42-5074

42-5074. Restaurant classification

A. The restaurant classification is comprised of the business of operating
restaurants, dining cars, dining rooms, lunchrooms, lunch stands, soda fountains,
catering services or similar establishments where articles of food or drink are sold for
consumption on or off the premises.

B. The tax base for the restaurant classification is the gross proceeds of sales or
gross income derived from the business. The gross proceeds of sales or gross income
derived from the following shall be deducted from the tax base:

1. Sales to a person engaged in business classified under the restaurant
classification if the items sold are to be resold in the regular course of the business.

2. Sales by a congressionally chartered veterans organization of food or drink
prepared for consumption on the premises leased, owned or maintained by the organization.

3. Sales by churches, fraternal benefit societies and other nonprofit
organizations, as these organizations are defined in the federal internal revenue code
(26 United States Code section 501), which do not regularly engage or continue in the
restaurant business for the purpose of fund-raising.

4. Sales by a nonprofit organization that is exempt from taxation under section
501(c)(3), 501(c)(4) or 501(c)(6) of the internal revenue code if the organization is
associated with a major league baseball team or a national touring professional golfing
association and no part of the organization's net earnings inures to the benefit of any
private shareholder or individual.

5. Sales at a rodeo featuring primarily farm and ranch animals in this state by a
nonprofit organization that is exempt from taxation under section 501(c)(3), 501(c)(4),
501(c)(6), 501(c)(7) or 501(c)(8) of the internal revenue code and no part of the
organization's net earnings inures to the benefit of any private shareholder or
individual.

6. Sales by any nonprofit organization organized and operated exclusively for
charitable purposes and recognized by the United States internal revenue service under
section 501(c)(3) of the internal revenue code.

7. Sales to qualifying hospitals as defined in section 42-5001.

8. Sales to a qualifying health care organization as defined in section 42-5001 if
the tangible personal property is used by the organization solely to provide health and
medical related educational and charitable services.

9. Sales of food, drink and condiment for consumption within the premises of any
prison, jail or other institution under the jurisdiction of the state department of
corrections, the department of public safety, the department of juvenile corrections or a
county sheriff.

10. Sales of catered food, drink and condiment to a motion picture production
company. To qualify for this deduction, at the time of purchase, the motion picture
production company must present to the business its certificate of qualification that is
issued pursuant to section 42-5009, subsection H and that establishes its qualification
for the deduction.

11. Sales of articles of prepared or unprepared food, drink or condiment and
accessory tangible personal property to a school district or charter school if the
articles and accessory tangible personal property are served to persons for consumption
on the premises of a public school in the school district or charter school during school
hours.

12. Prepared food, drink or condiment donated by a restaurant to a nonprofit
charitable organization that has qualified under section 501(c)(3) of the internal
revenue code and that regularly serves meals to the needy and indigent on a continuing
basis at no cost.

C. The tax imposed on the restaurant classification pursuant to this section does
not apply to the gross proceeds of sales or gross income from tangible personal property
sold to a commercial airline consisting of food, beverages and condiments and accessories
used for serving the food and beverages, if those items are to be provided without
additional charge to passengers for consumption in flight. For the purposes of this
subsection, "commercial airline" means a person holding a federal certificate of public
convenience and necessity or foreign air carrier permit for air transportation to
transport persons, property or United States mail in intrastate, interstate or foreign
commerce.

D. For purposes of section 42-5032.01, the department shall separately account for
revenues collected under the restaurant classification from businesses operating
restaurants, dining rooms, lunchrooms, lunch stands, soda fountains, catering services or
similar establishments:

1. On the premises of a multipurpose facility that is owned or operated by the
tourism and sports authority pursuant to title 5, chapter 8 for consumption on or off the
premises.

2. At professional football contests that are held in a stadium located on the
campus of an institution under the jurisdiction of the Arizona board of regents.