Ariz. Admin. Code § 15-5-1503

Current through Register Vol. 30, No. 50, December 13, 2024

Section R15-5-1503 - Sourcing of Leased Tangible Personal Property

A. In this Section:

1. "Business location" means the business address that appears on a lessor's privilege license, but if the lessor does not have a business address in Arizona, business location means the lessee's residential or primary business street address.

2. "Source" means to determine the location of leasing or renting activity for tax purposes.

B. The personal property rental classification applies to a person who is engaging or continuing in the business of leasing or renting tangible personal property in Arizona for a consideration. Gross receipts from leasing or renting tangible personal property in Arizona are taxable under this classification.

C. The Department shall source gross receipts from leasing or renting tangible personal property to the business location. Thus, gross receipts of a lessor without a business address in Arizona, derived from leasing or renting tangible personal property, are sourced to the lessee's residential or primary business street address and are taxable when the property is shipped, delivered, or otherwise brought into the state for use in Arizona.

D. Gross receipts from leasing or renting tangible personal property are not taxable if the property is shipped or delivered outside of the state and intended, at the inception of the lease, for use exclusively outside of the state.

E. Gross receipts from leasing or renting tangible personal property are not taxable if the property is removed from the state and used exclusively outside of the state. Intermittent use of tangible personal property outside of the state does not constitute removal of the property from the state for use exclusively outside of the state, and therefore does not change the business location of the property or liability for the tax. For example, use of a business's leased tangible personal property by its employees at different locations on business trips and service calls does not change liability for the tax.

F. The burden of proof for establishing the applicability of subsection (D) or (E) is on the lessor.

G. For leasing or renting activity related to a motor vehicle, the Department shall examine whether the motor vehicle is licensed, registered, or primarily used in Arizona.

H. A taxpayer shall not take a deduction or credit for taxes paid in another state on a lease or rental of tangible personal property.

Ariz. Admin. Code § R15-5-1503

Amended by final rulemaking at 10 A.A.R. 3071, effective September 11, 2004 (Supp. 04-3).