individual taxpayers that paid certain fees to public schools in
Public Schools 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.
Credit for Taxes Paid to (INDIVIDUALS ONLY) Taxpayers that paid a net income tax to
Another State or Country Arizona and another qualified state or foreign country, on the same income.
ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT 53
54 ARIZONA DEPARTMENT OF REVENUE 2002 ANNUAL REPORT
CREDIT AVAILABLE TO
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.
Solar Hot Water Taxpayers for the installation of solar hot water heater plumbing
Heater Plumbing Stub stub outs and electric vehicle recharge outlets in houses or dwelling
Outs and Electric Vehicle units constructed by the taxpayer. The houses or dwelling units
Recharge Outlets must be located in Arizona.
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.
TABLE 28
INCOME TAX COLLECTIONS
FISCAL YEAR 1997-98 THROUGH FISCAL YEAR 2001-02
PERCENT OF
NET COLLECTIONS
SOURCE FY1997-98 FY1998-99 FY1999-00 FY2000-01 FY2001-02 IN FY2001-02
Withheld from Wages
Gross Revenue $1,863,292,013 $2,072,018,474 $2,259,201,907 $2,363,693,852 $2,309,340,885
Refunds and Charge-offs (11,947,994) (18,463,322) (10,053,362) (7,032,321) (9,047,839)
NET $1,851,344,019 $2,053,555,152 $2,249,148,545 $2,356,661,531 $2,300,293,045 94.4%
Individuals & Fiduciaries
Gross Revenue 669,323,279 765,853,606 826,789,215 858,775,963 705,843,394
Refunds and Charge-offs (657,470,764) (721,059,420) (784,055,322) (911,549,899) (915,490,638)
NET $11,852,514 $44,794,187 $42,733,894 ($52,773,936) ($209,647,244) -8.6%
Corporations
Gross Revenue 630,836,596 643,230,321 637,765,231 678,002,658 512,257,476
Refunds and Charge-offs (102,775,471) (97,842,182) (114,583,545) (136,828,789) (165,976,997)
NET $528,061,125 $545,388,138 $523,181,687 $541,173,869 $346,280,480 14.2%
Subtotal
Net Collections $2,391,257,658 $2,643,737,477 $2,815,064,125 $2,845,061,464 $2,436,926,281 100.0%
Less distributions for:
Urban Revenue Sharing 291,243,578 340,310,656 377,710,988 396,452,640 421,876,573
Contracted Collection
Agency 82,890 39,610 58,016 60,989 20,922
Wildlife Contributions 190,715 146,278 177,079 194,201 177,886
Child Abuse Prevention 223,435 210,355 185,666 222,325 210,223
Special Olympics 95,487 74,471 83,854 88,051 83,873
Neighbors Helping 61,562 32,374 46,610 38,800 37,696
Neighbors
State Aid to Public Schools (1) *** 48,503 7,411 26,884 33,955
Domestic Violence Shelter (1) *** 137,524 139,208 152,928 150,954
Democratic Party 12,091 14,401 11,127 15,130 15,984
Green Party 0 0 0 2,667 2,559
Libertarian Party 3,004 3,077 3,210 2,422 2,090
New Alliance Party 5 0 0 0 0
Republican Party 11,623 12,077 13,650 15,474 14,127
Reform Party 973 869 194 36 92
Natural Law Party 0 0 0 142 200
Clean Elections (1) *** 340 1,827,616 2,315,832 3,246,597
Subtotal Distributions $291,925,363 $341,030,534 $380,264,630 $399,588,520 $425,873,731
NET REVENUE TO STATE
GENERAL FUND $2,099,332,295 $2,302,706,944 $2,434,799,495 $2,445,472,944 $2,011,052,550
WQARF DISTRIBUTION (2) *** *** $15,000,000 $15,000,000 $15,000,000
(1) Individual and corporate income tax checkoffs and donations established in tax year 1998.
(2) 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.
TABLE 29
EXEMPTIONS, DEDUCTIONS AND CREDITS
TAX YEAR 1997 THROUGH TAX YEAR 2001
AGE 65 STANDARD MAXIMUM MAXIMUM
TAX PERSONAL BLIND AND OVER DEPENDENT DEDUCTION PROPERTY FAMILY
YEAR EXEMPTION EXEMPTION EXEMPTION EXEMPTION LIMIT (1) TAX CREDIT TAX CREDIT
1997 2,100 (2) 1,500 2,100 2,300 3,600/7,200 502 120
1998 2,100 (2) 1,500 2,100 2,300 3,600/7,200 502 240
1999 2,100 (2) 1,